‘The End Is Here For The Housing Boom’: Oregon
The Oregonian has this update on Portland. “The Portland-area housing market has decisively cooled, resulting in a July median home price decline that bucks the three-year trend of relentlessly rising values. Adding to the changing housing picture, the inventory of houses for sale rose in July to 3.5 months’ supply, up from 2.6 months in June. That was the Portland area’s highest inventory figure for a summer month in three years.”
“‘We’re at the tipping point,’ said Mark McMullen, senior economist with Moody’s Economy.com. ‘The end is here for the housing boom and the median price.’ Less affordability is gradually biting into demand, and demand is falling by almost any measure,’ said McMullen, who is a part-time Portland resident.”
“The new market realities have frustrated sellers, such as Reid Biggs and his wife, Linda, who are hoping to sell their Hawthorne-area bungalow and downsize. Biggs said he spent $150,000 on second-floor renovations six years ago and is annoyed that homes with cosmetic fixes sold for more than $500,000 in last year’s overheated housing market.”
“The couple listed the house for $499,000 in late May and have lowered it to $469,000 since. ‘I won’t go one dime lower than what I’m at now; I’ve put way too much money into it to lose it,’ said Biggs. ‘If you do it with quality, then you should be able to get your money back.’”
“‘We’re probably settling into single-digit appreciation now rather than the double-digit appreciation we’ve had,’ said Tom Potiowsky, the state economist. ‘But this does open the possibility that we could have some mild declines in prices for the rest of the year.’”
“Available listings as of Aug. 1 totaled 9,555, up 68.9 percent from a year ago. ‘That’s a big number,’ said Portland economist Jerry Johnson.”
“For months, offers have been coming in below the asking price..because buyers and some real estate agents feel they can try to buy low, said Brian Bellairs, an agent in Beaverton and Tigard. ‘They feel that because the market is soft, it gives them carte blanche to do whatever they want,’ Bellairs said. ‘Sellers are having to work hard to put offers together.’”
“Sellers who would have blown off an offer $20,000 below a $600,000 asking price, are now relieved just to have a serious buyer to negotiate with, he said. Sellers will have an even tougher time this fall, Bellairs said.”
“While buyers may find more houses to choose from than a few months ago, they’re also anxious about overpaying, said agent Peggy Hoag. About six weeks ago, buyers for six houses she was selling withdrew offers that had been accepted by the seller, Hoag said. ‘It’s bizarre,’ Hoag said. ‘They got skittish and went sideways. They hadn’t even done the inspections yet.’”
From Oregon Public Broadcasting. “Drive around neighborhoods in Bend and Redmond, and you see lots of ‘For Sale’ signs. Real estate agent Kim Warner says there are a lot more than usual.”
“‘I think in Bend alone for single-family homes, we’ve got about 1,350 active listings right now, which has to be more than 3 times what we would normally have had over the previous few years,’ Warner says, ‘A lot of that is because of the amount of new construction.’”
“Kim Warner parks his pickup in front of a new place in West Bend priced at $545,000. ‘And you can see that recently, they reduced the price $50,000,’ Warner says, ‘That’s becoming relatively common. People are having to get more competitive with their asking price.’”
“Financial advisor Bill Valentine says some borrowers will have to sell or face foreclosure. He says that’s because they took out unorthodox loans that ultimately they couldn’t afford.”
“‘As some of these chickens come home to roost, I think there’ll be an unnatural amount of supply put on the market and that’ll put pressure on everything,’ Valentine says, ‘And as a derivative market, as people have less equity to bring into our state, our home prices are going to fall.’”
“Valentine says his talk of falling prices drew harsh criticism a few months ago. But he says his critics are quieter now.”
Thanks to the readers who sent in these links.
“‘I won’t go one dime lower than what I’m at now; I’ve put way too much money into it to lose it,’ said Biggs”
She might want to look up the definition of sunk costs. I bet she put way too much money into pets.com stock to lose that either. And just like the house, you never have to realize a loss if you never sell.
I wish I knew what they paid, but they’ve had it too long for the amount to be listed online or something. At any rate, the house was build in 1922 and has 1592 sq. ft. and 1 floor (per the county), so it sounds like they paid 150K to turn the attic into living space. The house is assessed at 275K. My guess is there is plenty of profit at 469K. And I’m sure they’re entitled to every cent.
It’s kind of like the guy who has a gangrenous leg that needs to be cut off before it kills him. “No, damn it”, he says, “I came into this world with two legs, and I’m going out with two legs.” So it goes with stubborn fools like the one described above.
Right now the seller only has to give up a leg. That wouldn’t be so bad. Wait until the buyers are asking for his balls. We’ll see what his attitude is then. I’m guessing he’ll wish he’d given up a leg.
One legged man with no sack…..sounds about right.
Look up sales history on zillow.com.. domania.com or local city/county on-line property tax records (if available)
If you’ve found the house in county records and it only shows one floor, chances are the “quality work” he is speaking of was no permitted. Finding permitted work in these old houses is the proverbial needle in the haystack. And the city won’t grandfather anything. You have to go back and pay for permits for anything done before you bought the house before you can get any new permits. There are going to be some very surprised people who bought during the as-is frenzy.
so true, ck
‘If you do it with quality, then you should be able to get your money back.’”
sounds like a stupid bumpersticker
She should talk to people who put pools in….they also want their money back.
“She should talk to people who put pools in….they also want their money back.”
Nice double entendre.
Hey MR Biggs….you are about to become a literal loser.
