October 27, 2006

“Can’t Run Away Fast Enough On The Way Down”

It’s Friday desk clearing time for this blogger. “Latonya Barbery, a medical assistant in Old Bridge, N.J., said she has looked for a home for the past 18 months but found them still too expensive. ‘They’re asking too much for these little shacks,’ she said in an interview with The Associated Press.”

From Connecticut. “More and more Fairfield homes keep coming up for sale, but buyers are no where to be found. According to Mike Tetreau, the president of the Greater Fairfield Board of Realtors, many homes have been popping up on the market, but house sales are slow. ‘It’s like having twice as much product on the shelf, but selling 25 percent less,’ said Tetreau.”

“The Delaware Community Reinvestment Council is one of the groups calling for tougher guidelines on nontraditional mortgages. ‘We are very, very concerned about the exotic mortgages, particularly in Delaware,’ said executive director Rashmi Rangan. For some people, ‘the only way to get the dream house is through the exotic mortgages,’ Rangan said. ‘In two, three years it’s going to become a nightmare.’”

From Kentucky. “Joe Simms, president of the Greater Louisville Association of Realtors, said Louisville is a buyer’s markete. But he thinks would-be buyers have been scared off by the national reports. The Louisville market ‘is not going to plummet, it never does that,’ Simms said, but ‘when in doubt, it’s human nature to say no.’”

“The number of permits issued for new Oakland County homes dropped by 51 percent in the year’s first three quarters vs. that period in 2005, a decline slightly greater than that of Southeastern Michigan as a whole. The state has the third-highest rate in the nation, behind Colorado and Nevada. ‘If (lenders are) selling a home for 80 percent of what a builder sold it for two years ago, how’s the builder going to compete with that?’ asked James P. Babcock, president of the Building Industry Association of Southeastern Michigan.”

From New Zealand. “Economist Gareth Kiernan said June quarter house prices last week were evidence that the five-year boom was ‘all but over.’ Mr Kiernan said, ‘Kaikoura and Mackenzie are now experiencing annual price declines, with other provincial areas such as Otorohanga and Westland at risk of the same fate.’”

The Moscow Times. “Demand for mortgages fell last month for the first time in years, banks said. Potential homeowners chose to wait out the price boom in hope of a downturn. ‘For the first time, we have run up against falling demand,’ said Sergei Tropin, head of marketing for International Moscow Bank.”

From Canada. “The demand remains strong but the cost of homes in Lacombe is levelling off, according to real estate broker Dale Russell of Red Deer. This is driven mainly by new construction. ‘Where demand starts to fall off a little bit then there’s more inventory. This really silly market we had in December and January, it lasted until probably the end of June,’ added Russell. ‘Now things have kind of cooled off a little bit.’”

From Wisconsin. “Dick Hinsman, who has sold homes in Racine County for 43 years, said he wasn’t sure why there are more listings on the market today compared to a year ago. ‘I don’t know if that’s a sign of the economy or of all the new homes being built,’ Hinsman said.”

“Finally, the bubble in Boise is breaking. What some are calling slumping Treasure Valley real-estate sales, some are calling good news. Others, however, are turning to voodoo. I am not making this up. My friend Stephanie was in my hood because there is a shop down the street where she bought her own plastic St. Joseph figurine to plant in her yard. ‘Stephanie, are you serious?’ I asked. ‘All you have to do is drop the price on your condo because you are asking for an unreasonably high amount.’”

“Economic growth slowed to a crawl in the third quarter, advancing at a pace of just 1.6 percent. Investment in homebuilding was cut by the biggest amount since early 1991. ‘The housing bubble burst and that really knocked down growth,’ said Joel Naroff, president of Naroff Economic Advisors.”

“Stephen Roach, the chief economist at Morgan Stanley, believes central banks have created a monster. Low interest rates in most countries created excess liquidity in global financial markets. This in turn led to ‘a profusion of asset bubbles,’” Roach said.”

“He said the resilience of the global economy for most of this decade was not an organic feature of globalisation, he argued. It was the result of excess liquidity.”

“Anyone who thinks a little drop in interest rates will bring back the good old days is delusional, said Paul McCulley, managing director of fixed-income giant PIMCO. ‘Housing is going to be very inelastic to falling interest rates on the way down, just as it was very inelastic to rising rates on the way up,’ McCulley said. ‘To think otherwise after a bubble is to not understand bubbles. Risk appetite in property markets will not be restored by modest declines in market-determined interest rates.’”

