Sellers Learning New Mantra: Reduction, Reduction
It is Friday desk clearing time for this blogger, starting in Virginia. “Local sellers stuck in the mindset of 2005 are learning a new mantra in the world of real estate: reduction, reduction, reduction.”
“Since last year, the area’s available housing inventory swelled to more than 12,000 listings. With an increase in competition like that, sellers with expectations based on last year’s market have had to make sliding adjustments to sale price. Here are just a few price reductions that have brought asking prices below $500,000.”
“The day of reckoning has come for Fairfax County and the Town of Vienna. The real estate bubble has burst. No amount of gloss and rosy forecasts by the real estate industry can mask the truth. It appears that the real estate industry is behind the curve or does not want to publicize the downturn, as will be realized by Fairfax County when it does its assessments this coming year.”
“The president of the Maryland Association of Realtors said he expects the cost of homes to drop later in the year. The county’s inventory of available homes has steadily risen since last year, up to nearly 1,100 in June, according to MAR. One year earlier, about 570 homes were available for sale.”
From Texas. “The number of properties going up for sale in Hidalgo County is growing as fast as real estate agents can pound in ‘for sale’ signs. As of Aug. 1, there were about 4,767 houses on the market in the greater McAllen area. And with real estate agents selling about 282 homes a month on average this year, it would take nearly 17 months to sell all the homes currently on the market.”
“In Edinburg alone, 346 new home permits were issued through May of this year, about a 25-percent increase from a year earlier. The high volume of homes on the market is driving prices back down from when they were rising at fast rates. ‘I guess right now we are headed towards a buyers’ market,’ said Don Martin, a real estate agent in Edinburg.”
From Illinois. “Builders and Realtors last week assailed a proposed $12,000 tax on those tearing down homes in nearby Wilmette in order to rebuild. ‘There’s a big oversupply of housing on the North Shore,’ said Bob Dekker, a Wilmette resident and officer in the Chicago Association of Homebuilders. ‘You add what amounts to a 1 percent tax on top of that, and it only exacerbates’ the downward pressure on prices.”
From Colorado. “Housing construction in El Paso County last month fell to the lowest level in nearly four years, the Pikes Peak Regional Building Department reported Tuesday. ‘We are paying the price for borrowing buyers from the future,” said Dave Bamberger of a local economic research firm. ‘The pool of buyers is smaller now, because many who would have bought now, instead bought in the last year or two.’”
From Canada. “Lower Mainland real estate markets experienced a dramatic drop in sales in July, which is a possible sign that they’ve hit their limit for overall growth, an analyst says. The Real Estate Board of Greater Vancouver reported its July MLS sales declined 25.2 per cent. ‘[The statistics] are certainly suggestive of a market that has stopped its rate of excessive growth of transactions,’ Tsur Somerville at the University of B.C. said.”
A realtor in Las Vegas. “Oddly, the summer has been quite a bust for Las Vegas and the Southwest US. We have seen an increase of 200-230 available homes a WEEK. Compounding this issue are the truly unbelievable incentives being given by the builders.”
“The Arizona Republic. “Pinal County’s resale housing market was in a state of flux in second-quarter 2006 as prices fell. Colleen Bechtel, an associate broker, said resale buyers are making offers lower than asking prices and want the few thousand dollars in closing costs paid for as well.”
“Bob Rucker, president of the Arizona MLS, said some homes are lingering for half a year or more on the sales block. ‘There is a lot to choose from,’ Rucker said. ‘It’s not like last year.’”
Another week closer to a housing bubble consensus. My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics!
I’d say there’s a consensus at this point. Anyone with two brain cells to rub together, or not employed by the complex (Realty Clowns, mortgage brokers, builders) knows that the jig is up. Even the FBs and MSM know this. Admitting it is just a matter of pride at this point, I think. There can’t honestly be anyone left at this point who doesn’t have a sense of dread about where we go from here.
The tide has turned dramatically in the last 45-60 days and the bears clearly have been redeemed.
I’d say there is no consensus. Too many folks out there either have fewer than two brain cells to rub together, are in massive denial, or are playing along, as their employment demands they continue pretending. Until all of the above groups are loudly acknowledging that real estate is a stupid investment, and pointing fingers at others to blame for the implosion, we cannot say the gig is up.
yes! who the hell are these gfs, soon to be fbs anyway.
boy, will they pay!!!
i called this unequivocally 2 years ago, having seen manhattan apts. (in my building) depreciate 45% from 1988 to 1996!
Everyone thinks prices are coming down, but no one thinks THEIR personal home is worth less.
well said - LBV
Amen. I bought pretty much at the height of the market in ‘89, lost my job in advertising in ‘94 and, sadly, lost my apartment to foreclosure a year later. Which later sent me into bankruptcy.
When the Manhattan market turns, the only one I know, it’s brutal. And when you find out that no, you won’t get close to what you paid for your place and your life savings have disappeared, well, it’s very very heartbreaking.
You are crazy. The Manhattan market will not experience a downturn. Just ask anybody at my work. Every time I say something to that effect they treat me like I just farted during Communion.
It’s hope and denial. In their hearts, they know better and are scared.
I’ll second that. Among those with a functioning cerebral cortex who are tuned in, yes, there’s a general consensus. Among the herd of FBs, denial still runs strong and deep –and many haven’t even HEARD of this “housing bubble” thingy, much less believe in it. I just lunched with an IT manager at my company (no dummy when it comes to her area of expertise) who vehemently denied there was any bubble in CA because “there’s a housing shortage –they’re not building enough houses for all the people moving here.”
