‘Normalization’ Of Housing Markets Continues
A pair of reports on slower housing markets. “Just take a look out the window as you’re driving around the Twin Cities and you will likely see an abundance of ‘for sale’ signs, just like the one that stands in front of John Burke and Heid Erdrich’s St. Paul house.”
“‘Of course I’m terrified, because a year ago houses like this sold fast, very fast, and it was competitive,’ says Erdrich. Two or three years ago, she says, all the houses on their block that went on the market sold even before the ‘for sale’ signs went up. Their home has been on the market for only a couple of weeks.”
“Minnesota’s metro area real estate scene has decidedly shifted from a seller’s to a buyer’s market. New MLS numbers compiled by the North Metro Realtors Association show a nearly 17 percent drop in home sales in June of this year compared to June of 2005.”
“Christopher Galler, VP of the Minnesota Association of Realtors, says people shopping for homes are finding 30 to 40 percent more properties for sale in 2006 than 2005. ‘We’re just in a cycle. For the last five years we’ve been running properties basically on sale, meaning that the interest was lower than most people had seen in most of their lifetimes,’ says Galler. ‘So what it does is allow people to purchase more property than they may have naturally purchased before.’”
“Annisa Jones, the marketing manager for Centex Homes, Minnesota’s largest home builder, says while her company is not giving away cars, it has several promotions aimed at luring business. There’s a drawing for $50,000 in down-payment money and ‘instant-win’ gas cards. And there are drawings for the chance to throw out the first pitch at a Minnesota Twins game.”
“Centex has also recently began offering a ‘down payment assistance’ program, in which the builder pays a nonprofit organization to ‘gift’ down payment cash to certain Centex buyers.”
“Jones, like many of her real estate industry counterparts, prefers to call the slowdown a ‘normalization of the real estate market.’ ‘We’re not worried about it,’ says Jones.”
From Madison, Wisconsin. “As the weather heats up, industry experts say the housing market is cooling down. So much, in fact, some home builders and Realtors are finding themselves lowering prices just to get the homes sold.”
“The building in Dane County never seems to stop. But Realtors are getting more and more worried about filling those homes. ‘About October, we had a slight, normal slowdown, and then it shut off completely,’ said Andy Lindgren, Realtor in Sun Prairie.”
“Lindgren also says, with continuous building, buyers have a lot more choices. ‘They realize that instead of one or two properties that fit their needs that they need to act on very quickly, there may be 15 or 20.’”
“‘The market has been absolutely out of control,’ said Chad Wuebben, President of the Madison Area Builders Association. ‘Things are just finally coming back to a more normal pace right now.’”
“But industry experts say it’s still a good time to buy a home, with all the choices out there. It’s not, however, a good time to be a seller. ‘If they purchased their house a year or two ago, they can’t really expect to do much more than break even at this point,’ said Lindgren.”
I was listening to MPR (Mn public radio) this morning, and they had a story about housing.
They said that home sales were down 16% in June 06 compared to June 05. And home sales to date are down 10% compared to home sales to date in 05.
They then went on to say we’re at record inventory.
Overall, a pretty gloomy report.
Until the end, when some NAR shill was presented as an expert who said that “with all this exploding inventory buyers have more to choose from than ever!”
end story.
Sigh.
Clouseau.
funny how npr (peoples radio) has adds and shills like bob kamikazi
Until the end, when some NAR shill was presented as an expert who said that “with all this exploding inventory buyers have more to choose from than ever!”
in the Netherlands they have the same story and to this they add that we have huge inventory because economic confidence is better than ever (people they are already offering their home for sale because they will be buying a much bigger home next year??). Those people with very positive economic expectations must be top managers or they are smoking something …
“Two or three years ago, she says, all the houses on their block that went on the market sold even before the ‘for sale’ signs went up.”
Yours will sell that quickly too - if you use the ‘two or three years ago’ price instead of the Summer 2005 price.
I’ve been talking to my neighbors about the flipper.
For the FIRST time in years, my neighbor’s outlook is not as rosy as it once was.