:imslow:
too bad we don’t have better smilies here
Unless you get one of those “margin calls.”
Too bad mortgages aren’t so easy to force margin calls unlike stocks…
I wouldn’t be surprised if somewhere deep down in the fine print some contigency like that exists.
Seems to be a universal truth. A lot of people add $10,000 worth of turbos, etc. to their car then think they can turn around and sell it for $10,000 more than the stock version. They usually end of removing the parts and selling them off separately. Maybe we’ll see granite countertops and re-hydrated paint on Ebay soon.
Back in the ’70’s many i recall in California were putting swimming pools in their backyard. Then we had a drought and prices for water went throught the roof. NO JOKE… People really thought their homes were increasing in value. They had to cement the pools over due to high cost. So it went nowhere and lost money on the improvements.
This kind of “deserved return” thinking is just what created the bubble to begin with. It’s a feeling of entitlement, and it shows a can’t loose, gold rush mentality. It’s ignorant and very annoying. Too bad, so sad, I say. That person doesn’t have to lower her price. On the other hand, no one has to buy.
-X
BubbleTrack.blogspot.com
I just had lunch at my favorite Sushi Bar and sitting next to me where two guys that work in the airconditioning business. They install units on new housing and they were taking about the housing market. They said the Home builders were not breaking ground on anything that is not sold. No more spec building. They are also asking their sub contractors to renegotiate their contracts for less money. They also said copper prices are up 60% and houses under construction are being stripped of copper. One guy said that he knew a RE agent sitting on 7 houses with a monthly payment of 20K. One guy had two houses in Cave Creek and has reduced the prices 85K on each. No offers. He looked worried.
The andecdotal evidence is piling up! The statistical evidence is also piling up!
Keep the stories coming, this thing is moving like a fully loaded freight train going 200 mph headed right for DL’s house!
Remember a year ago when we were scratching for stories? Jeez!……the flood gates have opened up!
YES!!!
Things -are- really starting to snowball. It’s nice to see so may predictions coming true- though it’s also getting hard to keep up with so much news!
-X
BubbleTrack.blogspot.com
Yep, I barely noticed when Ben Jones had to go from 1 or 2 stories per posting to the current 4-5 MSM bubble stories per posting.
thre are so many stories, it is hard to keep up
On 640kabc (LA) yesterday the fill in for John & Ken was asking if it was a buyers or sellers market. This guy called in from the “Center of the Universe” (Inland Empire) and said that the home he bought in 2004 had doubled in price and that he was going to sell it and buy a bigger house. His house has been on the market for over 6 months, no offers, he will not lower the price because “I know how much equity I have and somebody is going to buy it at MY price” Just clueless.
“RE agent sitting on 7 houses with a monthly payment of 20K.”
You may think that of all the people RE agents should have smelled the sh!!t before than anyone else. Uhhmm
That’s $20k in monthly payments. How much rent do you think he could bring in per month on those 7 places? I’m guessing $9,000 tops. That’s probably being generous. I keep trying to tell my co-workers that “real estate is the gift that keeps on taking”. It’s a hungry animal. It will eat a lot of well marinated humans in the years to come. Those suicide loans tenderize the victim.
Marinated and tenderize….I love it!
some RE agents did see it coming, thats why i got out, sold my house, and now rent one for half the cost.
some saw it coming, i quit realestate in 2005. sold my house too, renting for half price. i also quit because i had a conscience, and because RE Agents are going to be equated with worse things than pondscum in the next few years.
I’m overseeing a new phone system at work, and the installer, who lives in a new development in East Mesa, said that the other day a truck pulled up to an unoccupied (new) house on his street. He thought nothing of it, but found out later that whoever was driving the truck drove off with the appliances from the house. This could start becoming a problem–how do you secure a neighborhood where half the houses are empty, nobody’s at home during the day in the others, and where a truck or contractor type vehicle in front of a house wouldn’t raise an eyebrow anyway. Watch out who you buy that used refrigerator from…
Talon,
I’ve wondered about security for many of these new, unoccupied houses. Unlike a traditional neighborhood, where people know their neighbors and the rhythms of the neighborhood, in a lot of the new developments people don’t know and, in the case of flipper-owned properties that are often poorly kept up, don’t care who’s going in and out of the places.
There’s a house on the block where I’m renting that has sat empty for six years. It’s an eyesore, and the neighbors’ repeated calls to the city to complain have gone nowhere. Somebody has already broken out a back window to the place. The owner(s) aren’t flippers, but the house is tied up in some kind of litigation and they clearly don’t care about what the neighbor’s think. If somebody pulled up in a moving van and started hauling appliances and copper pipes out of the place, I don’t think any of the neighbors would lift a finger to stop them, because they have such a strong dislike of the present owners and wouldn’t mind giving them a reason to either occupy the place, or better yet, sell to someone who will keep it up.
I live in La Pine Oregon (30 miles south of Bend) and commented in March that the Cali flippers were buying the vacant one acre lots all around me building homes on them to sell as soon as construction was complete. The problem is that they all used Adair home builders( a local Bend builder) and picked THE SAME HOUSE MODEL. There are over six of these homes in just a two street area around my property all for sale, and probably 30 more in the town total already built or in the process of being built. The Cali owner of one of these next door to my property just reduced his asking price $50,000! I’m sure the other owners of these homes will shit themselves when they find out as all these new homes were within $8,000 range of each other for a asking price. One guy flinched now for the rest.
