‘Sanity Has Returned’ In Arizona
The Arizona Republic has some reports on the housing bubble. “Following decades of growth measured mostly in new prisons and mobile homes, any cooling hitting the Pinal County home market is a matter of perspective. And from the existing homeowner’s perspective, it hurts. Home builders have recently started slashing prices and offering perks.”
“And existing residents, from the investors determined to still make big bucks to overleveraged homeowners who need to sell at a certain price, are feeling the fallout. As a result, resale-home sellers are grudgingly cutting prices by tens of thousands of dollars, and their homes are still sitting unsold for half a year.”
“Titus and Angel Metzger put the Maricopa home they bought in July 2004 on the market in January so they could move up to a bigger home in the western Pinal County city. A second real estate agent and $40,000 in gradual price cuts later, they still have a sign in front of their home and only a few lookers have stopped by.”
“When they refinanced their house into a $174,000 loan, they couldn’t have imagined 2006’s market cooling. Now, they’re in a pinch. ‘Have we had luck trying to sell? It’s not even ‘no.’ It’s a big, ‘Hell no,” Angel said. ‘I’m ready to put on a clown suit and stand on the corner and do cartwheels.’”
“Ironically, builder D.R. Horton has slashed the price of the new home they want from about $300,000 to $215,000, cheaper than the smaller, older home they’re trying to sell, and offered a $10,000 down payment if they finance through the builder’s preferred lender. ‘They wouldn’t drop the price $80,000 if they weren’t desperate,’ Angel said. ‘That tells me something.’”
“They hope to sell within the next few weeks to avoid losing their $5,000 deposit on the new home.”
“Santan-area resident Karen Marsh put her 2-year-old home on the market in April and has seen only a handful of people walk through. ‘It’s just so frustrating,’ Marsh said. ‘We finally quit doing open houses because we would have to go out for the day and no one would show up.’”
“There are six other homes for sale on Marsh’s block alone. According to a neighborhood real estate Web site, there are nearly 250 homes for sale in Marsh’s San Tan Heights development. On top of that, there are brand new homes being offered just blocks away.”
“Developer Stacey said investors in homes drove up the market. Now, he said, people are looking to buy homes they’ll really live in. ‘We’re kind of like spoiled children in a toy store, and we’re throwing a fit and stomping our feet when Mommy finally said, ‘No,” Brimhall said.”
“It doesn’t matter much to investor Dana Byron, as long as any downturn doesn’t become so frigid that he can’t find occupants for his seven rental homes. ‘For me, the thought of punching a clock for 40 hours a week until I’m 65 is annoying,’ Byron said.”
“He recommends not fretting over the little things like collecting rent that is lower than monthly mortgage payments. ‘You can’t be upset you lost $200 on a rental when you made $10,000 in equity,’ he said.”
“He said many investors and homeowners have become used to big gains and are panicking over the market unnecessarily as it tries to find normalcy. Byron said renters help build his equity and ability to hold on to properties longer so he can sell when prices are more favorable.”
“Skip Brown (with) the Coolidge Unified School District, said a slowdown might be a welcome relief for both building new schools and finding the staff to fill them. ‘I wouldn’t mind a little, let’s take a breath here,’ he said. “Everybody count to 10. And maybe our HR guy won’t jump off the building.’”
“Byron Jackson, mayor of Eloy, thinks his city might actually benefit from a downturn. ‘It’s not going to hurt Eloy,’ Jackson said. ‘Is it doom and gloom? Probably not.’”
“Jordan Rose, a development attorney, said land developers and farmers who sold an acre for $5,000 a few years ago ran up their starting prices to $80,000 an acre about nine months ago, often without doing anything to develop the land: no rezoning, no plans, no nothing. As sanity has returned, land prices have begun falling back to the $30,000 to $40,000 range, she said.”
“Developer Brimhall, who years ago bought land at prices as low as hundreds of dollars around Pinal County and south Maricopa County said they sensed a coming cooling.”
“‘People kept redefining what low (land prices) meant. To me it meant $1,500 an acre,’ Brimhall said. ‘But to guys coming off the plane, low was $50,000. They bought too close in at high prices. Depending on how long the downturn lasts, they won’t be able to hold out.’”
