‘Everything Works Fine As Long As There Is Appreciation’
Some housing bubble updates from California. Bakersfield, “The once-frenzied market has slowed to a crawl, and builders are going out of their way to entice buyers into their half-built neighborhoods. ‘They already own thousands of lots that they still have to use up,’ Alan Nevin, chief economist for the California Building Industry Association said.”
“Builders can’t get rid of that land at the price they want to sell it for, Nevin said, so they’ll stay. Nevin estimates that developers will build 20 percent to 25 percent fewer homes in the Central Valley next year. They’ll also stop buying up land, he said.”
“Houses are already being built, and they can’t be stop, Randy Char (of Pulte Homes) said. ‘We’d rather sell them now and ensure the sale than hold out for top dollar,’ Char said.” ‘We’re just trying to do everything we can to be aggressive,’ he said.
“In the San Francisco Bay area, adjustable mortgages of the kind Perry borrowed make up 49 percent of all refinance loans so far this year. Borrowers no longer ‘ask me what is the quickest way I can pay off my mortgage,’ said Jack Williams, the president of the California Association of Mortgage Brokers and a broker in Orange County. ‘I haven’t heard people say that for 15 years.’”
“California, which has 14 percent of the country’s housing stock, leads the nation, with 21 percent of homes purchased with adjustable-rate mortgages, and 44 percent of California borrowers have refinanced with option-ARM loans so far this year.”
“The fate of subprime borrowers, industry experts and economists say, will be closely tied to home values and the job market. ‘Everything works fine as long as there is pretty decent home price appreciation,’ said Grant Bailey, a director in Fitch Ratings’ residential mortgage-backed securities group.”
The Orange County Register. “Larry Pendleton, a financial planner by trade, already owned a modest Irvine rental..when he found apartments being sold as condominiums in Laguna Niguel for $480,000.”
“Some novel financing helped Pendleton obtain the Laguna Niguel place. He used a hybrid loan whose 6 percent payment is fixed for 10 years before payments adjust. He also opted to pay only the interest for the next decade.”
“With a renter in place, the new condo is almost break even for Pendleton after he tallies up various tax breaks. However, that math doesn’t include the roughly $100,000 he put down earning no interest. He’s counting on future appreciation, over many years, to make that move profitable. ‘Am I buying at the top?’ Pendleton asks. ‘I’m not selling soon.’”
The San Luis Obispo Tribune. “A slowdown in the market hasn’t resulted in a mass exodus of agents from the industry, local real estate professionals say. But agents and brokers acknowledge that it could be a test for salespeople who have not adjusted to the new reality.”
“‘There are too many agents for the number of transactions happening,’ said Leslie Appleton-Young, chief economist for the California Association of Realtors. ‘There’s not enough business for everyone to be a successful full-time agent in the state of California.’”
“Stephanie Pipan, an agent for nearly four years, said she’s still picking up business but has revamped her image to attract the attention of potential clients. ‘Now, my dog and I go everywhere together,’ she said. ‘I connect with people who own dogs, cats, reptiles and fish. I can get in on that personal level.’”
“Lynn Bates was working in banking and property management when she decided to sell real estate in 2004. Bates said this summer has been challenging. ‘I’m not sure what the next couple of months are going to do,’ she said. ‘Some things will have to shift.’ Besides, Bates said, ‘I’m not really good at wearing the little cap and taking french fry orders.’”
Thanks to the readers who sent in these links. One posted from San Diego:
‘Although California continues to add jobs, a monthly decline in construction and financial hiring suggests that the state is beginning to feel the effects of the slowdown in the housing market.’
From the Bakerfield article: ‘and they can’t be stop’ Pretty sure this is a typo; ‘can’t be stopped.’
It’s not a typo…its redneck ebonics.
most construction jobs wont show up in the stats.most are illegal under the table jobs.no wonder the hospitals are broke.i tried to make a dr appt friday it takes 6 weeks to see your dr here in los angeles.
3 facing prison for real-estate scam
Defendants could get 20-year sentence for charges of identity theft and mail fraud.