“Real estate is ‘the ultimate momentum market,’ McCulley said. ‘Can’t get enough on the way up and can’t run away fast enough on the way down.’”




Flippers “Hit The Skids” In Oregon

The Olympian reports from Washington. “South Sound median sales price increases for homes year-to-year have dropped from 28 percent in February to 5 percent last month, the Olympic MLS reports.”

“Median sales prices have dropped in five of the first nine months this year, peaking at $262,488 in July and finishing at $249,575 in September. And the inventory of homes for sale has nearly doubled this year to 1,764.”

“Russell Saimons, a financial adviser in Seattle, said he eventually wants to buy a home but ‘it probably won’t happen for two to three years’ because he expects prices to keep coming down.”

The Mail Tribune from Oregon. “The median price for Jackson County homes rose 5 percent in September, after dropping for the first time in 22 years during August. With countywide inventory 171 percent above last fall’s level, buyers are biding their time. New home sales are down by about 30 percent this year in the county.”

“Rick Harris, former president of the Oregon Association of Realtors, and an agent in Ashland, said Jackson County isn’t experiencing the severity seen in some regions. ‘Statistically we’re an anomaly from the prices you see from Poughkeepsie to Pocatello,’ Harris said. ‘Oregon has already made the adjustment and we’re starting to stabilize.’”

The Newport Times. “Starting Friday, Oct. 27 and spread over three consecutive days, 17 different new homes from Roads End to Depoe Bay will be open for 16 hours. (Realtor) Dave Davis was inspired to start what he believes to be the first-ever tour like this in north Lincoln County by a number of things.”

“One of them, he concedes, is a housing market that doesn’t see new construction selling as fast as it used to. ‘Our inventory is up,’ he said. ‘There are more new homes on the market than I think we’ve ever seen in Lincoln County in the last four years.’”

The Oregonian. “The frenetic pace of sales and price appreciation that catapulted Portland’s urban condo market the past two years has calmed. ‘Everybody knows it’s not appreciating like it has in the past,’ said real estate agent John Cooper. ‘Whether it’s leveled off, or will level off soon, or hit the skids, no one knows. But it’s not good now.’”

“In the city’s core neighborhoods, the Pearl District, downtown, Northwest District and South Waterfront, dozens of buyers are shooting for a quick resale instead of living in their units, adding to a growing supply on the market.”

“Many fear the urban condo market is poised for a steep decline in prices and volume, as it saw in the early 1980s. And individual speculators, known as flippers have added to the mix. ‘Last year at this time in the Pearl, there might be 11 active resales, and we were just in awe,’ said Judie Dunken, a condo specialist. ‘This year, we have closer to the 100 mark.’”

“Several buildings are under construction with 50 percent or more of their units reserved with nonrefundable earnest money. Condo buyers, especially those who bought to flip their units, are worried about the potential for oversupply, said Cooper. Cooper helped a customer sell a South Waterfront condo development a few months ago when only 15 others were available for resale in building. This week, 40 units in the RMLS system are up for resale.”

“‘One thing that made my guy nervous was he knew as more people closed on their units, they would be putting them on the market,’ Cooper said.”

“At least one investor has lowered his asking price in recent weeks. Agent Judie Dunken said she is listing a townhouse unit in The Meriwether at South Waterfront for $999,900, down from $1.17 million.”

“A growing gap between expectations of buyers and sellers now is complicating the market, Dunken said. Buyers see lots of units available and want to negotiate prices down, while sellers want to replicate appreciation rates of years past, she said.”

“‘It’s tough because they’re absolutely beautiful units,’ Dunken said. ‘But they’re priced as if a buyer came to town and had $1.4 million to spend.’”




“A Little Bit Of An Overbuild” In California

The Monterey Herald reports from California. “Real estate in California moved in September like chilled molasses. For September, Monterey County reported 156 sales, less than 50 percent of the sales volume of September 2005. There were 2,437 homes on the market during September in Monterey County, up from 1,584 a year ago.”

“‘There’s 1,000 extra homes out there,’ said Monterey County Association of Realtors CEO Sandy Haney. ‘There’s too much competition. I think right now the market is at a stalemate. They’re saying it may have hit bottom or it’s close to it,’ said Haney. ‘Now, how long it stays there is the question.’”

Inside Bay Area. “The median value of new homes sold in the Bay Area dropped by 12.3 percent in September compared with a year ago in yet another sign of a housing market that is cooling rapidly both locally and nationally.”

