‘Waiting For The Dust To Settle’ On Second Homes
The New York Times has this report on second homes. “The brand new 6,000-square-foot vacation home has been on the market for more than a year. After plenty of showings, but no offers, the investor who built the house recently cut the price twice, by a total of $600,000, to $4 million.”
“It has still not been sold. The price reductions have created more interest, and he now hopes that it will be sold right after Labor Day, a prime season for home transactions in the Hamptons. ‘My feeling is that everybody is waiting for the dust to settle before they make their big decision,’ said the agent, Ira Birns. But, he acknowledged ruefully, ‘there is a lot to choose from.’”
“It is not just the most expensive vacation homes that are going begging. A wide variety of popular locations for second homes, areas like Florida, the Jersey Shore and Lake Tahoe, as well as the high-price playground on the East End of Long Island, has slowed markedly in recent months.”
“As the overall housing market weakens, the interest in buying vacation homes appears to be falling faster. ‘Second-home buying is very discretionary,’ said Edward Leamer, an economist at the University of California, Los Angeles. ‘There is no force of demographics that is pushing people into buying homes as there is in primary home markets.’”
“Prices at all levels are softening, and in a few places recently have begun dropping. In Florida, price declines have been most pronounced in areas dominated by second-home sales. In June, median prices fell 8 percent from a year earlier in Naples and nearby Marco Island on the west coast and 10 percent in Panama City in the Panhandle.”
“Paul Ciotti has had his two-bedroom beachfront condominium in Naples on the market since late last year. He first asked $999,000, when ‘everybody was going for pie in the sky.’ He has since cut the price to $799,000. Mr. Ciotti bought it for $515,000 in 2004.”
“This spring and summer, median home prices in the Ocean City, NJ., area have fallen by 10 to 15 percent from a year earlier. Sales have slowed and more houses are sitting on the market, according to Nicholas J. Marotta, president of the Ocean City Board of Realtors.”
“He blames speculators for rapidly inflating and then depressing the market by trading in condominiums and oceanfront homes that they bought with low-interest loans requiring only small down payments.”
“A local developer added that new construction had flooded the market, with more than 100 homes priced at $2 million or more. ‘We believed in our own confidence,’ said the developer, Raffaele Pansini, who has been building homes for nine years. ‘And in a way, we proved ourselves wrong because we don’t have 100 buyers coming in.’”
“Anecdotal evidence suggests that vacation homes might have reached a new high-water mark in 2005. ‘I saw a lot of clients buy first, and ask questions later, on second and third properties,’ said Leo Grohowski, at U.S. Trust, which caters to affluent families.”
yo mr C,2004 for pricing by xmas
otherwise fugedaboudit
“Paul Ciotti has had his two-bedroom beachfront condominium in Naples on the market since late last year. He first asked $999,000, when ‘everybody was going for pie in the sky.’ He has since cut the price to $799,000. Mr. Ciotti bought it for $515,000 in 2004.”
LOL. I had a similar response: If he bought it for $515K in 2004, then it is probably only worth $150K (since we were already three years into the bubble by then). Let’s talk when he cuts the price to $175K — if he throws in closing costs and perpetual flood/hurricane insurance, we may have a deal.
No shit. I’m sure that blurb will attract mucho commentary. Greedy pig. These people have no idea how this type of publicity hurts their selling efforts.
Oh, but make sure you don’t “insult” Mr. Ciotti by lowballing his 100% in a year profit asking price.
Mr. C, I’ll give you 100K for that fucking albatross, but you have to pay the HOA for five years and come clean my toilets once a week for year.
“…and come clean my toilets once a week for year.”
and feed my squirrels…
“…his 100% in a year profit asking price.”
These are the sorts of real estate listings which outline the absurdity and greed which has infiltrated the market. As if 20-30% per year were not enough, thousands of idiots think they can just hang a miracle number on the place and some fool will come calling. Sorry Mr. “Chianti”, there are no fools greater than you, so enjoy your drunken stupor while you and your house rot away…
Remember what we all learned yesterday? Compassion.
I guess the compassion depends on whether he’s stupid or he thinks someone else is.
“Sure, I’d love to give you $284,000 to pay for your ridiculously glamorous lifestyle! Live it up for me, player!”
