A ‘Rude Awakening’ In New York
Some housing bubble reports from New York. “Doctors Patricia Sheiner and Michael Silver loved their dream house in New York’s suburban Westchester County. But they’re not living the dream anymore. The family put the 7,000-square-foot home up for sale and moved to a smaller house in December to save on their mortgage payment, utilities and taxes. Now, it’s an albatross they can’t sell despite dropping the price.”
“‘We bought our other house feeling our other house would sell quickly,’ Patricia Sheiner said. ‘And then the market suddenly died. It died. It’s a hardship for anybody to pay two mortgages,’ she said. They didn’t believe one of the hottest real estate markets in the country would cool off so quickly.”
“Drive around almost any wealthy suburb these days and you’ll see a lot of very big houses, so-called ‘McMansions,’ under construction everywhere. But the once red-hot housing market has cooled off and the big homes are starting to give a lot of people some serious headaches. As for doctors Sheiner and Silver, realtors say their empty house may be on the market for months more, even if they drop the price again.”
The New York Times. “In what may be a ‘rude awakening,’ as one real estate agent put it, the number of Long Island homes being put up for sale, combined with those sitting on the market, is climbing skyward, according to a report from the MLS of Long Island last month.”
“At midyear, there were 75 percent more homes on the market in Nassau County and 65 percent more in Suffolk County than a year earlier. Brokers report far fewer buyers in recent months.”
“More homeowners with adjustable-rate or interest-only mortgages are trying to refinance their homes with fixed-rate mortgages as their payments begin to rise, said Bethany Marten, a Baldwin-based broker, who is also a mortgage broker.”
“Many of the ‘option’ adjustable-rate mortgages that were popular with cash-poor buyers when home values were rising rapidly are no longer available, according to Robert Campbell, a professor of real estate financing at Hofstra University.”
“Georgianna Velardi, a broker in Long Beach, said she had recently seen more sellers looking for a way out of high mortgage payments. A couple in their late 30’s came in to price their three-bedroom ranch. The interest rate on their mortgage had risen to 9.5 percent, from 3.5 percent three years ago. They didn’t have the equity or good credit to qualify for refinancing at a lower rate.”
“To make matters worse, the City of Long Beach raised property taxes 25 percent. ‘They needed to get out because they were so overwhelmed,’ Ms. Velardi said.”
“‘It’s not going to bottom out immediately,’ Ms. Marten said. ‘We’re going to see, I believe, what we saw in 1988: a flattening, a gradual downturn and then down and down until it hits bottom.’”
A related link:
‘ Sometimes real estate professionals, like the market they work in, have a way of readjusting. The cooling market has certainly sparked some imaginative, if sometimes controversial, thinking among brokers and sales agents. Valerie Stone, a sales associate at Prudential Douglas Elliman in East Norwich, will host two auctions next week at homes she is listing in Nassau County. Unlike properties most often put up for auction, she emphasizes that her listings are not distress sales, such as foreclosures.’
‘ Some are skeptical. Kathy Giamo, broker-owner of Giamo-Einsidler Real Estate Services in Melville and chairwoman of the Real Estate Practitioners Institute at the C.W. Post Campus of Long Island University in Brookville, says an auction implies that a property has problems. ‘When you sell a property, you want to maximize the value, not decrease it,’ she says.’
FB’s…gotta love ‘em!
It might come as a surprise to some of you, but doctors and lawyers are ‘known’ for poor credit scores and poor financial decisions. They feel they have to ‘look’ like they are doing well by going into crazy debt. Yes, many DO make a lot of money, but they are spending every penny. The big houses and fancy cars add up quick, especially when there are student loans and other family members to worry about.
SoCalMtgGuy
oy 2 doctors ,lets get out the tiny violins
flat down, then really down
see, it’s the same this time
7,000 square feet? I guess they had to fire the servants.
My thoughts exactly. “Jesus, you mean a couple, of which both are doctors, CANT afford to live in a SEVEN THOUSAND square foot home?….may god have mercy on our souls…”
A least they can get free drug samples for the headaches and acid reflux they’ll get from this debacle.
A least they can get free drug samples for the headaches and acid reflux they’ll get from this debacle.
Why is it that everyone wants to sell their “dream house.” I find this very funny.
a nightmare is one type of a dream.
