Making Deals On Every Transaction
The Denver Post reports from Colorado. “With more people afraid their homes won’t sell in today’s slumping real-estate market, the number of existing homes listed for sale in the Denver metro area in September dropped from the same period a year ago. ‘Sellers, if they’re not in an upside- down position and they have any equity, are going to rent it out and hold on to it for another year or two until this whole mess washes out,’ said Ed Jalowsky of Hottest Homes Realty. ‘If they don’t have the cleanest, freshest apple on the pile, the property is going to go stale on the market.’”
“Sales of existing homes also declined, in part because buyers can get better deals on new homes. ‘Part of the reason is the new-home builders are at a point where they have inventory on the ground, ready to go,’ said Gary Bauer, an independent real-estate analyst who compiles a monthly report based on MetroList data. ‘The only way they’re able to sell that inventory is they’re making deals on every transaction.’”
The Rocky Mountain News from Colorado. “The recent collapse of the subprime mortgage market and still-climbing foreclosures drove down sales and home prices in Denver last month.”
“The recent shakeout in the subprime market is a ‘blessing,’ said Deviree Vallejo of Kentwood City Properties. ‘No. 1, the unsavory lenders are getting out of the business,’ said Vallejo, who has seen bidding wars on some homes.”
“‘And No. 2, everyone was getting their real estate license, but now those people are getting weeded out,’ Vallejo added. ‘So only the best professionals will make it.’”
The Arizona Republic. “Not long ago, builders were raising home prices here thousands of dollars week after week. Families camped out for lotteries to win the right to buy. Buyers gambled with loans whose risks were obscured by euphoria.”
“While the pressures at work in Queen Creek were extreme, the choices people made - and the consequences, are not so different from those faced by thousands of other homeowners and their neighbors.”
“‘In 2004, Dave Gustafson and his family headed to Arizona to visit relatives. Back in California, they had less than 1,100 square feet. But salesmen here offered 2 1/2 times the space for half the price. ‘The sales person was saying that they (homes) were going up $1,000 a week,’ Dave Gustafson recalls. ‘So … we signed right away.’”
“Kris Rowberry, ecstatic when the value of his home in nearby Gilbert took off, bought a second one in the Villages as an investment. ‘I was thinking, man, if I could have 10 properties, I could just kind of retire … and kick back and live off the income,’ he says.”
“There was a problem, though, obvious only in hindsight. A market that had skyrocketed was about to plunge. Problems began to snowball. High gas prices prompted people to rethink living on the outskirts. Investors rushed to sell. Builders continue adding homes at reduced prices. Investors are trying to sell.”
“Lenders are seeking buyers for foreclosures. Homeowners whose financial troubles might be solved by selling can’t compete.”
“Things looked…uncertain to Joy and Paul Kessler, until they did the math. They could fight for their house. But why? It’s worth at least $40,000 less than they paid.”
“‘It’s sad to say but honestly, we don’t feel like there’s anything worth saving in this house,’ Joy says. So the couple decided to let the place go. Everyone said it was the right thing to do.”
“Metro Phoenix now leads the country for condo ‘reversions.’ Developers jumped on the condo-conversion craze in the Valley a few years ago, snatching up apartment complexes to turn them into for-sale condos.”
“But the demand for those condos slowed with the rest of the housing market. Now, more than 2,946 condos are being turned back into apartments in the Phoenix area, according to Real Capital Analytics.”
The East Valley Tribune from Arizona. “Corporate homebuilders are watching their earnings drop and tightening their belts, Valley real estate analyst RL Brown said. ‘There are scores of subdivisions that have little if any activity in them,’ said Brown.”
“John Fioramonti, senior managing director at Meyers Builder Advisors in Scottsdale, said he’s seen cancellation rates as high as 40 percent in some cases.”
“At Shea Homes, employees help potential buyers set realistic asking prices on their old homes, ‘which is a hard pill to swallow’ for some people, said Ken Peterson, the builder’s VP of sales and marketing. That’s because some homeowners owe more on their properties than they’re worth.”
Business Week reports on Nevada. “Las Vegas was once the hottest of the red-hot real estate markets. But when sales really started choking up last year, developer KB Home did something drastic. Determined not to be caught with a big backlog of unsold homes through one of the industry’s notorious down cycles, the builder started slashing prices. A lot.”
“In the 1,400-home Huntington community, a subdivision of two-story stucco houses west of the famed Strip, homes that started at $320,000 a year ago are now listed for $270,000–just a starting point for potential deals.”
“For homeowners who jumped in at the height of the boom, the discounts aren’t so good. Mike Alley has gotten whacked hard by the area’s declining housing market. In the spring of 2005, Alley, an independent real estate agent in Racine, Wis., moved to Las Vegas.”
“He quickly found a sales job with Pulte, where he says agents were pulling in $500,000 a year for basically taking orders. A year later, he decided to jump into the market himself and buy a home. He spent a month searching, settling on KB’s Huntington subdivision.”
“The $86,000 worth of upgrades thrown in by KB Homes at a discount clinched it. Alley thought he was getting a deal: In August, 2006, he paid $360,000 for a three-bedroom home in Quayside Court, which was appraised for $415,000.”
“Yet even Alley, who made his living in this industry, says he was blindsided by the markdowns. Today he reckons his home is worth around $300,000. ‘I didn’t quite keep my finger on the pulse of what [KB is] doing in this community,’ says Alley, who’s largely gotten out of the real estate business. ‘I’m looking at the sales data, and they were selling my model for $50,000 less even months after I bought it.’”
The Review Journal from Nevada. “Home sales in the Las Vegas Valley reached the lowest monthly total in five years, the Greater Las Vegas Association of Realtors reported Friday. The 990 sales in September were down 25 percent from the previous month and 43.1 percent from the same month a year ago.”
“Realtor Eric Young calculated a 22.1-month supply of homes on the market. About 45 percent of the homes are vacant. ‘The figure for the Vegas Valley reflects the tremendous number of speculators that are headed for the exits,’ Young said.”
“‘Buyers are there. They’re just going to have to feel confidence to get back in the market and realize there’s no mystical bottom,’ said Devin Reiss, president of the Greater Las Vegas Association of Realtors.”
“‘No one expected such a downturn in the market and a lot of people are stuck holding the bag,’ Reiss said. ‘You can’t blame Realtors. Everyone has a right to make money.’”