What’s in Your Wallet?
http://www.xanga.com/home.aspx?user=russwinter&nextdate=8%2f16%2f2006+23%3a59%3a59.999
“If you do it with quality, then you should be able to get your money back.”– Mr. Biggs was heard shouting as he left a Las Vegas “Gentlemen’s Club”.
Maybe she has what is called, an “over improvement”. People will not give credit to things she has put into the property. It still amazes me that borrowers will say to me, I put in a brand new heating system it cost me $5,000 so my house is worth $5,000 more. Dont they understand a home needs a heating system doesn’t matter if it’s 10 years old. Try to see a home without one and see what happens
Actually if you watch that stupid show on A&E - Flippers Something. It goes like this:
New Roof - Cost $5,000 - Added Equity $15,000
New Carpet - Cost $2,000 - Added Equity $7,500
New Paint - Cost $2,000 - Added Equity $5,000
ETC….
WTF!??!??!?!?!?
The last couple of shows “flip this house” the people got burned bad. The best one I saw was called “wrong way remodel” Some california chick bought a overpriced POS for $750,000 and thought she would sell it for $950,000. She fired here buddy electrician and hired some illegals who screwed everthing up. In the end she ran out of $$ and the show ended with her saying I have learned a valuable lesson.
actually that lesson doesn’t begin until the bank comes looking for their money, honey!
I wonder if they’ll keep these reality shows going as the crash unfolds. The networks can always find some greater fools if they advertise enough. The ratings might even improve as the flippers get splattered. Just as these shows indirectly encouraged irresponsible behavior as the bubble inflated, perhaps they’ll have a dampening affect on people’s real estate ambitions as the bubble deflates.
-mr. b
Ha! That’s awesome. Anyone want to bet how much longer these shows stay on the air?
-X
BubbleTrack.blogspot.com
They’ll switch to shows about how to keep a 1987 Toyota running for another 20 years, how to repair a cord on a toaster oven instead of having to go to Wal-Mart for a replacement (now $120 where as 2003 it was $19.97), how to repair your shoes at home, how to spruce up your aging house without having to rip out the ‘dated’ granite counter tops. You know, things people used to commonly do for themselves back when, except now it’ll be hip to do it yourself, except most people will still suck at it and will require a pro to do something for them. But they’ll still feel quit smug that they actually opened up a dryer that hasn’t worked in 4 years and managed to replace the $35 porcelain ignition coil.
Then there will also be reality shows that pit one group against another in an all out war to dig the most gold and silver out of a defunct mine. The team that comes up with the first 3 ounces gets a trip to Hawaii and $50k.
With shows like that around, you gotta wonder if the smug self-important attitude will ever go away.
They’ll switch to shows about how to keep a 1987 Toyota running for another 20 years, how to repair a cord on a toaster oven instead of having to go to Wal-Mart for a replacement (now $120 where as 2003 it was $19.97), how to repair your shoes at home, how to spruce up your aging house without having to rip out the ‘dated’ granite counter tops. You know, things people used to commonly do for themselves back when, except now it’ll be hip to do it yourself, except most people will still suck at it and will require a pro to do something for them. But they’ll still feel quit smug that they actually opened up a dryer that hasn’t worked in 4 years and managed to replace the $35 porcelain ignition coil.
Then there will also be reality shows that pit one group against another in an all out war to dig the most gold and silver out of a defunct mine. The team that comes up with the first 3 ounces gets a trip to Hawaii and $50k.
With shows like that around, you gotta wonder if the smug self-important attitude will ever go away.
what time and channel is that show, I used to watch it last winter and now can’t find it, I’ve been waiting to see the flippers loose money instead of making insane amounts of it.
I saw the show last weekend with the two idiot couples in Santa Barbara that thought they could pretty well gut a house and upgrade it for 75k in 6 weeks, including landscaping! They got SOOOOO lucky some idiot fell off a turnip truck and paid their asking price of 1.4m (they paid something like 1.075m) but after all their cost overruns and the two extra mortgage payments they had to make, and the realtor fees, they cleared less than 40k between them. Of course one of the guys put in hours upon hours of work to get the work done but I think he got paid about $1 an hour for his labor.
That must of been another one the chick brings her mother in to help her because she did a rehab like 20 years ago, then get this she goes away on vacation thinking the illegals would have it done but when she gets back not one thing was done. Lol
On House Hunters they just keep showing a bunch of re-runs from better times . Currently it’s hard to find a buyer for the show I bet .
that seems right, if not, nobody would flip a house because they would never make money.
I am of the opinion that there is no magic formula which determines how much financial return any specific improvement can or will garner. After all, a home is only worth what someone is willing to pay period. Remodels, rehabs, etc. are very subjective and therefore, risky. I believe two very different people with different tastes and properties can spend the exact same amount of money on a home and realize very different profits. I have seen high end homes using top of the line materials which look cheap and stupid. I have seen middle class homes shine with mid range materials. There is a certain wow factor that you cannot put a price tag on. It comes down to presentation, style, location, etc. There are many, many variables involved. When considering any home improvements, you better do your homework and decide who your “target audience” is and have great instincts or you can easily get burned.