The equity they’ve envisioned was a dream. Their fortunes made were a fantasy. You know, “dreamhouse” about sums it up.
LOL, makes sense
You can only live in a dream so long. Eventually you wake up and reality hits.
If I had my dream house, you’d have to drag me out in a pine box. I don’t care what it’s “worth.”
Are you saying you would kill yourself if a bank foreclosure agent tried to take it back or something? Thats kind of maniacal…
First take out the agent, then the sheriff, then yourself. Don’t forget the wife and the kids too!
I don’t think that I have ever had a dream about a house.
Doctors may be the most fiscally irresponsible profession. When the dust settles, we’ll be shocked by how many people bought new homes before completing sales of their current home. Unintentional speculation, but the result is the same. They create an apparent shortage, and buy into it. What was Bob Casagrand’s stat? 30% vacancy in the listed homes in SD? It’s not just SD. I personally know of 5 cases of this, and I don’t know that many people that have just bought. Scary.
The first thing that struck me when I read the article is that there was nothing “unintentional” about this white cloaked couple at all! They’re doctors (which means they’re real real smart) O.K? So they bought this “manse” KNOWING they’d make a killing (then quickly saw that wouldn’t be the case and promptly bailed. Oh they’ll keep up the two mortgages for a time. But only until it cuts into their “lifestyle” and then they’ll simply “let it go”.
Lenders have GOT to start getting savvy to this “sophisticated debtor” tactic! Start saying, “Tell you what, Doc, you get a bona-fide offer on your existing home and then we can start shopping for your next dream home O.K”? Mark my words, the lender is gonna eat this one. But Doc won’t care. They’ll have bailed out of the situation and will be having a very comfortable lifestyle. Their credit will be bruised (but they won’t care). I’m not picking on medical professionals, I think we’ll see a lot more of this and it will come from ALL walks of life.
The lenders are a big part of the blame when a house is bought before the already owned house is sold. And the legislators are also blamed for not creating law that would at the very least require the lender to scare the crap out of the poor seller/buyer.
And the RE agents are blamed for “buying the listings” and thus giving false comfort to the seller/buyers.
Having done a few loans for doctors, I can tell you in my experience they’re clueless when it comes to finances.
Yes you are right when you say doctors are clueless. My father was a doctor. Everyone said he was clueless when he bought a seven acre parcel in a place called Kihei. The property had no dependable water, the road to it was dirt, and hippies squated there because of the mango trees. Even more clueless was that dad bought on the wrong side of the road. He could have bought on the beach but he bought on the mauka (mountain) side of the road. Mom nicknamed the place Art’s folly. Dad just smiled and took the abuse. Fast forward 10 years. County built a real road and a big developer teamed up with the county to bring in water. Then the county condemned the makai (oceanside) land for a park. Suddenly Art’s folly was beachfront. You all can guess the rest. Not too bad for a clueless doctor.
And just how many doctors’ credit reports have you looked at in your lifetime?
There are and always will be exceptions but nvmtgbrkr’s overall impression based on his experience is shared by many in our line of work.
Not a one. The point of my post is not all doctors are clueless. When you paint with a broad brush you may paint some stuff that you don’t want to.
When you paint with a broad brush you may paint some stuff that you don’t want to.
They’re not painting with a broad brush. They are using language in the manner it is meant to be used.
Thank you for sharing your personal experience, but it is irrelevant to the discussion.
Not bad for old dad!
That’s it, I’m buying that 20 acres of wasteland in Fresno and wait for the San Andreas fault to finally give. By God, it’s my turn. I can take the family abuse …..
Luthor (Superman I) was going to set an atomic bomb off on the San Andreas and his desert property would become beach front.lefantome has a good idea plus Fresno is one of the safest towns in Ca.
I know of 3 families that have purchased new houses without selling thier old one first. 2 of the families saw prices falling on the houses they wanted to move into and thought they were getting a deal. They at the same time were oblivious to the fact that their own house was also losing value and was no longer worth what the last neighborhood comp went for last summer. These aren’t stupid folks either, one even has an MBA. The third family is building their dream house down in North Carolina and got caught by a changing market as it took a long time to build and won’t be finished until late Nov.
Some of these buyers getting caught in the downdraft of the housing market will lose lots of money. I think some will not be able to make payments and will end up losing both houses.