The Las Vegas Sun from Nevada. “After years of skyrocketing home values and speculation, Nevada sits near the top of most foreclosure rankings. About 40 homes go into foreclosure every day in southern Nevada, the governor’s office said.”
“Gov. Jim Gibbons said he saw the problem as largely a matter of borrowers taking on loans they should not have sought. He said he did not believe the state should intervene with funding assistance or restrictions on loan products or limits on the way they are marketed.”
“‘Not everybody is going to be able to be saved in this,’ he told reporters.”
In Business Las Vegas from Nevada. “Famed bond manager Bill Gross has called on U.S. government to bail out the millions of American homeowners who face losing their homes to foreclosures, but you haven’t heard such a call in Nevada where the state has the highest foreclosure rate in the nation.”
“It will be hard convincing any taxpayers at the national or state level to kick in massive amounts of tax dollars to bail out those whose poor financial decisions may cost them their home. Many will ask: What’s next, bailing out those who have gotten themselves into credit card debt?”
“The division president of one leading Las Vegas builder said the government should opt against any massive bail out. He said buyers should take responsibility for speculating or buying more home than they could afford. He referred to it as giving an alcoholic another drink.”
“‘I am a free-market guy,’ the division president said. ‘I don’t believe in a bailout. It just rewards irresponsible behavior so people take more risks.’”
“Las Vegas housing analyst Steve Bottfeld warns against any massive federal bailout because it would be abused. He said the government should focus on stopping similar problems in the future by cracking down on those who took advantage of the mortgage system.”
“‘I really think you have to criminalize those who take advantage of the mortgage system and lie. I am not referring to investors but to speculators,’ he said. ‘When you get 40 foreclosures with the same name on it, you can’t get that number of mortgages without lying. The reason for it is very simple. That person just hasn’t hurt the lender. That person has hurt the entire industry.’”
“The prices of new and existing homes have been steadily dropping in Las Vegas since mid-2006 and professional traders and national economists who are monitoring Las Vegas like a weather vane are betting prices will continue to slump.”
“‘We have not hit the bottom yet in Las Vegas,’ said Tim Sullivan, president of the Sullivan Group Real Estate Advisors. ‘The overriding theme is we have too much supply, a weakening economy, and we have got to figure out a way to survive this downturn.’”
“At the end of August, there were a record 27,321 resale homes on the MLS, according to SaleTraq.”
“Astoria Homes, a private homebuilder based in Las Vegas, announced it will hold its first-ever sale. The company’s new-home sales are down 42 percent from 2006.” “Astoria’s sale runs Oct. 12 through Oct. 14, showcasing homes from Aliante in North Las Vegas to Southern Hills in Henderson, its development in Centennial Hills and another near Summerlin.”
“Prices have been discounted by as much as $200,000, and its least expensive homes during the sale will be marketed in the $170,000s after a $50,000 discount.”
“‘We want to be busy,’ said Astoria Homes President Tom McCormick. ‘It is a reflection of the market. We have never had a sale in our 12 years in business, and we have to be more aggressive about adjusting our pricing.’”
“‘It’s going to take up to two years for the market to work itself out,’ said Ryan McPhee, owner of RPM & Associates, a Las Vegas real estate investment company. ‘We have too much inventory, and more on the way.’”
“The median price of existing homes in Las Vegas stood at $164,000 in 2003, but that quickly jumped to $230,000 in 2004 and topped out at $285,000 at the end of 2006. Speculators and low borrowing costs drove the drive up prices, the experts said.”
“Almost half of Las Vegas home sales in 2005 and 2006 were to people who intended to resell quickly for a profit, according to data compiled by Fannie Mae, the world’s largest mortgage buyer.”
“When the value of a house is less than the mortgage, owners who want to sell have to pay the lender the difference to buy out the loan, in some cases as much as $50,000, McPhee said.”
“Some of the owners who bought in the early years of the boom are stuck, even after seeing prices double in five years, McPhee said. ‘Some people have seen their home values soar, but a lot of them refinanced to pull out that equity and spent it on cars or gambling,’ he said.”
Always follow the salesman’s advice, he’s a real estate professional…
“‘In 2004, Dave Gustafson and his family headed to Arizona to visit relatives. Back in California, they had less than 1,100 square feet. But salesmen here offered 2 1/2 times the space for half the price. ‘The sales person was saying that they (homes) were going up $1,000 a week,’ Dave Gustafson recalls. ‘So … we signed right away.’”
‘The cloud over the housing market has a silver lining for commercial builders in Las Vegas. With fewer homes being built, it’s easier to find construction workers. Material prices have also stabilized, said Marty Harpster, vice president of Core Construction.’
‘Ready-mix concrete prices have relaxed 20 percent and drywall is back to what it was before the run-up a couple of years ago, Harpster said. Concrete went from $60 to $100 a cubic yard in eight years. ‘So the boom that triggered the rapid escalation of material costs has relaxed,’ he said.’
Bad news for Floridian construction guys, that think the grass is greener in the vegas, eh?
Commercial builders of…commercial real estate? Is he kidding Friend of the daughter’s just got a year’s severance pay from a Chicago commercial leasing company. Fortunately, she’s now free to be fulltime with Second City Comedy. Don’t know if comedy is going to be a growth industry, but commercial real estate is going to be a comedy.
There is that pesky deflation. Quick Bernana B, drop some liquidity.
More akin to a reversion to the mean, like housing prices are doing. Inflation is evident in other pricing as evidenced by gold, milk, gasoline, eggs, tires, lapdances, etc. I really don’t think deflation is evident in a bursting housing bubble any more than in a Nasdaq crash. With the dollar being hosed, import pricing from the third world slave gulag should show some upward momentum.
You nailed it. It’s a race to the bottom in currency valuations.
Not everything can lose value at the same time. Either there is deflation or there isn’t. For currencies to lose value, something has to continuously be worth more.
For currencies to lose value, something has to continuously be worth more.
And that “something” is … gold!
Another home savant in a country full of em’…
“Kris Rowberry, ecstatic when the value of his home in nearby Gilbert took off, bought a second one in the Villages as an investment. ‘I was thinking, man, if I could have 10 properties, I could just kind of retire … and kick back and live off the income,’ he says.”