Housing shortage in lower income families.
She’s been told or read it somewhere but was not given all the real facts.
I see plenty of for rent signs and for sale signs.
I had a similar conversation with a graduate student in econ last week (ABD, nearly PhD), who recited the Realtor (TM) party line to me (prices always go up over the long run, you won’t get hurt as long as you are not speculating and plan to stay put for the long run, etc.) as though he was conducting a lecture in high-level economic theory.
“you won’t get hurt as long as you are not speculating and plan to stay put for the long run”
The best laid plans give way to job loss, accident, illness, divorce, vice, and death.
Yep, lots of reasons one might HAVE to sell. But I can’t think of a single reason why anyone HAS to buy.
GEt Stucco…I hope you gave him/her an Elliott Econ lesson that one day he/ she may remember..and thank you for it!
My Realtor gave me the “long run” pitch in 1991–it is a long run when you’re upside down watching others buy better houses for less money for five years.
I know many folks here don’t like BusinessWeek, but there was a cartoon this week showing a woman reading to her kid in bed, saying:
“…and the wolf said, ‘You might as well let me blow it down. It’s been on the market over six months.’”
Nice.
Agreed. It’s WAY too early. Every single potential client in the last couple weeks has a house (or two, or three, or four. . . ) they are scratching their heads about. The banks are still taking the position that they can sell at August, last year, prices. The owners realize they can’t. This will be a stratisfied, multi-level breakdown where the buyers acquiesce first, the lenders holds out and then the public/Govt ends up picking up the pieces.
“The banks are still taking the position that they can sell at August, last year, prices.”
BK Lawyer….I found that comment of yours to be very interesting. Do you have any more insight as to why the banks are stuck there? Thanks
I really, honestly, do think we’ve reached the tipping point. I am openly talking to co-workers now about the coming recession. I get some nonchalant ambivalence, some agreement… but no strong deniers.
I wonder how us bears, us “voices in the wilderness”, will be treated when all of the recession/stagflation chickens have come home to roost? When even the IT manager mentioned in HARM’s post recognizes that the bubbles have burst. At the workplace, among family, friends, etc. - will they kill the messengers? Or will we be forced into new positions as manager / directors for “common sense” mutual funds?
“will they kill the messengers?”
There must be some good reason that I am Getstucco and you are “sell high buy low in SLO”
I see your point. Time for a new name!
SLo— my motto - Call em as you see em…if they won’t listen Then who _ cares.?
How about Get T-111. hehehehehehehe
Getstucco — funny.
There’s a consensus that prices are no longer skyrocketing, but that’s it. A lot of people still think that values will just be growing more slowly or that rapid growth will resume after a brief pause. A coworker of mine just signed a $3 million mortgage this week, and when I gently suggested his timing might not be too great, he just said something like “nobody ever knows what the future holds”. I didn’t argue with him; of course he’s right that none of us has a crystal ball, but on the other hand, we’re at a juncture where the information we do have is not remotely priced in yet.
Actually you cannot completely predict the future. Part of some research into information warfare and data mining suggest that the best you can do is achieve a “pocket of predictability” where the outcome to a limited set of conditions can be deduced.
I would suggest that we are in such a pocket now.
I did some data mining tonight and my research shows that the fellow with the $3 million mortgage is F#cked.
Suzanne researched it, too!
Got to thinking a little bit tonight over a few brews. I wonder how difficult it is to get tinto the mortgage business? I have a feeling that just as quick as all these lenders popped up they will just as quickly disappear when sh@t hits the fan.
Very easy to get in…..way to friggin’ easy to be exact….and brokers and LO’s are already dropping like flies. There was a time this was a respectable business, and you could fell good about what you do. Those days are long gone. This industry, I feel, will never be the same after this nightmare plays out.
Yea it will, It’ll be just like last time only the best and the cream of the crop will prevail. The rest will be spectators or will have moved on to other ventures. This market is about to become very hard to earn a living in. The days of throwing on a suit/dress and flashing a smile and making 100k a yr are over.
I was just looking at the sales numbers over the past year or two for a couple markets. What struck me was how many people are STILL BUYING right now–at least through June in some markets (e.g., Riverside Cty, Ca). Granted, the percent decline may be 25% or more, but there are still THOUSANDS OF PEOPLE in these markets that are shelling out big cash. Is this because those who own might as well make a trade now as anytime (trading falling equity for falling equity is pretty much a wash)? Or is some material percentage first time buyers (who arguably are the ones who should run, not walk, away from today’s prices)? I find it hard to believe that even the greatest fools would not be aware of the trends and what they portend.
Trust me, the Inland Empire is loaded brain-washed idiots. Riverside is going to be a trip to watch meltdown. I’ve made predictions of 25%-30% declines in most areas, which is probably more conservative that many here. But when it comes to Riverside and surrounding areas, I’m looking for 50% plus. I’m not a betting man, but I’d bet the farm on that one.
Funny you should mention the IE see my post below.
There are those who did not get in due to losing bidding wars, etc., who can’t believe their good luck because of all the inventory. There are still equity locusts too. There is still a lot of money floating around due to loose lending. This was the biggest bubble of all time, it will take a few years to work off the excess. When the sleazy credit finally dies it will take the last GFs down with it too.
Don’t forget that around 80% of all home buyers are existing owners. I ahve a friend who just bought another home, and he is very financial secure. He was able to sell his old home for a good price, and got to move into a neighborhood were his grandkids live (and he now has a pool for them). He said that even if prices in central Florida were 25% over what he could pay in 2-3 years, the costs to him were only to the difference in prices between the 2 homes, and rising interest rates would mitigate some of that.
not at my office..
sadly to say!
