June 17, 2006

Following The Market Down In Las Vegas

The Review Journal has this slightly mixed- up report on the housing bubble in Las Vegas. “The opportunity to become a homeowner in Las Vegas has widened greatly, observers say, as investors bail out of a cooling market, leaving inventory at a record high and forcing sellers to lower prices by as much as $50,000 in some neighborhoods.”

“It’s a new game in a changing market, and old rules no longer apply, said Jason Braford, district director for ZIP Realty in Las Vegas. ‘Just because you’re seeing stories about homes sitting on the market for months or years, if the house you like is..a special property, all the old rules still apply,’ he said. ‘In other words, multiple offers and the need to move fast.’”

“First-time buyer Alaina Brox, 26, recognizes that Las Vegas has become a buyer’s market but thinks prices will continue to rise. She was looking at a four-bedroom, 1,230-square-foot home near Lorenzi Park listed at $235,000. ‘I’ve got two kids, so I need something big. I like the big yard. I don’t know if I have enough money to fix it up,’ she said.”

“(Researcher) Dennis Smith said Las Vegas is very much a buyer’s market for long-term investment. Smith is traveling to Boston and New York later this week to meet with hedge fund investors and analysts. With home builders’ stocks taking a beating, they want to know what’s on the horizon for housing, he said.”

“Based on Thursday’s closing prices, KB Homes stock is down 40.4 percent for 2006; Pulte Homes stock is down 31.4 percent; MDC Holdings, which does business as Richmond American Homes, is down 19.7 percent; and D.R. Horton is down 32.6 percent.”

“‘Most of the large institutional investors all think the long-term outlook for Las Vegas is excellent,’ Smith said. ‘It’s going to take a year or two for the inventory to shake out from all the investors.’”

“With rising inflation and interest rates, the pin that could pop the hyped real estate bubble is the poor credit of potential buyers, said (mortgage broker) Tom Piecenski in Columbus, Ohio. A consumer survey by the mortgage company showed that 63 percent of renters in Las Vegas plan to buy a home within the next few years, but they’re hesitant about buying because of credit and financing concerns, Piecenski said.”

“A majority of those surveyed in Las Vegas said they lack the financial knowledge to take the plunge into home ownership, Piecenski said. More than one-fourth admit to having little or no understanding of mortgage fees, and almost 40 percent don’t understand how points affect mortgage and closing costs.”

“On the other side, sellers need to update their thinking, Braford of ZIP Realty said. Many of them are setting their list price based on information six months to nine months old. They tend to underprice their home in a rising market and overprice in a falling one.”

“‘Owners typically don’t seriously consider a wide enough range of potential housing market outcomes, including the possibility of a steep decline. That leads people to take more risks than they should,’ he said. ‘Don’t follow the market down. If you follow the market down, you may never manage to sell because the price is always just a little too high. Price your home according to the changing market.’”

“Braford said it really comes down to what a buyer is trying to accomplish. ‘Do what’s best for you, not your neighbor,’ he said. ‘Potential buyers sometimes feel safety in numbers and think that millions of buyers can’t all be wrong. This herd behavior is what lured a lot of people into overpriced houses in the first place.’”




‘It’s Not Last Years Market Anymore’ In LA

The LA Times has this update from California. “Without question, the market has changed. Bidding wars are fewer and farther between. Word-of-mouth sales before a sign goes up are less frequent. And deals struck in the first minutes of open houses are all but history, agents say.”

“For four long months, there has been a ‘For Sale’ sign in front of David and Jody Saltzman’s Malibu home. ‘I was hoping it would sell in 60 days,’ David Saltzman said. When it didn’t, the couple lowered the price by $100,000 in April. They took another $100,000 off in May. With the house eventually listed at $1,495,000, making it the least-expensive listing in the development for a house of its size, they finally entered escrow a week ago.”

“The Saltzmans aren’t alone in their prolonged struggle to sell. Houses throughout Southern California are staying on the market longer than they were a year ago.”

“(Realtor) Tuba Ghannadi in Palos Verdes listed a 3,000-square-foot house in during the Christmas holidays for $1,948,000. But the house isn’t moving. ‘In February we lowered the price for the first time. Every month we’ve lowered the price some more,’ she said. The asking price is now $1,748,000. Still, the house sits vacant.”