I’d say a good rule of thumb would be, given a house in a particular neighborhood where all the houses are worth say $200k, if one house puts a pool in, then you’d may get back 50% of the value of the pool, however, the next upgrade may only return 45%, the next 40% etc… Especially if you’re hiring someone to do the work. Different story if you buy a foreclosed house for $100k in a $200k neighborhood and then do all the work yourself.
the best advice a real estate agent ever gave me was “other than paint, don’t spend a dime on improvements. sell it as a wreck for custom rehab.” great advice! saved me thousands. (i hope i never have to sell.)
this is going to be a slow motion trainwreck that goes on… and on — screechingly –for about 5-8 years. is there really any reason to assume that the same dolts who bought at or near the top ‘because r.e. only goes up’ are suddenly going to gain 20 iq points and realize the bottom is not just around the corner as the cheerleaders will tell them, but way down the line after burning their margin and equity to a cinder — and at 30%-50% of what they could get if they bailed now??? NOT!
slo - mo if things stay status quo.
just throw one variable into the hopper and see what happens. it could quickly jump on the fast-track.
“is there really any reason to assume that the same dolts who bought at or near the top ‘because r.e. only goes up’ are suddenly going to gain 20 iq points and realize the bottom is not just around the corner as the cheerleaders will tell them”
If I took out a 100% neg am loan, am paying 57% of my gross to make the mortgage payments, the median is down 5% YOY, and my interest rate is about to reset, am I going to hold on for a few more years, even if my IQ is 90?
you’ll probably hold on until someone — like the bank — takes it away from you. that’s not exactly ‘choosing to sell’. is it?
this is the one class of fb’s. but there will be a whole other class who actually could have got out without a loss by selling now with just a bruise instead of a severed aorta, and yet hold on for dear life. and they’ll lose BIG.
Time will tell, but IMO people will not continue to make huge payments when 1) prices are falling and 2) they can rent a comparable place for 1/2 the cost.
i could be off on this, but i believe something like 45% of all u.s. homeowners have no mortgage on their primary residence. please correct.
35%, and that number is at a long-term low point.
I heard 20%, and I bet it lower than that when you consider that a percentage of those people probably took out HELOCs which probably don’t count as a mortgage, just a lien as well as reverse mortgages.
Or who finance partially with credit cards.
As a native So. Californian priced out by idiot FB’s monopoly money, I wish it were otherwise, but the sad reality is –and has always been– real estate is incredibly sticky on the way down. Transactions are too slow, expensive, bureaucratic and cumbersome to make it otherwise. Even a standard no-unusual-problems escrow takes at least 30-60 days under ideal circumstances.
Now throw in the fact that FB’s neg-am teaser rates reset at different times (~$300 billion this year, a Trillion in 2007, another Trillion in 2008, etc.). Now throw in how long it can take to foreclose on the average FB, who –especially if it’s his primary residence– will probably do practically anything to avoid it, including running up credit cards, tapping other family members, attempting a short sale, etc., accusing lender/appraiser of “fraud”, etc. It’s astonishing how emotional and irrational people get over the loss of their house, even when losing it quickly (cutting your losses) may be the best possible outcome. Psychologists call this “escalation of committment”.
Much as I personally hate to admit it, we probably won’t see a bottom here in CA until at least 2010 –possibly 2012. And by then, inflation will have done a good part of the job. Of course if we get an unusually severe recession, or the “Big One” hits, then all bets are off.
I won’t even try to predict the future, but I do from experience that “stickiness” (sp?) was not a factor in the bust of the early 1990s. I was in the legal side of the RE bus. at that time; things started to slow in mid-1989 (talking NY suburbs) and the market was in a complete coma by 1991. BTW, those were the days when a radical loan was a 90 LTV arm.
“….. Much as I personally hate to admit it, we probably won’t see a bottom here in CA until at least 2010 – possibly 2012. And by then, inflation will have done a good part of the job……”.
I agree with HARM’s time frame, along with the “escalation of commitment” process.
To steal a line from Jeff Goldblum in ‘Jurassic Park’, “Life finds a way …..”. Don’t underestimate ones ability to deal with financial adversity. This is going to be an angry bunch of property owners who are currently poring out their feelings about those homes they unwisely purchased for investment. As bad as it might get, the “I’ll be damned if I’m going to give it to you” attitude could be a rather strong force in shaping future values.
Rent rooms in your own home; Rent the property at a manageable loss; Move your kids back into the house; eat Top Ramen; Give back the SUV and boat (this is already being advised by the RE community); Get a second job; Dump cable TV …….
“BUT WHAT EVER YOU DO, DON’T GIVE UP THE HOUSE”!!!
People have survived homeownership in the past (divorce, job loss, etc.), so not an impossibility for many (not all) morons investing out of their league to overcome this debacle. Hence, the sticky ……
about 5-8 years?
I would call the bottom “a fast one” within 3 years. A prolonged correction would be too painful. Do it sooner as possible and be done with it. Fact is we have 100% inventory YOY that was on forseen by many. Prices will be dropping 5% qtr over qtr going forward.
wait until certain inventory starts to DROP! then you’ll know we’re really in the standoff period. and that could last several years, where the quality properties are simply taken off the market. but there’ll be plenty of cheap crapshacks 2 hours out in the desert to choose from.
One argument for a fast decline, I believe, is because “comps” are the basis of new loan limits. If you buy a stock and it goes down, it really doesn’t matter what you sold it for because next month’s or next year’s buyer doesn’t know and doesn’t care. But as comps spiral down, word will get out that you can be screwed or more screwed, choose one.
As others have stated, it’ll be a relatively fast crash (50%+ inside 18 months) followed by a slow, downward grind (additional 25%+ over another 3-5 years).
Yes, I agree that it will be a VERY long way to the bottom.