“Contra Costa County saw the biggest price decline for new homes in the Bay Area, a 20.8 percent drop to $551,000. ‘There was a noticeable chunk of condo conversions. That could be part of it,’ said DataQuick spokesman Andrew LePage, adding that new-home builders lowering prices could also be a factor.”

“Scott Kucirek, Northern California general sales manager for Prudential California Realty, thinks that too much new-home inventory is the driving factor behind the price drop. Builders are reducing prices and offering incentives such as upgraded kitchens to draw in buyers.”

“‘They are in a crisis,’ Kucirek said. ‘We are seeing significant price reductions. … A lot of builders are publicly traded so they have to answer to Wall Street.’”

“In the Bay Area, new-home sales were off 22 percent in September compared with a year ago, according to DataQuick. ‘New-home sales are definitely down,’ said Cory Reid, president of Emeryville-based Fountainhead Mortgage. ‘My sense is that there is a little bit of an overbuild.’”

“At the same time, some buyers are apparently sitting on the sidelines waiting for prices to drop, he said.”

The San Francisco Chronicle. “Falling prices, sluggish sales and mortgages that let borrowers pile up debt faster than they can pay it off could put more Bay Area homeowners out of their houses this year than at any other time this decade.”

“By the end of September, 865 homeowners in the nine Bay Area counties had lost their homes through foreclosure sales, easily surpassing the 529 borrowers whose homes were repossessed all last year, according to the DataQuick.”

“About two-thirds of Bay Area homeowners have mortgages with payments that start at a low level and rise over time. ‘There is no time in modern history when we’ve had such aggressive underwriting,’ said Ken Rosen, at UC Berkeley. ‘We have a potential this time to see a much more serious problem than any time we’ve seen in the past.’”

The LA Times. “Last in vogue during Southern California’s previous real estate downturn in the early 1990s, auctions at new-home communities are gaining steam again as builders look for ways to move their merchandise quickly in a sluggish market.”

“An Irvine-based developer whose Aliso Viejo condos were auctioned was able to unload 30 units in one afternoon and avoid piling up losses on its 344-unit development that was still half complete. The auction in mid-October was ‘the first big event’ at a new-home community in the current real estate cycle, said Rhett Winchell, head of residential auctions at Beverly Hills-based Kennedy Wilson, which has been arranging auctions for 20 years.”

“But it won’t be the last, he said. ‘A lot of builders are considering it and a lot more are coming,’ he said.”

The Press Enterprise. “Clarence Noreikas, owner of Riverside Appliance, said most of the year business has been slow at Riverside Appliance compared to the previous few years. ‘We’re not getting the bodies through the door like we were before,’ he said. ‘There’s still people with money, but when they see something going negative they get negative, and they don’t want to buy.’”

“He attributed much of the decline to the cooling housing market.”

The Appeal Democrat. “Sales of local existing homes declined last month, continuing a trend that began about a year ago and could extend into next year, Yuba-Sutter real estate experts said Thursday. Although the median price also declined, the drop was not considered significant, they said.”

“‘There’s a lot more inventory to choose from. Consequently, they (buyers) are taking more time to (buy),’ said Shirley Henrikson, past president of the Sutter-Yuba Association of Realtors.”

“The number of homes sold in Yuba-Sutter dropped from 194 in September 2005 to 120 last month. The median dropped just slightly from $287,000 in 2005 to $282,304, according to numbers gathered by Henrikson.”

“Last year, 189 home sales occurred in September, with a median of $289,000 and 111 last month for $276,000, Lloyd Leighton said. Drops in the market occur when people stop buying, homeowners lower their prices. That causes buyers to wait further for possible better prices, which causes prices to drop further, he said. It’s a good time to buy a house, both Realtors said.”




Quick Decline “Like A Culture Shock To Many”: Chicago

The Daily Herald from Illinois. “So much for the Chicago area being insolated from the sharp home sale downturns felt in other markets. Local home sales plummeted 23 percent in September, according to a survey. The September picture was dramatic. Illinois combined sales for single-family homes and condominiums dropped 19.5 percent from last year’s record, according to the Illinois Association of Realtors.”

The Chicago Tribune. “That Chicago prices have not declined as precipitously as the sales figures may be due to a number of factors, experts say, and some warn that prices may be poised to head south. ‘The sellers in Chicago are very stubborn,’ said David Lereah, chief economist of the National Association of Realtors. ‘They’re not bringing their prices down, so sales are going down.’”

“Lereah says Chicago prices are in the typical pattern after a boom. ‘Price always lags, so as sales drop off, prices will follow,’ he said.”