They’ll throw in whatever “incentive” to make a deal work…
nudge nudge, wink wink
“In the 1,400-home Huntington community, a subdivision of two-story stucco houses west of the famed Strip, homes that started at $320,000 a year ago are now listed for $270,000–just a starting point for potential deals.”
So much commercial was built here in Missoula MT and I don’t understand why because some of the retail and office has sat empty for years. Is there some big tax break for building new commercial space??
We’re flooded with retail and office condo space here in PHX, but they keep building at an insane pace!
$avants, pissing away more money…
“Things looked…uncertain to Joy and Paul Kessler, until they did the math. They could fight for their house. But why? It’s worth at least $40,000 less than they paid.”
“‘It’s sad to say but honestly, we don’t feel like there’s anything worth saving in this house,’ Joy says. So the couple decided to let the place go. Everyone said it was the right thing to do.”
This is what most FB’s want, a way out. As more and more people go through foreclosure, the stigma of being foreclosed on will evaporate, making it easier for more people to deal with “Just letting it go”. Removing the tax consequences, just greases the way out.
“‘It’s sad to say but honestly, we don’t feel like there’s anything worth saving in this house,’ Joy says. So the couple decided to let the place go. Everyone said it was the right thing to do.”
Easy come, easy go.
Everyone said it was time to buy.
Everyone said it was the time to let go.
Everyone said it was the right thing to do.
Ode to a Lemming Pt I: The First
by Christine L. Santos
Little fuzzy rodent
Floating gently with the tide,
When you approached the cliff
You should have watched your stride.
You ran right off the edge
And with a belly-flop you died.
Why would any living creature
look forward to mass suicide?
Hi Sammy,
Bubblers…this is a squeamish subject for the faint hearted (me!)
I don’t know how much hipe is said about the Depression, but reports about suicided rates were said to be large.
I do not think many have the conscience of yesteryear!
Now come on, I don’t want to see suicide rates rise, I’m actually wondering if said repeats are also about to happen. I believe some will, but we seem to be a shameless society.
Yeah, love the amoral tone. No qualms, no guilt, no remorse about walking away from hundreds of thousands of dollars of debt. Just a little sadness.
Boo hoo.
The silver lining in guiltless foreclosure is that it will give lenders one heck of an incentive to be conservative in the future. There’s a reason why there used to be a 20% down-payment requirement.
Sniff…house, we’re gonna have to let you go. Too bad, so sad. Sigh.
I don’t know about other people on this site ,but I think walking just because your house went down a modest 40k is sick . These people should have a penalty for walking on a small dip like that in price . As I have said before ,I had a house for 23 years that went down below my purchase price twice before it went up and remained higher in price .
These people that think they are entitled to a profit so early in the holding game make me sick .These people didn’t buy for long term ownership and it was just the investment scheme of real estate with the easy money low down that got people like this into real estate .I just can’t stand the thought of tax dollars bailing out people like this .Thousands ,maybe millions ,of people like this have cause a major problem with their reckless actions and they think ,”Oh, we will just walk ,why hang around when there isn’t any easy money ,oh well .”
To think that the government is even talking about bailing out people like this . We should be talking about what penalty these people should get for their perjury on their loan applications .
Totally agree, Wizard.
Considering most people will be underwater for far more than $40K, it doesn’t exactly bode well for the future now, does it?
I don’t think most people walk because they are upside down; I think they walk because they discover they can’t afford the payments.
Many were planning to refinance into another teaser rate loan when their current teaser loan reset, only to discover the refi door was slammed shut. Since they can’t afford the higher reset payments they agreed to when they initially signed the papers they have no choice now but to walk.
combotechie,
In the next couple years there are going to be lots of people that’ll be six-figures underwater. They’ll walk.
tj/combotechie,
IMHO, (c) both of the above.
I think more repudiations the better. Once all lenders go out of business, there will be far less debt and its ill effects. This country will be destroyed and reborn as a debt fearing nation. I for one, will rejoice the day when we become a net creditor nation.
Pretty soon the psychobabblers will be conducting “foreclosure recovery workshops.”
I agree with that. And I think in the end its going to creat a market of “Hey had to let your house go…well if you are at least a year out of foreclosure with a good payment history on your rent..we can get you into a home of your dreams….” One persons downfall is someone else’s opportunity..
the builder started slashing prices. A lot.”
“In the 1,400-home Huntington community, a subdivision of two-story stucco houses west of the famed Strip, homes that started at $320,000 a year ago are now listed for $270,000–just a starting point for potential deals.”
- 50K reduction is not enough to spark the market. The average income in Nevada is enough to support a 100k home.
started slashing prices. A lot
they slash like a girl..
Mike Alley has gotten whacked hard by the area’s declining housing market. In the spring of 2005, Alley, an independent real estate agent in Racine, Wis., moved to Las Vegas.”
But…but…I thought realtors were supposed to be “experts” on the local market. That’s how they justified their 6%. Another myth goes up in smoke.
Another ‘housing’ crack dealer gets addicted to his merchandise and overdosed.
Notorius BIG Crack Dealing 10 Commandments (Clean Realtor Edit)
I been in this game for years, it made me a animal
It’s rules to this s*%t, I wrote me a manual
A step by step booklet (Rich Dad Poor Dad) for you to get
your game on track, not your wig pushed back
Rule nombre uno: never let no one know
how much, dough you hold, cause you know
The cheddar breed jealousy ’specially
if that man f**ked up, get your ass stuck up
Number two: never let em know your next move
Don’t you know Bad Boys move in silence or violence
Take it from your highness (uh-huh)
I done squeezed mad clips at these cats for they bricks and chips
Number three: never trust no-bo-dy
Your moms’ll set that ass up (even your mom will try to sell you an overpriced house) , properly gassed up
Hoodie to mask up, s*%t, for that fast buck
she be layin in the bushes to light that ass up
Number four: know you heard this before
Never get high, on your own supply (Realtors shouldn’t buy houses)
Number five: never sell no crack where you rest at (Don’t sell subprime loans to family)
I don’t care if they want a ounce, tell em bounce
Number six: that god damn credit, dead it
You think a crackhead payin you back, shit forget it (no modifications needed for this one)
Seven: this rule is so underrated
Keep your family and business completely seperated
Money and blood don’t mix like two (edited)
Find yourself in serious s*%t
Number eight: never keep no weight on you
Them cats that squeeze your guns can hold jobs too
(not really sure what this means)
Number nine shoulda been number one to me
If you ain’t gettin bags stay the f**k from police (don’t use cops as straw buyers)
If *&^$ think you snitchin ain’t tryin listen
They be sittin in your kitchen, waitin to start hittin
(or the cops will beat you up in your kitchen)
Number ten: a strong word called consignment
Strictly for live men, not for freshmen
If you ain’t got the clientele say hell no
Cause they gon want they money rain sleet hail snow
Follow these rules you’ll have mad bread to break up
If not, twenty-four years, on the wake up
Slug hit your temple, watch your frame shake up
Caretaker did your makeup, when you pass
Crack king, Frank Blizzard
Uhh
I also love how he didn’t even buy his own company’s product. I’ll admit buying a home is much different than other “products” but I don’t think I’d get the warm fuzzies about my purchase if I found out my Pulte sales agent had recently bought a KB home.