A friend of mine who owns a house in NoVA just bought another home in Virginia Beach (he is relocating this winter). He plans to sell his current home in NoVA next year. A while back suggested that he reverse the order to sell first and then rebuy second. He scoffed at the idea. Then I suggested he hurry up and sell his current home. Again he scoffed. Oh well.
Ditto here - just discovered that not one but two families I know are in the same boat - bought one first, have old one to sell. And this is just in the past three months. One couple just (three weeks ago) had another baby. They look very tired. I like them very much and I do feel sorry for their situation. They really have no idea what they’re doing.
I will bet there were many friends and family who had experiences buying houses during prior cycles that suggested selling the old before buying the new. But, no, we are smarter than the old folks, and this time it is different. Don’t be taken in by this victim crap. They took a risk and are personnaly responsible for the outcome.
Hey, 1 bedroom apartments are still avaiable
The fact that one has an MBA or not does not make them any smarter as far as real estate is concerned. Selling your house is hard work, fix all the loose ends, get it in viewable shape and have everybody bossing you around because, well, you sell. The only time selling was fun was at the peak of the market with multiple offers and so. So I guess people are procrastinators and really negligent with their finances. It is much easier to “buy”. At least for now you are a precious commodity as a “buyer”. That’s why they bought first and worried about selling later.
Agree. Stupid vs. Smart. Dumb vs. Intelligent.
In my book, you can be intelligent and stupid at the same time.
One is mental capacity. The other is wisdom.
Just my two cents.
Ouch, a 9.5 percent mortgage?
There is one bright spot in the real estate market. With big houses now out of the reach of many buyers, there is a growing demand for small homes. Patrick and Barbara Connolly, with a floating rate mortgage, were looking for a smaller house. They want one half the size of their 6,000-square-foot home. Patrick Connolly looks forward to “lower operating costs, lower maintenance … lower taxes, lower price.” There are now more people trying to sell houses 5,000 square feet or bigger than there are buyers. “Reality is coming back,” Endres said, “and they are looking for smaller homes. And that’s what they’re focusing on. … I certainly see more of an increase in inventory, and that might continue.”
Well now here’s what irks me - I’m a (hopeful) smaller home buyer. So these greedy, materialistic SOBs decided to build these enormous homes at enormous prices which helped to increase the prices of the smaller homes in the neighborhood - and now they don’t want them? Now they’re after the smaller homes? Nice. So even if/when the market corrects, I will still be hosed because I’ll be competing with “downgraders” who are far wealthier than I am.
No you will not. You will be competing against people who have a humongous house that they cannot sell, therefore having to either drop the price significantly, therefore making smaller houses cheaper; or worse case scenario for them, end up losing it, and their credit, therfore earning a Darwin finacial award, and removing themselves from the market….
They just seem wealthy right now because they have a big albatros!
This is America, even the guy who runs a casino into the ground twice doesn’t get a Financial Darwin award.
This is America, even the guy who runs a casino into the ground twice doesn’t get a Financial Darwin award.
Wow! How do you trump that?
It’s not so sure that they are still wealthier than you. They might have a large house with a large debt attached.
Even if they were wealthier just by having higher incomes, they made a huge financial blunder that will wipe any income advantage over you. Say you earn 50k and the wealthier guy earns 100k. He will have about 30k more than you after tax. you have a 200k mortgage on your home and he has 400k mortgage. At 6% interest, he pays 12k more interest than you. You add property tax differential, maintenance, utilities, the difference will be about 20k. He is still 10k ahead but you have to add the lifestyle (more expensive cars, dining, etc) and you are even. And when the correction comes and his house looses 30% (say yours is worth 250k and his 500k), you’ll be out 25k, but he will be out 50k (negative equity).
With 20% house price falls, unemployment gets ugly. Both of you lose your jobs. If you get a 30k job, you’ll be able to scrap by, but if he gets a 50k job, with the expenses he has, it will be point of no return for him.
All these people who bought the monster homes might have to suck it up. They will have to take such a bath on selling the monster that they might decide they have to just stay put and wait for the market to recover which will be, um, 8 to 10 years?
Time to sleep in the bed that your pretentious egos made.