In Europe it will probably take 10-20 years because the bubble is 10-15 years old in most EU countries and still expanding. Most of the bubbleheads (including those in charge at the lenders) have never heard of declining home prices, they will hang on to their equity dreams for many years before facing reality. This is by far the biggest bubble in history and the required correction should be the biggest in history as well.
In the 1970’s my country, Netherlands, had a 100% price runup within about 5 years, which was fully corrected around 1980 with a 1.5 year, -40% homeprice crash plus some high inflation years. Our current bubble had pricegains of 600-1100% (depending on area of the country) and it is now over 15 years old. In my area there are many expensive, empty homes that have been sitting on the market for several years (sometimes more than 5 years). Both inventory for sale and prices have been rising for years, but still NO sign at all of a housing/credit bubble top here
“The couple listed the house for $499,000 in late May and have lowered it to $469,000 since. ‘I won’t go one dime lower than what I’m at now; I’ve put way too much money into it to lose it,’ said Biggs. ‘If you do it with quality, then you should be able to get your money back.’”
Keep dreaming ! Buddy Boy Keep Dreaming… People Have in the Past Will now today and to be in the future …. Lose money in Real Estate … Your timing is bad you should have sold last year….
Thing is, I bet he’s far from ‘losing’ money on the place if he bought a while ago - he just feels entitled to similar money people were getting a year ago. So rather than appreciating he can still maybe make some decent coin if he drops his price enough to get out now, he gets stubborn and will continue to lose money.
There is so much new construction here in Oregon City that I find a slowing in the real estate market hard to believe. I see for-sale signs go up on existing homes and in a couple of months they are sold. It may take a little longer to sell, but they do still sell. The new developments are definitely being built before being sold, not waiting for a buyer first.
A lot of the new contruction around Boise is being done on speculation- homes aren’t being snapped up in pre-construction like last year. Latest MLS stats for Julyshow new construction sales down over 20% vs July 2005.
More reason to short home builders stock.
It’s a bad week to be short the homebuilders. I should know. I’m short on the homebuilders. The rally this week has been painful. They are like alchemists. They have spun all the shit news into gold. “We have hit bottom”, many analysts say. What a joke.
Wait until next week. I can tell you what all of the fear next week will be about. Iran is up against an August 22 deadline. They are going to tell the U.N. and anybody else that will listen to “go f#ck yourselves”. How will this play out? At present, Iran is on a collision course with a nuclear war with Israel. That is not being alarmist. That is fact. I could not believe it when I heard Ben Stein predict that Israel, in 2007, will detonate a nuclear bomb over Tehran. He said this just this past Saturday on the Fox News Cost of Freedom block. Nobody even questioned him.
Iran will undo this week’s rally. Real fear will set in next week. Somebody has to start bombing Iran, if they refuse to stop their nuke program. President Ahmenijad can’t be allowed to get “the bomb”. That crazy bastard, and all of the Mullahs, will actually use it. Tonight the homebuilders have sweet dreams. Next week the world gets back to reality. Anybody that thinks it won’t impact this housing crash is kidding themselves. Of course self-denial has become a sport in the U.S. Have a good night everybody.
It’s always some unknown world event that the number crunchers can’t alogarithm which takes the whole mess down, just like that Capital Hedge Fund debacle.
All the PhD economic, computer, and fianance wizards thought the Russkies would defend the ruble, and voila…they devalued sending CHF’s whole derivative game into the crapper.
And it was Greenie to the rescue.
Today Greenie is gone, and $100 trillion in derivative bets ain’t gonna withstand a nuclear blow-up in the Mid-East.
Hold on to your fookin’ hats…
Check out
Black Swan
at Wikipedia. That is the term for your description above.
When scrolling the blog, I always stop at HD74……One of the best that post here IMO….
Man, I hate to get all poly on this blog, but you are so right, I have the shivers.
Easy there NYCBoy.
As much as the situation looks bad, nobody, not the Sons of David and especially not the Iranians are going to go around tossing nukes. The mullahs have too much to lose and so does Isreal. Ahmenijad is a tough-talking puppet with meaningless power.
Iran isn’t going to be bombed anytime soon. We know it. They know it. We have the not the will nor the means to subject Iran to our policies. This is why they are making noise. They are trying to project a position of power (oil embargo, nukes) to get what they want: Acceptance by the West and Trade. The West will ultimately get what it wants: cessation of Iran’s nuke program.
While the tensions are not yet at a peak, they will be no means erupt into World Chaos. At the end of the day, everyone loses. While I agree there is potential for great catastrophe, so was every other crisis of the day.
Nothing every really changes. Just the faces. I recall all the same things spun the same ways just substitue Telecom Index for Home Builder Index and I think you get the idea.
Well, that attitude has been right for the last 50 years, certainly. But the last time we faced the downsie of the cycle, we had two world wars. And if you read history, you’ll find that people said the same thing you are saying right before the balloon went up.
I don’t know how it’ll all turn out, but I can’t be as sanguine as you.
“President Ahmenijad can’t be allowed to get “the bomb”. That crazy bastard,…”
No crazier than our own presnit cuckoo bananas. In fact, I’d wager a whole lot smarter. Care to guess what percentage of the world’s oil passes the Strait of Hormutz? Care to guess who could shut the Strait at their convenience? (Answer: it ain’t just us.) There will be no bombing of Iran now or anytime soon.
I stopped at a gas station in Oregon City to get some directions last summer. Nobody there spoke english.
More foolishly obstinate sellers chasing the market down.
This is all unfolding exactly as most everyone (except for the trolls) predicted it would.
