‘The Slowdown Has Started’ In Pennsylvania
The Morning Call has this report from Pennsylvania. “In June 2005, many homes on the market in the Lehigh Valley drew competing offers and sold in a matter of weeks, if not days. A year later, it’s a different story. Homes are staying on the market longer, the rate of year-over-year appreciation is shrinking and the number of homes offered for sale is soaring, creating a glut in some areas.”
“The number of existing houses sold in Lehigh and Northampton counties fell 7.5 percent compared with June 2005. ‘It appears the slowdown has started,’ said Bethlehem economist Kamran Afshar. ‘A year ago, people were saying the best thing to invest in is a house. I think people are still saying it is a very good thing to invest in. But as time goes by, it will regain its status as it always has been, one of many things to invest in.’”
“Real estate agents say they have to market properties harder than they did last year, when often merely listing them was enough to entice buyers. Agents are now counseling sellers not to overreach when setting their asking price. In some cases, sellers have had to cut their initial listing price.”
“Gary Elbert, a real estate agent in Allentown, said that once buyers see homes are not selling, they realize they have options. ‘It is becoming evident buyers are being more discriminating in how they are evaluating the asking prices and the properties,’ Elbert said. ‘We are seeing some ridiculous asking prices.’”
“The time on market is lengthening largely because many more homes are for sale. In May, a record 1,611 new listings were recorded. In June, the total number of homes for sale, including new listings, rose 41 percent compared with the previous June. ‘When you look at the numbers, it is just skyrocketing how many listings are being offered,’ said Afshar, the Bethlehem economist. ‘My guess is that will further put pressure on prices to go down.’”
“While listings grew, pending sales, a measure of future house closings, fell 7.7 percent last month from the same period last year. It was the second month that pending sales fell.”
“People are also becoming wary of non-traditional mortgages such as those that charged only interest in the first years. ‘Previously, people were jumping into buying houses, using adjusted-rate mortgages, because they could buy more house for their dollars,’ said Ryan Sweet, an economist in West Chester, Chester County. Now, Sweet said, ‘first-time home buyers are being crowded out, because they can’t afford these exotic mortgages.’”
“Economists say there is no danger the Lehigh Valley housing market will crash. Even if home appreciation continues to slow this year, the gains of the last few years won’t be rolled back. And the gradually slowing rate of appreciation resets the meter to ‘normal,’ experts say. ‘At this point, it appears to be a very healthy correction,’ Afshar said. ‘This does not concern me. This is somewhat welcome.’”
It crashed in the 1980s. Eastern PA had, and has had again, a boomlet of people commuting over two hours each way to work in NYC and the surrounding suburbs. As in the early 1990s, I expect them to decide heaven on earth in their new subdivision on the weekend isn’t worth hell Monday to Friday as soon as closer-in options are available. Then homes will need to be sold to those who work in the Eastern PA economy, which is doing OK, but has lower wages.
The time on market is lengthening largely because many more homes are for sale.
I suspect time on market is lengthening because people aren’t buying.
‘At this point, it appears to be a very healthy correction,’ Afshar said. ‘This does not concern me. This is somewhat welcome.’
And the ‘Recycling Dot.com Crash Bullsh*t Award’ goes to…
Afshar said. ‘This does not concern me.
This is probably a true statement. My guess is Afshar has already sold all his real estate holdings so it doesn’t concern him in the least.
“Economists say there is no danger the Lehigh Valley housing market will crash”
Tune in next month when “Economists say, ‘No one could have seen this coming.’”
You know that’s a BS statement. Reputable economists generally don’t speak in absolutes; they talk about probabilities. Can you imagine an economist saying, “There’s no danger of a stock market crash.”
I love how people make comments like this and then don’t back them up with any logic. Why would there be “no danger” of a crash when the only justification for the absurd run-up in the first place — easy money — no longer holds? Inventory is growing like crazy, no one can afford a home with a traditional mortgage, everybody’s brother has been buying spec properties, and the economy is on the verge of a downturn. Yep — no danger of a housing crash here!
Now, Sweet said, ‘first-time home buyers are being crowded out, because they can’t afford these exotic mortgages.’”
…or…
“Economists say there is no danger the Lehigh Valley housing market will crash. Even if home appreciation continues to slow this year, the gains of the last few years won’t be rolled back.”