*Sigh* If this is true, then this is not good news. However, there are several reasons to think why this might not be true. First of all, most of the people seeking to “downgrade” are going to have to sell their old home first unless they want to be caught with 2 mortgages, that may be difficult for most. Second of all, smaller homes were ALREADY in high demand (at least in most metro markets), so they’ll likely face the same problems as more expensive homes, it’ll just come later. Also the market will tend to balance itself out, why go for the little home when that formerly-1.5 million dollar home near you is suddenly a bargain at 400k?
BW,
I tend to agree. My wife and I are “bubblesitters” and while renting for the last two years hasn’t been without compromise we’ve been (as a group) a hell of a lot more responsible than these yahoos! Think of it like this, how many times have we watched an auto sale ad and think to ourselves, “hey, that’s really not a bad deal, in fact it’s a pretty good deal, now if only I didn’t have this DEAD HORSE to pay off with all of the damned negative equity”! Those attempting to “downsize” their housing debt and associated monthly obligations should encounter like obstacles! Would auto lenders allow people (already stretched to the hilt) buy a new car without so much as a plan as to how they were going to deal with their existing obligations?
No, car dealers and their finance will let you hang yourself with as much debt as you want. You can go out and get that brand new escalade with 0 down, and they will even “pay off” your existing dead horse. Of course the balance will be tacked on to the escalade, and you will have a 7 year note @ 12%!!!
pinchapenny,
Thank you! Exactly. The dead horse must ALWAYS be dealt with (at least in “auto world”). I can’t see as a lender how I would be comfortable handing over the keys to a Maserati (or yes even a KIA) not knowing how the FB planned on making good on all of this? “Well, O.K here’s the new keys, try to keep up both payments until your other car sells”. “Since we hold the paper on both of your FB car loans we COULD help you sell your old car though”! No thanks, I’ve got it handled! “Uh, o.k”.
The dead horse must also be dealt with in RE, too. Problem is that people are still trying to ride the horse in RE.
Regarding fighting over smaller homes, we have one HUGE advantage over the screwed folk: We won’t have gone bankrupt in the past few years. Lenders ought to like that, no?
Yep. You’re right. I know of a house in San Francisco’s expensive area of Pacific Heights where they did just that. I huge home that was once a single family mansion was remodeled into 2 apartments…but was sold again years later to a family that turned it back into a single family dwelling. There are plenty like this one, too.
Yep…that’s definitely down the road for these McMansions.
BayQT~
I’ve been saying this for years, but then again, how many people need to rent a place? It’s not like we have 100,000 people in each city living in a sports stadium waiting for a place to rent. I think we’ll see some parcelled McMansions (the first FB to get a clue), and a lot of outright abandoned homes. I used to see plenty of abandoned homes out if the sticks in south jersey. Not so much anymore, people rehabbed them, guess they go back to being abandoned homes along with a lot of abandoned McMansions. The problem with all that is that we’ll have a bunch of abandoned McMansions in what once was nice farmland. The bubble destroyed all that permanently. Kind of reminds me of Easter Island. The stupid phucks there cut down all the trees to move their dumbassed stone faces to the shore and wound up destroying their own ecosystem. Then yuppies tune into PBS and Discovery Channel and laugh at them when they’re doing the same thing. Oh, that’s right, we did it through financial instruments and the kindness of foreigners buying our debt, we’re much smarter.
OMG– was in Phx this weekend and there was a radio commercial for Quicken home loans that was exactly spot on. Dad going to go shopping for a new car with son. Get into car, and then “Wait for me!” The voice of their HUGE Mortgage. Remember, you can’t go anywhere without me! Kid complaining about being squished by Big MO. Dad letting out a sad sigh.
Today’s McMansion = tomorrow’s duplex or quad-plex. Hell, they are built so close together these days you could throw up a connecting hallway between 20 McMansions and call it an apartment building.
When this all shakes out people are going to suddenly say, “OMG, we have way more houses than we have families to live in them!”
Binko, we think alike, but you’re a little faster.
With a name like Binko, you’d have to be.
Zoning in most suburban places wont permit subdividing houses or lots. Those McMansions will stay as one unit and will be reduced in price until there is a family that can afford to live there.
Of course in some of the neighborhoods around here there are illegal immigrants living ignoring zoning laws living with 10 families in a single family house. Maybe Communes will come back in vogue where a few families join together and live in a Mansion.