But it is about to get FAR worse than any one imagined!
Including Prechter!
“I’d say there’s a consensus at this point. Anyone with two brain cells to rub together, or not employed by the complex (Realty Clowns, mortgage brokers, builders) knows that the jig is up. ”
Craven, I could see where you’re coming from if you lived in a bubblicious area, but most people I interact with still won’t admit to the end of the bubble. I had a conversation recently with someone who said real estate was selling like crazy in Phoenix where their son lived. I asked her if she’d checked the numbers in the last 6 mos. and mentioned getting info from Ben’s blog.
I think in less bubbly areas people are just going through their day-to-day like nothing is going on. A lot of people I know even avoid the news so their kids don’t see anything negative. Outside of town gossip I’m not sure how much they’re tuned into. It’s not that the locals are stupid - au contraire, there is a high concentration of advanced degrees here but there is a difference between educated and paying attention.
The Baseline killer and the Serial Shooter have been caught. It’s safe to go to open houses in Phoenix again. Only 110F so turn on the F’d borrower’s ac down to 68F and relax. Those of you bloggers in the Phoenix area, let us know about the traffic this weekend. Some one reported that it was Nina and Suzanne who apprehended them? No?
Suspects arrested in Serial Shooter case. Baseline Rapist still running loose. And it was only 100F today.
Weekend traffic will be the same as usual: nonexistant. Some of the builders don’t even have their models open on the weekends any more. It’s a waste of time.
Builders in Queen Creek and Casa Grande (south of Phoenix) are advertising price cuts of 20+% on current inventory. Pity the poor guy that bought at list in January (and was probably bragging about the great deal he got).
“Where are the Buyers?” {smirk}…
http://www.foreclosureforum.com/mb/messages/18224.html
I’m trying to figure out what he means by buying at a discount.
I think he is saying if your going to buy a property to flip, you better buy at the 35-45% discount if you want to have any hope of selling for a profit?
Yeah, but he doesn’t seem to understand. Nobody thought it was worth more than he paid for it when he bought it, why would they think it was worth more when he wanted to sell.
To put another way, the price you paid IS the best estimate of the value of the house. What price is his 35-45% discount a discount from?
“Yeah, but he doesn’t seem to understand. Nobody thought it was worth more than he paid for it when he bought it, why would they think it was worth more when he wanted to sell.”
Because, presumably, he added value to the property by cleaning it, repairing it, clearing the back taxes, and making it move-in ready. This is a legitimate business model. Unfortunately, it doesn’t work well in a rapidly falling market — time works against you.
I think, BWAHAHAHAHA!!!! That felt d^mn good.
Mozo Maz — thanks — excellent site. Appears to be posted by the Truly Screwed and no trolls.
What know buyers, but, but they have to buy it is my freakin birth right. SCREW YOU FREAKIN GREEDY BASTARD!!!!
here is some wisdom from the wizard.
lead the pack or else get eaten by the lions. haha.
aside from bashing the stupid people who bought high using ARMs, the sobering fact is that the mortgage industry has cajoled a lot of poor folks into taking out money from their homes and these folks are facing foreclosures. there should be a criminal investigation into the lending practices of these so-called mortgage companies.
i could not agree more! this was like a dam of traditional virtue WRT the sanctity of a mortgage and its eventual disposition that has forever been broken. once upon a time, paying off a 30-year mortgage was the most sensible forced savings plan. now it’s a historical curiosity. we are all bubblef@ked!
This is going to be a huge cull of the mortgage herd. The beasts that are too stupid or too weak to survive will be eliminated and possibly consumed by the stronger ones. There will be some pain to be certain, but at the end of the tunnel we will have set the stage for a tremendous era for growth and prosperity. That is so long as we don’t get too many fools at the helm. As my mother put it so well over the weekend - the majority of the economy has been about screwing other people over for a bit. I have hopes that the coming shake out will reduce that by a large amount.
i can hear the violins in the background! WIZ
Are they 21 or older?, then let them “eat cake”
So they didn’t learn how to read? then they should have stayed in school..because the school of “hard knocks” is a “hard road.
Philospher stone!
But mention the word “regulation” and people freak out.
People just love getting screwed.
The bust is now taking on a life of it’s own, just as the bubble had before. I think the downward momentum is building. It’s a great week for us bubble believers here in the San Fernando Valley- median up 1% y/y, average down about 2% y/y!!! Prices on individual properties are falling now (this is hidden in the median, as we all have discussed). The media is out of spin, and even the industry analysts can’t deny it any more.
Thank you, Ben.
What is interesting to me is to see how localized the downward pressure is right now. There are some areas where the downdraft is being felt and growing (San Diego), and some areas where there is a huge log jam (Phoenix) and everything is just hanging around.
For example there are a slate of markets that are still ascending at 10-20% for 2006 with brisk sales volume. They are just as hosed as the rest of the market, but they are still getting some equity pumps as the locusts search around for the last few bits of green to munch before it all ends.
Yes, I am back (at least a bit) and will probably post some market stats this weekend.
Think about how a wildfire spreads. It taps into a main source of fuel, burns out of control, then dwindles down to isolated pockets of flames. It may even look like everything had totally blackened… then an occasional spotfire shows up on the fringes.
The 2003-5 era of the bubble was the main fire.
Avg SD mortgage payment = huge
Avg Phoenix mortgage payment = not so bad in comparison
It makes sense that SD would crack first.