When flippers bought last year (different house), everybody was wondering how many DAYS it would take to sell. Everybody was confident that the flipper would make big bucks. (she did)
A different flipper bought on the block behind me (I share an alley with the house) early this spring. He actually wasn’t a true flipper IMO, because he bought a teardown, tore it down, built a new home, and sold it. At that time, most on my block were not at all surprised when he asked for $175,000 more than any other house on that block had ever sold for (it was a new house though). He got it.
Jump to today. The flipper who is flipping the house across from me (3rd flipper) is doing a great job, I must admit. He’s put a LOT of work into the house. (anybody who thinks that flipping is always EASY, should see the hard work this dude is doing).
The consensus of ALL my neighbors is that he’s going to lose money. Even though he got the house for almost $95,000 under previous comps.
That is a HUGE shift in mentality of Joe and Jane Sixpack, in just a few months.
Clouseau.
If there is a silver lining to this bubble, it’s been the time, effort and money sunk into older housing stock to bring it up to current standards. Sure, a portion was wasted on over-the-top granite and stainless steel, but many a marginal home has been saved and improve. I’ve seen this manytimes in my own town, and when the bubble finally plays out the investment will still exists.
And by the way:
when the divorcee sold to the flipper for $95,000 under all previous comps, it BECAME the new comp. (although surely you all recognize that my house is special compared to her trashy house, and thus her comp doesn’t affect my house…. sarcasm off)
Which is why no area is immune to drops in prices. As others have said, the RE market fair market value is decided at the margins.
Clouseau.
Appraisers usually do not go on just one comp . A market appraisal needs 3 to 4 valid comps to establish a trend and adjustments are made for sq. footage etc/rooms . Sometimes a odd-ball
sale is eliminated ,(such as a distressed sale ).
If you have a area that gets alot of foreclosures/distressed sales in one tract ,than its a declining market value area ,so underwriters could decline the loan . Another reason why distressed flippers in new home tracts or condo development that can’t afford the payments can bring the prices down .(However appraisers don’t like to use foreclosure comps ,but if there is to many, they can’t ignore that the area is declining ).The underwriter is made aware of the declining values and it affects the underwriting decisions .(example :declining market value area ,high loan risk ).
The above information was just given to me by a retired Regional Loan Supervisor Vice President .
Established tracts that have a slow turnover with alot of owner occupied dwellings usually remain much more stable .
The current market is so out of kilter that it will be difficult for any appraiser to establish value in a declining market .
than its a declining market value area ,so underwriters could decline the loan .
This aspect of an apprasial report is the “BIG LIE”. Fannie and Feddie won’t buy mortgages in a declining market, so mortgage lenders must SHOP for an appraiser who will ignore market trends in an immediate neighborhood, and check the STABLE box on the report. They will then go to a neighborhood or subdivision which will cover the numbers needed by the L/O and lie about the distant to the subject.
WTF does some CA underwriter know about markets anywhere else than their own backyard.
But if you don’t play the game, you’ll be labeled as an obstructionist by the local real estate agents and mortgages originators who will badmouth you to everyone and “blackball” your biz.
I luv the newbie appraisers on the AppraisersForum who crow about being swamped with business.
More rubber stamper meat for the mortgage sleazebags.
The fix is in.
And that retired loan supervisor knows it. He’s mouthing empty rhetoric now that he knows the roof is caving in.
Hd74man …..The retired supervisor also mentioned some of the points you made as well.
While that’s all true, remember that appraisers don’t actually set prices - they attempt to validate prices that are set, which is a different thing entirely. The market sets prices, and the market doesn’t really care if a sale was distressed, or a foreclosure, once negative expectations set in.
We will want and need a bigger house. Ours was bought pre-family 17 years ago and there is just no more room. We could never figure out who could afford to buy (NO. VA) until I started reading this blog. ARM’s??? I never heard of them. We were still in the 20% down + closing world and every time we got close prices would jump.
So we were figuring out what we could afford - say with a 30% drop in 2 years when I realized that perhaps the old formula does not work. That is income x 3 = house price. We never understood how people did it until I realized - home equity is how.
