‘Row Upon Row Of Unsold Houses Flood The Market’
Some housing reports from the central US. “Downtown Chicago condominium sales fell about 24 percent in the first six months of 2006 from a year earlier. Buyers signed contracts or reservations for 3,739 Chicago condominiums through June, a decline from 4,898 in the same period of 2005, a record year, according to Appraisal Research Counselors.”
“‘I think the market has slowed down a little bit, but we don’t think the market has stopped,’ said Ron DeVries, of the Chicago consulting firm. Buyers signed contracts or reservations for 1,496 units from April through June, compared with 2,243 contracts signed from January through March, the study said.”
“The study points toward a softening in investor demand. ‘Because there is this perception out there that the market is turning–and we would agree that the market has fallen off a little bit–there is less investor activity,’ he said. ‘The speculators are still out there. But as the market cools we would expect to see the speculators buying fewer of these units.’”
“This year has been ‘extremely active’ in announcements of new-construction condominiums, the report said. Projects with more than 4,200 new condos started marketing during the first half of 2006.”
“With the large amount of new development in the South Loop, unsold inventory levels in that area have risen far above other downtown submarkets, the report said.”
The Sun Times. “Appraisers are taking the heat in Illinois and nationwide for what some see as a bloating in real estate valuations. The charges include over-inflated appraisals, underestimates and criminal fraud, according to Daniel E. Bluthardt, director of the Illinois Division of Professional Regulation.”
“Under the current system, ‘there is a tremendous amount of due process that goes into the discipline system,’ he said. ‘These folks hire lawyers who know the system and it will delay the end result. They can go on for a couple years.’”
“The nature of complaints is changing, Bluthardt said. ‘We have almost exactly the same number of pending complaints,’ he said. ‘However, the current complaints are of a more serious nature than the complaints that were pending in prior years.’”
“‘What we have seen is a trend lately to outright fraud,’ he said. ‘Some is being conducted by people who are not licensed, but are using the names and license numbers of legitimate appraisers.’”
“Real estate appraisals that come in over the ‘true’ property value threaten home owners and home builders alike. As the housing market cools, for the first time in years, Quad City sales are down on a year-over-year basis with prices weakening in the upper brackets, folks are confronting a problem that was easily ignored during the real estate boom. The problem is inflated home appraisals.”
“Critics inside and outside the appraisal business have long warned that many appraisals are too high because generous appraisals help mortgage loan officers and brokers, who often select the property appraiser, complete more deals.”
“Those with flawed credit are particularly vulnerable, says Iowa Assistant Attorney General Patrick Madigan, who coordinates with law enforcement officials from other states on a variety of mortgage-related issues. Madigan believes that the deliberate overstating of appraisals is ‘widespread’ among loans to subprime borrowers.”
“Jacquie Doty of Freddie Mac predicts that inflated appraisals will lead to higher default rates in the coming years. For sure, the inflated appraisal concern in the Quad-Cities likely is lower than in places like Florida or California, where consumers had little choice but to play along with silly appraisals if they hoped to buy a home.”
From Nebraska. “It’s a buyer’s market for Omaha-area home shoppers, expert told KETV. About 6,000 homes are up for sale around the metro, and a number of real estate experts said that is among the largest pools of available real estate in decades.”
“It’s a phenomenon being seen across the country as row upon row of unsold homes flood the market. Real estate experts said the national numbers of available homes are the highest they’ve been in half a century, and Omaha isn’t immune.”
“‘In my 26 years, I’ve never seen this many homes for sale (in) this market,’ said Omaha real estate agent Van Deeb. Deeb points to slower sales and continuing new construction among the reasons for the swelling inventories. Statistics from the Omaha Area Board of Realtors show that 5,940 homes are on the market now in Omaha and of that, about 4,400 are pre-owned and about 1,500 are new.”
“Deeb said he doesn’ t, however, believe that Omaha’s housing bubble is bursting, unlike the markets in some other cities including Phoenix and Las Vegas.”
This blog is having some network problems this morning. Apologies to those that have experienced delays.
Who could have seen this coming???
Hey, along this ‘See it coming’ line …..the following was in an article yesterday, and while there was a bit of well deserved bashing, I think ol’ Don got off pretty easy. You just can’t cover everything – too many topics and good comments, but here it was …..
‘CEO Don Tomnitz laid out Horton’s strategy for retrenchment after the company reported its first-ever decline in business. “It (D.R. Horton) has anticipated the housing bubble bursting, saying a downturn could work to its advantage….”’