‘The sales person was saying that they (homes) were going up $1,000 a week,’ Dave Gustafson recalls. ‘So … we signed right away.’”
Another prime candidate for a court-ordered sterilization.
Another prime candidate for a court-ordered sterilization.
Sammy, when I read stories like this I literally laugh. Come on, who the heck would believe that in this market? chuckle.
Look at the SAAR (seasonally adjusted sales). The long term trend crosses through about 4.6 Million resale homes per year. We’re still above that threshold, but the line has one trend. No blips. Oh, I’m talking closings, not pendings. I see blips up in pendings… but there is absolutely no translation into closings.
May these suckers wake up before they find themselves in a 10% subprime option ARM. Not to mention inventory is going back up. If the peak is set in October… we’re going to break the six sigma event.
Got popcorn?
Neil
Don’t buy stuff you cannot afford.
http://dantwo.net/video/snl_dontbuystuff.wmv
Bravo!
try: http://www.feedthepig.com
“What’s next, bailing out those who have gotten themselves into credit card debt?”
I like it. Good way to frame anti-bailout argument.
They were obviously tricked by the credit card companies. I think it’s time for the Save Our Credit Act of 2007. Who would want to deny milk, food and clothes to the children of these credit junkies? Bush can sit at the desk and sign the bill with Pelosi and Reid standing on either side surrounded by children. Great photo-op.
“But the demand for those condos slowed with the rest of the housing market. Now, more than 2,946 condos are being turned back into apartments in the Phoenix area…”
These condo reversions are going to be interesting to watch. I strongly suspect that most of these leveraged to the moon, and probably will not pencil out at rent levels that are competitive in the marketplace.
So I expect to see a wave of “repartment deconversions” going into foreclosure in order to nail down the loss. The bankers will then have to sell the properties for a price that makes them work as rentals.
I guess one way to look at this is: A bunch of apartments just got paragraniteel upgrades at the expense of some speculators and some CDO investors.
After these properties start to filter back into the marketplace with workable financial structures, older, unconverted apartments will feel some competition. That will probably take a few years to settle out.
“‘No one expected such a downturn in the market and a lot of people are stuck holding the bag,’ Reiss said. ‘You can’t blame Realtors. Everyone has a right to make money.’”
Remember the ‘it’s a good time to buy or sell’ campaign?
Wrong on all counts. A lot of us “non-experts” saw this coming a long time ago, as memoralized by our thoughts in Ben’s HBB going back to at least 2004. And I CAN blame realtors for their part in this Ponzi scheme. As an industry, they’ve been singular in their sleaze, disingenuousness, and moral guilt for wittingly betraying the trust of millions of their foolish “clients.”
Everyone may have the right to make money, but not to do so in an unethical manner.
Wanted: Real Estate sales.
Do you like helping people? Are you interested in a career that does not limit your income? Do you like being independent? Real estate may be for you.
Only saintly humanitarians need apply.
Sammy ,I agree with your thoughts . The “foolish clients” that you speak of bought into the investment ponzi scheme hook line and sinker and they have no right to a taxpayer bail out .We should be talking about what criminal penalty is going to be enacted on all these clowns that committed perjury to get a loan with the intent to gain by the ponzi scheme .
I object to a government that is going to reward criminals by a bail out .The borrowers were criminals and the mortgage brokers and realtors helped the borrowers commit perjury on the loan applications . You see, borrowers don’t know what to put on those loan applications ,so they have to have a party helping them with their perjury .
I want someone with the main stream media to bring up the point that the government has no right to bail out criminal activity .If a borrower cannot afford their adjusted up payment ,that means someone committed fraud on the loan application .
Why does everyone avoid the true lack of merits to the bail out ideas . The goverment can’t reward criminal acts ,and I would venture to say that 75% of the loan applications in default now were fraudulent loan applications on income and owner-occupant intentions . I think I would argue that it is unconstitutional for the government to enact a bail out for people who have broken the law . Sure ,there are some cases where people were victims ,but the bulk of these borrowers were just getting in on the investment wave by fraud . I can’t help it if these people/borrowers where urged on by a mania and cheerleading amoral realtors and commissioned loan agents .No excuse ,no bail outs.The people who were priced out of the market, or people who had their taxes raised unfairly are the victims of all this fraud in lending .
I wouldn’t sweat the idea of any bailout. Anybody that gets bailed out now will be getting backdoor visits from the Joshua Tree for years to come.
We’re headed for major bad times, and the attitude these people exhibit will come back at them in spades.
Sammy I don’t know if I ever “saw” it coming till 06. I wished for it to come even back in 02, when I SAW that renting was already cheaper than owning. In 04 I capitulated and bought a house, lest I be priced out forever. In spring 06 I SAW the bust coming (and started reading HBB) and sold the house at almost no profit to me; some to the agent of course. Really glad I used the same agent for the purchase AND the sale: when I wanted a quick sale, he knew how to get one.
Thank you for that comment. It is absolutely true. All these predators in the RA market blaming sub-prime as a type of “scum” know full well these so called sub primers were merely everyday people who were taken for a ride, told to overpay trusting these animals with their financial future. They trusted those predators when many in the RA market knew that is was a pricing scam. Then like any weasel the RA scam artists turned on the ones they lied to and blamed them for the problem. I am so disgusted with the whole industry and how it just did anything to make a buck at the cost of so many people’s financial security. Ain’t greed great?