But the 1 x 3 I think is no longer valid? Why? Retirement. We are paying for our own so there goes approx. 12%. Savings another whack to the wallet. College Fund. - Well that is like funding a mini retirement. Medical, dental, clothes, food etc. The numbers do not work.
stcamp
I still think income x 3 = house price should be valid even after 401k and health deductions. (As for college, well I’m YEARS away from that but I can tell you that I pay the same amount for a year of daycare that I would spend for a year of tuition at a state school - like my alma mater Penn State - so I figure if I can pay daycare now, I can handle college later.) This rule of thumb is essentially the same theory as I was always told that your mortgage amount should be no more than 2.5x your salary - factor in a 20% downpayment and you’ll be at the income x 3 number.
HOWEVER…there are NO home prices that correspond to this formula. Not for average income earners like myself - nor for high income earners. Ok, sure, someone making $100,000/year around here can definitely find a $300,000 house. BUT…it won’t be the type of house that most $100,000 per year earners would want to buy. It surely won’t be a McMansion - more like a slight step above a starter SFH.
When I bought my house in 99, we were right there in the incomex3 range. We had to watch our spending, but we were never in trouble.
Many of the people who have bought in the last three years are leveraged up to their eyeballs, and that is a very dangerous game.
As for the college thing, I’m with my fellow eastcoaster. My kids are 10 and 12 and I’m paying close to 10K a year for various lessons, leagues, and camps. They will provide some of their own support through school, so we should be able to make it.
I couldn’t figure this out for the longest time either. I heard of ARMs, but not toxic ARMs and couldn’t believe people would be buying these homes with ARMs at low rates (2002-2004) because the rate is only going to go up, how stupid is that. You can’t get any stupider and still be able to wear lace-up shoes. So I had to assume that maybe people really were making that kind of money, but then checking the census bureau I come to find out people aren’t making enough even for that. So I was stumped for awhile. Til last year when I toyed with the idea of buying a piece of land in Florida. Did some research and came up with low offers for like half of what I thought I’d have to pay, checked the fine print and realized they were originating speculative loans. That’s when I did a 180 degree and got the hell out of Dodge.
try rent w buy option
then just wait till foreclosures rise to 1990-93 levels and buy
I’m in 22151
doesn’t rent w/buy lock you into a price?… (which, currently, would be more than i’d be willing to pay.)
A buy “option” means you don’t have to buy.
It does typically lock the landlord into the agreed-on price.
You might have to put down a deposit, which you would lose if you don’t buy.
You want a good lawyer to handle the contract.
Right now, a rent w/ buy option seems to make sense mainly as an insurance policy against the possibility of continued price increases.
“‘Of course I’m terrified, because a year ago houses like this sold fast, very fast, and it was competitive,’”
So being terrified is normal?
That is an interesting quote coming from someone who has had their home on the market for a couple of weeks. Imagine what the comments will be in 6 months.
Industry experts say it’s important to remember that this isn’t the end of the world — the sky isn’t falling, as they put it. This is just a sign that the market is returning to normal.
These unnamed “industry experts” have a crystal ball which allows them to see the future. The future will be “normal” according to them. Well, considering the reliable source of that unbiased statement we should all take great comfort in the expert prognosis of a stable real estate market going forward. Why? Because, well, they’re experts, that’s why.
Those guys are what I’d call sell-side. They don’t care who wins or loses; they collect tolls along the way. All they want to see are transactions. There are so many analogies to this bubble to stocks.
Exactly. Turn on any financial show, and just listen. I have not heard a one that doesn’t say “We’re having a bad day” when stocks go down, and not a one that doesn’t say “We’re having a good day” as stocks go up. Sure, there is money to be made as stocks go down, but that isn’t the average person who puts a little of their money into stocks every month.
They only complain about higher oil prices….period. I haven’t heard a one complain about high home prices, food, clothes, etc. Only oil. I don’t know what their intent is, but they certainly are biased and don’t mind showing it. It would be refreshing if they started complaining about high home prices. That, in retrospect, will have done far more damage to our country than high oil prices. Most working Americans aren’t going into hock 1/2 a million dollars to buy oil. However, they are doing it to buy homes. That is going to leave a mark.
Want another? Anyone seen the “Normal” curve? Maybe what they’re all talking about is related to the shape of the normal curve (just the shape - notions of mean and standard deviation would be beyond comprehension for them). Maybe they mean that we’re about to take a roller-coaster style ride down the backside.
With apologies to all you denizens of the environs of Frisco…
but…
all the local NAR hacks are huffing and puffing after Essex County MA was recognized as being the most “overpriced” market in the entire nation in a recent Forbes Magazine article.