I sat stunned for a minute. This is the CEO saying this, just minutes after you bought an overvalued house from him? Holy crap! “Yeah, I knew it was comin’ and I’m gunna’ make a lot of money off it…”.
I began to wonder how this would go over in another industry, say if the NRF’s CEO Tracy Mullin was selling you a garment at Macy’s:
Mullin: “Thank you Mr. Shopper, you just got the last pair of bell-bottom slacks we had. Boy, I was afraid we weren’t going get rid of those, since they don’t go with any of the shoes, belts, shirts and coats that we have coming out in our ‘Fall Line’ tomorrow …..”.
Shopper: “What!? You said I looked real spiffy in these? Now I’m already stuck with pants that don’t go with anything? Hell, take these back and I’ll wait until tomorrow”.
Mullin: “We can, but unfortunately we can’t give you the full price. We saw this market change coming. Bell-bottoms are on the outs.
Shopper: “Unbelievable ….. fine, give me the refund – I’m out of here”.
Mullin: “So we’ll see you tomorrow”?
Shopper: “No, I’ll be back in the spring when all that stuff is on sale. At least then I can recoup some of my loss”.
Mullin: “See you in the spring ….(When none of this crap matches our ‘Spring & Summer’ Line….we’re always a step ahead of you morons …..)”.
Yep …. It’s the new age …… D.R. Horton has no problem hosing you with their own product, and then telling us all how savvy they are the following day. Fortunately, the bell-bottoms don’t cost 500K a pair.
Of course, these sorts of issues never happen in the Midwest, because it’s different there, and their prices are not volatile.
Riiiiight.
I don’t think home prices in the Midwest are that disconnected from median incomes as to call the area in a bubble. Chicago looks frothy to me though. Here in Michigan we have had so much restructuring in the manufacturing sector that the housing markets are reflecting this.
It sounds from the report Ben posted here that there is a huge supply glut of homes in Omaha. And he has reported similar findings for other places in the midwest (e.g., Columbia, MO). You cannot discuss prices in a vacuum without considering the balance between supply and demand.
Why are the people in Omaha selling and where are they going to move to? I can’t imagine too many places cheaper to live then Omaha.
I thought everyone wanted to live in Omaha!
Yeah, something like 1,000 people a day are moving there, from what I’ve heard.
They aren’t making any more “Omaha” so you better buy now!!
That’s the funniest thing I’ve read on this site!
PC stop, you’re killing me
“Why are the people in Omaha selling and where are they going to move to? I can’t imagine too many places cheaper to live then Omaha.”
Council Bluffs - HA!!!
Yes. Awash in global liquidity and in the face of a complete lack of lending standards and toxic mortgages, how many Midwestern “flyover” areas are stealth recipients of this rogue capital wave? Put another way: if housing has only appreciated modestly in the Midwest over the last several years, how much worse would the RE markets there be if all of this easy money didn’t exist?
It would be a lot worst. You can pay me now or you can pay me later. The FED choose the pay me later option. Now it’s payback time! And it won’t be pretty anywhere in the US but also in all the anglo-saxon economies that have the same disease.
Darth,
Another thing I wanted to mention. One of the many reasons that RE went up here, that nobody has touched on yet, is that A LOT of people from higher cost areas cashed out and moved here! Read that again, A LOT of residents from places (especially Cali) moved here b/c our cost of living WAS so low, but they drug it up in the process. People here are moving and selling for ALL of the same reasons as the rest of the US.
1. HELOC
2. RE-FI
3. NEG AM
4. NO DOC
5. ARM
6. 100%
7. NEG EQUITY
8. JOB LOSS
9. GOING BACK “HOME”
etc.
Scary:
http://dallas.craigslist.org/rfs/194493190.html
Unbelievable…………..where do I sign up?
The sad thing is that somebody will probably do it.
The sad thing is that somebody will probably do it.
A fool and their money will soon be parted.
Proverbs 22
Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.
Bubbleonians 5:6
Yeah verily, in the end times of the bubble, sayeth the Deliverer of Justice, I will scourge the land with plagues of equity locusts; mine ears shall be deaf to the lamentations of the FBs and the wails of the HELOCed. And Suzanne wilt I cast out from among your midst, and rain down upon her the righteous wrath of the FB multitude who art turned out of their houses and set adrift like sheep without a shepherd.