By Samantha Gonzaga, Staff writer
“LOS ANGELES - A Downey woman and two others on Thursday were indicted by a federal grand jury for their alleged part in a $12 million foreclosure scam that victimized more than 100 Southern California homeowners.”
“Cynthia Valenzuela, 23, of Downey, showed up at the U.S. District Court along with Vladimir Stefanovic, 35, of Lancaster, and Maria G. Juarez, 36, of Reseda for allegedly participating in a ring led by Downey resident Martha Rodriguez, 35, and Torrance resident Edward Seung Ok, 40. The latter two - who ran real-estate and escrow offices in Downey and Seal Beach - were arrested in November when the jury issued its first indictment….”
Lynn Bates couldn’t hack it in a fast-food restaurant so we switched to selling real estate?
BWHAHAHAHAHAAHAHA!
I’m guessing her next stop will be something in the sanitation industry.
No, the article said she ‘was working in banking and property management when she decided to sell real estate’. Still, kind of an ironic statement.
Bates said, ‘I’m not really good at wearing the little cap and taking french fry orders.’”
True, but by her own admission she sucked as a fast-food worker. Go figure.
I think that she was speculating, same way she did with her real-estate career.
I think everyone should go out and get their RE license so they don’t have to pay an agent to do the negotiating when they throw in low ball offers!
Request complete.
“Stephanie Pipan, an agent for nearly four years, said she’s still picking up business but has revamped her image to attract the attention of potential clients. ‘Now, my dog and I go everywhere together,’ she said. ‘I connect with people who own dogs, cats, reptiles and fish. I can get in on that personal level.’”
Oh, wow, you own a dog, too? Well, that changes everything - where do I sign??
I can understand her affinity for reptiles, too, given her chosen profession.
Her clients like reptiles, that’s the key.
Wonder if she shares her commission with the dog?
Actually, she may be smarter than you think. I interviewed 6 real estate agents when I was ready to sell my house last year, and I only considered the ones that had dogs (5 of the 6 did). Why? Because with 4 dogs, one handicapped, I needed at agent that would be sensitive to the difficulties in getting the house ready for market and showing it while having 4 dogs + 2 cats hanging around. I wanted an agent that would help me solve problems relating to my menagerie rather than being insensitive.
There are so many incredible quotes in above article, but this one about the broker and her dog is my favorite.
I just love her admitting what we all know but brokers usually refute…that a broker’s services are basically a commodity. In her case, she’s saying “pick me because I love my dog!”. In my area (Mar Vista in Los Angeles), there’s a broker team that says “pick us because we are, like, blonde!” (The Bizzy Blondes).
I guess Stephanie Pipan is just following the old saying: If you can’t beat ‘em, try bringing your dog to work.
Say what you want, I’m familiar with those blondes. Having them on your team is a plus. They have been around awhile and they are knowledgeable(sp?) and very good. It would be hard to find better.
thanks for your vote of confidence! It sounds like you have quite an objective opinion.
Sarcasm noted, and yes I know the party line “kill the broker go fsbo”. I’m familliar with a lot of the Southern California Broker/Agents mentioned in the articles here being as that when I was selling R.E.O’s I came across or did business with a lot of them. The Blondes are ones that I would highly recommend if one needs an agent especially on the Westside. Actually I can only think of maybe 5 I would even recommend. Based on longevity and knowledge.
how about George Cheung?
San Diego used car dealers are often seen on TV with a dog under their arm. Must be some book out there about best ways to sell one’s self as an agent.
everyone needs a schtick
Pick me because I wear a straw hat!
http://www.therealestateshoppinglady.com/
HAHHAHAHAA!
Was she sensitive to the needs of squirrels?
I hope she doesn’t take the dog to showings, it may end up as flea-bitten as the product she’s peddling.
http://news.bbc.co.uk/2/hi/middle_east/3024046.stm
Gary Watt’s replacement has been identified.
http://www.welovetheiraqiinformationminister.com/#quotes
Usually you’d have to go to the NAR’s website or SDCIA bulletin board to find quotes this priceless.