Interesting you AZ folks think SD is worse off. From where I sit (SD), it seems that AZ and FL are in much worse shape. We don’t seem to have as many “pure” speculators and empty homes in the middle of nowhere. Although I never bought the “running out of land” myth here, Southern CA is very crowded, and people are stacked in tiny houses (especially lower-income groups). Perspective is everything.
That’s made things tough on sellers, like Abiel Garza, a construction worker from La Joya who has been trying to sell his house by himself for the past month.
“Things are slow,” he said, adding that he hasn’t really had much interest in his four-bedroom home. “If things don’t pick up, I might hire (a real estate agent).”
Hire a real estate agent? Things are really getting bad.
That leads me to the peculiar observation that, on the long boulevard I drive to count for-sale signs, I’m seeing a lot more FSBO signs in place of R.E. pros’ ones. I’d have thought the opposite would occur when these folks figured out that no one’s looking, no one’s buying.
In microeconomics, they teach (taught) that when times are getting lean, the last thing you should be cutting back on is advertising. Yet I am seeing, effectively, the opposite.
They are in too tight probably already underwater and can barely afford the escrow fee nevermind the commission. You’re(happy) looking at future R.E.O.’s
I checked out an FSBO last weekend. No intention of buying, just trying to catch the atmospherics. The FSBOer was asking too much, naturally, but as I headed for the door after giving the place a cursury once-over, the desperation started to show. The guy was clearly in some kind of financial distress and looking to downsize, and said he’d “be open to any reasonable offer.” Since I have no intention of buying until there’s blood in the streets, I told him, candidly, that he needed to price his place to sell, and do it quickly, since Colorado Springs inventory has just hit an 18-year high, and tightening credit requirements and rising interest rates are sharply curtailing the pool of buyers. He tried to do the “let’s make a deal” thing, but I said I had a few more places to look at (like, next Spring).
When the panic sets in, these guys will curse themselves for not getting out while they could still get decent price.
The lesson is you shouldn’t cut back on advertising, but the only reason this is a documented lesson is that so many do and suffer, it’s now a fact.
When will we see 10% commissions? It’s coming and this joker doesn’t have a clue. He should call Nina and her partners to take it off his hands. They might have some chump change to flip to him.
I am sure that the coming AOL layoffs will just add more fuel to the fire in Northern VA.
More info please?
http://tinyurl.com/fu6qw
But …. The Motley Fool said AOL was a stock to hold for “100 years” …
I remember that. In 1999 those clowns also said “Dont buy real estate - buy Stock’s and Nasdaq stocks especially!”
that is exactly what is going to happen….one day it will be wall paper…I have some of that but not from the 1990’s but from the late 1970′ s when I trafficed in what we called “penny stocks”…..Now called small cap or micro cap….either way……both will soon be NO CAP!
We just bailed out of NoVA. That place is going to crash hard. It’s amazing how the attitude has changed. Just a year ago, when we told people we rented, they looked at us like we had just told them that we collected shrunken heads. Now, everybody acknowledges that it’s all over. It’s undeniable — multiple “for sale” signs on nearly every street, nothing moving, not even interest in rentals. The whole Ponzi scheme was based on an assumption of never-ending population inflow, but no one stopped to consider that the inflow might taper off if home prices doubled in a three-year period. I suspect that others like me are voting with their feet and moving to more affordable areas.
Fill in the blanks:
Our town of __________ has high growth prospects. It is said that residential real estate in __________ will be in high demand for years to come due to the rapid influx of new high-paying jobs. What’s more, a lot of monied baby boomers are expected to be drawn to __________ as they begin retiring in two years. The strong industry and opportunities in tourism, health care, infrastructure, liesure activities, as well as a talented and diverse workforce will continue to make __________ a desirable destination for both companies and families alike for years to come. The city managers and industry leaders have even unveiled a plan to make __________ the next Silicon Valley, revolutionizing the way technology is developed and marketed to the world.
Unlike other cities in the US, __________ maintains a healthy real estate market with a world-class nation-leading real estate workforce ready to work for you whether you decide to buy or sell your home. Even the real estate investor in __________ has a lot to be excited about. Home prices in __________ are expected to moderate to a plateau and then increase substantially for the next 10 years or more. When you get right down to it, no other town has as much to offer as __________ for professionals in real estate or any other industry.
This is so true. Everyone thinks their city is so special.
Comes from the genius of Greenspan who said that there was “some froth in regional markets”. Notice how he never mentioned which markets? He never did name names did he? So all the players could say, he’s not talking about our city. What great psychology! He used this to not only fuel the bubble by starting the mantra of “we are different”, but now can say, “Well I did warn everyone”.
If you were lucky enough to be reading this blog all along you were quick to realize that posters were reporting the exact same things at the same time all over the country and the world.
Pure genius.
This is so funny. It’s the song of my town’s chamber of commerce. I’ve heard this so many times I can recite it in my sleep.
I’m not much of a fan of Bush, but I recall someone asking him about the affordability of housing-or lack of it-and he said simply, ‘the markets will work this out’. On this issue I think he’s right.
“We are paying the price for borrowing buyers from the future,”
Hmmm, remind me where I read that theory ABOUT 10 MONTHS AGO!?
Good take on how long it will be until we hit bottom
http://www.oftwominds.com/blogaug06/post-bubble-symmetry.html
Home builder stocks are at the beginning of 2001 if their price charts are lined up against the NASDAQ. If history repeats, they have another sizable downleg ahead (50%?) in the next six or so months before they flatten out in a final reversion to trend.
