September 3, 2006

‘Vigilantes’ Pulling Down For-Sale Signs In Phoenix

The Arizona Republic reports from Phoenix. “Scottsdale Coldwell Banke Branch Manager Earlene Nelson invited me to hear some of her agents’ firsthand housing market experiences. Valley home buyers are sitting on the sidelines waiting to see when the market is going to level off. Most open houses are drawing only a few lookers, and those who do show up aren’t serious enough to bring real estate agents.”

“Neighborhood ‘vigilantes’ are pulling down ‘for sale’ signs because they are tired of having so many lookers cruise their streets and turn around in their driveways.”

“New homes on the Valley’s fringes, particularly in Pinal County, are selling with big discounts. Buyers are asking some sellers to cut prices by $50,000 to $75,000. Some sellers say they are motivated but realistic about how they are pricing their homes. Most prospective home buyers are just ‘kicking the tires’ on Valley houses.”

“Trends are changing daily, as are buyers’ and sellers’ minds. But what most agents are wondering is when and if the Valley’s housing market has finished its cooldown and when it will start climbing again.”

“At a time when overall sales are plummeting, Surprise’s home values have nonetheless been rising so far this year.The number of local home sales declined from 4,154 last year to 1,951 so far this year. ‘We’ve had a huge increase in supply, so you would think we’d have a decline in prices in Surprise.’ Realtor Mike Holloway said.”

The Daily Courier from Prescott. “(Mortgage brokers) Jerry Sell and Theresa Baca have both noticed a change in the loan options buyers are seeking from 2005. ‘Last year we saw tons of the interest-only products,’ Baca said. ‘We saw lots of California buyers coming in wanting to get into investment properties with little or no money down.’”

“Baca said young buyers are having problems affording homes that have appreciated. ‘There is so many young families trying to buy and the prices have gone up to a level where they are having trouble with the payments,’ she said.”

“Sell said he is leery of interest-only loans because of the risk involved. ‘I don’t advocate those,’ he said. ‘I feel those have the potential to get somebody in trouble in future years.’”

“Sell explained that the glut of homes in the tri-city area means that a hard winter is likely. He said rates will stay down and sellers will have more realistic views about their property and adjust their asking prices accordingly.”




‘It’s Hard To Accept That Prices Are Going Down’

The LA Times reports on the condo market. “Buyers seeking condos have scads to choose from, but if it’s bargains they want, they should probably hang tight a bit longer. It’s unclear how long these high prices will last, but appreciation rates already have slowed dramatically.”

“If history is a guide, condo and single-family-home prices will ‘dance to the same tune,’ said John Karevoll, chief analyst for DataQuick, meaning that the two types of housing will adjust together. Condos and single-family homes have historically declined in tandem the first 5% to 7% of a market slide. Condo prices then tend to drop slightly more.”

“Condos and single-family homes are sitting on the market longer than last year in part because sellers are holding out for top dollar and buyers aren’t jumping into purchases, waiting to see if prices will fall. ‘I had 50 buyers bidding on 25 condos a year ago,’ said Walt Tamulinas, an agent in Yorba Linda. ‘Now I have 75 condos with 25 bidders.’”

“In downtown Los Angeles, there is a glut of units, said Stephen May, a veteran broker. The broker’s sales count through June of this year is half that of the same period last year, he said. Today, seven condo units are listed for every one that sells.”

“May recently represented a seller who had bought a condo last November for $385,000. She listed it in early July for $485,000, with a warning from May that she should be prepared to reduce the price. She quickly did, to $450,000, then $419,000, the price of five others for sale in the building. May urged her to drop the price to $395,000, which would set her apart from the others, but she refused and the sales contract expired. The condo no longer is listed.”

“‘Her property isn’t worth what she wanted it to be,’ May said. ‘It’s hard to accept that prices are going down.’”

“Gary Schaffel in Van Nuys, a prolific San Fernando Valley builder of condos ranging from $500,000 to $1 million per unit, said he’s taking a more conservative approach about future deals. ‘We’re keeping the same pace for the projects that are already rolling,’ Schaffel said. ‘But I want to see the land prices dip more before I make future land purchases.’”

The Half Moon Bay Review. “Slipping home sales across the nation have left Coastside real estate professionals rethinking the local market. ‘One thing is for certain,’ said agent Jack Wagstaff. ‘It’s not a seller’s market anymore.’”

“John Gieseker, president of the San Mateo County Association of Realtors, attributed the slump to higher interest rates and a steady, but unsustainable period of growth that has occurred over previous years. ‘The kind of double-digit growth we’ve had can’t go on forever,’ he said. ‘Markets have to fluctuate.’”

“‘I’d say that demand is still there,’ said Cid Young, a Realtor in Moss Beach. ‘But the ‘wealth effect’ is dropping. People are having to suggest more realistic asking prices when they put their homes on the market. You just have to remember: it’s not last year’s market. Get over it,’ she said.’




What Have Been Important Housing Bubble Milestones?

A couple of readers suggested noting the significant ‘milestones’ we’ve seen with this housing bubble. “I’ve got a Labor Day weekend topic suggestion. It’s good time to look back at how far we’ve come and what the important milestones have been.”