‘Byron Jackson, mayor of Eloy, thinks his city might actually benefit from a downturn. ‘It’s not going to hurt Eloy,’ Jackson said. ‘Is it doom and gloom? Probably not.’ Jordan Rose, a development attorney, said land developers and farmers who sold an acre for $5,000 a few years ago ran up their starting prices to $80,000 an acre about nine months ago. As sanity has returned, land prices have begun falling back to the $30,000 to $40,000 range.’
I guess the Republic also saw the writing on the wall and decided to report on this thing as a fading mania, and good riddance too boot. IMO, this land isn’t worth $5,000 an acre, but progress is progress. Who is going to pay $80,000 now?
My father sold 120 acres of land near charlotte NC for 100k an acre.
He bought it 15 years ago for 2500 an acre.
Be very, very nice to your father.
Hope you’re his favorite son/daughter!
“He recommends not fretting over the little things like collecting rent that is lower than monthly mortgage payments. ‘You can’t be upset you lost $200 on a rental when you made $10,000 in equity,’ he said.”
What a totally moronic statement… So what if I lose $200 a month in REAL money on seven properties ( $1400 a month negative cash flow) as long as I “have” $10,000 in imaginary profits in an overinflated property.
We are still in the denial phase with loons like this.
The $200 is only for months when there is an occupant. That’s provided the occupant actually pays, there are no maintenance expenses and no advertising or other incidentals added in.
Multiply this by 7 and consider what type of loans someone as dumb as this might be holding. His ARMs are going to reset pretty soon so his bonehead arithmetic might need revision…
I totally agree. This investor is in deep denial. It’s this type of thinking that got us into this mess.
He probably calls himself an ‘investor’ without contest. Shame.
real RE investors must shake their heads when they read about people like this.
Indeed I do, counting on ever increasing equity to bail your foolish investments out is pure stupidity. I have never once bought a rental property expecting a large gain in value to subsidize a loss in rental income.
Leverage = Great in up market.
Leverage= Lower risk in down market, but you are still a loser (not looser) depending on your net negative bloodflow. Motivated to add to the bloated inventory?
Eloy? People living in Eloy are aware of high housing prices? LOL. I didn’t know anyone actually lived in Eloy.
Actually Eloy is basically a very COOL skydiving center (Skydive Arizona) surrounded by a few “salt-of-the-earth”-types living in their old, shabby houses on worthless desert caliche. Funny that the mania even infected that part of the state.
‘For me, the thought of punching a clock for 40 hours a week until I’m 65 is annoying,’ Byron said.”
Yes, hard work for pay is annoying. LOL.
Simmssays…10 Wacky Things in the Land of the Free
http://www.americaninventorspot.com
yeah, unbelievable!
Who works 40 hours a week?? Just about any job north of 50K a year demands nonpaid overtime. If this guy cannot handle 40 hours a week, how is he going to react when he actually lands a real job?
Yeah, managing rentals requires 24/7 duties, not 9-to-5 and forget about it. Water main breaks at 3am ? etc. etc.
You’re right.
Another classic:
‘You can’t be upset you lost $200 on a rental when you made $10,000 in equity’
Translation:
It doesn’t matter if you bleed to death so long as it’s only from a paper cut.
Four years of $200 (probably more) negative monthly costs wipe out that gain. So then you’re break even and have to wait for more appreciation. And then more appreciation to cover transaction costs.
Sounds like you’ve got a bit more slaving to do there, buddy.
I can assure you he’s lying about $200/month negative. It’s probably closer to $500-800, multiplied by 7. He’s toast in 6 months.
‘For me, the thought of punching a clock for 40 hours a week until I’m 65 is annoying,’ Byron said.”
LOL. It’ll be more “annoying” when he’s 75…
Beat me to the punch. You know, I don’t want to have to earn a living too AND I want a pony. Reality disagrees. Sheesh. It’s the sense of entitlement in that quote that gets me upset.