“But David Thorpe, for example, has lowered the price on his Glen Ellyn residence to $389,000 from $429,000 in March. He took it off the market Oct. 1, and he and his wife have moved to Naperville, will dress it up before relisting it in January. ‘I just don’t think there’s any action out there right now,’ he said. ‘We had so few people look.’”

“Pete Flint, CEO of a residential real estate search engine, said speculative buying had fueled the price run-up in the last several years. Those investors generally have fled the market now, he said. ‘Investors or speculators have disappeared completely,’ Flint said. ‘On a median basis, prices seem to be relatively steady and firm’ because control of the market has reverted to ordinary consumers.”

“Economist Ian Shepherdson expects the market to worsen and take prices with it. ‘The longer-term downward trend in mortgage applications and sales should reassert itself over the next few months as people balk at using borrowed money to buy depreciating assets,’ he said. He expects ‘a steep and prolonged downturn’ in housing, with sales and housing starts dropping 50 percent or more from their peaks.” ”

“Housing consultant Steve Hovany said home builders have been forced to cut prices and sell excess land. And many have quietly laid off staffs. ‘They are trying to sell their last six or eight houses at some projects and want to get rid of them before winter, so they can start fresh in the spring,’ said Hovany in Schaumburg.”

“In Chicago, a report by a consulting firm said that condo sales in new buildings fell to about 700 in the third quarter, from 1,200 in the second quarter and 1,600 in the first quarter. About 5,700 new condos are being marketed in the downtown area, up by more than 1,000 from last year, said Gail Lissner of Appraisal Research.”

“However, many of those condos have yet to begin construction, she said, ‘and some projects may not be built.’”

From Chicago Business. “The number of Chicago-area homes entering some stage of the foreclosure process increased in September, keeping the metropolitan area’s rate at more than twice that of the nation. A total of 6,177 homes in the eight-county metro area were in the foreclosure process last month.”

“‘I wouldn’t be surprised if (foreclosure numbers) go higher than that,’ said David Rose, director of research for the a consumer advocacy group in Chicago. ‘If the second half of the year is anything like the first half, we are going to see a jump.’”

“Mr. Rose’s organization tracked 4,695 foreclosures started in Chicago for the first six months of the year. Last year, the city had 7,575 for the entire year. He said the housing boom of the late 1990s and early 2000s is proving to be problematic for consumers who find themselves financially stretched in the economic slowdown.”

“‘A lot of people were getting into houses they couldn’t afford with teaser rates,’ he said. ‘Then the loans reset and they get into trouble. We’ve got some rough times to look at in Chicago and we will see pockets of housing where the prices are not rising,’ Mr. Rose said.”

From USA Today. “Javier Diaz’s made several profitable real estate investments, but the three-unit apartment building he bought in Chicago earlier this year wasn’t one of them. ‘I figured this year the property would go up 30 or 40 grand, but that didn’t happen,’ says Diaz.”

“He put it up for sale in September, asking $415,000. He’s already cut the price twice, to $375,000. That’s less than he owes on his loan, which means that if Diaz sells at that price, he’ll have to pull $5,000 out of his own pocket to pay the bank.”

“Being a mortgage broker, Diaz knows some investors who used their home equity like debit cards. He says of the quick decline in real estate, ‘It’s coming like a culture shock to many.’”




“The Market Is Close To Becoming Illiquid”

Newsday reports from New York. “In January, when retired psychologists Ben Schwartz and wife, Peppi, put their Commack home of 44 years on the market for $649,000, it looked like a safe bet. ‘Houses in Commack last year were at a premium,’ Peppi Schwartz recalls. ‘We thought it would sell very quickly.’”

“Yet, through a dispiriting spring and summer, the house didn’t move despite several price cuts. So last month, the Schwartzes chose an alternative that may be cropping up more: They decided to rent their house. They’re still hoping to sell, at $499,000, but are now concentrating on marketing the house as a rental, at $3,500 a month.”

“‘We have to try to unburden ourselves,’ Ben Schwartz explains. With the couple now ensconsed in a two-bedroom, low-maintenance Mount Sinai ranch house, rental of the paid-off Commack property would help offset the new monthly mortgage payments. And besides, the emotional wear-and-tear of dealing with the unsold house was just too great, says Ben, who had come to think of his once-beloved Commack home as ‘an albatross around my neck.’”

“Some Long Island real estate agents are reporting that an increasing number of would-be sellers, daunted by the cooling of the once-sizzling housing market, are offering their homes ‘for sale or rent,’ or simply for rent.”