“I’ll suggest a format:

1. What marked the top of the housing bubble? (e.g., last summer’s Time magazine cover).

2. What have been the three most important events/milestones/turning points since the top? (e.g., July 2006 — Countrywide CEO says he’s never seen a soft landing in his 53 years).

3. What will be the next key milestone? (In my opinion, when public perception shifts from the housing bubble to the lending fiasco — the Business Week cover seems to be pointing in that direction).

Another added, “Next key milestone - negative YOY price change in the national median for existing homes.”

“No matter how flawed that measure may be, it will be a headline statistic that the MSM will use. Joe/Jane Sixpack will see it and react.”




‘The Momentum Is Away From Soft’ In Florida.

The Orlando Sentinel has this editorial from Florida. “The Florida housing market is spiraling down. How hard we land remains a matter of speculation, but the momentum is away from soft. Those who bought a downtown condo with the intention of flipping will get burned unless they have deep enough pockets to hang on. Last month, the Realtors’ association reported selling only six condos valued at more than $400,000.”

“The phrase ‘investment condo’ will become an oxymoron for a while, a long while on the coast.”

Myrtle Beach Online from South Carolina. “Condominium developers are reacting to a softening market by slowing condo building in Horry County - reversing a three-year trend. ‘Builders will have some excess inventory, and that will end up being good news for consumers. They have to work out that inventory and that means softening prices,’ said Bernard Helm, (who) tracks real estate markets.”

The St Petersburg Times. “The number of building permits issued in the Tampa Bay area fell an average of 43 percent between July 2005 and July 2006. The hardest hit: Pasco County, where permit totals plummeted 63 percent. (Broker) Jim Knetsch in Carrollwood, said that while some cautious lenders have placed a ‘temporary moratorium’ on funding for new subdivisions.”

“Though clusters of ‘For Sale’ signs have provided abundant proof of a housing glut, evidence that home builders were getting the message was elusive until recently. ‘Everybody has revisited their plans and business plans.’ Anyone who says otherwise is lying, he said McCar Homes executive Kevin Robles.”

“The prospective buyer and seller of a 416-acre parcel on State Road 50 say their deal has fallen through. Attorney J. Patrick McElroy of Citrus County, said the trust was willing to extend the contract but that Mercedes pulled out because of the sagging demand for new homes. He read a letter explaining that Mercedes was choosing not to buy the land ‘due to declining market conditions.’”

“Among the skeptics about the current market is County Commission Chairwoman Diane Rowden. ‘They can use all the excuses they want,’ Rowden said. ‘They can figure out that the market is not there for new homes.’”

The Palm Beach Post. “Two mixed-use condominium projects touted for years as key pieces of the city’s downtown redevelopment sit idle. One of them, 500 Ocean Plaza, this month asked the city for its second one-year extension for the site plan. Initially known as the Arches in 2003, the proposed project at Ocean Avenue and Federal has yet to begin sales or construction.”

“Similarly, Promenade, at Boynton Beach Boulevard and Federal, hasn’t started building and late last year canceled sales contracts and raised prices, citing soaring construction costs.”

The Star News Online. “Dear Mr. Berko: In May of 2005 we bought a condominium on St. Pete Beach, Fla., for $885,000. Five months ago my wife and I lost our jobs in the travel industry. We immediately put our condo on the market and have lowered the price twice, finally to what we paid for it.”

“Last week we got a lowball offer of $795,000, which is the only offer we’ve had since we listed the unit. At first we thought the offer was a joke because shortly after we bought our unit, two other condos in our building just like ours sold for $1.1 million. Then we were shocked at the possibility we might have to take an $83,000 loss.”

“Now we are frightened that we may have to keep the unit making mortgage and interest payments and paying maintenance taxes and insurance until the market gets stronger. That would certainly bankrupt us because we can’t afford the $7,000 monthly costs. It’s killing us and the possibility of taking an $83,000 loss would wipe out all our savings and we’d still be about $18,000 short.”

“We’ve read that the experts believe housing prices will increase this year between 3 percent and 7 percent. It seems that interest rates have stopped rising. So do you think when rates begin to fall again that the condominium market will get stronger? If so how long do you think it will take? D.S.”

“Dear D.S.: You folks are in big trouble and so are tens of thousands of others who bought homes with zero money down using an adjustable rate mortgage. And the banks may be in deep do-do, too, because in almost every instance the amount of those mortgages exceeds the market value of those homes.”

“I’m quite familiar with that section of Florida and I know that the number of resale listings has increased fourfold in the past five months. Your unit is competing against a surging glut of thousands of resales as well as a record number of unsold new units sitting empty and a soaring number of unsold ‘new builds’ that will soon triple the already swollen unsold inventories.”

“Now I know my advice is going to be hard to swallow, but you’ve got to consider the circumstances and take your loss and lump it. The housing boom, no matter what the experts, real estate agents or builders tell us, is going bust. Of course housing experts are predicting a 3 percent to 7 percent increase in property values this year. But these well-paid idiots completely ignore the fact that there wasn’t a sane reason for the astronomical rise in housing costs during the past five years.”