But he’s an ‘investor’, he doesn’t have to work for a living. He is ‘entitled’ to make money for nothin’…
Yeah, work is pretty annoying. What an a-hole! I’m envisioning him working fast food or janitorial services for the rest of his life after his upcoming bankruptcy/repossesion proceedings.
I’ve never seen anyone make a living losing $1400 ($200 x 7) a month. Wonder if he’d be willing to pay $1400 a month to punch a clock… That would be really annoying!
How about the thought of punching the clock for 60 hours a week until you are 85 to pay off the dumbass loans you took out for your soon to be upside down properties? How will that grab you, Mr “Investor”?
This article has just too much “red meat”, I’ll be back!
Some months ago, it looked like San Diego or Vegas were going to lead the way on the bubble crash. Now it appears that Arizona is ground zero. Or are we simply not hearing enough about the others?
I’d say AZ is a better candidate because it seems like the boom there was far more artificial. It used imported boom money to pump up an area that did not have an economy to begin with.
I think more money will be lost overall in San Diego and Las Vegas though.
Don’t forget us in Florida, particularily SE and SW Florida. We are doing our best to keep up with Arizona. Our boom was artificial as well. Loads of specuvestors.
It’s funny to watch people stick up for their region of the country as being the most bubblicious. AZ is good, yeah, but give FL its’ due. LOL.
My bubble is bigger than your bubble.
No it’s not, my bubble is bigger
No it’s not
uh-huh
not
uh-huh
not
lol
First step, slow sales, rising inventory.
Second step, price declines
Third step, folks selling at a loss (downtown San Diego):
http://www.komaut.com/mills.htm
“…now selling for less than what I paid, not to mention the upgrades. There is just too much inventory downtown! My loss is your gain.”
Low HOA - $316
WHAT THE HELL IS A HIGH HOA THEN?
From what I’ve seen, $700+ is not uncommon. Ask what it goes towards…they say: Valet parking…LOL
Personally, I prefer to park my own. BTW, did you happen to notice the valet guy who made copies of the woman’s keys and ended up under her bed for two days? Sheesh…
HOA fees are a big drag for buyers. Not tax deductible either.
Anyway, hopefully the price declines will come faster and faster now. Still way way too high…Sorry FB’s!!!
Still overpriced. I’ll wait for the REO fairy in downtown San Diego. At least the huge population of bums could be given a free (vacant) place to live for the next 2 years.
HAHAHHAHAHAH LMAO!!!!
$570,000 for a 960ft one bedroom and $300+/mo HOA!!!!!!
WTF!!!!!
This Monopoly money mentality has warped the conciousnes of the masses to perveted degrees!! If I had $570k cash I would much rather buy a real home in a less bubblicious area (200k, 3-4br, 1500-2000ft) and retire on the difference and a job at Subway Sandwiches!
It is even sicker that millions of FBs have bitten at this bait and are on the hook for that much money for that little home!!!!
Boston is leading the way down. No contest!
I agree excpt AZ is closing and may even whip BAHSTIN
According to http://www.benengebreth.org/housingtracker/location, it seems a lot like Phoenix is winning.
I keep asking where the jobs are in Phoenix to support all that growth. I know of hi-tech jobs in San Deigo paying good salaries, and Vegas hotels where parking attendents making upwards of $65,000 a year, but what are the jobs paying in Phoenix? If all the investors cash out or walk out, I think Phoenix will be ground zero..because of no jobs.
Let’s see.. the house he is trying to buy has had a price drop of 85k, but they have only dropped their house by 40k… Now, I think THAT has to tell you something!
“A second real estate agent and $40,000 in gradual price cuts later, they still have a sign in front of their home and only a few lookers have stopped by.”
“Ironically, builder D.R. Horton has slashed the price of the new home they want from about $300,000 to $215,000, cheaper than the smaller, older home they’re trying to sell, and offered a $10,000 down payment if they finance through the builder’s preferred lender. ‘They wouldn’t drop the price $80,000 if they weren’t desperate,’ Angel said. ‘That tells me something.’”
Their not looking for a greater fool, their prayed the prefect fool. I am amazed though that Horton has drop prices this fast (or maybe that the boom went bust as quickly as it did!) A 28% cut is approaching the region of implosion. Kinda validates Ben’s blog and the great posters here.