Sammy, right on with your comments. ANYONE with an average IQ that was willing to open their eyes could have seen what was developing. I actually thought things would play out sooner and expected mortgage interest rates to go up after the last election. My predictions back in early 2004 are working out exactly as I thought. I put my money where my mouth is and sold my house in July 04 and moved my family into a rental a few blocks away and then out of state. It was the best move I ever made.
“Everyone has a right to make money.”
Exactly. And everyone has an equal obligation to take a loss if the deal doesn’t work out, without whining or expecting to be bailed out. IMHO the most honorable men on this planet are boxers: They don’t throw punches without expecting to take some on the chin.
an equal obligation system where both good fortune and suffering is equally shared by all has been proven to function well for eons in ant and bee colonies.. why couldn’t it work with humans?
We should try it .. or am i forgetting something.
You are forgetting that humans became the dominant species on this planet, no doubt due in part to the dual human nature — cooperative in a shared emergency but competitive otherwise.
ah yes.. that pesky “human nature” thing seems to forever be blocking the path to social nirvana.
equal obligation system
I don’t think that analogy holds. How many workers is an ant/bee colony prepared to sacrifice to keep a queen safe?
i dunno.. ants are kinda like the Borg. Although driven by impulses beyond their control as individuals, they aint stupid as a species, and i suppose will eventually retreat if able to.
But regardless of how many survive, without the queen that hive’s genes are removed from the pool, as they should be, and the survivors may as well pack it in anyway. With ants and bees, the whole purpose of life is leaving something to posterity.
“Some of the owners who bought in the early years of the boom are stuck, even after seeing prices double in five years, McPhee said. ‘Some people have seen their home values soar, but a lot of them refinanced to pull out that equity and spent it on cars or gambling,’ he said.”
Ha ha ha ha ha… morons and idiots… ha ha ha ha ha
“‘Buyers are there. They’re just going to have to feel confidence to get back in the market and realize there’s no mystical bottom,’ said Devin Reiss, president of the Greater Las Vegas Association of Realtors.”
That’s right. Markets expand forever. Contractions are a myth.
Enjoy the Ramens, professor Reiss.
“‘We want to be busy,’ said Astoria Homes President Tom McCormick. ‘It is a reflection of the market. We have never had a sale in our 12 years in business, and we have to be more aggressive about adjusting our pricing.’”
Thank you, Ara Hovnanian. Deals of the Century are popping everywhere.
You the Man!
I have a friend who lived in Las Vegas for about a year and worked in one of the restaurants there. He told me how surprised he was by the number of people who he worked with that had bought houses. Vegas restaurant workers are mostly unionized so they do tend to make a little more than similar employees in other cities, however their wages are not so drastically different that bus boys or line cooks can afford to be buying $400k houses. I wonder how many of my friend’s former co-workers are now going through foreclosure.
This mania pentrated every level of society. You can see how some less sophisticated or less educated buyers could be convinced to purchase something well beyond their means. What is harder to understand is how many people who I know who are educated and should be more financially sophisticated bought into the idea that “Real Estate never goes down” or “Well, you know their not making any more land”. When I tried to point out examples of the values of real estate declining it didn’t matter how many facts I used, it could not be discussed rationally and for the most part I avoided the subject of the real estate market with a number of people that I know. One friend I have bought his house in 2005, when I asked him what the rush was he felt that if he didn’t buy now the exorbinant price he ended up paying would have been even higher. He is now realizing that his house is worth less than he paid for it, his property taxes are going up every year (this is Jersey after all) and that the expenses in maintaining a 3,500 square house are enormous. This is someone who makes a good income and is not in danger of being foreclosed, however the decision to buy his house when he did will signigicantly affect his finances for the next 15-20 years. What I am interested in seeing is what the next mania whether it is stocks or commodities or something else. You can be sure that the same people who told you that “real estate only goes up” will be the ones telling you the what the next sure thing is. I guess it’s part of human nature to repeat the same mistakes, sometimes without even realizing that’s what you’re doing.
This is the dumbest reasoning I’ve ever heard.
Now now… only the “freshest apple on the pile” is going to sell. By “fresh,” I take it to mean “great bargain.”
As to renting for two years? Capitulation before 24 months. Easy…
Got popcorn?
Neil
Unless they’re talkin’ road apples. Even the freshest road apple won’t sell.
Repeat after me:
Close eyes, shut ears, hold breath.
Do NOT acknowledge stupid comments!
Smiles,
Leigh
The last post I could find from House Inspector Clouseau on this or any blog was 06-22-2007. Does anyone here remember him announcing a name change? I know he’s reading this post right now. He’s still a stinker.
Hey Ben,
When will this “the is no real estate bubble” bleed into Hollywood? WE have a 1 in 3 guess: CSI New York, CSI Miami, CSI Las Vegas?
I vote: CSI Lost Wages!
As an aside…something mortgage wise happens on: “Desperate Homowives” this year.
‘Sellers, if they’re not in an upside- down position and they have any equity, are going to rent it out and hold on to it for another year or two until this whole mess washes out,’ said Ed Jalowsky of Hottest Homes Realty.
Warning to knife-catchers: I don’t think we’ll see the real plunge in home prices until next Spring or Fall, when the huge overhang of greedheads who’ve been holding on “until this whole mess washes out” realize that the RE bloodbath will be far more horrendous and prolonged than they believed possible. When hope gives way to panic, and the scramble for the exits begins in earnest, a staggering number of houses is going to get dumped on the market. Inventories and foreclosures will soar; prices will pancake. And Sammy the Vulture will be liesurely winging his way toward the dirges of the knifecatchers and latest FBs, preparing to gorge himself till he can gorge no more.
They don’t believe that it will be painful, so they need to feel the pain themselves. It will take several years before they have enough and then will sell. After the decline there will be a bottom for many years - plenty of time to buy and make a good decision. But till then it’s good for us renters that there are still so many investors.