The difference is that Muhammed Saeed al-Sahaf tells the truth once in awhile. Poor substitute for “in the bag” Watts.
“Stephanie Pipan, an agent for nearly four years, said she’s still picking up business”
———————————————————————–
picking up listings is not the same as picking up sales. During the bubble the key was to just get the listing, no problem selling. Having the listing now is almost worthless, in fact it costs the agent money. I hope she put a lot of her 2002-2005 commissions into savings but most did not.
Kind of like the dot com boom and bust to IT Headhunters / recruiters. Before, there were tons of jobs and just finding someone was your key to getting paid. Once everything crashed, there were a ton of people looking for jobs and hardly no jobs! If you could find a job listing, you had 100 willing and qualified candidates to put into the position. Funny how that is now being applied to RE. Supply and Demand…. ah such a basic and great concept.
Actually, that very imbalance kept good recuiters paid. Some employers don’t want to weed through 100 resumes and sit through multiple interviews. They just want the opening filled with a qualified candidate, and the recuiters shorten the time to do it.
Yes, and by the very same reasoning good realtors will still make a living, as mrincomestream keeps pointing out.
AJH;….Its estimated that 5% of the licensed realtors make 80% of the money…..
[vicious sarcasm]Yeah, and with four years of experience she should have no problem realizing this. [/vicious sarcasm]
-
A Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The high returns that a Ponzi scheme advertises (and pays) require an ever-increasing flow of money from investors in order to keep the scheme going.
The system is doomed to collapse because there are little or no underlying earnings from the money received by the promoter.
One reason that the scheme works so well is that early investors – those who actually got paid the large returns – quite commonly reinvest (keep) their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme don’t actually have to pay out very much (net) – they simply have to send statements to investors that show how much the investors have earned by keeping the money in what looks like a great place to get a high return.
The catch is that at some point one of three things will happen: (a) the promoters will vanish, taking all the investment money (less payouts) with them; (b) the scheme will collapse of its own weight, as investment slows and the promoters start having problems paying out the promised returns (and when they start having problems, the word spreads, and more people start asking for their money); or (c) the scheme is exposed, because when legal authorities begin examining accounting records of the so-called enterprise, they find that much of the “assets” that should exist do not.
http://en.wikipedia.org/wiki/Ponzi_scheme
So what does Social Security have to do with real estate?
“There are too many agents for the number of transactions happening”, said Leslie Appleton-Young, chief economist for the California Association of Realtors. “There’s not enough business for everyone to be a successful full-time agent in the state of California.”
Really?? I did not know that.
Dang close tags close tags
help!!!
Stephanie Pipan, an agent for nearly four years, said she’s still picking up business
This is what cracks me up, you here this RE Agents harpin on that they are doing fine, like the above statement, never do you here them say it sucks right now haven’t had a sale in months.
Well she is right in a way, Have a friend who’s best friend and wife live here in Laguna Niguel, both agve up their full time jobs back in 03/04 to become realtors ™. AS all in their line did nothing bust boast how is money was coming in, anyway to get to my point, they too are harping on about how many houses they have picked up to sell from client’s.
What they don’t tell you is, and I know this for a fact, is that niether one of them has had a sale since August 05′.
But remember they have been working open houses every weekend, yes every weekend since 05′ without a sale, also couple in the costs of advertising, they have got to be losing soem serious bucks. (but I suppose the pitch is well we have lots of houses for sale so business is good Riiiggghhtttt). That there should give them a clue.
re-post;…Its estimated that 5% of the licensed realtors make 80% of the money…..
gotta go back to school and learn to type
No problem. I believe in substance over form!
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Excellent Post!!
Syntax excellent - prescient thought less than expected.
Everything Works fine as long as there is appreciation…in a Ponzi scheme.
My thoughts as I read that, Exactly. What other man-made invention is predicated entirely on appreciation. Pyramid & Ponzi schemes and RE bubbles - All the same.