It will no doubt continue to crash over the next few years, with a bottom at 40 - 50% of peak prices, as predicted here many times.
i think that fundamentals will reassert themselves as the bubble deflates, so that you will have quite a lattitude between mere 20% drops for the truly quality properties/neighborhoods, and 80% for the bubbleboxes built on brownfields and freeways for nothing but appreciation –they will be ready for the wreckers.
I still don’t understand this position: prices can go up 100% in five years, but they won’t come down the same amount, even though the wage picture hasn’t changed. Why not? If fundamentals are really to reassert themselves, why is it unreasonable to think that the market will take back everything?
Not unreasonable at all. A 50% drop would wipe out 100% of the gain. I think that the argument is that houses in desireable locations (urban or centrally located?) will decrease less on a percentage basis. I think this is a faulty line of reasoning, as more desireable locations appreciated more than outlining areas, and therefore have further to fall percentage-wise to reach their “fundamental” value. But I could be wrong.
You’re not. It’s wishful thinking. Re-read Manhattanite’s post — the first line completely contradicts the rest.
the most outrageous price drops due to foreclosure and/or the wrecker’s ball will be obvious. but the most select properties that will best retain their value will be invisible, because they will not be put on the market. so no one will ever know what they might have fetched at the bottom.
wow ,another big reduction in my hood 22151 - close to pentagon (hiring) and nice schools (rare here)
wow we’re 12+ % off in a year
in 1990to1994 we lost 20%tops ,less in my hood
“The couple listed the house for $499,000 in late May and have lowered it to $469,000 since. ‘I won’t go one dime lower than what I’m at now; I’ve put way too much money into it to lose it,’ said Biggs.
By Proclamation of the Almighty, the Laws of Gravity are hereby suspended for Mr. Reid “Greed” Biggs.
LOL, good one Sammy!
hey, folks — we’ve just hit the first rapids. that’s niagara falls up ahead — pull your knees up into the barrel!
Manhattanite,
We’re not the ones in the barrel. It’s more like we’re parked in our lawn chairs at the base of the cliff, watching the lemmings line up for their date with destiny.
i fit into that increasingly obscure profile of homeowners who simply like where they live too much to move… and maybe don’t plan to move until i’m planted. and i collect some rent in the bargain. so gimme a barrel — and a lawnchair! and a long, cool drink. i’m in for the duration.
- They (Buyers) feel that because the market is soft, it gives them carte blanche to do whatever they want,’ Bellairs said.
- ‘It’s bizarre,’ Hoag said. ‘They got skittish and went sideways. They hadn’t even done the inspections yet.’
It’s bizare, Skittish, Soft and went sideways. Sounds like a T*urd.
I was just in Klammath Falls Oregon last weekend. My uncle’s street which is one of the nicer ones in town had 7 of the ~20 units for sale. All of the unbuilt lots that people had held for years are now on the market…hmmmmm??
The amount of For Sale signs and new construction in the Portland area is staggering. I thought I was in San Diego all over again!
A ZipRealty listing for Merced, Ca. The ultimate in incremental price drops:
Price Reduced: 06/30/06 — $545,000 to $519,000
Price Reduced: 07/17/06 — $519,000 to $518,000
Price Reduced: 08/04/06 — $518,000 to $515,000
Price Reduced: 08/07/06 — $515,000 to $514,000
Price Reduced: 08/09/06 — $514,000 to $499,000
And that is still wildly over priced for Merced. Everyone was hoping that the new UC would be their ticket to wealth but it failed to materialize. I considered relocating to Merced since I already work for the UC system but prices soared to levels seen at every other campus. The only lure to Merced was affordable housing and now even that is a bust.
Yeah, and now due to the probable Corps of Engineer red-lining of the UC Merced expansion EIR, all bets are seriously off.
Hmm, looks like some UC employees here.
I’ve been to all the UC campuses except Merced since it opened recently. Is it more like UC Riverside or one of the nicer UC campuses?
You mean UC Riverside Where a Freeway Runs Thru It?
UC Merced has some beautiful buildings, but the place feels to me like it is in the middle of nowhere. It’s going to take 20 years to develop, just like any other major institution. One can’t just expect instantaneous growth.
Hey now, be nice to UC Riverside! It’s a nice campus–quite large, actually, because of the West side, where the Agricultural Experiment Station is. The only real carillon is there, too, which sounds lovely when they give a concert. There are some issues for sure, such as all the construction due to the recent student enrollment expansion, but we’ve got our charm. Go Highlanders!
Of course, I’m biased, as I was an undergrad and currently employed there.
Yes, definitely looks like there are some UC employees.
I’m glad to hear some evidence for the bursting bubble in the Portland area. The bubble got started a bit late here, and I was afraid it would lag considerably behind the other metro areas.
“The RMLS data cover sales of new and existing houses and some condominiums in Clackamas, Columbia, Multnomah, Washington and Yamhill counties. Many condo sales are handled in-house by agents who don’t list them in the system.”
Supply via the RMLS is definitely underestimated. Below is just a sample of new construction currently being pre-sold outside of the RMLS system. Each of these towers is ~200-300 units.
Ladd Tower
The Encore
The Wyatt
The John Ross
Waterfront Pearl
The Westover
Riverscape
111 listings in Portland’s Pearl District today, up from 51 on May 5.
http://pearl-district-lofts.com/portland-oregon-pearl-district-homes.html?ob=b
Very little movement, other than 18 price reductions in the last week.
Yeah, I’m loving the price reductions. That Streetcar loft NE penthouse has been on the market since Thanksgiving. Original price was $749k; now it’s down to $639k.