A friend of mine has been telling me about an FB family on their block that ended up walking away from their house. No one in the neighborhood was sorry to see them go. This is in a neighborhood of $400K plus houses, and the concensus was, this family had gamed the system to “buy” their place, and they didn’t fit in. Their immediate neighbors hated them, since their dogs barked incessantly [and they didn't pick up after them], their kids were infamous for bad behavior, and their yard always looked unkempt. People around here don’t pay $400K to live next to low-lifes. One positive outcome of the ongoing mortgage flushout is that people who had no business living in nicer neighborhoods - due to class as well as income issues - will have a much tougher time living above their means.
lol
dog barking + bad kids = lowlifes
Obviously the Section 8 tenants put in by the FC buyer/landlord will fit in SOOOOOOOOO much better.
‘When you get 40 foreclosures with the same name on it, you can’t get that number of mortgages without lying. The reason for it is very simple. That person just hasn’t hurt the lender. That person has hurt the entire industry.’”
Agreed. What really gets my goat is people who politicize this thing. There are the anti-capitalists who ignore the individual home buyer (multiplied by millions) who greedily lied about their incomes and expected a fat profit because home prices always go up (we were told) and are now claiming they were victims.
On the other hand there are probably those on the other side of the spectrum who ignore that many crooked mortgage brokers in this bubble (not the previous though) put fuel on the fire and knew their buyers could not afford the crap they bought.
Grr.
I am a free market type too. I know the libs will take this into the end zone and chant for bigger government.
When I read your comment..
All I could think about was our jokes a year or so ago when with Bubba would do with his new roommate in the pen.
Bubba likes his new roomie.
Bubba pet the roomie.
But was does the new roomie break so easy? That no make Bubba happy.
chuckle.
40 mortgages? Casey was a Piker!
Got popcorn?
Neil
If a market economy caused the problem, then turning to it as a solution would be certainly fallacious.
However, we haven’t had a market economy. We’ve had an economy based on collectivism, taken in the form of corporatism or socialism-take your pick of any of the forms of collectivism. We seem to have had them all. The monetary side is controlled by the small group of Fed governors, and the fiscal side by the Congress. Neither was in the original constitution. The Fed still isn’t, and the Congress only through the 16th amendment did they gain the constitutional authority.
If one reads the Federalist Papers, one would find that even Federalists would not have granted the power to tax in any way deemed necessary to any one body. Not a chance, and it would never have been ratified. Not with their (both Federalist and Anti-Federalist) fears of tyranny-by any person or group.
Comments like this:
I know the libs will take this into the end zone and chant for bigger government.
honk me off. I’m so far to the left it would make your head explode, but I am vehemently ANTI-bailout. All my leftie friends are against it too. The only people we see who are for some sort of bailout are RE types who are, for the majority, Republicans.
Let’s leave off the leftie/rightie thing on this. Lots of folks on both sides want personal responsibility to reign here.
/rant
Common sense reigns. Thank you!
Hope the poster will listen, heed, and not respond.
lililegs –
You could be correct (I won’t say “right”) — but all the bailout talk I’ve been hearing from DC came from Dems — Dodd, Schumer, Hillary — are some Cong. Republicans into it too? I grant you there is a difference between a Senate Dem and a True Liberal.
” I know the libs will take this into the end zone and chant for bigger government.”
You gotta be joking. Bush and repubs have created the biggest federal government in American history. Need more federal bonndoggles…cue the Education dept. and that biggest and worst of the bunch…Homeland Security.
No Bill. You’re a fascist.
“mystical bottom”
Oh President Reiss, do tell us more about your kinky buyers?
“‘Buyers are there. They’re just going to have to feel confidence to get back in the market and realize there’s no mystical bottom,’ said Devin Reiss, president of the Greater Las Vegas Association of Realtors.”
“there’s no mystical bottom”
Yes, the bottom is so far away it should be described like a fable. A Camelot.
Got popcorn?
Neil
“Kris Rowberry, ecstatic when the value of his home in nearby Gilbert took off, bought a second one in the Villages as an investment. ‘I was thinking, man, if I could have 10 properties, I could just kind of retire … and kick back and live off the income,’ he says.”
oh yea! i really want to bail this guy out! its not his fault he was sooooooooo stupid. give me a break!
“Gov. Jim Gibbons said he saw the problem as largely a matter of borrowers taking on loans they should not have sought. He said he did not believe the state should intervene with funding assistance or restrictions on loan products or limits on the way they are marketed.”
“‘Not everybody is going to be able to be saved in this,’ he told reporters.”
send this guy to washington. he is speaking commonsence.
Funny how the government officals are calling fraud ,”borrowers taking on loans they should not have sought .” Look, these borrowers didn’t just inflate their income by 10% ,in alot of cases it was out and out lying by 50% to 100% on the real income figures ,as well as owner occupy intent .
Maybe if the government would start putting 2+2 together ,they will start questioning why there might be up to 17 million homes vacant . Doesn’t look like you even had poor victim homeowners that even moved into those houses/condos . Could it be that it was a investment mania and these so-called victim borrowers were really speculators .Does the government even know how many borrowers own more than one house ?
I’m wondering when the attorneys are going to get creative and fully involved. Lots of fraud. Lots of falsified legal paperwork. Lots of $$$ losses. Class action of some slaughtered investers going after the originators of the bad loans & doctored financial reporting (income statement on loan application…).
I’m sure there’s money to be made – civil suits for defrauding seem in order…
“Some of the owners who bought in the early years of the boom are stuck, even after seeing prices double in five years, McPhee said. ‘Some people have seen their home values soar, but a lot of them refinanced to pull out that equity and spent it on cars or gambling,’ he said.”
About 15 years ago, I bought a coin accumulation of an amazing size from an oldtime Vegas casino owner, around 50,000 Silver Dollars, amongst other stuff.
Over dinner, he told me he liked his Laughlin casinos the most. I inquired why?
He told me that he got almost 40% of his employees wages back over the tables, as there’s nothing to do there. It was only around 15% in Vegas, he related…
Imagine having 4 out of 10 employees working for free, for you?
Another thing to factor in, as far as how bad Vegas will be, compared to other locales, bubble-wise.
All the morons go to Vegas to gamble. I went there to work as a musician because it was good union wages, but I never could get over the dopes gambling their money away. I just watched ‘em. What a scream. The place just did not attract the creme de la creme. Great musicians back then though - the best. The smart entertainers kept their money and invested in the real estate back then - meaning the early 70s.
Many years ago I put my entire net worth into the one-armed bandits.
At a fairground, aged 8-ish, 2/6 in UK money. Maybe $10 in spending power today.