That’d be pretty sweet.
When things get bad, it might be worth trying to get some re-zoning on mcmansions to become duplexes, sorry “townhouses”. Mixed zoning neighborhoods are pretty trendy and forward thinking.
A 6,000 sqft home might make two nice 3,000 sqft homes. Or what about 3 2,000 sqft homes, or 4 …
how about turning them into upscale group housing as an alternative to senior/retirement communities? i, for one, (not married, no kids) would certainly consider something like that when i no longer can/want to live alone. i have too much house as it is, as do many of my single friends. not to mention that we outlive men so there will be lots of widows around also. just a thought.
Maybe they’ll be turned into house arrest prisons once all these people go tits up on their mortgage. Ironic, an FB yuppy being forced to wear a radio anklet in the banks home that they couldn’t afford anymore. Classic. Sounds like a Twilight Zone episode:
“Submitted for your approval or at least your analysis: one Patrick Thomas McNulty, who at age forty-one is the biggest FB on Earth. He holds a $800k ARM on a quickly depreciating asset. An asset of such monstrous proportions, and yet ironically lacking in any and all intrinsic value. An asset that could only exist, in the Lax Lending Zone.”
“Patrick and Barbara Connolly, with a floating rate mortgage, were looking for a smaller house. They want one half the size of their 6,000-square-foot home. Patrick Connolly looks forward to “lower operating costs, lower maintenance … lower taxes, lower price.””
Maybe I’m odd but I still think of 3,000 square feet as a big home.
I know! But we consumers need space to store all our crap.
The costs for a 6000 sqft home must be outrageous. Every cost.
Exactly! Our place is 2,700 square for just my wife and me and it’s way too big.
I sold my 3400 SQFT home April 2005, purchases in Oct 00, and been renting a 1350 SQFT apt and it works out just fine,,, I really never used all that space as i’m just a single guy
—AL
Are you crazy? You must be POOR or something if you dont live in a 7,000 square foot home, own five SUVs and own a investment condo in Miami, GEEZE. :-P. Thats where this country is at though. And thats part of the reason why we are where we are with this boom.
Location, Location, Location will also become a big factor again. Young professionals were buying homes in bad areas of Sacramento, but with the increase of inventory were seeing younger people waiting for better neighborhoods to come down in price. The hood homes rose in value a lot, but will fall hard as time goes by. I know some people who moved to these areas hoping for the best only to have their house robbed. So as the equity erodes in bad areas, good middle class areas if we still can call them that will become more affordable. With little or no equity in a hood home will make it nearly impossible for HUD or CALHFA recipients to move out.
David,
I’m not all that familiar with “Sac” but I don’t think it’s a necessarily a requirement to understand where you’re coming from. I can visualize that occuring in tons of neighborhoods coast to coast. Good observation (and coming to any area near you!)
I think that the bigger problem is that after loosing money on these fools, banks will be VERY careful who they give a mortgage to.
Binko! I mean, Bingo!
So the New York Times had two negative articles in Sunday RE section - this is a first in a long time. They had spiced one or two negative RE stories into their business sections, but this is the first time i’ve seen two in one sunday RE section - anopther turning point in the MSM.
they have to be careful- local papers get ? 25% of ad rev from RE
NYT is not just a local paper, its considered the paper of record and makes a lot of its money selling in other cities and countries.
Their “record” has spun a positive tune for months on end about the housing market, only occassionally brushing on the ominous signs in the biz section. Their RE section could have sounded a warning bell, but instead chose at one point to ridicule people who were “too timid” to buy - this article appeared last summer.
I’m glad to see they’ve finally caught on, but anyone thinking they’ve been publishing objective news instead of spin for all this time is poorer for it, in more ways than one. With a great reputation comes great responsibility, and as far as I’m concerned, they blew it big time, Jayson-Blair style on their RE coverage.
Don’t forget about Judith Miller. They propogandized for a war that’s just as big a catastrophe as our impending RE collapse.
I’m waiting to buy a large screen LCD TV from idiots like this. I figure I can get it for 50% off retail. I guarantee we’ve seen nothing yet.