Real Estate in the central San Joaquin Valley where houses doubled in for sale price in 2 years: It sounds just like scAmway. Enough said.
Everything Works fine as long as there is appreciation…in a Ponzi scheme.
As long as we have fake bids, pumped up counter bids, and fake apprasials.
http://appraiserspetition.com/
The concern of this petition has to do with our “independent judgment” in performing real estate appraisals. We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States, who seek your assistance in solving a problem facing us on a daily basis. Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value.
This pressure comes in many forms and includes the following:
the withholding of business if we refuse to inflate values,
the withholding of business if we refuse to guarantee a predetermined value,
the withholding of business if we refuse to ignore deficiencies in the property,
refusing to pay for an appraisal that does not give them what they want,
black listing honest appraisers in order to use “rubber stamp” appraisers, etc.
The comments, included with the petition signatures are informative and helpful.
‘We’re just trying to do everything we can to be aggressive,’ he said.”
Except what?…Lowering prices? Hmmm, Maybe?
It’s getting close. They won’t directly lower prices in a subdivision due to the backlog. But once the backlog is gone, it’s game on.
You got that right. If they cut prices why they have a lot of people under contract what do the people do, cancel the contract most likely, depending on the situation. That is a great point about the back log. I wish there was some way to figure out the back log so you could time the whole deal better.
Sometimes they will raise prices till the backlog clears, so the people think they are getting a deal and follow through on the contract. Once that is cleared, price cuts to move ALL that inventory that is left!
Need some help here.
Agents doing openvacant houses today say in Phoenix keep airconditioning going at home owners expense during those 4 hours and then turn it off.
http://weather.yahoo.com/forecast/USAZ0166.html
I was talking to someone (who shall remain nameless) the other day and I was telling them that one of the things I spend time on is researching the housing bubble on-line. They responded uhn, in a derogatory tone. Now this person is someone who got in a bind with RE in CO. I wanted to say: “you low life so and so, you were trying to talk me into flipping houses a few years ago, now you don’t even want to talk about it?”. People aren’t worth a dime, they’ll try to talk you into buying during a mania without giving it a second thought. Watch out for your friends and family people, they’ll steer you wrong every time and then later they will act like they don’t know what you’re talking about. Watch out for yourself because nobody else will.
They are doing the classic “pump and dump.” They have to evangelize everyone to think their way so they can profit. Kind of like religion. A few years ago one relative was disappointed because I did not get on her religious bandwagon. It was like, if she could not convince other people then her own world was shattered. Very wierd. See, you gotta root for the home team. If you don’t you are a commie! Ha! Actually what you are doing is called “moderation.” No one has all the answers because no one has all the facts. So may as well take the middle route. The only books that I have seen flawless have been mathematics books (minus the typos).
“They have to evangelize everyone..Kind of like religion. A few years ago one relative was disappointed because I did not get on her religious bandwagon. It was like, if she could not convince other people then her own world was shattered.”
What does this remind me of???
D’oh!
Scientology!
Of course: all adults are responsible oneself. The buck stops with you, as an individual. As for family and community, that gets a bit more complicated, depending on your ethical system. [If and when they start rounding up specific people group in your community, will you stand up for them?]