NO bailout (and big lecture) from parents. Spent the rest of the morning trailing around miserably watching brothers spending their money.
Lasting harm done: zero.
Financial Education: priceless.
“Almost half of Las Vegas home sales in 2005 and 2006 were to people who intended to resell quickly for a profit, according to data compiled by Fannie Mae, the world’s largest mortgage buyer.”
Sold to L.A., San Diego and Phoenix “investors” no doubt….
Looks like misery squared, if you ask me.
“For homeowners who jumped in at the height of the boom, the discounts aren’t so good. Mike Alley has gotten whacked hard by the area’s declining housing market. In the spring of 2005, Alley, an independent real estate agent in Racine, Wis., moved to Las Vegas.”
“He quickly found a sales job with Pulte, where he says agents were pulling in $500,000 a year for basically taking orders. A year later, he decided to jump into the market himself and buy a home. He spent a month searching, settling on KB’s Huntington subdivision.”
Now we know who owns all the second and third spec homes. Realtors. Dopes believed the propaganda they were pumping.
These guys go from being paid $500,000/yr for taking orders at Pulte to $7/hr for taking orders at McDonald’s. I suppose many of them pulled in over $1 million for nothing, but how many of them saved for the rainy years coming up?
“‘Buyers are there. They’re just going to have to feel confidence to get back in the market and realize there’s no mystical bottom,’ said Devin Reiss, president of the Greater Las Vegas Association of Realtors.”
“‘No one expected such a downturn in the market and a lot of people are stuck holding the bag,’ Reiss said. ‘You can’t blame Realtors. Everyone has a right to make money.’”
How did you make the money?
Everyone has a right to produce something that others willingly pay for. What the REIC produced was the same thing retail stockbrokers produce: improbable dreams of great wealth.
This is a 100% true story. My wife works 2 days a week for a company in Thousand Oaks, ca. I’m not going to say what the company does because they specialize. The people there make between $70,000 and $110,000 a year depending on their skill levels. Anyway, the owner was being hammered by the State of California for more money in various ways. As you might or might not know, The State of California is VERY greedy unless you are illegal. The latino population is now so big nobody dares oppose the latino population even if they are illegal.
The State knows the company is pretty profitable from tax records and they smell MONEY. Bear in mind that in California, a meter reader for example, makes $70,000 a year + medical benefits, plus pension plan, etc.
Onwards. In addition to the State, the owner is being hammered by his actual employees. They want all kinds of perks. He already has a generous health insurance plan and they have a 401k plan. Not enough it seems. They want a reduced work week and a profit participation.
The owner of the company decided the aggravation of demanding employees in concert with the State of California continually reaching into his pocket had gone far enough. So, he flew to India after doing some research concerning his product and left his partner to oversee the business. What follows is going to happen to a LOT of the USA:
He interviewed several Indian companies, finally picked one and gave them an assignment. He then returned to the USA to await it’s completion. It came back but it was only about 85% to 90% of the quality his US workers were doing. He relayed this to the Indian company and said the quality wasn’t up to the standard he required but, “Thanks anyway and good luck in the future.”
A week or so passed by and he was contacted by the Indian company again. They had re-worked the assignment and asked him to look at it. He agreed. It was now 100% as good as that produced by his US workers. Result, and the employees don’t know it yet, he is slowly going to shift production to India and begin to lay of his $70,000 to $110,000 workers. Now his business partner is thinking of taking a trip to China to see if they can farm out work there. There are between 15 to 20 US employees depending on how much work comes in.
Here’s the real kicker: The work done in India averages out about $12,000 to $15,000 per. Indian employee BUT he doesn’t have to pay health insurance. He doesn’t have to match the 401k contributions. No extra sick days. No profit sharing. No employee aggravation. You do the math…..
Want more? His office costs which run about $18,000 a month will be dropped when the lease runs out at which time he’s going to get a small office with, at the most, 2 employees.
Here’s another example about a friend who is a medical biller. The big medical insurance companies are ALL outsourcing to the Phillipines, the West Indies, India, etc. Slowly, the big medical billers (who have to deal with the incredibly incompetent US medical insurance companies) are ALSO switching their work to places like India.
So, as this trend of moving USA employment to other countries continues to gather momentum (you would be amazed at just how much work CAN be moved) who is going to buy these high inventory $800,000 crap boxes which are (STILL!) being built by DH Horton, etc, all over Ventura County in Ca.?
A week or so passed by and he was contacted by the Indian company again. They had re-worked the assignment and asked him to look at it. He agreed. It was now 100% as good as that produced by his US workers. Result, and the employees don’t know it yet, he is slowly going to shift production to India and begin to lay of his $70,000 to $110,000 workers. Now his business partner is thinking of taking a trip to China to see if they can farm out work there. There are between 15 to 20 US employees depending on how much work comes in.
Not uncommon. My best friend is trying to save a few thousand California jobs. I’m not going to say where for I think I’ve posted too much information before. Anyway, he is about to complete an outsourcing agreement. The trade is simple, by sending 400 jobs to India or Malaysia (two companies are doing trial work, with audits). Upon selecting the winner, they will immediately do a “snap audit” to verify neither switched the staff assigned to the project.
If they don’t outsource, jobs must leave California (due to high costs exceeding what is viable going forward). By outsourcing… jobs leave California. But the highest wage jobs (theoretically the highest value added) stay.
Now, this is despite the fact they’re going to have to pay for quite a bit of high paid staff to fly to India to Audit. It costs somewhere around $125k to $200k per audit (airfare, hotels, fully loaded wages, etc.) Doing less than six audits a year is inviting trouble. Yet its far cheaper to outsource than keep the jobs here…
Now let’s talk about my industry that has to pay worker’s comp out the wazzo (manufacturing).
Tough times ahead…
Got popcorn?
Neil
Good information. The other question is: what will happen to those follish ex-employees? Where will they find jobs paying that kind of money when tons of other people will also be looking at the same time (all wanting to make $100k)? $100K is probably more than 99.9% of the world’s household incomes. I agree with you in that outsourcing will happen wherever feasible. And eventually all people will make about $15,000 to $25,000 per year. The other main issue is how will J6P adapt to this new greatly decreased standard of living? Not well I imagine…
First, the Indian companies will copy the design of the American product, and go to market with something cheaper. Then the American who thought he was smart eliminating the workforce to profit more will be out. But this may not be avoidable.