Death_Spiral,
I don’t know how much I need or want a “large screen LCD TV” but, what the hell! We’ll probably be able to get them even cheaper than that (b/c they will take up too much room in former FB’s suddenly crowded repartment)! I see a spike in demand at “U-Store-it” places! Since FB’s kind of struggle with “the whole math thing” how long will one need to have a “big screen” in paid storage before it makes more sense to just give the damn thing away?!
Hey Death Spiral,
Do you happen to a PG Pilot?
Hey Death Spiral,
Do you happen to be a PG Pilot?
nope, don’t buy the LCD used. 1–they’ll want far more than it’s really worth, cause “we paid $$$$”, which doesn’t mean jack. 2– it’s tech…always cheaper tomorrow. 3–When home sales hit the skids–HELOC’s skid—-the imaginary spending money evaporates— and shazaam– the retailers end up sucking wind. Wait for the sales, AND it comes with a warranty.
The family put the 7,000-square-foot home up for sale and moved to a smaller house in December to save on their mortgage payment, utilities and taxes. Now, it’s an albatross they can’t sell despite dropping the price.”
I have to raise the BS flag on this one. How does one save on a mortgage by moving out of the house that it is written on? They have to sell it first so why would they go out and get yet ANOTHER mortgage prior to getting rid of the first? I don’t know their motives but “saving on a mortgage payment” wasn’t one of them.
My guess would be they were timing the market to get out and they miscalculated. One more pair of dolts to add to the list.
auger-inn,
You know, that’s a good point. What I would be doing as a lender is demanding that it be considered ONE LOAN until the former sells! Default on one, and you’ve defaulted on both! I see this as a total “safe harbor” tactic employed by a sophisticated debtor. They must be calculating, “well if the old home sells, then great, if it doesn’t we’ll just have to do some kind of short sale or just let it go”. (But at least we will have downsized our HUGE obligation and we won’t be “renters”). I mean come on, how would THAT look?!
Yep, this is very true. I know of several people that did this here in SoCal in the mid 90s. They new their house was under water/no equity. They also new if the bank ended up foreclosing on the property they would never get a loan to buy a house. So while their credit was still decent and no foreclosure yet, they bought a new home while still “paying” the mortgage on their other home. They moved into the new home and left the keys to the other home on the counter. Of course 10 plus yrs later they’ve had no problems getting financing for additional properties. Look for this strategy to become very popular during the next 3-5 yrs.
Auger-Inn? Another flying reference? Are we all pilots here?
Not that I care to admit to that profession but yes, I was in an earlier life
Possibly, but I missed the flying reference.
They don’t want someone else scooping up the other place. Greed. Besides, it’s ‘waffer’ thin.
“Also the market will tend to balance itself out, why go for the little home when that formerly-1.5 million dollar home near you is suddenly a bargain at 400k?”
No, that 6000 sq. ft. McMansion won’t be a bargain at $400K. With constantly rising energy costs, it will soon be unbelievably expensive to heat and cool those fancy warehouses. IMHO, for many people, maintaining even a 1200 sq. ft. house in the future will be a pain.
Add property taxes and insurance there.
nobubblehere,
I agree wholeheartedly, ultimately I don’t see my wife and I in something even that “big”. But isn’t there an awful temptation to rent one of these juggernauts (for about 1/3 of an I/O payment) for just a summer? I mean, make it THE summer of a lifetime! All your buddies, all the time! Hey, I’m even thinking about having a DJ “on call” for all the great parties we’ll be having 24/7 to annoy all of the FB’s in “the hood”.
But most of the McMansions I’ve seen are oversized on a smaller lot. Where are you and your buddies gonna live it up? In that little 3×2 strip of grass out front? And nobubblehere: people are buying things like LCD screens, home theatres, and other insane “toys” on heavy credit while buying these McMansions anyway. I doubt the costs of living will detract those who will be drawn by the allure of a big-ole home in the exurbs.
Yup, the electric bill will kill u. So Cal Edison is putting in another rate increase. Sliding amt based on usage bands, which DON’T change based on house size, purely location. My area, base is 10kwh/day. If you’re using more than 2x, rate just went up by 50%. At least on these mcmansions, if they get real desperate, they can stick their fingers in the socket.
People in SoCal are “hoping” for $800 electric bills (meaning they hope they aren’t going to be even higher). Cooling a two-story home in 110 degree weather (not to mention the humidity we have this year which makes it even worse) is going to break some people.