Watch for the reverse splits. Remember Ericsson?
i agree. imo much longer to reach bottom — 8 years is not unreasonable.
I think there is a chance we may see something new here. The combination of negative factors (Suicide Loans / Recession / Energy Crunch / Election Season / China Co-Dependant Economy) is unprecidented. We may see some things unwind much faster than this predictions. I suggested for this weekend the topic of predictions of how far prices will fall back to. Another fun aspect would be what the time frame would be for that move.
Certainly is more likely than in the past. Information disseminates so much more quickly now.
In Vancouver in ‘82, the housing crash coincided with a major recession: the result, 3 yrs from peak to bottom.
I expect no longer this time, for obvious reasons.
Wow! I enjoyed looking at that chart, Mo Money. Most people refer to pre-2002 pricing being the bottom. Seeing as I bought in 2002 the next few years are gonna hurt as we head to 1994. (chart’s bottom) Here’s to full liquidity!
I thought it was a positive that all the updates….roof, appliances, floors, paint had been done but now I’m realizing we paid inflated pricing for all our maintenance materials…..pain, pain…..at least we got free labor by doing everything but the floors ourselves.
ben- when the housing bust is “done” in a few years, what will you do? just blog the money and metals bull market till it becomes a bubble?
He will make millions on his movie and HOPEFULLY NOT FORGET ALL THE LITTLE PEOPLE who helped him!! LOL
No..he can change his “blog” to
PENNIES ON THE DOLLAR
Buy a house maybe?
Ben will be the next Chief Economist for the National Association of Realtors. I have a feeling there will be a vacancy soon.
After the crash, when the collective snake-oil hucksters of the NAR, appraisal industry, Freddy Mac/Freddy Mae, and mortage brokers have been sent packing, perhaps new, untainted, honorable institutions with reputable leaders will arise in their place. And, no doubt, we’ll see a flood of reforms and new laws (with actual enforcement) to curb the excesses that helped cause this bubble. The “voices in the wilderness” who foretold this disaster, and acted with integrity and foresight, will exert considerable influence in the New Era as sanity imposes itself.
As the FBs and disgraced NAR officials huddle around their hobo-camp trash can fires, roasting rat kabob and sharing tales of woe while passing the paper bag that holds the Ripple, thousands of new, fiscally-responsible homebuyers, who in the dark days of 2005-2006 had their Road to Damascus awakening after happening upon this site, will give silent thanks to Ben Jones.
And somewhere, amidst the blackened skeltons of unfinished condos and “luxury” condos converted to moderately-priced apartments, Suzanne will be leaning wearily on her corner lampost, adjusting her fishnet stockings as she plies her new trade, though she still seals the deal with a Hummer in the driveway.
Too funny, that is a good one! :LOL:
Very post-apocalypse.
Perhaps then at some point gangs of former RE agents, mortgage brokers and appraisers will travel in ragged caravans. Road pirates stealing gasoline and terrorizing the locals who have barricaded themselves inside a makeshift fortress. Then, from the dusty horizon, at the end of a long lonely highway, a vehicle races through the desert. Inside that patched up sports car a man grips the steering wheel, outfitted in black leather, his feral dingo at his side. He quickly scans the pitted road ahead as he plots his course past the maniacal agents racing toward him. Ben Jones… “The Bubble Warrior”
I’d love to forward these “Suzanne” comments to the advertising agency who created that thing. I’m wondering if they are quite aware of the backlash. Manhattanite, do you know who’s responsible, by chance?
The “Suzanne” Century 21 ads had to be the worst ads ever. A close second would be the new Hummer H3 ads, where some vegatarian wuss, and a mom who lets some brat kid cut in front of her kid on the slide, decide to reclaim their, uh, courage or manhood or gumption, by buying a Hummer. Right!
In the same spirit, maybe Porche will aim an ad at balding, paunchy, underendowed middle age men who think a hot car will somehow cause the babes to sigh and groan when they pull up next to them at the light.
I worked with a guy that characterized sports cars as D!ck extensions and he was quite proud that he didn’t need one.
I give one exception for owners of sports cars, if they actually go out and race them on the weekends.
But in OC you wouldn’t believe the numbers of sports-sedans that drive 40 MPH on PCH and accelerate and brake in the same manner as old people f@ck.
What if this it? Does anyone think we might just flatten out here?
I’m kind of chuckling right now. It reminds of the scene in the movie “Forrest Gump” when Forrest decides it’s time to stop running, and all the people that were following him are like “What the heck do we do now?” I guess we all need a cause.
I’m sorry, this was supposed to post under “John Law” comment above “Crispy”.
I’m sure your kidding, You are kidding right?!?! I’m doing a loan for someone now that is buying a property for 295k in a neighborhood that was fast approaching 500k late last year. Flattening is not in sight.
Can you tell us what neighborhood? That is an amazing drop.
Inland Empire on the Riverside side. Movie Industry dude lost his gravy train got nervous on the market and just let it rip to the first offer that came through the door that his agent could muster up. He’s losing close to a hundred grand hard cash but he values his credit and his new car more than his house.
Hoo boy; that one is going to impact the comps :twisted:.
Just asking. I want to at least question my/our own assumptions - just in case can I/we missed something.
A realtor in Las Vegas. “Oddly, the summer has been quite a bust for Las Vegas - WTF !!!!
OK. We might. It’s called an “L” shaped recovery. We had one in 1930.
SURE?