Unfortunately for this bubble, I believe that so many people will be underwater that they will turn to Uncle Sam for hand outs and that means all of us taxpayers will be on the hook. And don’t think the problem will end at our borders: the financial tsunami will hit outsourced IT folks in India, factory works in China, people dependent on “scacrificial foreign aid” (money wired from the immigrants in the U.S.) and all those 1st world MBS “bag” holders…
“I believe that so many people will be underwater that they will turn to Uncle Sam for hand outs and that means all of us taxpayers will be on the hook. And don’t think the problem will end at our borders: the financial tsunami will hit outsourced IT folks in India, factory works in China, people dependent on “scacrificial foreign aid” (money wired from the immigrants in the U.S.) and all those 1st world MBS “bag” holders…”
I think there is a good chance what you say will be true. That is why it is a smart idea for one to diversify in tax avoidance schemes. There are more than a few people on these blogs who either sold at the top or saved cash and in securities for the last 5 years that have enough money to plant a flag overseas. It’s perfectly legal for a U.S. citizen to also be a homeowner in another country. You can also take $9,999.99 each time you go from the U.S. to that other country where your residence is. You must physically be in the United States at least 6 months per year to retain your U.S. citizenship. My millionaire colleague has a house that is almost built in one of the Carribean nations. He also has property in Iowa and Miami. Bought long before the bubble. I think he may already know but will remind him he could open a bank account at his island nation and have some money flow into a U.S.-based mutual fund as a foreign investor if he so chooses. The tax laws are different on foreign investors of U.S. investments, of course. My friend may opt to just buy gold over in his island paradise and store it in a safe at his bank there. He’s all set when America goes down the “Road to Serfdom.”
“You must physically be in the United States at least 6 months per year to retain your U.S. citizenship”
Huh? Citizenship doesn’t just go away like that, although I’m sure that a lot of wealthy people wish it did. You have to either formally renounce citizenship or join another nation’s army in order to lose US citizenship, and even then, you still owe income taxes to the IRS on your worldwide income.
Travel restrictions are another possibility if confiscatory taxes become necessary. Wouldn’t it be ironic if wealthy people end up having to sneak over the border into Mexico with their gold in order to reach their eventual destination in the Carribean or someplace?
I lived overseas for 3.5 years without losing my citizenship. Of course, I did file with the IRS ever year.
You must declare your overseas bank accounts to them as well.
Hope you were applying for the Foreign Earned Income Exclusion. First 72k of income is untaxable if you are out for more than 11 months straight. The 72k is probably closer to 80ish, by now.
“Losing citizenship” is a ridiculous notion. However, you could lose residency if you do not file state taxes. California has an 18 month limit. After that, you no longer have to pay/file taxes - but, when you come back, no cheap community colleges/universities, and no voting while overseas (in LOCAL elections/props, etc.).
Note that you don’t automatically lose U.S. citizenship for signing up in another nation’s military. They are very accommodating now since many countries with dual U.S. citizens require military service (like Israel).
See for details: http://www.richw.org/dualcit/faq.html#forarmy
You really, really have to want to lose U.S. citizenship, to lose it. (Makes sense to me, since U.S. government loves to jail folks for non-tax payment: wasn’t some gangster caught and sentenced only for tax evasion but not for any other crimes he committed?)
DannyHSDad: There’s a difference between being drafted and enlisting in a foreign military. The USG still takes a dim view of people volunteering to serve in foreign militarys.
jim A: No, you need to read the law:
http://www.law.cornell.edu/uscode/html/uscode08/usc_sec_08_00001481—-000-.html
you can enlist and still keep US citizen. Until you start fighting the US or become an officer, volunteering won’t make much difference. Even if you were, you still have a process to retain your citizenship: The law is pretty relaxed about it.
Currently policy is even more loose:
http://travel.state.gov/law/citizenship/citizenship_778.html
I stand corrected. I wonder when that changed. ISTR after WWII they passed laws to make sure that nobody who volunteered to fight for one of the allies wouldn’t lose citizenship.
It’s permanent residency status for aliens, i.e., their “Green Card”, that is in jeopardy if they leave the US for more than 6 months at a time. A citizen (born or naturalized) can theoretically spend his entire life overseas without risking his status.
Only Green Card holders are affected, US citizens cannot lose their citizenship unless they renounce it. I am a Green Card holder who recently purchased a place in Argentina and will buy another in Uruguay. My Spanish is poor but I will learn. I don’t see how I can retire in the US. I sold my house in Camarillio, California in June 05 and never regreted it. I love the US but this country has changed and not for the better. Too much debt will choke and kill everything we aspired to be. Good Luck to everyone.