“‘It’s not going to bottom out immediately,’ Ms. Marten said. ‘We’re going to see, I believe, what we saw in 1988: a flattening, a gradual downturn and then down and down until it hits bottom.’”
I think she was referring to some Johnny Cash lyrics:
“…I fell in to a burning ring of fire
I went down,down,down
and the flames went higher.
And it burns,burns,burns
the ring of fire
the ring of fire…”
I thought she was describing the sinking of the Titanic.
I was checking out some listings in one of the wealthy suburbs around Boston, where there are many large (4,5, or 6+ thousand sq. ft) multimillion dollar homes for sale, that have been listed for 100-300 days.
The most excessive of all was a 25-room, 17,000 sq. ft estate listed at $13 million (mls#70428668). But when I checked into the owner, I was surprised to see that this was not just any old monster mansion. This used to be Mary Baker Eddy’s mansion, and still owned by the Christian Science church. Apparently they’re selling some real estate to cut expenses. Upkeep on the mansion is estimated at $700,000 per year.
I wouldn’t worry about competing too much with downsizing macmansion owners. Someone selling a 7,000 ft house probably thinks 3500 sq. ft is small. And they’re still going to want all the luxe amenities already installed.
I dont know if I’d want to live there. Unless she had a big family many of the rooms in that house were probably unused. I dont know about anyone else but when Ive visited huge houses that have sat unused for a long time I always get a really creepy “man, this place HAS to be haunted” feeling.
I would totally live there. Living in a huge estate like that is sort of a dream of mine. In fact, I have recurring dreams of living in a huge house and always finding more rooms I didn’t know about. But unlike the buyers of “dream homes” in the Times article, apparently, I know the different between and dream and cold, hard reality….
I have no idea why, but the proposition of finding a room in my house that I didn’t know about is pretty terrifying. I would just lie in bed at night thinking about all those empty dark rooms in my house and their stillness. Its probably out in the middle of some woods too. *shivers*
“The interest rate on their mortgage had risen to 9.5 percent, from 3.5 percent three years ago. They didn’t have the equity or good credit to qualify for refinancing at a lower rate.”
Do they even see the irony in this tragedy? They can keep their 9.5% mortgage , but they don’t qualify forthe lower payment of a 6.5% refi????? Are you gonna supposed to feel bad for the these lenders when they get stuck with a hundreds of REO’s and go under? Freaking predators!
Do you think the lenders will respect local comps when trying to liquidate their ever increasing REO inventory?
Every morning that I wake up in New York is a rude awakening. Why should Real Estate make it any different.
Because it could effect your pocketbook instead of just your impression of a city? *shrugs*
These articles are all lies. There is no new land in and around New York City. There are too many immigrants moving in. And the wages are too high for real estate to ever fall. Real estate ALWAYS goes in in NYC.
As my wife and I stay in our crappy rental apt waiting for the bubble to crash, most of our friends and family have told us these “facts”.
So these articles can’t be true.
Prices are falling now including the median price for overall US homes!!. Check out the charts at http://www.homepricebubble.com
Sorry, I was trying for sarcasm.
Don’t worry — some of us picked up on it!
Yeah, there’s no new land and it’s SO hard to get permits and build here and the red tape is SO onerous but somehow developers found room to put up 55,000 new lux condos in NYC with more on the way.
Thats almost as bad as Miami. Anyway, anyone who claims home prices are going up because of WAGES is seriously delusional.
Since a few posters have mentioned this Sunday’s NYT’s RE section, I thought the most interesting part was the “house hunt”. First, because it had a family move out of the city to Bedford, in West. Co. Second, the house they rented was $2300.00/mo. Even assuming they are paying the utilities, that is less than half the PITI ownership cost.
“the hunt” touted the great bargain of renting (in swanky westchester) over buying.
renting is the new black!
“Buyers have been more conservative in recent months and are taking their time, according to Htun Han, a partner in the Hamptons Realty Group in East Hampton.
“They feel they can pick and choose what they want,” Mr. Han said, “erroneously thinking that owners are getting desperate and will take whatever they offer.” This has led to rising inventory, he said.
“For someone who is really ready to buy, now is the best time,” he added. “Inventory is high and prices have stabilized somewhat.”
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Buyers making erroneously low offers is leading to rising inventory. Uh uh.