“Common-sense valuations suggest that as of January the prices of most homes and condos were 40 percent to 50 percent too high. So sell that unit before the buyer rescinds his offer.”




Post Local Housing Market Observations Here!

What do you see in your housing market this weekend? Builder incentives? From Arizona. “As the real estate market declines, so does the number of jobs related to the industry. Thus far layoffs among homebuilders have been minimal, and real estate agents say their numbers are still strong. ‘Here’s the bottom line, nobody knows what’s going on,’ said Ron LaMee, Arizona Association of Realtors vice president of information services.”

From Seattle. “You’ve probably heard something like this before: ‘Every child is unique and special. It’s the same for a city’s personality. It’s just as easy to think of Seattle as special; defying the trends ahead. Our regional narrative continues to insist that we remain a red-hot real estate market, ignoring the cautionary data. The rest of the country might be experiencing a pop in the housing bubble, but the ‘we’re different’ idea suits our perception of ourselves.”

“I would suggest Seattle is riding its wave, too. The real estate numbers reflect the swell in the tsunami ahead: In King County we keep building (a 43 percent increase in housing permits), while home resales are shrinking (down 13.7 percent from a year ago). Our inventory of available homes is huge as we shift into an era when no one wants to be the last person to buy a home at its most expensive price.”

The Globe and Mail. “For those of you who have just sunk all your savings into a new house in Toronto,..you may have just bought at what some experts are calling the tail end of a long seller’s market. Out in the field, people for whom real estate is business are already noticing the pendulum swing.”

“‘Prices seem to have softened somewhat, that’s for sure,’ observes broker Niels Christensen. ‘There are more houses selling for under asking price now than there were for the same period a year ago.’”

“There are signs that Greater Vancouver’s elevated real estate prices may ease back in a soft landing, rather than a burst bubble. The report notes housing demand in Vancouver has been softening since the beginning of the year while listings have risen.”

“TD defines a bubble as when buyers bid home prices up beyond underlying fundamentals on the expectation of further price gains. ‘It is, by definition, impossible to identify a bubble before it bursts, since rational investors would refuse to hold any asset whose price was certain to fall,’ it notes. The report also says there are clear signs the U.S. housing market is falling back to earth, dampening U.S. economic performance and possibly spreading to affect Canada.”




‘Now Is Not A Time To Speculate On Homes’

The Union Leader reports from New Hampshire. “State revenues were off by 6 percent in August, pulled down by a plummeting real estate transfer tax and sagging rooms and meals returns. The biggest disappointment to budget writers is the real estate transfer tax.”

“Department of Administrative Services Commissioner Don Hill said the real estate market has peaked and is now in decline. ‘The real estate bubble is broken. The high mortgage rates don’t help,’ he said.”

The Providence Journal from Rhode Island. “The real estate agent who finds a buyer for a $5.8-million house in Jamestown will receive a 2007 Mercedes CLK 350 convertible. The Mercedes is an extreme perk, but many sellers, at all levels of the market, are offering a little extra to help reel in buyers, and motivate their agents.”

“Often, the incentives come after several months on the market, and more than one price reduction, have failed to produce a buyer. For people who need to sell their houses and have a deadline, it’s a frustrating experience, said (realtor) Wendy Wagenbach.”

“‘They just feel like they’re just giving and giving and giving at this point,’ she said. ‘Buyers are just taking their time’ and ‘the people who are under the pressure [to sell] are really kind of frantic at this point.’”

“Janet Neff, a sales associate in North Kingstown, says she has not witnessed any unusual concessions by sellers other than ‘the willingness to reduce’ the price of their property. ‘I don’t perceive it as a bad market at all,’ even though ‘we’re flooded with inventory right now,’ she said.”

“Neff said it’s not necessarily a bad thing that buyers have the time to shop around and compare properties before making an offer. Neff said, sellers ‘are giving me longer listing times’ to sell their houses. ‘It’s really impossible to sell a house quickly without really dumping it,’ she said.”

“Wagenbach said motivated sellers, who have to move for a job or who have made a financial commitment to purchase another house or condo, are doing ‘whatever it takes’ to sell their property.”

The Ridgefield Press from Connecticut. “‘Real estate is a cyclical business,’ said Richard Walter, president of the Ridgefield Board of Realtors. He and fellow real estate agents in town ‘are finding that prices have leveled and are coming down somewhat.’”

“As of June 1,305 single-family homes were on the market, up from 203 as of the same date in 2005, Mr. Walter said. While not as drastic as the imploding real estate bubble predicted by some financial analysts, the dip in the housing market here means that now ‘is not a time to speculate’ on homes in town, Mr. Walter said.”

“As for selling, Mr. Walter was still upbeat, though somewhat less effusive. ‘Homes will sell as long as they’re priced right.’ When it comes to choosing an asking price, Mr. Walter said sellers should let themselves ‘be guided by their Realtor’s recommendation.’ Of course, Mr. Walter added, keeping an available ‘house looking good’ can’t hurt.’”




Bits Bucket And Craigslist Finds For September 3, 2006

Please post off-topic ideas, links and Craigslist finds here!