So which is it? Minimal affordibility coupled to the belief that the good times of higher prices are eternal makes no sense at all. Or does this bozo actually believe that a plateau at current prices is a ‘very healthy” situation. Again, just another example of your friendly, local RE shill, scattering stardust to help the masses ‘realize their dreams”.
Well we’re living here in Allentown
And they’re closing all the Realtors Offices down
Out in Bethlehem they’re killing time
Filling out foreclosure forms
Standing in line.
Well we’re waiting here in Allentown
For the High Prices we never found
For the promises our Realtors gave
If we priced high
If we flipped fast
So the Realtors graduations hang on the wall
But they never really helped us at all
No they never taught us what prices were real
I’m had to give up snorting coke
And chromium steel spinner wheels
And we’re waiting here in Allentown.
And it’s getting very hard to stay
But I won’t be getting an offer today
Apologies to Billy Joel………
Now main streets whitewashed windows and vacant stores
Seems like there aint nobody wants to come down here no more
Theyre closing down the textile mill across the railroad tracks
Foreman says these jobs are going boys and they aint coming back to
Your hometown, your hometown, your hometown, your hometown
Also fitting 80’s lyrics from Bruce Springsteen. The early stages of outsourcing. Now look where we’re at!
Let me get this straight. How does a market reset it self never to go lower? This guy is nuts!!!!!!! I bet his car and jewlery never go down.What a lucky investor that has no risk. He should be retired and have millions by now with no risk!!
It is surprising to hear this from an economist.
Is everyone ready for the two o’clock stock market faerie?
Again — this is a case of a newspaper wrongly using the term “economist”. Just like in the case of Learah. I don’t care if you have a fancy degree from somewhere. If you take money from organizations who expect you to put a positive spin on the economy, you’re a pitch man, not an economist.
This guy’s website lists his clientele and its the usual suspects: banks (mortgages) and local city governments (tax receipts) who pay a guy to whistle past the graveyard.
Seriously, any time you read a newspaper article about the real estate bubble, and you get to a quote from an “economist”, just turn to the funnies. There’s more value there.
Maybe a little OT, but… A family member recently offered to ’sell’ me her investment rental property. Bought 2 years ago @ 200K, now listed at the reduced (from 700K) bargain-basement price of…600K. (OK, this is CA, where nothing makes sense, but follow along). I ran the numbers and counter offered at 230K. She roared in laugher, then was alternatingly insulted, angry and skeptical of my intelligence when I assured her I was serious and my offer was an accurate reflection of value and carrying costs for a traditional loan structure on the property. “Well, that’s your problem. Nobody buys today with money down or a 30-year loan. That’s stupid.”
No matter what I said she could not see that a half-million dollars of debt was excessive beyond belief. We don’t talk much anymore. I think my last comment was it. “In a couple years, you’ll be happy with my offer.”
“Well, that’s your problem. Nobody buys today with money down or a 30-year loan. That’s stupid.”
And no one gets cash flow on an investment property without money down and a 30 year fixed, so who is stupid now ? Why is she trying to sell this goldmine anyway ?
It’s the one thing that most intrigues me about the bubble. The ‘lottery winner’ mentality of sellers. The ingrained expectation of the big killing. She honestly expects to sell, and the expectation is based on toxic loan pushers. Sad.
Inquiring minds want to know…. what are the numbers you ran? Something like $1700-2000/month rent?
Sometime back, I was looking to buy a rental property in my neighborhood. $240k for a beat-up rental house that needed some cosmetic work. My calcs at the time based on interest rates then indicated $1800 would keep me holding onto it, though even that wasn’t compelling enough to put my money there rather than elsewhere. Since it appeared that the market wouldn’t support that much rent for that house, I passed on it.
Good thing, too, since it turned out that there were other problems that were more than cosmetic and later on bit the poor guy who did buy it! Ouch! But then, he made out like a bandit on appreciation. Luck of the draw, roll of the dice — assuming he sells now (er, or last year?) and seals in his paper profits before they evaporate.
By the way, I ran the numbers based on IO loan instead of traditional, since that gets you closer to the cost of money than a fixed, 20% down loan, unless you run the recommended opportunity costs of your down payment/principle alongside your regular rental calcs.