God, spelling is so hard!
Especially when you got fingers like sausages.
Or, if you are busy fingering your sausage! (sorry, couldn’t resist)
Wow - I saw this article online late last night and was pretty floored by an actual local media report being somewhat decent for once.
Anyways, I forwarded this article to my brother who owns a house in Goodyear (PHX suburb in the West Valley). He’s been kicking around the idea of selling and moving to the midwest and paying cash for a new home based on the 100% increase in value on paper of his PHX area home. I told him that it would be a good idea to sell now and even rent before this gets too bad and he starts losing more and more of that paper equity.
He emails me back basically saying that this article is only talking about the fringes of the valley and not his area. He then sends a Jay Butler article in the AZ Rep saying that Goodyear has gone up 20% in the first six months of this year so far and that everything will be fine. And something to the effect that it might go down in his area maybe 10k to 20k tops. I was aghast! I can’t believe that so many friends and family are still so clueless to this bursting bubble even when the local paper has at least 3-4 negative articles a week about RE having problems.
I was half way tempted to write back and say something like “well, for your sake, I hope you are right. Lets talk again in six months and then again in 12 months to see if you are right as I would hate to tell you one of those “I told you so…” type lines.”
Sigh!
you have to understand that your average lay person is both stubborn and stupid when it comes to this real estate market. They drink the Kool Aid people like David Lereah spew, and will only believe that real estate prices go down once the bottom is basically in (And the newspapers are full of stories about how Joe Sixpack lost everything).
Take my cousin and his wife. They got married two years ago and are now selling her old townhouse. She was lucky enough to find a renter willing to pay roughly the amount of the monthly mortage payment (because she bought pre-bubble here in South FL). But hurricane-related costs and other repairs have run into the thousands of dollars, meaning overall cash flow on the property has been negative. Now, that renter is gone, and she’s had it on the market for almost three months with only one offer (that she rejected as too low). Since that offer several weeks ago, nothing. She is financing the mortgage payments on the rental with a freaking HELOC on their primary home — a HELOC that’s almost maxed out due to the monthly bleed since the renter left.
I have tried to get them to cut the price enough to get noticed. But instead of going from, say $220,000 to $199,000 to really grab attention, she may … MAY … knock $5,000 off this week. A 2.3% price drop.
And you know what’s the most ridiculous about all of this? She bought the place for something like $100,000 (Again, was lucky enough to buy pre-bubble). So even if she were to just take the hit and move on, it’s not like she’d lose money on the sale. She’d just make less. Instead, she thinks dithering around with these small price cuts will make a difference, while in reality, her gains are going out the door each and every day.
The worst of it? Every single one of my predictions to my cousin and his wife have played out. I’ve been proven correct since I started ranting about a downturn last year. But they STILL won’t believe me now, and refuse to cut their price enough to get noticed. So trust me when I say I fully understand your frustration.
Mike -
Thanks for your comments. Simply amazing how so many are intoxicated with this kool aid.
Another quick and funny observation - my parents just last year said to my wife that I needed to go to professional counseling because of my refusal to buy in last year’s “ever increasing” market. Now that its been a year later, my parents are starting to say all the time when they hear about the problems in RE, “well, looks like our son was right.” I now chide them and bust their chops at family gatherings about their counseling comments last year to me. Let me just say that they feel kind of embarassed that they even said that. I take much pleasure in this to say the least….
Just remember, as Bruce Williams always use to say, “The best revenge is living well”!
I take much pleasure in this to say the least….
Have you considered counseling?
LOL
Last year my sister and brother-in-law moved to SoCal for a job transfer and promotion. I tried telling them that it would probably make sense to rent for a while while this RE mess works its way out. They thought I was completely stupid for suggesting such a thing since their deadline to use some company money for a new home was quickly coming to an end (something piddly like help with closing costs). I even emailed some news articles and projections from RE bears about the bad times that were ahead. They went out and did it anyway and bought a cracker jack stick home on a 5,000 sq ft lot in Murrietta, Riverside County, California. The brother-in-law even commented afterwards when he got his loan, “wow. it is true. They’ll give a loan to anyone.” So they are probably even got an ARM/IO loan that will reset within two years on top of purchasing at the very peak.