Second, his employees could form together and hire Indian teams to develop a similar product at a low cost, and compete.
Moving backoffice works (e.g. medical billing) to India is a no-brainer but moving product development oversea is fraught with perils for the company doing the outsourcing. Companies who had done outsourcing are increasingly aware of both the pros and cons and not just the seemingly cheaper cost in the short run.
1. Intellectual property laws / standards are fairly weak in India / China. Your supplier(s) may well become your competitors in the future, thus the long term cost may be high indeed.
2. The outsourcing companies experience tons of personnel churn as the demand for quality employees surpasses supply. Good luck when it’s time to fix or maintain the outsourced products. Generally, a core local onshore staff must be maintained to preserve the “corporate” memory of the projects and products and this need reduces the advantage of outsourcing and adds to its cost.
3. Working with the major (i.e. reliable) oversea outsourcing companies is not cheap due to rapidly climbing wages in India. I work with oversea consultants and each currently cost about half of what it costs to hire a local person (at least in my field). But the cost of supervising them remotely (midnight teleconference calls…) and generally scrutinizing their work much more closely means the cost advantage is really only about 25% less than that of a local hire.
4. The culture and time differences can make you tear your hairs out and go bald shortly thereafter…
5. The good thing about oversea outsourcing is that companies can contract for and adjust headcount very flexibly to meet peak personnel demand on projects without carrying a large permanent full-time staff. It is rather demotivating to constantly layoff full-time staff
6. It is possible to in-source within the U.S. outside of high cost states like California at costs competitive to using oversea outsourcing companies.
So, I see smart companies outsourcing oversea primarily for the staffing flexibility rather than for any great cost advantages which cannot be met by in-sourcing within the U.S. to lower cost locales (like Texas or NC). In fact, the company I work for does both (in-sourcing and out-sourcing the work) and so does most of our competitors.
California (in general) and the Bay Area (in particular) may be doomed within ten years for actual product development. Although the HQs, marketing and maybe some high level technical staff may stay here, most of the day-to-day grunt work will be done elsewhere.
Once a substantial number of the working grunts are gone (to lower cost locales) along with their jobs, housing here has nowhere to go but down, even in the “Fortress”.
From the BizWeek article:
“When we first moved here [in the summer of 2006], the housing market was incredible,” says Tammy Elder, a mother of three. “Unfortunately we bought a house that was overpriced, and we don’t know if we’ll ever break even.”
It’s all fun and games until someone loses an eye. If they are truly in it for the long term, want to build community, and own their own home, why do they care? Hmm. I think I know why. It was never about any of those things, was it Tammy?
I have the print copy of BizWeek. Here’s another article that follows the LV story:
Subprime Woes at Cerberus
It bit off a big hunk of risky loans when it bought GMAC
http://www.businessweek.com/magazine/content/07_42/b4054043.htm?chan=search
LOL. This scammer picked the right place for this ad.
http://dallas.craigslist.org/apa/441952326.html
Check this out. States $60.000 in equity, $60? maybe, but it may be due to the fact that the “patio is included”. LOL
SSorry link here….
http://inlandempire.craigslist.org/rfs/441868321.html
I would like to apply as an editor for this bank.
I know this area it’s the new South Central LA, lots of crime.
My MOL owns a very similar house in the same town. We bought it for 77k in the mid 90s. So in today’s dollars, we’ll hit the bottom when houses like that go for 140k. IMHO
Even though the five-largest publicly held residential builders have cut the value of their land and unsold homes from $49.7 billion in 2006 to $41.9 billion today, that inventory as a percentage of sales has soared 33% during the past year….
8 billion just went poof!
I am just enchanted by this ‘mystical bottom’ thing. I got up and ran to my big mirror to look at my own, to see if it was mystical in any way, but I was disappointed to see that it was not. Just a plain old bottom, same as I had yesterday. At least it’s not descending, unlike the ‘mystical bottom’ this Devin Reiss, prez of LV realtors, is currently looking at.
OT: Sorry if this has already been posted, but there is a new reality show on TLC called “Please Buy My House”. It’s about 3 families in trouble with their houses….can’t afford them, haven’t sold the first house before buying the 2nd one, and so on. It’s on right now, Channel 50 in the Bay Area.
BayQT~
Well, here you go. One woman lives outside of NY, now separated from her husband, is a single Mom and she can’t afford to keep the house. She’s dropped the price by over $100k (from $989k), hired a real estate agent, hired a feng shui specialist…no luck yet. She needs to be out in a month.
Someone on the blog a long time ago said that this would be happening, or at least joked that we may start seeing these shows pop up.
Well, here we are.
BayQT~
The show is just aweful. How about the family throwing in their son’s interior design services?
It is now clear that all folks had in savings was the ‘equity’ in their house … wow
Yep. The folks in Florida did a LOT of stuff to try to sell their house, it made no difference. And although they are renting out the house that didn”t sell, they are still in a wait and see mode. As the husband said, it’s only a band-aid. Bottom line, they shouldn’t have bought the 2nd before they sold the first…and all this with one income.
Did the FL family actually have money in the bank saved for their kids education, or were they banking on the equity?
BayQT~
“She’s dropped the price by overf $100 k (from $989k), hired a real estate agent, hired a feng huie specialist … no luck yet.”
She didn’t go far enough. Next to her For Sale sign she needs to bury a statue of Saint Joseph upside down, plus she should consult an astrologer and perhaps a palm reader.
Another sobering thought, baby boomers who are relying on the equity for retirement. Ummm, yea, if your retirement is dissolving that might cause a panic. So even people who have been able to afford their homes will soon be dumping them for something smaller and more affordable.
OK folks, I was in vegas last week…wasn’t my best showing…so, when i went to the cashier and said, hey…back in california at the indian reservation in colusa, i’m doing ok, but here, i kinda got my ass handed to me…could you, um, well forgive the fact that i’m down a thou-ie…and quite honestly, i’m just going to tell my credit card company to consider this whole vegas thing a no-go.
call me
crush
btw that’s the whole take i’m getting from these people that have / had property in other places, and decided to buy…and then walk away when the shtf….i would have to say that’s bs…it should be: you broke it, you bought it…jackass
crush