This was all common knowledge 10 years ago among real estate investors. Now we have all these ‘investors’ with quotes around them out there they have no clue how rentals and property valuation actually works. They just assume like a 4 year old that you just get out there, get any loan and buy the place then put your hands on your hips and stop your foot and say “Hhmmppff. There, showed you how it’s done.” Yeah, ok bozo, enjoy being tits up in a few years.
I think this explains a good part of why the FBs are going to be in a rage, whereas when renters were priced out, they were merely quietly pissed and disappointed. Speculators consider the housing bears to have missed out on a profit. But the speculators are now facing an actual loss and residual debt. That is not just a “flip-side” to them. And it’s why I’m careful not to gloat and to keep my views to myself, except when blogging on bear sites and among those few friends who really want to know what I think.
I’d always recommend “NEVER” doing business with family or friends. For that exact reason.
Woohoo! Pennsylvania homes for everyone! Break out the Quaker Oats!
Is everyone ready for the two o’clock stock market faerie?
Apparently the faerie is on a long break.
The slide stopped at exactly 2 p.m.
Markets that are down all day tend to close at the low. This one probably will too.
All this is doing IMO is making the timing of a re-short more difficult.
Markets that take the DJIA too close to 11k tend to bounce back like a mongoose from a cobra. Can’t have the foreign money parked in US markets get nervous or have the Bush cabal take a loss on anything now can we?
But then you probably believe in “free markets” with no government interference. I probably shouldn’t tell you the truth about Santa Claus and the Easter Bunny either since you live in denial.
The pattern is unmistakable. They either buy in the morning and sell in the afternoon or they let the morning slide and then prop it up at the end of the day. Right now there is very little risk in the market. The government has set a solid floor.
I think that it’s Martians, elephants and Peruvians who are interceding here to stop the market slide. I read about it on a blog, so it must be true.
Elephants, yes, those are the ones.
No solid floor today. The guvmint wasn’t able to stand in front of the train, I guess. But tomorrow is another day. Don’t be surprised if the homebuilder stocks soar at the opening and get encouraging efforts throughout the day.
DJIA @ 11k has been the floor so far. Nice orderly decline, we can’t have a market crash in this environment, it’s impossible.
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I was stuck in Nazareth for a few weeks as a kid (it’s next to Bethlehem). I thought I’d die. When I got out of there I cried with joy, and I was only 12. It was such a depressing place.
‘Previously, people were jumping into buying houses, using adjusted-rate mortgages, because they could buy more house for their dollars,’ said Ryan Sweet
————————-
Um, no…they were able to pay more dollars for the same house.
Always gets me when I see this oft-repeated quote about “buying more house”. People have been buying LESS house for a LOT MORE money. That’s what these low interest rates/EZ kamikaze loans have done.
I heard Bruce Norris (investor in SoCal) say that of the top ten builders in SoCal in 1990, none were still in business.. I wonder who the top ten builders are now.. anyone know?
UK - why no crash - all arms, rates up 2004 - where’s the crash?
http://www.housepricecrash.co.uk/forum/index.php?showtopic=32455
This BBC article from a couple of days ago shows some of the ways in which the bubble is being prolonged over there:
http://news.bbc.co.uk/2/hi/business/5145090.stm
However, there are a few signs of trouble appearing:
http://news.bbc.co.uk/2/hi/business/5153140.stm
“Even if home appreciation continues to slow this year, the gains of the last few years won’t be rolled back. ”
Lol. Maybe if he says this enough, prices on’t fall and gravity won’t keep us grounded.
Simmsssasy…rediscover your favorite toys.
http://www.americaninventorspot.com/favorite_retro_toys
Even the Morning Call is lying. Every week they say prices have increased since last year and houses sold + also for East Penn. I live in Emmaus and have watched the local NY & NJ commuter(Suckers) run the prices of real estate up 90-100 % in less than 5 years. Just like the Poconos in the late 90’s when they pushed “Why Rent”. All those people who bought overpriced homes in the last few years will be SCREWED! Any real local could have seen this coming like we have. The lehigh valley bubble has already burst and I love it. All those commuters will start to hate that 2 hr drive and or interest rates come to reality and boom the house will sell for 50% of what they paid. That’s reality so get used to it in the valley.