A year later, they are already under water as far as depreciation and just wait until their ARM resets and they can’t refinance.
Yikes
Any chance they told you what it cost? I remember looking in the Murrietta area about 2002. They’d just carved up some orchards & farmland. $500-600k got you a nice place on 5 acres, many with 4+ac of avocado trees. Some of the ads even mentioned using the cash flow from the avocado farming to offset mortgage.
Yeah, I’d say they’re sufficiently phucked
I believe the 2200 sq ft home was sold to them in May of 2005 for something like $410k to $420k. There is an empty house on the very same street that is on the market by an specuvestor. If it sells for the current listed price, it would mean the comps would be lower and put them under water (not even including realtor costs of potentially selling).
When it comes to family, I no longer talk religion, politics or real estate. It’s a no win discussion, so keeping my big mouth shut seems to be the best policy.
I’m up in Broward and posted an almost identical story last week. A coworker and his family just moved out of state last weekend and now his house is empty and he is bleeding the PITI and utilities. His parting statement was “I hope the neighborhood teenagers don’t vandalize the house or a hurricane hits before I get a good offer”. Jeez, unbelievable! All because he is unwilling to mark the price down to what would cause it to sell (doesn’t want to loose any phantom profit on his 100% gain in the last 4 years).
Has anyone mentioned this WSJ piece yet” “Surviving a Real-Estate Slowdown.” It’s an interview with Kenneth Heebner, manager of the real-estate focused CGM Realty Fund. Snippet:
“A significant decline in prices is coming. A huge buildup of inventories is taking place, and then we’re going to see a major [retrenchment] in hot markets in California, Arizona, Florida and up the East Coast. These markets could fall 50% from their peaks.
. . .
. . . Some people got 100% financing for their homes. It made the tech bubble look like a picnic.”
Sorry, forgot the link:
http://tinyurl.com/g64pm
Congrats Jerry you got your own posting! That is always fun.
Per zip realty there are 50,384 listings in Maricopa and Pinal counties. I believe normal is 22,000. 10yr bond is at 5.23%. Here come rates over 7%. Not only that, margins are so thin that no fees are being waved either…..squeeze is coming.
In 2000, I re-fied my home at 8.4% (and since chased it down to 5.4%) and felt damn good about that rate since I had once managed a home loan at 12.3%. It’s just so odd thinking that a 7% rate is high. High is 10+, over 12 is close to nosebleed.
The first house I bought in 1978 had an interest rate of 11.6%. When I moved to Phoenix in 1992 the interest rate was 7% and was the lowest in almost 30 years.
Here is an exercise: When you (not specifically you but anyone) bought in 2000 a $300K house you paid 8.4%. Now to buy that same house you need $600K and 7%. What was the monthly payment then, what is it now? What was your monthly salary then, what is it now? What was your car gas/electric/gas/property tax etc… bill then, what is it now?
If you end up with the same number per month of income divided by a month of expenses, then you my friend are a magician.
Maricopa is going to be a disaster! Nothing going on there. It is an hour commute to Phoenix. Why anyone would want to buy there is beyond me.
When I moved back to the Phoenix area in 2003, I BRIEFLY thought about buying a transition home out there. You could buy a house for about $75 to $90 per foot on about a 7,500 square foot lot. Anybody buying that far out at double those prices now deserves what they get.
My buddy bought out in Maricopa….he paid $139,000 and it was worth $180,000 or so when he moved in….and then went up to $240,000. He didnt refinance or buy into any of the nonsense that his neighbors were talking about. He had 7 for sale signs on his street, but some have sold….I think they are back down to $200k in his neighborhood….
I went to visit in April, and there were FS signs on every block, and a lot of the houses that didnt were empty. It felt like empty town to me. The commute to PHX is an hour, and John Wayne Parkway is a raceway with spectacular accidents and deaths near weekly. He likes it out there, but he works nights as does his wife.
‘I’m ready to put on a clown suit and stand on the corner and do cartwheels.’”