“Such price reductions aren’t limited to the $1-million-plus market. In San Jacinto in Riverside County, real estate agent Hugo Florez has seen the price of one of his listings drop every month too. The three-bedroom, two-bathroom house came on the market in April at $275,000. ‘We dropped it to $265,000 in May, and $259,000 in June,’ said Florez. ‘It’s not last year’s market anymore.’”

“After 111 days on the market, Bruce Kurnik’s clients cut the asking price from $1,489,000 to $1,399,000 for their five-bedroom, 4 1/2 -bathroom house in 3,699 square feet in Oak Park, an unincorporated community of Ventura County. ‘We had two offers when it first hit the market, and the sellers didn’t take it,’ said the broker.”

“Kurnik has a Van Nuys home that’s been listed for 125 days and counting. ‘The seller wants a certain price,’ said Kurnik, who listed the three-bedroom, two-bath house for $589,900. ‘We had a very interested buyer, and we were extremely close to putting it into escrow,’ Kurnik said. ‘But the seller said, ‘We’re coming into summer, let’s hold out.’”

“Houses and condos can linger on the market for many reasons, and sellers, through no fault of their own, can be caught in a market shift. David Saltzman still doesn’t know why their home sat for more than four months, but he’s philosophical. ‘We don’t feel insulted, because there are several houses that have been on the market quite a bit longer than ours.’”




‘We Can Pretty Much Live Anywhere, Can’t We?’

A couple of readers suggest regional price comparisons for a topic. “Why would $325K get you a crack shack in grimy SoCal, while the same money will get you this in North Dakota?”

A reply, “You see in that ad where it says ‘WINDY’?? That may give you a clue….. On a serious note, your point is well taken…If you reduce it down to basic quality of life issues; food, health, family & friends we can pretty much live anywhere can’t we ??”

Another said, “Brrrrrr. I’d like to see some pics around January. Of course, with global warming, it could be like Phoenix real soon.”

One considers amenities. “Dang…sweet! But (there is always a ‘but’ right) you would really have to enjoy isolation to live in this house. I want my kids to have lots of friends to hang out with, good restaurants to enjoy, and entertainment, so I’m destined to be in the suburbs of a major city.”

And another said, “Or, spend just a little more (or low ball) and live safe as a hobbit in this dwelling ’secretly’ secured in Durango, Co.”




North Port Homebuilders Have ‘Caught Up’

The Herald Tribune has this update from Florida. “North Port may be the fault line for the downturn in the Southwest Florida housing market. The adrenaline of a real-estate gold rush has given way in a matter of months to a buyer’s market.”

“Local builders blame investors for the downturn, saying they flooded the market, bought up houses and tried to flip them. And now there’s simply too much inventory.”

“All along Price and Toledo Blade boulevards, North Port’s ‘builders’ row,’ the signs of the cooling housing market are flapping in front of almost every model home in big, bold letters: $10,000 in free upgrades, $20,000 buyer’s bonus, homes starting below $200,000.”

“On top of that, some builders are offering giveaways like a chance to win a trip to Bermuda, a $10,000 gift card to a Rooms To Go furniture store, free moving expenses, an eight-night hotel stay or a shopping spree at Wal-Mart.”

“A year ago, when the city was issuing more than 350 permits a month and builders had customers on waiting lists because they couldn’t build fast enough, marketing tactics like these were unheard of in this fast-growing city. But today, as the flood of customers has slowed to a trickle, home builders are reaching out in new ways to attract buyers and move their stalled inventory.”

“North Port officials had expected to permit more than 5,000 single-family homes this year, but in May issued just 74 permits. That followed only 88 in April.”

“‘Everybody is doing something; you have to,’ said Marge Weber, a new home specialist with Jade Homes. ‘We’re sitting here not selling many homes.’”

“More than 1,400 homes, 377 of which were built this year, are listed for sale with agents in North Port. That’s not counting the houses that are for sale by owner and many builders’ spec homes. Combined, some real estate professionals estimate, close to 5,000 homes are sitting on the market in the city.”

“The only other area where builders are offering such incentives is Orlando, according to the Florida Home Builders Association. Around Orlando, builders are raffling off Mini Cooper cars, furniture packages and vacation getaways, behavior Beth McGee, executive director of the home builders association there, hasn’t seen in more than a decade.”

“‘For a long time, they couldn’t keep up; they couldn’t build them fast enough to accommodate the sales,’ McGee said. ‘Well, now they’ve caught up.’”