And yea, in the darkness before dawn shalt Ben Jones come down from Mt. Sinai, and the avenging angle TxChick57 shalt rampage through that den of inequity called the SDCIA forum, butchering their sacred cows and tipping over their idols [or the other way around?]. And Sammy Schadenfreude did bear witness, and saw that it was good, and did laugh and make merry with an end-zone dance as he waved the keys to an FB’s house.
Sammy,
Are you a writer? Cause you should be.
LOL. Not a writer, just an avid reader and maybe a bit of a jokester. I’d love to have the time and space to write, someday, but for now, I’ve got a family to take care of.
LMAO!
Not even! It’s borrowed money.
I just heard an advertisment on the radio from a company that is trying to sell second and third TDs. If you call their 800 number, they will explain why this paper is not risky, and how you can make very high rates of return on your investment. This was on KNX 1070 in LA.
Sound to me like the well is running dry for the mortgage brokers, if they need to peddle individual notes on the radio. Wanna bet they’re trying to dump the garbage that they can’t sell to the institutions?
No, what they are peddling are not the same as institutional notes. They are doing the same thing as the lender that just crashed and burned in Vegas I think the name was Liberty Capital. It was all over this blog for a days. This is not your everday run of the mill mortgage broker. What they do is you send them cash and they place it on a property that they are lending on. Fractionalization of notes. Is what I think they call it. It’s an interesting time to be promoting that to the masses especially in California.
I can hear the ad now: “This way, you too can be part of the FB revolution without even having to own a home!!”
This is sooo obvious!! What legal ramifications could there be? I feel as though appraisers can get away with anything! In fact the house I had in Dallas was “mis-measured” by an appraiser in 2002. When we bought the house we thought it was 3000 sq. ft. just to find out when we got it appraised for a refi that it was only 2600 sq. ft.! When we sold in May we has to bring $20k to closing!! We only sold due to job transfer, but it seems to me that no one is liable for our loss!! Normally I would think we could sue, but in the current environment I just think we are screwed! I’m just happy to have it gone after trying to sell for 2 years! These appraisers can get away with murder! If I made mistakes or lied on my job like they do I would be FIRED! Any ideas??
In the early 90s, some of them ended up in prison. They will again.
Google “Danny Faulkner, I-30 Corridor, Savings & Loans”
You’ll see.
Makes me wonder how long these guys were in prison, and whether or not this latest cycle is brought to you by the same thieves in different clothing. Maybe the “prison term cycle” predicts the condo speculation and overbuilding cycle…
Here ya go:
http://tinyurl.com/mkk6v
Isn’t it the brokers and loan officers who go shopping for the appraisals? There are a whole lot of people who should be in jail over this fiasco of a housing market…not just the appraisers. Will anyone actually go to jail? Probably not.
you guys are shooting the messenger by putting a disproportionate share of blame on the appraiser. he has tremendous career risk and it is not in his best interest to say “i don’t think this house should be worth this much, so i’m valuing it lower.” he’ll starve very quickly. the market was much too insane to try to participate in it in a sanely fashionl. when group think is moving like a tsunami, you’ll be bowled over by the waves if you try and resist. one could argue ad nauseum about the ethics of it all, but that’s how it works. similar think happenen with dot.coms. if you were an analyst and put a sell on emc at 75 and it went to 100, you lost your job and nobody else wanted you either. career risk…significant.
Ever hear of something called INTEGRITY?
Ever heard if something called EATING?
Just kidding.
Unlike a brokerage house analyst, the appraiser is hired to be an objective third party. If an appraiser is unable to perform that (fiduciary) responsibility, then he or she should leave the business. “Well I was looting because everyone else was doing it” doesn’t impress the judge.
hey, wait a minute!! this site is full of people saying that a house is “worth” what someone is willing to pay for it. does this only apply on the way down? how is it out of integrity to say that a house is worth 5-10% over comps when someone is standing in the wings waiting to pay the price? i’m not an appraiser, nor a lender and i don’t know any. i’m just trying to stand back and objectively observe what happened.
well, actually, the REAL business of an appraiser is to take the current comps, compared with statistics about the home and neighborhood, and with their mad math skills, actually nail down a price based on actual sold goods…not what a buyer is willing to pay, whether it’s 10% over or 10% under. Period. Anything else is speculative and beyond their scope of so-called expertise.