Sweetheart, you ARE wearing a clown suit. That’s how the seller identified you when you bought the dump in the first place.
Good one!!!
Agreed…..many chuckles…..
Where is Bubbles? “(
OT
Just now on CNBC, Greg Zuckerman said that RE investors could expect prices do decline 50% from their peak.
I believe the article was called the “The Journal Report” and the name Will Weaton was also on the screen (have no idea who that is). Sorry, no link, but was just on CNBC.
Here is the report/article they are referring to… enjoy…
————————————————
Surviving a Real-Estate Slowdown
A ‘Loud Pop’ Is Coming,
But Mr. Heebner Sees Harm
Limited to Inflated Regions
By GREGORY ZUCKERMAN
July 5, 2006; Page R1
http://tinyurl.com/mnepl
If I am reading correctly he is saying markets which escalated the most will decline the most, other markets should be ok?
I totally disagree with him on the TX market. There are plenty of funny money loans in TX and people live way beyond their means. If this were 20 years ago, you could argue that there is a solid floor by virtue of the fact that there is no home equity lending allowed (that began in 1998) but I’ll bet you that >70% of owners in TX big cities have had their hands in the cookie jar of home equity multiple times since then. Add to that the debtor friendly laws and generally poor credit quality and you have the makings of a nasty dump similar to any bubble area.
I’m planning on moving to TX next summer (07) and am betting my $ on the same line of thinking as you. Just because an area didn’t see a crazy appreciation rate like the true bubble areas, these areas areas areas are still prone to the effects of mortgage interest rate hikes, high inventory, and a depressed economy. I’m full in on my opinion that even TX will see a slight depression in prices from where they are right now. Of course that is nothing compared what will happen in AZ. Further more, as prices depress in bubble areas, some of the migration to “cheaper” areas should lessen.
Great article. Just at the correct time to tell Joe/Jane 6-pack that he/she is screwed.
“We started cutting back on home-builder shares at the end of the fourth quarter of 2004 and eliminated them during the first six months of 2005.”
Says everything that needs to be said …
I seemed to remember Heebner was a huge holder of the home builder stocks. So I Googled and found this headline from June 2005…the man has good timing! Caught the top almost perfectly.
CGM’s Heebner dumps home builders
The fund manager worries about real estate speculation; broadens bets on REITs.
June 3, 2005: 10:22 AM EDT
By Stephen Gandel, Money magazine staff writer
http://tinyurl.com/77md7
I had to drive over to the east side of Tucson late morning July 4th and back down I-19 early afternoon. i noticed the first two new developments I passed, in various stages of completion, had only one vehicle each in front of the sales office. I then made a point looked at the several others I passed and they too had either one of two vehicles in front of each sales office, presumably the salesperson(s). I passed six very large developments , all in various stages of completion. Hundreds of new homes. No lookers yesterday. Although, i have no direct evidence find it hard to believe that a majority of these new homes are already sold. Only one development (in the crappiest location) had any price sign, which said starting form the low 200’s. Driving past it looked like the smallest home was no more than about 1100sq feet, albeit driving by at 40mph. Four of the six developments had a great view of either I-10 or the garbage dump, some lucky enough to have a view of both. the signs galore were from all the major builders, Lennar, U S Home, KBH, etc. Mostly the heidous two story , with a scattering of smaller one story (starter?).
Are you talking about the housing developments around Valencia & Alvernon in the prime location between the dump, the airport, and the missile factory? I’ll never understand why anyone thought it was a good idea to build homes there.
The one good reason in builders minds was… CHEAP LAND. One thing about builders that became painfully apparent during this craze is that by and large, they lack taste. Take a look at the majority of these large subdivisions in anytown USA and they are devoid of any charm, character, architectural appeal, aesthetic natural surroundings, and on and on and on. It is all about the buck with them. Unfortunately, they, too, will be left holding the bag as the braindead speculators, etc. will no longer be lining up in droves to bid on cardboard boxes built near nuclear waste dumps.
A little OT, don’t know if this was posted earlier.
From the OC Register.
Sales slowing for apartments
Investment is down 39 percent from a year ago as high prices cut deeply into potential returns.
http://tinyurl.com/r9orz
Here’s another interesting article. This might have been posted already as well.