Noted reasons for the No. #1 ranking-”the highest cost of living in the nation; lowest salaries; least job growth; and least affordable
housing….”
You may also include-rotting road infrastructure; horrific traffic commutes to include passage thru the Big Dig (which is in the process of collapse); ardent NIMBY activism relative to zoning; mind-boggling muni service and school costs.
Course the naysayers say, “We have the Ocean!!!!!!”…as all the beaches close due to bacterial fecal contamination.
Had to drive into Oakland yesterday. On the way home my wife and I stopped in a new development we’d passed by never gone in. It’s around the 85 and 101 hwy. Turns out to be side by side developments (KB and Lennar). Both styles of homes were similar. Front door with no porch or overhang. Two and three stories, narrow halls and stairwells, etc. This is the first time my wife saw houses completely staged with clothes in the closets, tables set, etc and she just kept laughing. To make a long story short, there was an endless supply of people viewing these homes. They were either in their twenties or elderly with grey hair and they were stopping and talking seriously with the sales staff. Not one sales staff bother to ask or say anything to me or my wife.
Were you wearing your “I ♥ Ben Jones” t-shirt?
We also need “Vote for Ben Jones” t-shirts, pronto!
Yeah Salinas;…..I have been through those models too…I think they run 850K and up for Lennar don’t they ?? A sign of the times here in Silicon Valley…As long as everyone is awash in income around here I guess this kind of pricing will continue…
Speaking of the Silicon Valley, “View from Silicon Valley” has this to say in their latest article:
“San Jose Realtor David Martz said there were nearly 4,700 single-family homes for sale in the county last week, approaching the high inventory of more than 5,300 in July 2001.”
Once again, the RE pros have an information advantage. They know the “real” inventory number is 4,700 compared to us amateurs relying on DataQuick (DQ)figures, last published (June 30) at 3,117. The pros know inventory is approaching July, 2001 depression levels instead of just the early-stage recovery figures from late 2003.”
The rest of the article can be found by clicking on the View from Silicon Valley link on Ben’s blog.
I really confuse them when I go in to a model. I wear a Breitling Bentley on my left wrist with $ 6 eye glass frames and worn out tennis shoes.
Had one gal staring at my watch the whole time I gave her the bubble speak… I was quickly written off as a tire kicker though. kinda funny how people perceive wealth or lack of it here.
Had one gal staring at my watch the whole time I gave her the bubble speak…
She was probably trying to figure out if it was a “knock off” in order to properly qualify you! You obviously failed inspection
You two have an intelligent look about you. They hate that.
My neighbor is trying to buy a condo. She is a mortgage broker. I told her she is loading up on risk but what the hell do I know?
Just put in a low-ball offer for a condo. She was rejected. Doesn’t believe me when I saw in 6 months those sellers will be begging you to buy it from them!
It is hard to reason with people when they get in that mode. I say a word to the wise should be sufficient. If that doesn’t resonate with her then at least your conscience is clear because you shared some of your perspective. Best thing to do now is avoid commenting on the subject for the time being.
We closed on the sale of our house in Madison last Halloween. I’m so glad it’s sold…. I’m so glad it’s sold…. I’m so glad it’s sold!
lions ,tigers and most bears - oh my
Congrats!
Madison renter here… We like to torture Real Estate agents at open houses on weekends. I told one recently that I was interested in buying but only when blood was running in the streets. His responses was that I would never buy then because we were not going to get 15% increase but more like 5% “guaranteed” and if I don’t buy now prices will only be higher a year from now.
House buyers’ bargain time?
The area’s housing market continues to slow after five years in overdrive.
Six months into the year, the Twin Cities housing market continues its retreat from the record sales of previous years.
Pending home sales last month fell almost 19 percent, sale price increases continue to moderate and the number of homes for sale jumped to a record high, according to data released Wednesday.
With listing inventory at all-time highs, buyers will find themselves in the driver’s seat. At the end of June, more than 31,000 homes were for sale, a 45 percent increase over last year. That means an average of 6.18 homes were on the market for every sale expected this month.
That number is up from 3.67 during July 2005.
New listings last month rose 11 percent, pushing the total number of listings this year to 61,000 — a 17 percent increase over last year.