I was an appraiser so I can explain a little. A Catherine mentioned, an appraisal is just compiling the the most similar recent sales and then stating that the current home is the same price with a few changes. So on the one hand, the appraisal really is nothing more than a report of what just happened in a local neighborhood. It doesn’t actually reveal whether the market as a whole is overvalued.
Now on the other hand, there is a spot within the Comparable Sales Approach in which the appraiser can make a value adjustment (to the subject property) for financing. I have never seen it done by any appraiser in 20 years, other than my father who was one of the last honest appraisers, back in the 1980’s. So, YES, appraisers could have made adjustments to every single appraisal they did in the last fews years, if the appraisals had some sort of exotic financing with a lower start rate than the traditional FNMA / FHLMC fixed rate 20% down pymt with a 28% payment to income ratio. But none of them did as this would have resulted in market value adjustments of at least 10% to 30% per home, and then consequently they would have been out of work pretty quickly. The lender would have found another lackey to do the dirty work. The lenders command the aprpaisers. But then the lenders are ruled by the realtors and builders. Having been a loan officer as well, I can tell you that the first time you dont get someone flakey-flake qualified for a loan, then it doesn’t matter if you have been doing business with the realtor for years, you are out. So the whole lot of them are unethcial, which is why I am no longer in the business. I couldn’t in good conscience make loans to people who I knew couldn’t really afford the home they were buying…
I hear you. I had the title company present me with obsolete HOA covenants at closing. The first letter I got from my new HOA was a list of fines, I had to ask for the latest covenants since most of the fines were for things that weren’t even prohibited on the copy of rules I got.
The title company said “sorry”, but you’re supposed to verify everything, we really only work for the mortgage company.
Who told you it was 3,000 SF. You bought the house cause you liked it not because it was 3,000 SF. The measuring situation is a tricky one because appraisers have different ways of calculating S.F. I will give you an example
If you have a colonial with a 14 x 14 open foyer, some appraisers minus the second floor out of the calculation, however now you must minus it out of the comparable because the town records include it in there calculations. I myself feel that you must compare apples to apples so I include it in. There are also split level homes in which the basement area gets factored in which is 100% wrong however again information sources would include it in SF. I minus it out. During the boom there were a lot of “skippy” trainees but there gone now. If you still have those appraisal see if a trainee did them.
As I remember, a F’B was suing the Glendale, Ca MLS for publishing DOM that wasn’t correct. Do any bloggers know what happened in that suit? Or, did da Judge say ‘caveat emptor’?
“In my 26 years, I’ve never seen this many homes for sale (in) this market,” said Omaha real estate agent Van Deeb.
“Deeb said he doesn’ t, however, believe that Omaha’s housing bubble is bursting, unlike the markets in some other cities including Phoenix and Las Vegas.”
Mr. Deeb confesses these are the worst conditions he’s seen in 26 years yet still does not admit there’s a bubble. Denial runs so strong.
It reminds me of the time I was stationed at a military base when the BRAC announced its closure. Many of the older civil service employees refused to give up hope all the way until the day the fed govt put the locks on the front gate.
Omaha is my husband’s hometown. You couldn’t pay me enough money to live there.
Huggbear PLEASE stop misquoting Mr. Deeb….it’s different in his area…not like So CA.
Of course if you read between the lines he is a loozzer.
Ya, Buffett is subsidising it. Remember he was the idiot who wanted to get rid of our Prop 13 protections. Der Arnold got rid of him in a hurry didn’t he ?
“It’s a buyer’s market for Omaha-area home shoppers, expert told KETV. About 6,000 homes are up for sale around the metro, and a number of real estate experts said that is among the largest pools of available real estate in decades.”
The bubble tsunami has swept inland to The Oracle of Omaha’s back yard.
Buffet was warning about the housing bubble over a year ago… He probably was literally watching it in his backyard.
“Deeb said he doesn’ t, however, believe that Omaha’s housing bubble is bursting, unlike the markets in some other cities including Phoenix and Las Vegas.”
That’s right, Deeb. The bubble is out there somewhere else; your local market is different, even if a little bit inundated by an inventory flood.
“‘What we have seen is a trend lately to outright fraud,’ he said. ‘Some is being conducted by people who are not licensed, but are using the names and license numbers of legitimate appraisers.’”