I hope he losses his ass!
Probably took out a HELOC against it to pay for nice furniture, golf club membership, plasma tv, nice convertible, boat, etc.
So he is either greedy or needs to keep the price at the level to recoup any HELOC, RE commissions, closing costs, etc.
“This spring and summer, median home prices in the Ocean City, NJ., area have fallen by 10 to 15 percent from a year earlier.
Now add the 12% round trip comissions and carry costs and we are down 25-30%.
“Anecdotal evidence suggests that vacation homes might have reached a new high-water mark in 2005. ‘I saw a lot of clients buy first, and ask questions later, on second and third properties,’
This is so true. I personally know dozedns of people who can’t afford their own home buying one or more vacation homes.
Simmssays…the next thing for your cell phone
http://www.americaninventorspot.com/p2p_cellphone
I was putting finishing touches on one condo project in late 05 and the new owners - a young couple - came into the room and asked me if I thought the units would rent.
Ready, Fire, Aim
Fire, aim, not ready.
Yes it will rent! Your family can live in the kitchen and rent the other rooms to families whose condos were foreclosed on!
Ah,…only problem is it was a one bedroom / kitchenette hotel room type condo.
380K
“He blames speculators for rapidly inflating and then depressing the market by trading in condominiums and oceanfront homes that they bought with low-interest loans requiring only small down payments.”
Wahoo may disagree with me (because he lives there), but IMO places like the Jersey shore are exactly where I expect there to be speculators. They are vacation towns for the most part and, therefore, primarily rental markets.
It’s places like Idaho or the midwest where I don’t understand speculation. But the fact that this is happening everywhere just indicates that no area is immune.
I too live at the Jersey shore. Several friends own local “investment” properties. One friend (MD) owns 3 shore properties. A local realtor I fish with says that a huge number of local shore properties were bought by people (non local) thinking that they were buying vacation homes that were going to also serve as investments. In his words “they think that they are going to get paid to vacation at the beach”.
And that doesn’t surprise me at all. Heck, I’m one of those who only rents for a week at a time (well, I used to rent for the whole season along with a bunch of other friends when I was in my early 20s . . . ahhhh Sea Isle City . . . what fun I had back then). My point being, I need those owner/investors so I have a place I can rent for a vacation. But I sure wouldn’t be looking for a weekly rental in Boise. (No offense to Boise, just not where I picture people flocking to for vacation.)
I should have added that at least one (the MD) friend is frantically trying to sell their shore properties and getting more nervous by the week. Last update was that they had received no offers. These properties (one condo two houses I believe) have been on the market since late spring. For exercise I regularly ride my bike along the beach and I have noticed more for sale signs than ever before.
Eastcoast, when I was in my 20’s and living in Philly we used to pile into a summer house in Stone Harbor. “The Dump Down Shore”. If you know the area, you know why the neighbors hated us.
Ah yes, the summer is over. They didn’t rent out to full cap. and now they get to carry it through storms and cold.
I sold my home 9 months ago. I remember the psychological strain the situation bears. It must be terrible for these people. Especially since almost everyone now knows the market is crashing.
Nah EC, you are right. There has always been another GF that the realtors sell the “vacation for free while your house pays for itself” dream to. After a few years they realize it is alot of work / hassle and sell to the next GF. But as I’ve said before no one complained because appreciation was letting everyone at least break even. Now it will be different.
What’s happening in Wildwood? Surely no one is buying condos in converted doo-wop motels.
Or did the devleopers tear down the motels? A big fat shame if they did.
I’m new to posting here, but I’ve been reading since January–and you’ve really helped me put my situation in perspective.
I am no FB, but a long-term homeowner (since 1985) in bubblicious Northern Westchester, NY. In 1993, my ex-husband PAID OFF the mortgage and turned the place over to me. (Don’t worry; he still came out way ahead.) The property taxes are insane there, and I no longer need to reside in the so-called top-flight school district. So I listed the house last November at the Zillow-esque price of $820,000–which it may well have brought about 18 months earlier. Ridiculous, I know.