Full article at
http://www.startribune.com/535/story/548949.html
There was a house here in Salinas that went vacant about a month ago. Yesterday am when I went walking I saw a moving van moving someone in. Today I see that they are from Florida. It’s out of my way but I’m going to try to go by on the weekend when someone may be out in the yard and find out why they chose to move here. (not many high paying jobs here or jobs at all, and why did they move here from Florida?).
I had a real estate agent tell me last night that the market was healthier in May 06 than May 05 and housing is the best place over time to put your money and nothing can touch it as far as an investment. She also said housing prices have on decreased twice in Florida (NE) and that is not the case this time.
Are they blind, stupid or criminals?
I hope the bubble bust all over their a$$. If it doesn’t I am screwed; I sold my properties and moved my family into a rental.
all of the above
Condos, townhouses moving into suburbs
Amid growing signs that the appetite for family homes in the suburbs has peaked, a clash may be looming over how the Metropolitan Council will spend billions of public dollars to create new Woodburys and Lakevilles in the decades to come.
The council, which oversees planning and development in the Twin Cities, is making the home-building industry wary by signalling repeatedly — including again on Wednesday — that a seismic shift is underway in the metro housing marketplace, leading to the construction of more high-density housing in the region instead of traditional single-family homes.
Any shift toward multifamily homes could also kick up a backlash from suburban homeowners wary of changes in their communities.
“To me, big buildings should be in a big city. The reason people move here is to have a little bit of space,” said Johann Toikka, an Andover homeowner whose back yard overlooks a new three-story, 30-unit condo building.
…But home builders are wary. They say they regret the Legislature’s move to combine the council’s planning functions with a once-separate agency that oversaw the construction of new sewer lines — the foundation for all urban-style growth.
In the late 1990s, when Ted Mondale was the agency’s chairman, the Met Council issued a report saying there was plenty of land to build on. The home builders objected, contesting the validity of the data.
“If Minnesota is the land of 10,000 lakes, Apple Valley is the land of 10,000 town homes,” said Jason Gabbert, who bought one in that community and worries that overproduction is minimizing his home-equity growth. “Town homes are nice, but it gets ridiculous when there are hundreds and hundreds and hundreds.
Jim Erkel, of the Minnesota Center for Environmental Advocacy, said the Met Council needs to change with demographic realities. He said more than 40 percent of the region’s growth from now to 2030 will be people living alone, and not in the market for big homes with yards and swing sets.
“You have to start wondering,” Erkel said, “why we are still building four- and five-bedroom homes out on the urban fringe. The market is just not there.”
Full article at
http://www.startribune.com/462/story/549024.html
“To me, big buildings should be in a big city. The reason people move here is to have a little bit of space,” said Johann Toikka, an Andover homeowner whose back yard overlooks a new three-story, 30-unit condo building.”
What a fool. He doesn’t think that many his land was once a pretty wooded lot for someone else to enjoy.
And for the guy complaining of competition; I am going to call Ford and complain that they are building too many cars which is increasing my depreciation.
jackasses
To EC, if I had one I’d definitely worn it. I was only able to engage one elderly couple in small talk and they were seriously looking. They said that they had a nice house up in the state of Washington. I said that the houses they were looking at weren’t good for the elderly as there were no bedrooms downstairs and that the house were way over priced. They replied that was no problem because they had a house in Washington (I think they were thinking of buying to flip). My parting shot was have you checked out the free fall in these builders stocks? Then my wife pulled me away and told me to mind my own business. Damn, next time I’ll take my son.
LOL! You go, Salinasron!
…” And there are drawings for the chance to throw out the first pitch at a Minnesota Twins game.”
Overpaying $100k+ on a new house gives you a lotteries chance of throwning out a pitch at a Twins game? That has to be the LAMEST incentive ever. For that much money, they should be giving away starting/closing pitching jobs. It’s not any guy/gal off the street could be any worse of a pitcher than the Twins bench. (No offense to any MN fans, I would say the same thing about my D-Rays if this were in Tampa).
“Jones, like many of her real estate industry counterparts, prefers to call the slowdown a ‘normalization of the real estate market.’ ‘We’re not worried about it,’ says Jones.”
I am not scared, but I can’t even say slowdown… Can you say CRASH?