Other than a general slowdown in mortgage and refinance origination, and squeezed credit spreads, this is where I expect additional pressure on bank shares in the next few years. Even though most of the “iffy” mortgages may have been sold to MBS buyers, these contracts always contain “charge-back” provisions which apply (among other instances) when the buyer argues that the asset sale was fraudulent. Since most banks and other mortgage originators control the appraisal process, I expect to see quite a few of these actions pressed by MBS “FB’s”.
But an MBS security owner is an FL or FS (lender or saver), not an FB. Remember, the B in FB stands for borrower.
signed contracts ? try gettin em through escrow
That’s the invisible statistic in all these reports. Escrows are falling out in droves, contracts cancelled, pendings going..pfffft.
Title people tell me: a) property not making appraisal b) buyer’s not selling their home c) loans not funding (many more nervous lenders!).
face it well financed folks w MBA’s aren’t out home shopping- what you get a dipsticks that have been “qualified” by realtors
Along these lines, I just got a flyer in the mail from a real estate agent bragging about an offer “pending”! It’s pretty telling when these agents start celebrating a “pending” in this unstable market. These days I wouldn’t feel safe until escrow closed just like I felt VERY nervous from Feb-Mar ‘06 while our house was in escrow.
he Sun Times. “Appraisers are taking the heat in Illinois and nationwide for what some see as a bloating in real estate valuations. The charges include over-inflated appraisals, underestimates and criminal fraud, according to Daniel E. Bluthardt, director of the Illinois Division of Professional Regulation.”
WTF do these azzholes expect.
The appraisal management companies utilized by the lenders to absolve them of liability, are usin’ a bid process which has driven the price of a residential appraisal down from $350.00 in 1988 to $35.00 on a fee split for newbie trainees hired by a numbers bucket shop.
As the sayin’ goes ya get what you pay for in this life.
Garbage in-garbage out.
The trillion $$$ portfolio’s held by Fan & Fred are nothin’ but junk, appraised by total bozo’s workin’ for chump change.
And you can blame the lenders, with their, “punch the number I tell ya to-or no more soup for you.”
And now the system is meltin’ down, and everybody’s freakin’ out, LMFAO.
Just wait’ll those October winds start blowin’ in another 10 weeks, and the heatin’ fuel oil bills start rollin’ in.
Good point! I just realized Aug 29 will be the 1 year anniv of Katrina and we have had no major hurricanes this year. This thing gets worse if we have a major hurricane or unusually cold fall/winter.
I’ve been thinking about that, and it seems the hurricane cycle has run its course for the time being. Nature appears to have balanced out the heat issue for the time being. At least in this hemisphere.
Second warmest July on record. The heat is there, but so is wind shear, which prohibits development. Last year wind shear was shifted further north than usually, if I understand correctly.
Check out “weather underground”, and read Dr. Jeff Masters’ “WunderBlog”, and read his bio; he’s a meteorologist, and was in several the Hurricane Hunter flights.
right on !!
Indiana Jones,
OOOOOOHHHHHHHH yes they are. I live in Council Bluffs, work in Omaha. When you see those hilarious pictures of multiple real estate for sale signs on every street corner, that could just as well be here. Granted, you can still buy a crap hole here for 100K, but if you want something decent, you will pay well over 200K. I saw this coming here back in 2001. Omaha is just like everywhere else. Wages have stagnated, virtually nobody makes more than they did in 2001, or 1999, come to think of it. For my specific position, I might make $35K here, but I would make $55K in Dallas, $60K in Chicago, and $85-90K in LA. Trust me, I’ve been looking. So, based on my lower wages, I think prices here rival the disconnection of at the very least, Dallas, Chicago, and Denver. Plus, there are plenty of idiots around here that have used ARM’s, HELOC’s, zero down, you get the idea. We have a couple of neat resources here. One is a cable cannel for real estate only in the Council Bluffs area. It is amazing to see all of the prices that say “REDUCED”, and how many of the pictures have snow (indicating that they have been on the market at least since February). We also have a website called pottco.org (pottawattamie county assessors site), which is VERY useful buyers bargaining tool (yet the RE agent usually winds up being a bigger tool, if you get my drift). I don’t personally know any flippers, but their signs are obvious. There were two flips down the street from me, and plenty of junk has been purchased as “income property”. Flips here started way back in 1995/96. When you think about things in terms of percentage, things are dropping off here just as much. We VERY often see 10-20K reductions on property that they were originally asking 110-140K. And they will go much lower. Trouble is, we don’t have much industry here, nor do we have many professional jobs in Counci Bluffs (commonly referred to as “Council Tucky”, because as anyone from Omaha will tell you, we are just a bunch of rubes over here). Yet, the number of $400K+++++ homes have been increasing exponentially. WHY?????????????????????????? Last year, I also began to see $250K+ fixer uppers. Give me a break. When the population averages $35K per year (slightly less than in 2000) and the average house is up anywhere from 25-80%, yes there is a bubble, and yes, there is a disconnect.
rant over
sorry
i just got so excited to hear that Omaha is not immune from the media!!!