I’ve finally got a deal closing next Wednesday, after many thousands of dollars worth of work and relisting with a competent agent for $170,000 less than than the original, embarrassing price. Thank GOD I got turned down for that home equity loan I tried to get in March!
“Prices at all levels are softening, and in a few places recently have begun dropping.
- Please explain the difference to me between ’softening’ and ‘dropping’?
Softening is when other people are losing money. Dropping is when youlose money.
Lol. It’s to early for this . Anyway , Paul Ciotti the investor wanted about a 1/2 million dollar profit in about a year 1/2 of buying his condo before he reduced the price 200K . Now he will settle for about 300K profit in 1 1/2 year . I believe these are the type of gains alot of speculators/flippers were expecting on some of these investments . My question is why would this condo be so undervalued just 1 1/2 years ago that it should command about 500K more than the original 515K purchase price ,(approx 100% mark-up )? What did Mr Ciotti do to the condo ? This level of greed gets me pissed .
It’s never too early for a little levity. Anyway, time for another comparison. Investment is when you sell for a good profit. Greed is when you TRY to sell for a good profit. It is just human nature to try to get the last spoonful of peanut butter out of the jar. This is a good thing for those of us who see it otherwise I’d have no one to sell my near empty jar of peanut butter to for the full jar price.
Someday you have to try playing Monopoly according to the real rules. It’s great because the first time even experienced players by by the real rules a property bubble and burst invariably occurs. Here’s how the game really works; when a player lands on an unowned property and declines to pay the full price an auction is immediately started. Anyone can bid and Inearly always get the person who landed originally to pay more than the list price. This is great because after a few turns they are cash poor and property flush. Sound familiar? Then with no cash, they either mortgage their stuff to stay liquid or I just buy subsequent properties pennies on the dollar as there is no competetion left with any cash. Again, sound familiar?
Only one problem with the Monopoly comparison- as I have previously written here, the central banker in Monopoly has a set of rules he must follow- Unlike the CB of the US who can (and does) inject $$$$ into the “game” at will.
It’s amazing how everywhere you look we’re surrounded by the irrefutable truths of proven fundamentals, tried and proved over and over again. “Ah, but it’s different this time”. It’s like the poor fool that sticks his hand in the fire, gets burned, and then tries again, except this time he turns his hand over, thinking it won’t get burned this way. The excercise is repeated over and over again. Each time the hand is stuck in the fire a little differently in the hopes that “it won’t get burned if I do it this way.” Never mind the established law that fire burns flesh. So it goes with our housing bubble.
HW,
Great coverage on Ben in Newsweek btw! Without making any reference WHATSOEVER to Mr. “C’s” nationality this type of speculative activity just brings out the “mobster” in all of us! What in God’s creation would lead anyone to believe they are entitled to a 100% profit in a year? Show me any LEGAL business activity that can consistently show this level of “profitability”! Mr. “C” must have felt smug in the knowledge that he would double his money while he and “Tony” were at the golf course. Only in America.
30095 Cartier, Rancho Palos Verdes, 90274 $1,749,000*
Status: ACT Orig Price: $1,945,000
this is second 200,000 price drop in 90274 (Palos Verdes Peninsula, CA) in less than a week. Other was on via valmonte.
prices are a coming down.
Frankly, I have no idea if this lowered price represents a ‘coming down’. Like Ciotti, asking 2x your purchase then dropping it a fractional amount means squat. When sales start going for under their previous purchase price - now that means sumpin.
Exactly. That is why all of those “Reduced Price” signs that realtors hang should be changed to “Greedy Seller”. They do not indicate that the property is reasonably priced. I think anybody purchasing now (as insane as it seems) should always know what the owner paid. And then I think it is appropriate to call the “Ciottis’” of the world on their BS.
-’now hopes that it will be sold right after Labor Day, a prime season for home transactions in the Hamptons. ‘My feeling is that everybody is waiting,’ said the agent, Ira Birns.
- Note to Ira…He read my mind exactly. Right after Labor Day I am going to offer $2.5 mil for that puppy.
Whatever happened to all that Wall Street money that was going to buy up every property within 500 miles of Manhattan!?
“Whatever happened to all that Wall Street money that was going to buy up every property within 500 miles of Manhattan!?”