I am too. My fiancee and I have fallen in love with Portland. We didn’t want to buy an over-priced POS in San Diego and we certainly don’t want to buy one in Portland.
Have you spent anytime in Portland over the winter? Don’t judge it by the beautiful summers. I grew up in Portland, and the dreary winters and springs are such that I would never go back, even though it is undeniably a wonderful city.
BTW, there’s no way the local economy in Portland can support $500k suburban houses. I look for that stuff to crash hard, and maybe not all that slowly.
Those $500K suburban houses have been supported for some time - first by Bay Area people needing to re-invest proceeds from their sale (before the tax law changed), then later by Bay Area people buying outright for cash. Portland has always been far less expensive than any other West Coast city, and still is. On the other hand, I think those Pearl District condos are way overpriced; wages are lower here, and I’m not sure how many Bay Area equity-rich people are left top move here.
Those $500K suburban houses have been supported for some time - first by Bay Area people needing to re-invest proceeds from their sale (before the tax law changed), then later by Bay Area people buying outright for cash. Portland has always been far less expensive than any other West Coast city, and still is. On the other hand, I think those Pearl District condos are way overpriced; wages are lower here, and I’m not sure how many Bay Area equity-rich people are left top move here.
“While buyers may find more houses to choose from than a few months ago, they’re also anxious about overpaying, said agent Peggy Hoag. About six weeks ago, buyers for six houses she was selling withdrew offers that had been accepted by the seller, Hoag said. ‘It’s bizarre,’ Hoag said. ‘They got skittish and went sideways. They hadn’t even done the inspections yet.’”
So a newbie real estate question here. If you make an offer and the seller accepts, has there been any exchange of money yet?
Where is your window of withdrawal before it costs you anyting?
Yes. You have to put ernest money down with any offer. Usually $500 or $1000, sometimes more. You then have a certain number of days to have a thorough inspection of the property completed which allows you time to withdraw or ammend the offer should you find some problems with the property. Typically, you forfeit your ernest money should you withdraw your offer for anything other than problems with the property found during the inspection. I am not sure if laws differ from state to state. This is a very basic explanation of the process.
The name “ernest money” is a joke in CA. You can pull out for any reason in the grace period (due dilligence period, typically 30 days). We had a buyer pull out after the grace period (we eventually sold at the same price to another buyer), and there was nothing we could do. The “ex-buyer” can make life miserable for the seller by not letting them cancel the escrow (if you claim the ernest money). You can’t go into a new escrow, i.e. sell, until the old escrow is cancelled.
Oh, and ernest money is typically 1% if you want to be considered serious, so it’s more than pocket change: $5K….$10k. Not that you’ll ever lose it, you can just say your furniture wouldn’t fit or whatever. Doesn’t have to be something the building inspector found.
Maybe in CA, not here in WA.
Any real estate attorneys reading?? Please advise on the ernest money issue.
It’s “earnest” money as in you are serious about the offer, not “ernest” as in “Ernest goes to camp.”
This is true….in CA at least. I found out the hard way
LOL MD_renter, so true, thanks for the correction.
I just noticed I misspelled amend too…I will be more careful with my posts in the futute.
Futute? I meant future! Maybe I need to take up drinking again…
“Boy, I sure picked the wrong day to quit sniffing glue!”
If the contingency is written to say that the building inspection results must be to the buyer’s satisfaction, then the buyer can be dissatisfied about whatever it is they choose to be disatisfied about. It’s not up to the inspector, it’s up to the buyer.
Regardless of which state your are in, the fate of any earnest money would be spelled out in the purchase contract. Most “standard” purchase contracts will have several outs (contingencies like inspections, financing) that have to be met before the earnest money would be released to the seller. Of course, these contigencies could be altered in a written addendum, e.g. “all buyer contingencies are waived after the ten day inspection period.”
Contingencies were often waived from day one during the frenzied parts of the bubble, but obviously that was not the wisest course.
here’s a good portland story- a couple of young flippers bought an old wreck of a place across the street from my folks in the NW/23rd area of portland. well, this couple, more re-habbers than flippers, really,went to town on this place- really fixed it up to the nines, which is what it deserved, being an old dutch colonial in a nice neighborhood. they paid $650k for it. put it back on the market for, gulp, $1.45mil. where it’s been sitting for almost 3 months.
a few weeks ago, a house around the corner, similar in size and amenities, went on the market for $710k. reduced 2 weeks later to $690k. it is also not sold.
I can only imagine the sleepless nights that the flipper couple are having. they have been effectively shut down by this other listing and when and if that other, much cheaper, place, does sell, it will screw their comps beyond repair.
ouch.
That’s a beautiful area of town, but I remember not that long ago when it was full of flophouses, dive bars and drunks skittering down the street. Remember the Flatiron Tavern? Maybe if enough FBs go down, it’ll go back to that.
The same situation exists across the Columbia river from Portland in Vancouver WA, except the inventory has built up to 6 months worth in SW Washington as opposed to 3.5 in Portland. This article appeared in today’s Columbian:
http://www.columbian.com/business/businessNews/08162006news51358.cfm
It just blows me away how much Clark Co. has grown. When I was growing up in Portland (Beaverton, actually), Vancouver was mostly blue collar and a handful of commuters who hated paying OR property taxes enough to brave the Interstate Bridge everyday.