You could be describing half the country - hell, damn near most of the country. The wages, prices and disconnect in Council Bluffs
is about spot on with the Central Valley of California. And here too are ‘row after row’ of unsold housing. But the local RE board says we’re special - so that makes me feel all warm inside.
I spoke to a guy a couple of weekends ago from Chico, Ca who also swore prices won’t go down there. He says it’s “different” there and their home prices are justified. Oh, he also said he did a no-doc, 100% loan because his financial situation was also “different”.
You are right. And my main point of my retarded rant was that even po-dunk communities were not immune to the bubble. They will crash and burn just like everywhere else.
Don’t they have a ‘Meat’ processor in Omaha?
There is one in CB, IBP (Iowa Beef Processing) and one in nearby towns for Tyson and Farmland, but they all employ illegals.
PUUUULLLLLEEEEEZZZEEEE nobody start the illegal immigrant issue again.
Thanks.
I thought they had the “Pig Palace” in S. Omaha? You have to see it - a slaughterhouse with a huge, smiling, pig head on the roof (think Porky Pig) with the words “Pig Palace” right beneath it.
Deeb-
you are in stage 1
Oops
http://sandiegomarketmonitor.blogspot.com/
I was just in Chi-town last week and saw ‘price reduced’ signs everywhere. I’m always surprised by the amount of condo development going on there.
I love Chicago, it’s my absolute favorite American city, but who is going to buy all of those expensive condos? European tourists? Because the residents of Chicago are not all that wealthy (which is one of the things that makes it such a fun city).
People keep saying that the Chicago condo market is OK because, “you have to sell 50% of the units before you can get construction financing”. Whatever!
I wonder how many of that 50% are speculators?
Walking back from Navy Pier, I saw a couple with their 4 young children stopped in front of an unfinished condo tower looking at the pricing for a 1 bedroom. I hope Chicago doesn’t become like NYC, where immigrants move into studios or 1 beds. and then bring their entire extended families over. That would ruin the city real fast. Hopefully, they will be much more vigilant with code enforcement than NYC is.
I mean this as a slam against overcrowding, not immigration, btw.
I wonder how much of that 50% is actually sold at all. You know there some BS accounting going on.
Anecdotal evidence, but I guy who used to live down the street from me in Chicago is a union carpernter. He and his cowerkers bought several high-end condos for flipping purposes back in 02-03, not sure if they are still at it, but when I quizzed him on why he thought it would go up - the answer was, of course it will - it always goes up.
I think Chicago metro is going to mask their true trouble until next Spring. High and ultra high end 600k+ will continue to move and skew the median upward. The 200-350k condo market, probably dead already. I want the coldest winter ever, with a bunch of snow so people burn gas waiting for the traffic that never moves after snowflake #1. 1000 square feet at last year’s rates with a 20′ average temperature will push 200+ a month, ARMS adjust up, HOA’s skyrocket. Cook county property tax cap sunsets. Homes reflood in the spring. None of these people had reserves for a down payment let alone a home that is bleeding money monthly. March/April foreclosure will heat up so the bank can get these on the market before next school year.
Also, with the increasing costs of property taxes, heating fuel, insurance and everything else associated with home ownership does the old formula of 20% and 1/3 of income need to be made even more strict, 1/4, 1/5? If gasoline jumps from 3 to 5%, heat goes from 3-5%, insurance and property taxes leap, and all the numbers have to add up to 100, don’t additions have to be subtracted from somewhere across the ledger.
Every sentence in your post was a home run Andy!
I don’t care what the Fed does the rest of this year but I hope we get two .25 rate increases before the spring buying season and a “nuts up your ass” cold winter. People would jumping out of the windows of their finely appointed luxury condos then.
On the bright side of things, even if Omaha becomes an illiquid RE market, the average home there goes for less than $150K which is about a thousand dollars per month and is affordable even if you can’t sell it to anyone else in the future. That’s in stark contrast to cities like Boston where starter homes are at $500K and a person has to foot over $3000 dollars a month just to keep out of foreclosuren, nevermind taxes and maintainence costs.