If there was ever a market poised for a severe and long crash it’s the east end of Long Island. The smart money has quietly been exiting for over a year. When the adjustable loans reset on the wannabees’ second homes, there will be a bloodbath.
Put the Hamptons mania right up there with the tulips. (There is actually a Holland style windmill out there - rather appropriate). There are $150,000 homes out there owned by the lower blue collar rung that have sold for $700,000 to NYC DINKS in downscale places like Shinnecock Hills. That sort of outlay made no sense at all, except for the notion that somehow the law of gravity had been repealed in the Hamptons. Uh uh.
As soon as this cycle reverses in earnest, the lemmings will be over the cliffs en masse out there and billions of dollars in home equity will be vaporized.
Everyone goes there thinking proximity to a small handful of stars will ensure never ending RE appreciation. And many budget for their mortgage payments by renting out the properties. However, so many new owners were former renters, that the rental market is showing signs of weakness. The home sales market has also dropped significantly and price declines and “new low price” ads are becoming more common.
Our whole economy overheated in 2000 with the dotcoms and the Feds’ policies created a housing bubble to ease the pain. But in the end, the pain will not be avoided and we’re in for some humbling times, imho.
When this happens, the fashionable Hamptons will go out of fashion as fashion does. And the morons who bet the ranch on trash towns like Shinnecock Hills will see their gold turn back into lead.
While I will agree that the Hamptons market has been at an irrational fever pitch over the past few years, I think it will ultimately mirror the situation in Manhattan, whether it is up or down. This is for a number of reasons. First and foremost, NYC money is Hamptons money. If you have money, you will not spend it on acreage in some hick borough upstate or up-island. Or even in Westhampton or Hampton Bays. For whatever it’s worth, money sticks with money- and it’s mostly east of the Shinnecock Canal.
Secondly, like Manhattan, the Hamptons (east of the Shinnecock Canal) is an island. And the zoning and land-use regulations are extremely anti-development. In fact, the east end towns collect a percentage of every real estate transaction in order to buy parcels of land for open space. The sometimes inappropriately used old adage “they don’t make any more land” definitely applies to the Hamptons. This is why you will still see acres of cornfields and hedge farms next to multi-million-dollar oceanfront residences in the estates section of Southampton.
Based on my own anecdotal observations about both the Manhattan and Hamptons markets (I am a resident of both areas), asking prices are still flat-to-climbing slightly. It’s frustrating that the market seems so “sticky.” Whether it’s the desireability, the scarcity of land, the abundance of Wall Street money, etc., etc., I can’t explain simply why prices are not “correcting” along with the rest of the coasts. Time will tell, I suppose…
There’s already data out clearly demonstrating price drops versus year ago. It was minus 5% in April.
manhattan prices, especiallyl in the most established good neighborhoods, will be the last to crash. in another few months, i predict a DECREASE in inventory for quite a while of older construction (pre-war thru 60s), with a flood of high-end new/preconstruction inventory clogging the market. eventually, if not sooner, the high-end will be forced down in price, pancaking much of the market beneath it. it may be 3-5 years before you have anything other than desparation sellers entering the market at more than 10%-15% off the june 2005 peak. and i think that 10%-15% off has already been largely discounted, despite the continuing meaningless median price rise. buyers are just getting a bit more for their money, which is going farther purchasing ny co-ops than a year ago.
remember, in manhattan you have plenty of rich people who don’t own a car! no need to. it’s a self-contained universe, and considering the little use it’s likely to get and the incredible expense and hassle of parking it, you can always rent a car, take a cab — or hire a limo. not to mention the savings in ga$$$, and commuting time. so unlike just about any other city in the country, there’s a considerable premium value to living in manhattan for new yorkers. location, location, location — and LOCATION!
I would say that the high cost of living (apart from the high cost of home ownership) pretty much negates the savings of not having to own, run and park a car. So much of what one does in Manhattan costs money - everything from restaurant meals to going to a play or opera. New Yorkers also spend well above average getting away on vacations - arguably necessitated by the terrible pace of life.
“‘It’s not going to bottom out immediately,’ Ms. Marten said. ‘We’re going to see, I believe, what we saw in 1988: a flattening, a gradual downturn and then down and down until it hits bottom.’”
I thought she was describing what was happening to the crap she took just before the interview.