Simmssays…Discover the Magic of MUD
http://www.americaninventorspot.com/magic_of_mud
(The flipper who is flipping the house across from me (3rd flipper) is doing a great job, I must admit. He’s put a LOT of work into the house. )
I wouldn’t call him a flipper if he is actually improving the property. An investor is more like that. Plenty of people have earned a good living in Brooklyn buying rundown houses at reasonable prices, fixing them up and selling them. One guy I know was heading upstate to do the same — prices too high here now.
(To me, big buildings should be in a big city. The reason people move here is to have a little bit of space.)
A townhouse or condo in a place where you still have to drive to everything is NOT a good idea. All the urban disadvantages without the advantages. Add these to the excess supply of McMansions in the far off fringe for big losses.
In some older regions, you have railroad suburbs with little main streets and town squares. You could put some more people there, within walking distance. Otherwise, forget it.
So much, in fact, some home builders and Realtors are finding themselves lowering prices just to get the homes sold.
Gasp!! They’re resorting to that???
“Annisa Jones, the marketing manager for Centex Homes, Minnesota’s largest home builder, says while her company is not giving away cars, it has several promotions aimed at luring business. There’s a drawing for $50,000 in down-payment money and ‘instant-win’ gas cards. And there are drawings for the chance to throw out the first pitch at a Minnesota Twins game.”
I thought the first pitch throw out was to honor someone or let some kid have some fun? Its a sick world. Even the simplist element of the “national pastime” is a for profit item.
I related this story several weeks back but it encapsulates this mania so well that I just have to repeat it.
I have an aquaintance that called me to invest in his “project” up there in the NW corner of the twin cities. This guy’s real job is in no way related to construction. He used to have some rentals that he managed but other than that, he was not related to RE in any way other than buying for his own personal use.
Apparently he was talked into becoming a “developer” by someone that has the ability to oversee a large construction project (at least that is the gist of what I learned). My friend (and his construction buddy) located several acres of land that he bought for 3 million dollars. I believe my friend either liquidated his rental (or leveraged them) or he took out a HELOC on his family’s house in another part of the country that has seen big equity gains. Now, he puts down a few hundred thousand on the land. I didn’t ask so I don’t know whether the land owner was cashed out with a bank loan or whether he subordinated to the bank. Either way, I understand that there is ongoing interest payments that relate to this purchase. The project is 220 condos starting at the high 200’s (if I recall correctly). The bank requires presales of 30 units to start construction on the first building. The building is like 5 stories or so which precludes biting off smaller chunks (building less units at one time) to get this ball rolling.
Meanwhile, interest is being paid out on the land loan AND the complex apparently has some commercial space that is required to be developed. So, either this guy is greedy or he can’t find anyone who wants the deal but he plunks down another 250K to secure the gas station/convenience store. He tells me that the presales are not going so hot and that only half are spoken for (this after a year of ads, etc). He is worried that if he lowers prices on remaining presales then that screws up what presales he has. He tells me that he has about 1.5 million into this deal after the year+ he has been working (working being a loose interpretation of what this guy has been doing as noted below) on it. I noted that he had called from an area code that is not in MN and I find out that he is overseeing this deal from the other side of the country because that is where his family and his extremely leveraged RE are located. I asked him what he knew about inventory in his area with regard to type and cost. Nothing, nada, no information was attempted to be garnered about this multi million dollar gamble he was involved in. I’m like HOLY SHIT guy. Let me get this straight. You have never developed land, you live out of state, you have gone into hock to the tune of 1.5mil and have left oversight of the project to someone who is collecting a salary off of you for doing so and with no skin in the game? Does this about sum it this up? YEP comes the reply. And you basically have not come up with a marketing plan or anyway to turn around sales? Nope.
Well, OK then. How big of a disaster are you shooting for? What do you mean? Well, do you want to owe 5 million or are you content with just owing 1.5 million at the end of this project? Huh? I should be able to make 10 Million at the end of this!
Needless to say, the conversation took an abrupt turn at that time and he left with a less than pleasant feeling about my thoughts on the matter. I’ll post an update should I get one. Is this insane or what? This guy will likely lose his house, rentals (if he still has them) as well as perhaps BK depending on how he structured the business/loans (which I didn’t ask about). Unbelievable!