New listings in the Greater Vancouver area keep coming my way. They are being listed at ridiculously high prices. The sellers are still either being influenced by last summer’s price levels, they are being deluded by slippery real estate agents who are acting as “yes men” to the them or the MSM reports are still too “abstract”. (or indeed) non-existent) This, despite a 28% MOM drop in July!
from our Milwaukee paper:
JPMorgan Chase & Co. plans to eliminate 170 jobs at Chase Tower in downtown Milwaukee, the bank said Wednesday. The job cuts, which amount to about 12% of Chase’s work force in Milwaukee, are in the home loan collections center.
I wonder why they are laying off Collection people. If anything i would think they would be adding to the collection staff.
Maybe they sold all their notes to some government agency that records everything with magic ink? Is FannieMae ever going to come clean?
The rest of that article mentioned they were “consolidating operations” in other cities. That must be a good euphemism for saying “we’re hacking a bunch of jobs and dumping their work on somebody else in the company”.
Yes, the sales slowdown has finally hit Vancouver. Price growth slowed down, but as we know from reading Ben’s blog, this is to be expected for the next 6-12 months as the market seizes up.
People here truly believe that Vancouver is different; that the 2010 Olympics will bring so much riches to our little city that house prices have nowhere to go but up. Some rude awakenings in our future . . .
VHB-
Uh-oh. If the Olympics aren’t going to hold up Vancouver then how will they hold up Bellingham, WA?!
People in Bellingham are EXPECTING that you know! It’s the only thing we’ve got on our horizon!
No high paying jobs, no companies moving in, just the Vancouver BC Olympics!
Did Vancouver ever go down in the course of the 90s? My understanding was that enough money was coming out of Hong Kong prior to ‘98 so that it has not been affordable since the days of Mulroney…
Man, I am so utterly tired of hearing about the farking Olympics: brain-dead Vancouverites think this 2 week event will make them all rich, very rich and will turn Vancouver into an upper class society of special people who were lucky enough to have bought real estate here and that we will be entitled to a lifetime of wealth. I wish I could go into a deep sleep for 5 years just so that I don’t have to hear all the BS as we approach the Olympics. What a bunch of morans. Bwahahahahahahahaha
VHB,
As I have said before…EXPO ‘86 (6 months long!) didn’t do anything to prop up the housing market in Vancouver, and the TWO WEEK Olympics in 2010 won’t do it either.
With 24 hour multi-channel media and the internet, there are so many more demands for our attention nowadays. The Olympics just don’t have the “grab” they once did.
Slightly OT question to throw to the floor for discussion: Just got through meeting with the landlord. He’s got more sense than most and realizes his investment (the townhome I’ve rented for almost six years here in LV) has a better than average chance of falling off its current market value (around 320k, according to comps and Zillow). He’s consequently considering selling when our lease expires. For the entire time we’ve done business here he has been a fair landlord and I’ve been a model tenant. I don’t want to panic him into a position where he feels like he has to sell before the lease is out as I don’t really want to move. I’m considering negotiating with him to come to a fair number for the renewal of the lease so I don’t have to move. I realize if I move, I’ll have more negotiating strength dealing with a some desperate flipper who is hurting from the carrying costs of having an empty investment property. The flip side is that I’ll have to deal with having that place sold out from under me or perhaps repo’ed at some point in the future if housing ever gets around to going sour here in Vegas. Big brains of the bubble blog, what’s the best way to proceed?
I currently pay 1200/mo in rent.
Stop paying rent now and begin looking around for a new place. It will take him 6 months to evict you. In 6 mos., $7200 down will get you into whatever you want i bet.
Better hope the next landlord doesn’t ask for references.
That’s a little harsh. I don’t do business that way (and I’d like to keep my credit rating in good shape). I want to convince him not to sell by either a) coming to a mutually beneficial rent hike or b) let him know that with inventories up and volume down, he’s better off holding on to the property than carry it with no income while he tries to sell.
Go ahead and move, if he won’t negotiate. Sign a six month lease, and call him back… when the house has been on the market 5 months with no takers. I bet he’ll be a lot more agreeable then.
You can make this work for you. Tell him that you too believe that this is the top of the market and you understand that he has to do what is financially beneficial and you are willing to help him since he has been such a good landlord. However you also have been a good renter and it is a hardship to live in a place that is for sale. He has BIG dollar signs in his eyes so a few concessions of a few hundred dollars will seem like a peanuts to him. Ask for a new lease on your terms. You could ask for a reduction in rent while it being listed say to $1,000,how low will he go? Remember people are being paid to make place look lived in. Also a big selling point to a landlord type buyer is if it is currently rented-remind him of this factoid. Since the current lease terms are also a selling point, you could say keep the current rent, but you would like a rebate for each showing. The place won’t cash flow at your rent and his asking price. So you could ask for a 2-3 year lease to lock in the current rent with an out of say 2 months with last month rent free if it sells. A 3 year lease at $1,200 almost assures it won’t sell, but give yourself an out also. This guy needs a dose of reality and you don’t want the hassle of moving. The place won’t sell, you know that, you just need to help him see that so he won’t be resentful. You are the more knowledgable one in this situation and so you may as well benefit financially from what you have learned from reading this blog. Make it work for you, remember YOU have nothing to lose.
wow, catspit, that definitely qualifies as the solution at one extreme of the spectrum! Obviously LV Renter’s integrity could not support such a strategy, however brilliant. Is your brother named “Catbert”?