50% of real estate in US is owned free and clear, and 35% have fixed rate mortages. I picked this up from research on a website for professionals in lending business. Can’t find link just now. It looks like 15% of the real estate in US is in the hands of the speculator/investor/over extended homeowner. They might make a lot of noise, but Uncle Sam ain’t bailing them out
And don’t forget to add the pension funds into the MBS “bag” holders. Just as Enron retirees were forced out of retirement, many pensions dependent on MBS and other real estate assets (REIT, RE related stocks from Realtors to home depot) will feel the pain all around. And don’t think that government workers and retirees are exempt since their pensions invest in same funds as private companies [Anyone else remember the Orange County BK?]. And wait for the earthquake when RE appraisals start coming down, sales tax decline due to no more home-ATM money, people stop paying their prop taxes and foreclosures bring in little or no money into the municipal coffers. Those with rainy day funds may weather out the storm for few years but watch out below when those funds run dry, too.
didn’t the gov workers get bail?
gov workers, the new centurions
The Orange County treasurer pleaded insanity and probably got off scot-free. Perhaps millions of underwater mortgagees can do the same.
Mort;…Classic profile of a new agent in the early years of their license….They cultivate the easiest business first (Family & Friends)….After those are exhausted, the incompetent (Most of them) find the business extremely difficult and in any downturn are usually out of the business…
[ Larry Pendleton, a financial planner by trade ] (and part time FB flipper).
I can almost imagine Larry’s phone ringing off the hook as people reading this article recognize his talents as a financial planner extraordinaire. Anyone that has consulted this buffoon in the past should demand a refund immediately.
what a greater fool, the renter barely covers his IO payment. I can’t wait to do a future value calculation on that $100,000.
this is a case of someone wanting to buy something as opposed to investing.
I’d guess this guy could get home price options for far less than $5,000/yr (in forgone income) from the CME.
JLAW;….The renter is his duaghter….I have some personal experience with this…The negative cash flow is far greater than you anticipate…
Gary Watts brother-in-law
From the LA Daily News article mentioned above…
” “Some people would say I am a little crazy,” acknowledged R. Lance Perry, 42, of Danville, Calif., one of the new breed of people refinancing their mortgages. But faced with a sharp increase in his monthly payments and a need to take cash out of his home, he refinanced earlier this year to keep his payments the same.
By the time the rate goes up, he figures, his income will have increased enough to cover the higher payments, he will have refinanced again or he will have moved. ”
The phrase “… need to take cash out of his home…” caught my eye.
It doesn’t seem like this gentleman can afford much of anything right now.
It will be interesting to see how long he an hang on…
Either this guy is an idiot or he has a nice place to put is mistress.
…can hang on…
Larry Pendleton, a planner by trade ] (and part time FB flipper And then from AZ Bubble Pops quotes. Not only should any people seek a refund of any charges for financial services from this buffoon. They should also be seeking him to cover their losses. I am sure most of his investment recommendations lost money.
Either this guy is an idiot or he has a nice place to put is mistress
He has both. He truly is an idiot, and his mistress is probably a bottle (filled with stuff to numb the pain of being a F&CKED UP BORROWER)
I met a young guy at a BBQ this weekend. I asked what he does, and he said, “Student, sort of. I’m studying to get my real estate license.”
I bit my tongue.
O/T: Anyone notice some options action WRT gold? Seems some heavy bets are being placed on gold taking a dive. I don’t know anything, and offer no advice, but those who have gold ETFs or stocks might want to look at tightening stops. As always, do your own due diligence.
Best to all!
I think the time to tighten stops was during the parabolic run to $750. Now we are actually entering a price zone on gold when you want to add to bullion positions, say in the $550-$600 range. Notice how the gold stocks are holding up pretty well. This is just one of many “jam downs” on the gold price we have seen over the past 4 years. Typically they represent a good buying opportunity. JMHO
Kubler-Ross invoked in print:
Commentary: Home prices suggest downturn
By Linda Rawls
Palm Beach Post Staff Writer
Monday, July 24, 2006
Have existing home prices in Palm Beach County finally started to fall? After peaking in November at a median of $421,500, existing home prices have languished around $390,000 all year. Some observers are privately saying that home prices have begun a downturn.