Global home prices ’strikingly out of step with the business cycle’
For those who don’t have a July 4th party to crash, here’s an intriguing global home-price report for holiday reading from economists at Organisation for Economic Co-operation and Development. The key point:
“Since the 1970s, house prices in real terms (the ratio of actual house prices to the consumer price index) in the OECD have been on a secular upward trend, rising by on average 3% per annum in the area as a whole. This is generally attributed to rising demand for housing space linked to increasing per capita income, growing populations, supply factors such as land scarcity and restrictiveness of zoning laws, quality improvement that is not properly taken into account in the price index and comparatively low productivity growth in construction. … Wide fluctuations around this trend have also been apparent, with the duration of the cycle tending to become longer and its amplitude larger. The current boom is in line with these tendencies, but it is different in other respects. Specifically, the current upswing is more generalised across OECD countries than in the past and strikingly out of step with the business cycle. Until the mid-1990s the OECD average output gap and real house price index were highly correlated, but this correlation has broken down since … This suggests that global factors have been at work to sustain the current housing boom. These factors include the easing of monetary policy stances in the wake of the 2000-01 downturn and the associated massive injection of liquidity, the exceptionally low levels of term premiums on longer-term bond yields and easier access to credit owing to the liberalisation of mortgage markets.”
People kept redefining what low (land prices) meant. To me it meant $1,500 an acre,’ Brimhall said. ‘But to guys coming off the plane, low was $50,000.
This exactly the point I was trying to make about fifty threads ago. Those builders that bought land high and don’t end up developing it will lose big time dinero.
dude ?
ditch the 5 $k
and be happy- how dumb can you get
(“Jordan Rose, a development attorney, said land developers and farmers who sold an acre for $5,000 a few years ago ran up their starting prices to $80,000 an acre about nine months ago, often without doing anything to develop the land: no rezoning, no plans, no nothing. As sanity has returned, land prices have begun falling back to the $30,000 to $40,000 range, she said.”)
I will make a note of that. those are huge gains.
‘We finally quit doing open houses because we would have to go out for the day and no one would show up.’”
That’s because any good HONEST Realtor would tell you Open Houses are a complete waste of time. Motivated Buyers use an agent to tour them through homes SPECIFIC to their wish list, not just having a “For Sale” sign on them. Open houses are just to satisfy dumb Sellers who somehow think having total strangers walk right off the street to poke through their stuff is a good way to sell a house.
Open houses worked during the bubble. It was the most efficient way to get a lot of people thru the house. My realtor held a weekend open house (once, maybe twice, I can’t remember) and over 100 people came thru, one of whom turned into the buyer. He had a real estate license (although he wasn’t working as an agent, he just got the license to get the buyer’s agent commission!).
But that was then and this is now.
Yes, I agree with both of you. Right now open houses seem like a waste of time and only get a few prying neighbors (my wife!) who want to see the inside of the overpriced house and walk away laughing. However, during the bubble days, my house was sold to a buyer who came to my second open house . Maybe because the inventory was so low when I sold there was a lot more traffic and open houses were a little more special. There are just too many now (inventory in my old zip up 500% since the time I sold in July 04) for it to make much of a difference. It’s all about whether the price is right.
sentiment ?
what is j6p thinking now
hate to say it ,but once it’s 70% negative/possitive the market move , up or down, is over
sentiment ?
what is j6p thinking now
hate to say it ,but once it’s 70% negative/possitive the market move , up or down, is over
The OC Realtor who I recently sent my “Don’t bother me now, I’m waiting for the Bubble to Burst” email just sent me the latest “Gary Watts - Mid-Year Economic Review” to ponder.
Gary’s revised his “15% it’s in the Bag” prediction down to around 8% but still sees nothing but blue skies for RE going forward. I had to laugh because the Realtor is the opitome of someone who’s been drinking the kool aid and has no clue what’s coming (he’s an expert on Orange County real estate but has only been living here for 3 months).
How do you “revise” your prediction? I mean he said 15% so he should stick with it. Two months from now he’ll be saying 3%. That guy is a tool.