It’s probably going into Canadian oil drilling trusts paying double digit yields! I’ve entered them late, but P/E’s are a comfortable 10 or so. I’m wary of bubbles and am not going to get greedy on those issues. Those who learned how people got clobbered by the dot bombs and how people will get clobbered by the RE crash live by the rule of diversification. To balance out my pgh yielding 11%, I just bought 2 oz of platinum and ordered $1k worth of 5 year T-note.
Have fun next April! Those aren’t worth the tax headache! Did they ever unite the A and B shares? If they haven’t I’d reccomend looking at PVX (or if you feel like taking a gamble BPT).
“Paul Ciotti has had his two-bedroom beachfront condominium in Naples on the market since late last year. He first asked $999,000, when ‘everybody was going for pie in the sky.’ He has since cut the price to $799,000. Mr. Ciotti bought it for $515,000 in 2004.”
Hey Mr C. , I bought a new BMW in 2004 for $52,000, I am trying to sell it for $70,000 and I have not takers…. can you help me?
‘Much of Florida and the Jersey Shore, areas considerably more affordable than the Hamptons, have been favored destinations lately for his well-to-do clients and friends, many of whom encouraged Mr. Grohowski to buy with them. He is happy that he resisted, he said, though ‘for a while, I was looking like a dummy.’
Isn’t this how manias play out? Feeling dumb for not buying a house he neither wanted nor needed. Like people feeling foolish for not having some Yahoo or Amazon stock.
I think I feel more antiquated then dumb. I would just like to make financial decisions based on logic and fact but when the whole world makes decisions based on herd psychology and slanted PR, solid logic and insight does one no good in the investment arena. What can one do except sit on the sidelines and watch while the world makes money going crazy?
kipper,
Couldn’t agree more! Many here are at a stage where we should be gleaning more and more of our income from our investments and less and less from wages. However, when all we insist on doing is going from one bubble to the next entry points are so critical many of us simply refuse to play and are forced on to the sidelines taking what reasonable returns we can. Rather than looking for true growth, we’re forced to use “income” (dividends) to substitute for growth! In fact so much so that many of us now say we’ll take a 9% return to our graves! This is simply not right. Just look at the dollar flow and popularity of High Yield funds. We’re confusing income for growth (and who can blame us). Well said kipper!
Hey Ben,
What percentage of the homes in Sedona do you figure are “vacation” (empty) homes on the market? ‘
I trying to plot out a graph for our area using my mad math skills.
TIA!
We are going to Sedona for Thanksgiving. I’m very excited. We found TONS of rentals that were out there… all for very reasonable. I was amazed at how many options there were for such a small city.
We ended up getting a 4 BR house that was very attractive with an awesome view and hot tub and plasma screen and luxury kitchen (with GCT of course) for $1100 for a week. not bad.
There were even better deals out there (4 BR homes for rent for a week for under $500), but we’re going with the not-so-frugal and they wanted a midrange priced property.
clouseau
Congratulations on that score! I’m shopping for friends and am AMAZED at the deals in Sedona (rentals, not purchases…nay, that will take a bit longer!)…
You’ll have a terrific time, if Ben can’t point you to hotspots, I’d be happy to…I’m quite familiar with the area.
My sentiments exactly. During the heyday of dot.bomb and day trading, I felt somewhat like an idiot for not having invested and for not knowing how to day trade. I had some friends who got into day trading and gave me pitying looks for not having “gotten in” at the right time. They took one of those infomercial seminars and all of a sudden they were experts, not unlike the people who have all of a sudden become real estate “investors”. Well, my friends found out all too quickly that they were not experts in day trading, but then, as now, Greenspan became the whipping boy for their own ignorance and inexperience. Greenspan, always Greenspan and his policies, was the reason they gave for their failures. I’d say it was their own greedspam that did them in. The difference between them and me was that I knew I didn’t know what I was doing, so steered clear.
Well said Palmetto. B/T/W I am trying to get my wife to hold on as long as possible from our buy - with how fast this news is traveling, i’ll bet I get that builder to trim another 10-20% of their price
hello
new posting from socalmtgguy
http://www.housingbubblecasualty.com/
good that is back more frequently
grom germany
http://www.immobilienblasen.blogspot.com/
No offense, but were does a retired teacher get the scratch to buy a $515,000 beachfront condo? Buyers are beginning to digest the fact that half a million is a hell of a lot of money when you have to pay it all back. Ah, Boise city of magic.