Ironically, though, this was essentially the same strategy I “suggested” recently to a friend. Upside down in a house bought in mid-2005, peak of the bubble. Has an 80/20 with prepay penalties. Total nut (PITI + HOA) is well over $3k per month for a place that would rent for maybe $1400. My take was, hey, screw the banks, they got you into this mess. Got to look out for the family. Stop paying everything, immediately, buy some time, make a payment every 3 months or so, make them force you out. Save for several months so you have the cash to start over again.
Problems: credit will be ruined, may be hard to get a good rental. And, bank could come after you personally for the 20% portion of his 80/20 loan. And, you get 1099′d for any forgiven debt.
Anyone out there have the lowdown as to what “they” can and cannot do to someone in this position here in CA?
Problem is, either way, he is really hurting. It really puts the F in FB.
My sister’s landlord wanted to sell too. So I told my sister that she shouldn’t accept a lockbox on the door, the for sale sign has “Do Not Disturb Tenants” and that she requests a 24 hours notice before allowing the realtor to show the house. That was 2 years ago…..my sister’s landlord decided NOT to sell. Hahaa
In my area they will get you out in a month. I am a property manager and no way would a tenant of mine be able to stay that long.
That is really also stealing and if you are evicted, most landlords in good areas will not rent to someone who was evicted.
Stop paying rent now and begin looking around for a new place. It will take him 6 months to evict you. In 6 mos., $7200 down will get you into whatever you want i bet.
Did you wander in here from the SDCIA bulletin board? What kind of scumbag suggestion is that? One thing I would hope that would set us apart from the Flippers, RE skanks, mortage fraudsters, etc. is INTEGRITY and HONOR in our dealings with others. Shame on you!
What makes you think he’ll be able to sell when your lease is up ?
If you can’t get a one year renewal go with a month to month lease and do not disturb tenants with out 24 hours notice if he still wants to sell. Point out the large number of listings and how long they are sitting on the market empty with no rent being paid.
You can also ask for your lease to be bought out if he is desperate to sell otherwise. Until the lease is up you don’t have to let potential buyers in at all.
also, learn to make meth in his kitchen, and threaten to get his property featured on “Cops” unless you get what you want…
Bit early to be a mean drunk isn’t it ?
probly, I’m only 46.
Do the right thing and have him do a 60 - 90 day closing and then find a new place to rent. If he has been good to you, as you have to him, then it isn’t worth messing up good karma. You knew when you rented, that the place could always be sold.
If you want to live in place forever, either buy or move into a REIT owned property.
Just my two cents…
I’d say you can do better with some sharp negotiation. First, he’s not likely to sell. No matter what his basis the prices he’ll be offered will be too low. We are just covering all the bases. 24hr notice or arrange for “no show” days to your schedule. Tell him the lease is transferable at existing terms if sold to an investor. See if the last month can be free in exchange for your cooperation; inspections, walk throughs, etc. See if you can get him to put in new carpets, drapes to help him sell the place. I smell opportunity not inconvienience.
Good advice.
“if housing ever gets around to going sour here in Vegas” The Las Vegas Board of Realtors show 1996 houses sold in July 2006 vs 3100 SFR sold in 2005. The period May, June, July 2006 vs May, June, July show 5000 sold in 2006 vs 7500 sold in 2005, and as of Aug 1, 2006 there wer 1000 more listings. Panic will begin the last week in August, when all the 4 months listings that didn’t sell crack under the weight of ARM resets and front page doom-and-gloom in housing
Sorry, I’ll chime in too. If you do happen to move, don’t rent from someone who just bought. There’s a good chance you’ll end up in the same position. Find someone who paid off the place a long time ago and just rents it out for income, and has done so for a long time.
That’s where I’m at. I’ve been at this place for years (big back yard, opens to a large park, large bedrooms, lotsa space, 2 car garage, etc.) and the LL hasn’t raised the rent once. Indeed, I pay a very nice rate for a renter. I communicate regularly with the LL and it doesn’t seem she intends to raise the rent in the near future. I’m good about paying the rent and tend to take care of some of the things around here, though I deduct any costs from the rent. She’s fairly rich and I have a feeling she just wants to pass the place on to her nieces/nephews when she passes on.
If you rent from a recent buyer, especially some flipper or person with too-large dollar signs in their eyes, that person will likely have much more pressure to keep the rent as high as possible, and bail out on you if an opportunity arises to sell the place at a good price. Don’t think you are going to successfully get a good deal just because you know that they are under pressure.
Brilliant replies all (except the meth cooking). Thank you all for your help. I’ll keep reading your insights on this blog and let you all know how this little situation pans out if and when it comes to negotiations.
Agree with Home a loan on the recent buyers. When we negotiated our lease in 2004, I explained what we were doing (sold to rent and waiting for bubble to pop) so they understood our motives. Wanted to see how they reacted (they agreed the bubble would likely pop) and they said they did not intend to sell any time in the near future. We also said we would likely want to stay at least 3-5 years, to which they agreed. We have put a fair amount of money into the house (brought some electrical up to code, new exterior lights, 4 new ceiling fans, some plumbing and wiring work, landscape work, etc. — totalling at least a couple thousand) because we don’t want to give them any reason to sell out from under us. We also pay our rent 6 to 12 months in advance. They have been awesome LLs (and we’re pretty awesome tenants
), so things have been working out very well, so far. Our rent is definitely below market at this point, and they haven’t said anything about raising the rent.
Just some ideas about what you can do with your current LL (also suggest multi-year lease) in order to avoid moving.
Good luck!
Interesting news on the Chicago North Shore. I am a big support of property rights, but the yuppies and Neuvo Riche are destroy the architectural history of that place. Its sort of like tearing down an historic landmark to install a strip mall.