It seems like builders /flippers didn’t do the proper research during this housing boom mania .People think nobody had the same idea they had and they don’t account for the competition. When the market turns it can be fast and brutal ,as we are all seeing .
This guy will lose his shirt. The NW suburbs (Brooklyn Center, Brooklyn Park, Crystal, Robbinsdale etc) are not really very well sought-after. More like run of the mills cookie cutter working suburbs. They are building townhomes and condos there like crazy, all pretty cheap comparatively. The best thing about that area, is that it isn’t North Mpls (the only dangerous part of the metro area), and that it’s within 1/2 hour to nice stuff (with no traffic) 3/4 to 1.5 hours if traffic.
Worse, congestion/traffic is awful, and they keep building out further and further.
If your friend has no knowledge of the area, he’s gonna get screwed.
The NW area does NOT have the “prestige” that the West and Soutwest suburbs have, nor even the East suburbs of St. Paul or NE suburbs of St. Paul. Condos/townhomes have a chance there at least (and then not even a very good one)
He’s in trouble.
Clouseau.
The DJIA has fallen below its plunge protection level of 11K, but the fairy has brought the homebuilder stocks back up to their opening levels after an initial plunge. Still holding out hope for you, TxChick!
I get the feeling that the current slide in the DJIA may continue for some time. Who would have thought that the kidnapping of a few Israeli soldiers would be the impetus for destabilizing the stock market. Although I could be wrong, tension in the Middle East is increasing rapidly, and it looks like many of the constraints which kept the violence in check are quickly being removed. I don’t see how or who will be able to put the lid back on this one. Here comes $100/bbl oil and $4.00/gallon gasoline. (And continuing inflation, and increasing job cuts, and …?)
Interesting. A friend who buys energy in huge commericial blocks told me last year that their five year budget forcast factored in oil at $140 a barrel in fiscal year 2010. He also mentioned that as part of it the company estimated that gas at $4.07 was the tip over point for consumers. Tip over meaning as in the economy.
If you read the stories about what is going on in Israel right now, you will see this crisis can very easily drag much of the Middle East into it. Iran (and to a lesser extent Saudia Arabia) backs Hezbolla, and apparently the Lebanese were trying to transport the kidnapped soldiers to Iran. Iran is the fourth largest supplier of oil in the world, doen’t like the West, and may not be afraid to screw with the oil supply to make a point to contries which support Israel (like the US). Although this would hurt their economy, the events currently unfolding could be used to jusify the action to the Iraian populace.
The tensions have been much higher in the region ever since the US invaded Iraq. With such unpredictable governments in the ME, all kinds of irrational responses to the Israelis are possible.
Unscientific, wild-ass statement: the dotcom bust basically killed the stock market for many stock investors for the rest of their lifetimes. And that has played into subsequent RE boom.
A possible aspect of globalization that I haven’t read much about: does it seriously erode the profit potential of American companies generally, vis-a-vis the rest of the world, and thereby lead to the long-term stagnation of the U.S. equity market in aggregate?
> A possible aspect of globalization that I haven’t read much about: does it seriously erode the profit potential of American companies generally, vis-a-vis the rest of the world, and thereby lead to the long-term stagnation of the U.S. equity market in aggregate?
I don’t think so. Globalization has so far helped US companies to keep wages down and profits up, by allowing to choose between many competing locations for their business. I see more of a problem in the over-leveraged US consumers. When they stop buying, many US companies will see their profits shrink.
The IRS said gift downpayment programs were a quote “SCAM,” because you can’t use a non-profit to benefit a for profit as reported in the Washington Post…
SCdave, I don’t know what they were asking for the units as they had no sales sheets available on the desk top. If I would have waited to ask a sales person I imagine one would have been available. Could possibly be that prices are changing and they don’t want to advertize the fact to everyone looking. I did love the hillside filled with burnable grass and the mosquito sump around the corner of the model home. One young asian couple was asking a sales lady about the availability of local transportation nearby.
OT,but i was talking to my indymac rep,and he told me that there is no market for subprime helocs or piggybacks anymore,even at the current 12%-13% rate,and that there is a sh!tload of unsalable loans on all the subprime lenders books.looks like someone finally figured out that this was really unsecured debt to people who started out with bad credit,and who will probably be borrowing the $ to file bk in a year.