When I saw this story on page one of the New York Times this morning, I said to myself “Self, the sh*t is really starting to hit the fan here” Then I went and saw that was another downbeat article on Page 1 of the business section about new home prices turning further down than last quarter, and I was stunned. The NY Times has been a big RE shill and to see all this news on Page 1 of front section & business section in one day gets me to thinking that this is the Day of Reckoning for the MSM and the negative psychology will just amplify from here on out. So many news outlets get their feeds from the “Paper of Record” that it is the equivalent of shouting from the rooftops across the nation. I a soooooooooooo glad I got out at the top with my little profits.
The New York Times. The liner of choice for all high-end Parrot cages!
I wouldn’t grace the cage of my dog’s crate with that commie rag.
“cage” - “base”
I didn’t buy it - just saw it on the newsstand - i was a subscriber 10 years ago, cancelled after their every news story became about being anti-Bush (Not that I am pro-Bush - I am independent and think he is screwing up plenty but report the news please, don’t editorialize every story and choose only to cover stories/issues that harm). Then when they published the anti-terror banking story, even after Murtha asked them not to, I had to say I would never give them a dime of my money again in my life.
Yeah, use the Washington Times instead.
what a long way down from the july 2005 nytimes sunday mag article touting toll bros. and prices that would keep going up, up, UP to the sky. that article was the pinnacle of r.e. pimpdom for the paper of record.
yet i shudder to think of a world w/o the nytimes.
It’s been a great week for the RE crash.
First Seattle, then Baltimore, and now NYC. The last of the bubble-non-believing local newspapers are going down fast.
Continuing Buddhaman’s observation about the sh*t hitting the fan-
The Mortgage Bankers Association sends out a push e-mail daily.
I had similar thoughts when I saw these stories highlighted on the MBA’s e-mail:
Top National News
Fannie Mae: Last Accounting Errors Have Been Found (Boston Globe)
Housing Boom Continues to Fizzle (Miami Herald)
Homeowners Start to Feel the Pain of Rising Rates (Wall Street Journal)
In the High-Price Playgrounds, Many Homes Wait for a Buyer (New York Times)
For Some, Renting Makes More Sense (USA Today)
Closing Costs Average Over $3,000, Study Finds (Asbury Park Press (NJ))
Countrywide Loan Funding Falls (Investor’s Business Daily)
When the MBA is highlighting these stories to the folks who signed up for their Newslink e-mail, it makes me take notice.
http://tinyurl.com/fh4n2
This will be extremely off topic…
I’ve been tracking the real estate(bubble) market for some time. I’m certainly no real estate expert, but I do have a solid grounding in economics.
It’s been clear to me for a while that the current real estate market, and indeed current housing prices, are unsustainable.
I don’t make enough money to buy, so I don’t have to deal with that part of it…but I have some questions for the community here.
a) This site provides a great running commentary and analysis on the action.. but is there good resource, like a FAQ, that takes in all the info at a glance?
b) Is there a consensus estimate on how bad this is going to be? Personally, I feel like we’re already beyond ’slowdown’ and into ‘correction’ territory.. what do the experts think?
c) How much of a drag is this going to place on the economy? To borrow a phrase from one of the stories, my economics background leads me to belive a ‘perfect storm’ of the housing bubble collapsing, a weak economy, consumer debt, and foreign exchange fluctuations could make things real, real hairy fairly soon.
Thoughts? Suggestions?
I would love to know what the common Housing Bubble Blog abbreviation “FB” means.
“RE” is easy: real estate. And HELOC threw me for a bit, until I figured out Home Equity Line Of Credit. Ah, easy! But “FB?” I keep thinking it is this blog’s shorthand for two obscenities…
f@ked borrower!
LOL!! That is perfect! Thank you!!
a) Check out http://patrick.net/housing/crash.html
b) Define “experts”
c) You’re definitely on the right track.
Next chapter in the sad saga of the second home craze: Realizing that these things do not pay for themselves in a sinking market…