Colleen Bechtel, an associate broker, said resale buyers are making offers lower than asking prices and want the few thousand dollars in closing costs paid for as well.”
The nerve of those buyers.
anszen’s Quick Comment
July 31, 2006
Giant Margin Call on Real Estate Begins
I start this Quick Comment with a short trip down memory lane.
Dancing, Booze, and Overpriced Houses
The housing bubble is reaching absurd, bacchanalian heights, which can only mean one thing: it’s getting ready to collapse.
06.01.05 by Eric Janszen - AlwaysOn Network
MIAMI, May 22—In the last month alone, you could salsa with dancers in fringed hot pants at Aqua, hear a drag queen D.J. at Cynergi or watch stunt men ricochet off a trampoline at Soleil.
Nightclubs? No. Carnival acts? Not quite.
These were launch parties for condominium projects, one of the stranger forms of nightlife in a city obsessed with real estate. Alcohol and music were abundant, but so were sales agents and brochures with statements like, “It is the impeccable aesthetic of textures and calming shades—limestone and blue marble—that further distinguish these voluminous spaces.”
—Salsa Dancers and Stunt Men? Must Be a Miami Condo Project, The New York Times
That’s from a piece I wrote for the AlwaysOn Network just over a year ago. In an earlier piece in December 2004, my research led me to conclude that housing bubbles, unlike stock market bubbles, don’t crash like stocks but rather seize up.
nothing like a little smoke and mirrors…
I can see people having visions of sugar plums dancing in their head..
The “buyers” were probably thinking that that is what life would be like in that complex forever. It probably didn’t occur to them that once the complex was sold out, that the party would be over and reality would set in.
This is good
http://www.itulip.com/forums/showthread.php?t=292
Fiat money supply follows gold price . banks go to zero fractional reserve lending. FED can’t control money supply and interest rates as well as they would like to. So can not the FED up the reserve requirement at banks?
Thanks for the link TxChick57 - a very informative piece. Can you imagine the howls from the banking industry if the FED actually increased the reserve requirements back to something like the 5-20% the article suggested?
txchick, i like itulip a lot too.
also think this is a great read:
http://tinyurl.com/d8q6j
atlanta realtor’s take on the bubble - bullish to bearish over the last 6+mos.
Succo is a an interesting guy and Minyanville is a must have site for traders. I’ve been a subscriber since the day it opened. 24 bucks a month and IMO, worth ten times that.
Oh my freakin gawd! 71% of the job numbers were oughtright made up! The Bureau of Labor could simply “revise” their numbers next quarter and take away most of the meager gains they posted.
I understand some guesswork must take place in a country this large, and they can’t survey every business in the USA every month for job stats. But good grief, this is how close we are to an official recession and job declines. Just some staticians opinions.
Let us assume that this bubble burst is going to playout like a roller coaster in slow motion.
Let us frame our “physics” problem as follows:
It will take 3 years or 1095 days to get to “the bottom”
1) it will take 3 years for the bottom to be reached.
2) the average home will lose 50% of its value
3) the average home is $500K
4) the speed of this slow motion roller coaster is 1 inch per day
5) From the top to the bottom the roller coaster will traverse 100 ft
6) Position of roller coaster is at the highest point
7) Pitch of roller coaster is “just nosing over from level to down”
9) There is zero acceleration just a constant slow linear velocity/rate
Given the above, comparing this house to a slow moving roller coaster the house will depreciate by a daily rate of $228/day.
Calculation:
500K x 50% =$250K / 1095 days = $228 / day
So it is not going to be real exciting watching prices drop but over time it will add up. Losing $6840 on your home per month is quite a bit of money!!!
At that rate we can expect a 10% decrease in prices will take about 7 months.
Conclusions:
For Buyers: Using Physics we have proved age old wisdom…patience is indeed a virtue.
For Sellers: Do you want to ride this to the bottom losing almost 7K per month or do you want to undercut the competition and do whatever it takes to GET OUT NOW!!!
I like your rollercoaster analogy. What month did it, or will it start on the way down? I know it varies by geography……but what is your overall thought as to the starting point down. I’m in Fairfield, CT, renting now after a divorce, and holding off buying until things get a little more reasonable. Just want to buy a nice place for me and my kids at a fair price. Thanks.
This is a great blog by the way. Have been reading it for several months..and had a binder on an okay place which seemed reasonably priced a few months ago…but pulled out when kept thinking about all the insights here and decided to wait it out for at least another 6-9 months and see what happens. .
For those desirous but not yet short the HBs you can short at will next week.
Today and yesterday were HUGE distribution days.
CTX a good one to start with.
ditto that. Looks like the 50 day MA pretty much tripped them all up like a wire strung across a horse track. Almost a textbook perfect inverted hammer candlestick printed out today for the DOW Homebuilders Index.
Centrex JAN07 45 Put@ 3.00 CTXMI has very good open interest
While driving around central Denver this afternoon I saw my first sign spinner (Condos from the 100s!) here. I’ve seen other posters talk about them in other cities, but have never seen one in Denver before. This must be a sign that things are getting more desperate here.
Ok, San Diegans. I’m convinced the world hs gone mad. Tell me:
Would someone really pay 615K for this? Would it appraise for that? It look about the size of my garage!
http://sandiego.craigslist.org/rfs/190328384.html
Not this San Diegan!
Txchick,
You’d be surprised what people are willing to pay for total crap here. Half a million for OLD homes in neighborhoods with active gangs. Stupid, stupid, stupid!!!