Even at 8%, there’s a lot of lost ground to cover. There year is half over already. Of course, he probably means “median” price and we all know how reliable that metric is in a downturn.
Bubble Analyst said it best regarding Watts.
FUN WITH NUMBERS! How to forecast the housing market like a pro.
The real estate industry loves to predict home price appreciation (8-11% for 2006 cited in current OC Register story) and they pat themselves on the back for their Kreskin-like abilities. But predicting home appreciation is much like predicting where a cruise ship will be in an hour. If you stand on the bow and point straight ahead, you will be right most of the time.
Here’s a Step-by-step guide on how to forecast the housing market like a true real estate analyst:
Step 1: Look at yearly appreciation for the past three months as reported by DataQuick. Use this as your prediction for home sale appreciation over the next 12 months. There is no Step 2. The chart below shows how these predictions compare to Gary Watts over the past 5 years:
3 Mo. Ave. Watts Actual
2002…..12.5%……10.0%…16.8%
2003…..17.9%……15.0%…19.1%
2004…..18.2%……25.0%…24.8%
2005…..20.9%……15.0%…13.6%
2006…..13.5%……15-18%..?
As you can see, the 3 month average beat Mr. Watts 2 of the past 4 years and it looks like 2006 may provide another forecasting victory. I am clearly a FORECASTING GENIUS.
To improve my forecasts I’ve considered adding inventory, sales and other data to the analysis. But why bother? I am not in the real estate industry and have no incentive to create a better MARKETING STATISTIC.
The problem with real estate forecasts is that they tell us very little about what’s going to happen to real estate prices in the upcoming year because they are based on old data—a comparison of the median price from one year to the median price of the next year. Here’s the problem:
The market price of homes at the start of 2006 was already 5.75% higher than the 2005 median—compare $585k ave. monthly median for 2005 (per the OC Register) to Dec. 2005 median price of $621k per DataQuick. You can use other numbers if you wish, but the results are the same—the forecasters are playing with a stacked deck. Much of the predicted home appreciation is already built into the market. For example, a forecast of 8% home appreciation is really a forecast of 2.25% home appreciation if based on prices at the beginning of the year.
To illustrate the absurdity of real estate forecasts and press releases consider a scenario where prices FALL from the Dec. 2005 median of $621k to a Dec. 2006 median of $608k, with a 2006 median price of $616k. Who would be right, those who predicted a 2% drop in home prices for 2006 or those who predicted an 5% rise in home prices? I would expect to see the following reports from real estate professionals in January 2007:
MEDIAN PRICE HITS RECORD HIGH OF $616K IN 2006!
HOME PRICES APPRECIATE 5% IN 2006!
Of course, the homebuyer who purchased in Dec. 2005 and sold in Dec. 2006 would have lost 2%. But hey, people are bad at math. If we repeatedly tell them they gained 5% they will believe it.
Gary Watts revised forecast is suspiciously close to the appreciation YOY posted at OCR. 6% is what is already priced into the median.
“Ironically, builder D.R. Horton has slashed the price of the new home they want from about $300,000 to $215,000, cheaper than the smaller, older home they’re trying to sell, and offered a $10,000 down payment if they finance through the builder’s preferred lender.
Soooooo . . . why praytell would a buyer not choose the new home as well?
“They hope to sell within the next few weeks to avoid losing their $5,000 deposit on the new home.”
Yeah, like *that’s* gonna happen - selling in the next few weeks when it’s been on the market how long?
Can you post Gary’s email/posting. Any contact info for him so we can make fun of him and his windbag comments? Maybe Ben can do a thread on this clown.
N2LC:
Gary Watts location
http://maps.citysearch.com/location/32747860?
Here is Lansner’s Q&A with him:
http://blogs.ocregister.com/lansner/archives/2006/04/insider_qa_housings_1_fan_gary.html
His website doesn’t reflect his new REVISED RE forecast.
http://www.impactre.com/Forecast.html
Brief Bio: College major Psychology is kind of appropo since con-men need to know psychology quite well their livelihood depends on it.
http://www.ocregister.com/ocr/2005/05/15/sections/news/news/article_520494.php