Omaha here and yes, I have been guilty of calling Council Bluffs “Council-tucky”. I’m not sure where that moniker came from.
The reason that CB is getting a lot of huge homes if memory serves, is because Iowa ran some deal where there is some serious property tax abatement for some term of years to build a house there. The same goes for businesses. The incentives to relocate are massive.
Omaha has nasty property taxes to the tune of about $2.40 or so per $100 valuation. That is also compounded by other taxes, which are generally lower than Nebraska. The dynamic there, IMO, is that NE has about 1/2 the population of Iowa and a lesser percentage of MN. But, NE wants all of the government programs that the larger states have.
This translates into higher taxes overall and not insubstantially. It is a no-brainer to live in Iowa. This assumes that commuting is cheap, however, which will likely not be the case in the future.
Part of Omaha’s problem is that a major homebuilder went bust and was unsurprisingly fraudulent. It did such things as getting multiple loans on the same properties. Since banks like to do actual work as little as possible, practically none of them perfected their interests or even checked, so now the banks are lining up to see who is not going to be screwed.
The bottom line from the Deeb dude is that he is surely ignoring the effect on price that supply and demand have. You simply cannot say that a glut will not have an effect on price. It is a nonsequitur.
We and other markets like Omaha will suffer the same consequences as the coasts. There are still idiots who use interest-only, negative amortized, pick your payment loans. There are flat wages in general. I don’t see, on the other hand, a number of flippers. I do see though a lot of people who bought second homes to rent out as a long term investment. Add to the supply and all of these dudes will get theirs.
I will be fully prepared to profiteer from their misery. I have no regrets on this, since they should have actually read what they signed and should have made themselves aware of the market and the possibility that prices don’t always go up.
Lasorcier,
You made so many good points. I am not so sure of the tax abatement for the property owner, but I think you are right if you apply it to a large builder (one who derives their income from property development). But, even if there WERE an abatement, there are other things to consider. The taxes are actually not that much lower. I have viewed an average of $1,800 for every $100,000 of property value. But, actions ALWAYS have reactions. Because of this, you actually get less home for your money in CB. Come over and look some Sunday, it will make you sick. One must also consider the tax implications of living in one state and working in another - obviously you pay more in taxes (I do this, and I hate it, but there is little accounting work in CB, unless you want to work for $10ph). And then, as you mentioned, there is the cost of commuting, which sucks from east CB to west O. But wait, there’s more. If you buy in certain new developments, you will also have to pay REIDs (real estate investment district), which basically pays the builder back for putting in the infrastructure, which totally sucks.
Let the finger pointing begin!!
The reason why people like to blame the appraaiser is they are an easy target. Everyone down the line pressures you to hit a predetermined # and if you don’t the line from the car salesman/women goes something like this “If you don’t bring it in i will get someone else” Nobody I mean Nobody want’s to hear the truth. I did an appraisal in the Boston area which was a purchase and the POS sold for $579,000 and the final estimate of value was $515,000. I sent the appraisal in and got my ass handed to me to the point where I almost lost the account and I was being impartial.. Needless to say the property didn’t sell and has had a couple of price reductions. You would think I would get a call from the borrower thanking me but never in my 20 years in the business.
i tried to make this point in an earlier post and got my head bitten off. thank you for the validation.
I believe your moniker…I’ve known really good and really bad on all rungs of the property exchange ladder…unfortunately, the good get lumped together with the bad, and there has been a LOT of bad appraising over the last few years, especially the last two.
Anyway, I’ll thank you…(although I’m not a lender or a borrower, just have an appreciation for honesty).
On the other hand - Got an appraisal on some industrial property I was selling from an MAI. Knew this guy was completely off base as I had done my own comps ect, and I refused to pay him (finally did because he was a friend). Ended up selling the property for over 500% higher than his appraisal. Tell the joke - A $ will get you a cup of coffee and a MAI. hehehehehehehehe
a LOT of bad appraising over the last few years, especially the last two.
All aided and abetted by the lending industry.
These azzholes know the score.
There are a bazillion stories similar to HonestA’s. His story corroborates my point of Fan & Fred holdin’ big junk.
Interestingly, when Skillings and Lay pulled this type of shite, they got 20 years.
Raines & his cronies should be no different.
Sign with blood, sweath and tears.