“The sale-to-rental approach ’seems to be a trend now,’ agrees Deborah Sande, who is marketing several of these houses. She says the sellers have come down in price, ‘but there’s a point where they want to stop. And they figure they’ll rent it and get an income from it, and when the market gets better, they’ll put it up for sale again.’”

“In Rockville Centre, (broker) Liz Wallace says ‘the market has dipped,’ and that is especially likely to affect recent buyers who need to move. ‘if they bought in the last two years and paid top dollar, with 5 or 10 percent down, the sale price of the house in this market may not cover what they owe the bank.’ Such owners, she says, ‘would be more apt to rent’ out their house than offer a painfully low price to choosy buyers.”

“Sheila Kassay says there’s been a change in the sort of person renting out a house. In the past, those putting homes up for rent were often investors. ‘In the last six months,’ she says, ‘we started seeing people who really had no intention of renting their home choosing to rent, because it’s sitting empty and they’re paying two mortgages.’”

“Ilana and Stu Austin of Long Beach got caught in a two-mortgage situation some nine months ago when a house they long wanted suddenly became available. They bought it and offered for sale their home of nine years, a Spanish-style Colonial they had painstakingly restored. ‘The market was hot,’ Ilana Austin says. ‘My assumption was we would close by the end of the summer.’”

“That didn’t happen. So the couple is offering the Colonial as a $3,000-a-month rental, preferably on a short-term basis with options to renew. ‘Our intention is still to sell it,’ she says. ‘[But] we can’t carry two houses, and the rental will help with some of the expenses.’”

The Main Line Times from Pennsylvania. “In recent months, some experts in the field are questioning if the real estate bubble finally has burst. Kathy Opperman, the incoming president of the Montgomery County Association of Realtors, said,’ Generally, we are in a correction mode.’”

“‘Over the past year, there has been an adjustment in prices across the entire area, including the Main Line,’ Chairman Harrison Tyson of Suburban West Realtors Association wrote. ‘prices are getting back to where they should be.’”

“‘There is more to look at,’ said Opperman. That’s a problem Alexis Finger of Bala Cynwyd didn’t expect when she put her house up for sale several months ago. In April, Finger listed her home in order to downsize into a new condo in. She expected someone to pick up the house in a second, she said. But the seconds dragged on and on and on. ‘I went April through June with nothing, not even a nibble,’ said Finger.”

“In late September, Finger finally began getting some nibbles. ‘It was like a miracle,’ Finger said of a few families who began taking a serious look at her home.”

The Wellesley Townsman. “The Massachusetts Association of Realtor released figures this week for sales in the Bay State of detached single-family homes and condos for the month of September - and it was not good news. Despite the fact that housing has become more affordable because of falling prices due to supply and the lowest mortgage rates in six months, sales were off 24 percent for single-family homes and 28 percent for condos compared to sales in September 2005.”

“In the single-family home category, last month’s sales total is the lowest home sales volume since 1996.”

“According to Wellesley resident Karl Case, a nationally known real estate expert who teaches economics at Wellesley College, the decline in demand is being matched by seller resistance, and the sellers are holding out for what they think the property is worth. Furthermore, he said, the market is close to becoming illiquid, that is, properties are just not trading hands like they were.”

“Commenting on this week’s report by the Massachusetts Association of Realtors, Case said, ‘the numbers are not horrible, but they’re pretty bad.’”

The Lexington Minuteman. “Finding the business climate a bit stifling in Massachusetts? The solution is more affordable housing. ‘Even if housing prices were to drop 20 percent … most of the housing stock we have is beyond the reach of most young families,’ said Barry Bluestone, a housing expert at Northeastern University.”

“He added: ‘Greater Boston is the single most expensive place to live [in America]. That’s why we’re beginning to lose population and lose jobs.’”

The Shrewsbury Chronicle. “In a market where homes are sitting longer and potential buyers are taking their time, real estate professionals are trying new ways, again, to attract business. Some have held art shows during open houses. Others offer incentives, a flat-screen television, low financing, the choice and installation of granite counters, but now they seem to be pulling out all the stops.”

“And more and more sellers are burying statues of St. Joseph. ‘Basically, when the market is really bad, people will try anything,’ said Maria Salomao-Schmidt, owner of Brick House Realty, Holliston.”

“‘There are whole rituals around all these pagan things,’ she said, ‘because people just want to sell. I think it helps people think they’re doing something rather than just waiting,’ she said. ‘And if you believe in energy work, it helps people envision their home selling.’”




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