Credit card borrowing surges — is a popped bubble to blame?
The plastic answer to housing woes
http://www.salon.com/tech/htww/
Add another economic indicator to the monthly must-watch list: The Federal Reserve’s report on consumer credit. Now, if you were just glancing at recent headlines, such as the Associated Press’ “Consumer Borrowing Slows in May,” you might think there wasn’t much to pay attention to. Overall, borrowing grew at a modest annual rate of 2.4% in May.
But as Dean Baker notes in his economic reporting watchdog blog, Beat the Press, the number that really jumps out of Monday’s Fed report is the figure for revolving credit, better known as credit card debt. That rose at an annual rate of 9.9%, the most since 2004.
Baker cautions that a one-month data blip is never sound evidence for predicting a trend, but then he goes ahead and speculates anyway, connecting the dots between the jump in credit card debt to the slowing housing sector. Homeowners who were borrowing against their equity to fuel their consumption are now facing the grim reality that home prices are stagnating, or even falling in some regions, and those adjustable rate mortgages are resetting and bumping up the monthly payments. So the mighty American consumer is turning to his and her credit cards to keep the cash flowing — and by extension, the global economy. Keep an eye on next month’s revolving credit numbers, says Baker — it could be a clear sign that the housing slowdown is beginning to bite.
And certainly, if you live in Denver, the boom has turned to bust. The Housing Bubble Blog directs us to a story from the Rocky Mountain News that reports that “More than 9,500 real estate foreclosures have been filed in the Denver area in the first half of the year, about 34% more than in the first six months of 2005.”
The nut: “Experts said foreclosures are being driven by several factors: adjustable rate mortgages that are rising with interest rates; interest-only loans; houses sold to people with less than stellar credit ratings who in previous years wouldn’t have qualified for loans; programs allowing homes to be purchased with no down payment; overbuilding; the lack of new, high-paying jobs; and predatory lending and fraud.”
Are Denver residents pulling out their plastic? Are we teetering closer to national insolvency? Not to worry, says a recent report to Congress from the Federal Reserve: “This review finds that as a matter of industry practice, market discipline, and banking agency supervision and enforcement, credit card issuers do not solicit customers or extend credit to them indiscriminately or without assessing their ability to repay debt.”
And if you believe that, I’ve got an uninsurable $2.5 million luxury condo in the hurricane-prone Florida Panhandle that is just waiting for you to move right in.
–Andrew Leonard
July 12, 2006
The trouble with credit card borrowing is at least fourfold:
1) No home equity gains are forthcoming to add to the credit balance.
2) The rates are generally much higher than recent home equity refinancing rates.
3) The interest is not tax deductible.
4) The rates are adjustable.
5) The rates can be adjusted very high for customers who are perceived credit risks, including cancellation (infinitely high interest rates).
So all told, I believe the increase in credit card borrowing will be a rather poor substitute for the home equity wealth effect.
Long time visitor to the site, really good to read a story from Madison, WI. I’ve been mentioning the bubble to people for about 6 months now, but I’ve been told over and over that Madison “isn’t one of those areas”. Even when I show them the MLS stats for this region:
http://www.scwmls.com/public/stats/stat_search/images/dane/residential_sales_inventory/dane_active_listings_04_05.pdf
The article still let the builders get in the last word, which is discouraging, but hopefully this will lead to more and more news sources in the area picking up on this story. Prices ARE starting to inch down in 5 to 10 thou increments, but they have a ways to go before they’re close to what they were before this whole build-up started.
No bubble in the UK. Prices have, in fact, apper to have reached a permanently high plateau.
http://money.uk.msn.com/Investing/Insight/Special_Features/Active_Investor/article.aspx?cp-documentid=660092
The study by First American Real Estate Solutions identified Minnesota as one of the top 5 States to be hardest hit by “mortgage payment reset”:
http://www.firstamres.com/pressrelease?page=detail&id=77
“The states with the highest percentage of risky properties, where fewer borrowers have significant equity and face greater likelihood of experiencing reset sensitivity include Tennessee, Colorado, Minnesota, Alabama and Arkansas.”
It seems Minnesotans used plenty of Interest-Only and Negative-Amortization loans….