“For months, offers have been coming in below the asking price..because buyers and some real estate agents feel they can try to buy low, said Brian Bellairs, an agent in Beaverton and Tigard. ‘They feel that because the market is soft, it gives them carte blanche to do whatever they want,’ Bellairs said. ‘Sellers are having to work hard to put offers together.’”
Hehehe, apparently this realtor is under the impression there is some sort of rule about what a buyer can offer. I wonder how long it will take for him to figure out that buyers CAN DO WHATEVER THEY WANT! If they want to offer a bag of pennies for the house then that is entirely within their right. Like this Motherfu*ker never lied about multiple offers or played any of the other games with buyers when the shoe was on the other foot. I hope this assh*le is quoted from a soup line next time we see his name in print. It is time for the sellers to realize that they are not in control and neither are the realtors. The sellers and realtors can go BK for all I care, not my problem. I hate this entitlement attitude so screw THEM! NO OFFERS UNTIL 97′ PRICES, PERIOD! rant off.
How come during the boom he wasn’t saying:
“They feel that because the market is HOT, it gives them carte blanche to do whatever they want, such as insist that potential buyes submit their biographies and agree to feed the squirrels.”
i’m a bubble believer as much as most others here, but please folks don’t break out the champagne already. all i care about are lower prices. after the ridiculous run-up in prices the last couple of years and flattening to single digit declines means diddly squat. show me 20-30% declines and i’ll start chilling the bucket but until then this is nothing to party about.
Back to reality.
Richard:
You have a point check back in 2 or 3 years.
I get your point but respectfully disagree. Things are unfolding exactly as predicted here on this blog more than a year ago, and it is only a matter of time before double-digit declines inevitably follow, as per predictions.
Indeed…those of us that want to buy a house aren’t much closer to being able to than we were last year. I still think there is a very good chance the government will devalue the dollar to bail everybody out….and I’m not counting on a raise if that’s what happens.
Bird in the hand, people.
Too early for champagne, but plenty of time for beer and popcorn. Sit back and relax, the show’s barely started.
“‘I won’t go one dime lower than what I’m at now; I’ve put way too much money into it to lose it,’ said Biggs”
My God..hasn’t this guy figured out that as the seller, he is NOT the one who determines what his house will finally sell for? LOL…yikes
Mr. Biggs, that will be determined by the person who buys the house…you know, the one with the money?
he is definitely still in the ‘denial phase’ of settling with reality
Mr and Mrs Biggs, you don’t have to reduce your house price by a dime. You will find lots and lots of desperate buyers. Just wait. Have a good day.
OT- I thoght this was too funny to share. E-loan just sent me thi tidbit…lol:
Ride out the housing downturn
By Marshall Loeb, MarketWatch
NEW YORK (MarketWatch) — With mortgage rates continuing to rise and the housing market continuing to soften, a homeowner’s ultimate nightmare may be around the corner: when the value of your home drops below the amount you owe on it. If you need to sell, you’ll be forced to make up the difference however you can.
“A lot of people turn to their retirement funds,” says Marc Minker, a certified public accountant with Mahoney Cohen in New York City. “It’s not the best answer, but it may be your only way out.”
“If you’re facing the crunch and don’t absolutely have to sell, a better option,” he counsels, “is to wait out the market downturn.” Whatever your situation, Minker recommends a few basic steps to make sure you’re prepared for the worst, should the housing market take a serious turn for the worse:
Refinance your adjustable-rate loan into a fixed-rate one. Interest rates have risen sharply — 30-year fixed-rate loans are averaging 6.80%, compared with 5.77% a year ago, according to Freddie Mac — but they’re still historically low and the pennies you spend now will pay dollars later on.
Set aside an emergency fund to make sure your mortgage payments are covered in case of catastrophe or if rates on your ARM rise sharply. You don’t want to be forced to sell in a down market.
Consider taking out a home equity line of credit, which you can tap when you want. The interest may be tax deductible, but rates are often variable so don’t get carried away and spend your “emergency” credit line on a new sports car.
If your situation warrants it, consider downsizing or otherwise changing your housing situation — like moving from a seller’s market to a buyer’s market — to take advantage of the downturn
Learn about financing with E-LOAN.
Seller’s market? Where the hell is there still a seller’s market?
SLC is probably the last market in the country to be a seller’s market.
The refi thing (into a fixed rate) sounds good, except most FB’s bought the most home they could afford at the ARM +1% teaser qualifying rate, so I seriously doubt that they have had enough of an income increase to qualify at the fixed rate.
Also, I keep hearing that the interest on HELOC’s and 2nd’s are deductible, this is generally not true unless it was for improvements to the home. If not, then ususally the loan amount that is above the current FMV is not deductible. So if the home drops in value below the HELOC amount, then that portion of the interest paid is generally not deductible. I dont think that most R.E. agents and loan officers even know this, or if so then they don’t mention it.
interests on HELOCs are not deductible are they? unless if it was for home imporvement.
making a mortgage payment is not “home improvement” as is buying that sports car:)
The first $100,000 of a second (or refinanced first not used for origination) can be written off even if you used it for cars, vacations and the all-important implants (which are not a medical deduction unless reconstructive.) However, many people have spent far more than $100k on other than original loan and home improvements. And the IRS is starting to audit returns forcing a traceback to where all the money went. If you have new 1099’s for mortgage or one that goes up considerable when the house address is the same, expect them to come aknockin’.
Real Estate Engineer Casey Jones Biggs has one hand on the throttle at 8 notches, a beer in the other as he speeds headlong into that Northbound Freight. Toot toot…OUT of MY WAY !
Why do you think the SLC market is holding?