The Florida Association of Realtors releases its report on June’s existing-home sales Tuesday, but here’s an early prediction of what the report might show.
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According to Regional Multiple Listing Service records compiled monthly for the National Association of Realtors, the median price of all single-family homes in Palm Beach County sold in June was $378,267, down oh-so-slightly from June 2005’s median price of $379,500. This includes all sales reported to the MLS, not just resales, so Florida Association of Realtors’ numbers will no doubt be different.
But the trend, some analysts believe, will be the same: the beginning of a downward move in home prices.
Palm Beach County home sales in June, according to the MLS report, plunged 39 percent compared with June 2005: to 947 from 1,551. If the Florida Association of Realtors report echoes this, June will mark the seventh straight month of significantly declining sales.
Could the MLS report be any grimmer?
Well, yes. Active listings in June represent an 18-month supply of homes at the most-recent sales pace, notes a correspondent in The Post’s real estate blog, The Real Deal.
•
The MLS’ new-listings report for June also gives a vivid snapshot of our real estate market — and just how unaffordable it is.
Of 3,495 new listings in Palm Beach County last month, nearly 80 percent had asking prices of $300,000 or more. Nearly a third had price tags topping $500,000.
•
Thomas Lawler, a Virginia-based housing consultant, thinks South Florida’s real estate market has entered what the respected “death-and-dying” psychiatrist Elisabeth Kubler-Ross called the first of five stages of grief.
“Denial in a previously hot real estate market occurs when a home listed at a high price doesn’t sell quickly, even though just a few months ago houses sold in just a few weeks,” Lawler says in his July 19 Lawler Economic & Housing Consultingnewsletter. “The home buyer says, ‘This is weird, but I’m sure it’s just a glitch,’ and does not alter his or her asking price.
“Anger occurs when, after a few months pass, the house still hasn’t sold, and little interest has been shown,” he continues.
“Bargaining begins as the home buyer starts to offer a few incentives, agrees to more open houses, starts to fix up the house to make it show better, and actually agrees to lower the listing price a bit.
“Depression starts to set in when the house has been on the market for about four months or so, and the seller realizes that his or her net worth simply isn’t going to be as high as he or she thought.
“Finally, acceptance occurs when the seller realizes that homes prices have fallen; that he or she will not get peak price of what is now six months or more ago; and that if he or she wants to sell the home, the asking price needs to be adjusted downward considerably.”
This process takes time, Lawler says, which is why home prices in hot markets that cool fast don’t immediately start falling.
Hello all…….
My wife and I have been reading this blog for awhile, and I have to say that some very scary shit is about to happen in our country.
I don’t have an Finance MBA or even a degree in Business…but I have a degree in Government (with about sixty combined hours in Economics, Labor Relations and Management) and also had the advantage of exposure to both sets of Depression-era grandparents for many years.
We also had exposure to an now-deceased older gentleman in the neighborhood whose family lost all its money in the Great Depression and extolled the virtues of paying cash for things for the rest of his life.
The bottom line is this. Any economy in which the participants are heavily leveraged is going to be out of balance. The good times will be very good and the bad times will be very bad…I don’t need Greenspan or Bernanke to tell me that. When everyone’s credit runs out, the party’s over.
My sense is that we’re heading into a period in which there will be significant changes in terms of regulation of business and commerce, in addition to the hated Sarbanes-Oxley.
I could foresee a permanent tightening of standards for mortgage lending PLUS raising the bar in terms of educational and ethical standards for both real estate agents and those in the lending industry.
One way or another, something has to give. Our national savings rate is now essentially negative, at a time when we need to be obsessively saving to head off all these demographic bombshells that are set to explode within the next eight to ten years.
Is there something I’m missing here?
One prominent UC-Irvine economist was quoted recently that “…we’re living beyond our means…” and implicating that we won’t get away with it and the Federal Reserve must step in and do something about it.
Big changes are coming to our country and our way of life.
It’s gonna be UGLY.