Market Slowdown Is ‘Simple Economics’
Some reports from the northwestern US. “If you’re seeing more ‘FOR SALE’ signs around town, don’t panic, say local realtors: The housing market is working just fine. ‘Right now our housing prices are relatively flat,’ explained Jim Wilcox in The Dalles. ‘There’s been quite a few price reductions on the market, because things were put at too high a price in the first place. I think the market just went beyond what most people were willing to pay.’”
“For instance, said Wilcox, according to the Regional MLS in Portland, the average list price, at present, for a home in The Dalles is $253,000. The average sale price, however, is about $181,000. ‘When you have that, you’re going to get a slow-down in the market,’ Wilcox said. ‘Simple economics.’”
“‘I’ve been here since 1992 and I’ve seen houses sit for a year, easy,’ realtor Rena Hunley said. ‘Now, if it doesn’t sell within a few days we ask, ‘What’s wrong?’ Nothing’s wrong! It’s just real estate, and that’s how it goes, up and down.’”
The Bend Weekly. “Bend may be booming, but like many parts of the country the housing market seems to have hit a soft spot. It is something Aaron Callahan discovered in recent weeks. They put their new 3,400 square-foot home on the market using Craigslist.org over two weeks ago and they have yet to have any interest.”
“Callahan says his work situation has changed and he simply has to sell the house sooner rather than later. ‘I am going to try to sell it on my own for the next month and if I can’t then I am going to bring a realtor in,’ he said.”
“Working in the mortgage business, he is no stranger to how the housing market works, but after unsuccessfully trying to also sell a condo in southern California for five months, he doesn’t have a lot of time or patience.”
The Oregonian. “The Portland-area median home price (was) 2 percent lower than June’s median. That month-to-month downtick, along with rising inventories locally and nationally, has economists saying the Portland area’s housing market has seen its hottest days.”
“‘As brokers, we’re having to work really hard to educate our sellers on pricing to get them right,’ said veteran agent Kathy Hall.”
“Debora Runnion-Jessup, an agent in Clackamas, said one buyer client wanted to offer $20,000 less than the asking price for a house on the market for $480,000. ‘On a resale, that’s a big gap,’ she said. But the buyer wanted to negotiate.”
“The seller countered at $467,000, more than halfway to the offer price of $460,000. Her buyer still insisted on countering that with $465,000. The back-and-forth forced her to try to come up with reasons to try to justify the price, she said. But sometimes buyers are making offers below recent comparable sales, which can be hard to justify to the seller.”
“‘I don’t want to keep writing offers and insulting people,’ she said.”
The Columbian. “Fewer qualified buyers, new construction and overeager sellers combined in July to push the inventory of houses for sale in Clark County to a six-year high. There were nearly 4,000 houses for sale last month in Southwest Washington, which includes Clark County and a portion of Woodland.”
“‘We had a lot of investors buying homes and fixing them up to sell, so we’ve got all those on the market,’ said Phil Frederickson, a Realtor in Vancouver. ‘In addition, there’s a lot of brand new houses sitting empty out there. Some of these new homes were bought by investors to rent, and then they decided to put them on the market.’”
“‘This year, we’ve got builders coming on with new product that missed the market and we’ve got sellers reacting to last year’s market,’ said broker Scott Mikel in Vancouver. ‘We also have fewer qualified buyers than we had last year. I don’t believe (higher) interest rates have slowed the (local) market. I believe the saturation rate has slowed the market.’”
“Californians keep migrating north to Central Oregon, according to moving company figures. Nancy Lynch, an agent with United Van Lines, warned that migration patterns are cyclical. She said has seen many people returning south after a few years in Central Oregon.”
“‘We’ve had people calling us, saying: ‘Remember us? We’re so-and-so, and you helped us move up here four years ago. Well, you’re helping us move back,’ she said.”
From the Bend article:
‘For buyers, he advises that they look at all of their choices and take advantage of the deals that can be had. ‘Don’t be afraid to ask for deals or amenities,’ he said. With sellers more hungry, Vander Kamp says buyers never know what they might be able to negotiate.’
Sellers in Bend are still waiting for the “bucket of money and box of stupid” from Cali
I hope those silly people take that offer for 465k and aren’t “insulted” all the way to the poorhouse.
Sickening how these same scumbags were telling everyone how real estate never goes down a year ago. Just sick.
‘What’s wrong?’ Nothing’s wrong! It’s just real estate, and that’s how it goes, up and down.’
It’s amazing how philosophical some agents have become in the face of this downward spiral. This quote makes me feel like a passenger on a plane. The pilot comes over the PA and says “Ladies and gentlemen, don’t worry about those flames. It’s just a little fire in the right engine. Happens all the time. Meanwhile if you’ll look out to your left we have a beautiful view of the Grand Canyon.”
what’s wrong is that you realtors told every buyer over the last 5 years that real estate only goes up…and they believed you.
“…Now it’s on the right…now left…pay no attention to that spinning sensation you’re feeling…”
it’s called monday morning quarterback syndrome…it’s obvious in retrospect. all these realtors were saying oh yea it can only go up and up, this is normal. now- sitting on the market for months is normal and what we had was not normal, duhhh.
and oh yea- that not so normal market for 5 years, there’s no consequences from that!
I agree with your assessment, but gosh, for the smart money and even the just above average intelligence money (like me), this bubble was like Mt. Everest looming on the horizon. Like all the disconnected posturing and silliness that pours out of Washington DC from our politicos, it was getting depressing over the last two or three years watching vast numbers of Americans ignore the blindly obvious.
Put your head between your legs and kiss your ass goodbye, but were not going to crash.
mad-tiger - LOL!!
“‘I don’t want to keep writing offers and insulting people,’ she said.”
The true insult is the listing price to begin with.
OCBear
I agree. It’s like asking: “enslave yourself for my prosperity!” Do unto others as you would have them do unto you! Although, people *do* like screwing each other.
Yeah, I’m tired of seeing this. What about “I’m tired of bidding wars, I don’t want to keep insulting buyers who made perfectly reasonable offers to begin with.” Never heard that one.
It’s a financial transaction. If you don’t like the offer don’t accept it, but there’s no “insulting” going on.
Was it considered insulting to the buyer when a seller asked for $20K above the most recent comp during the run-up? I think we all know the answer to that…
She’s a Realtor(R). She makes less commission if the seller accepts a lower offer. As messed up as it is, even real estate BUYER’S agents are really working for the seller due to commissions being percentage-based.
Bingo! It’s a damn offer, grow up, don’t be insulted. I am concerned about my money, not yours. It’s the “it’s not fair crowd” and we will be hearing this full volume very soon!
“‘I don’t want to keep writing offers and insulting people,’ she said.”
The bigger insult is the sellers and real estate agents asking the potential buyers to pay these hyper inflated prices as if they have no concept of simple elementary economics.
“‘I don’t want to keep writing offers and insulting people,’ she said.”
Funny isn’t it that sellers and their agents have no problem insulting buyers with their overpriced crap. 1200 sq ft fixer in my neighborhood just went on the market for an absolutely ridiculous $540,000. It just an ordinary 50’s tract home in a decent neighborhood, nothing special. The SOB’s paid $175,000 in 1992 did absolutely NOTHING to maintain the house and now they have the nerve to ask over a half million for their dump.
so true, this is the core of the NEW market. A home cost
$71K in 1980 and with a new roof and granite top kitchen counters it sells for $1.1 million in 2005! and somebody actually believes that it will be worth $2 million in 2010.. its not about adjustable rate mortages, no money down, rising interest rates its a simple bubble
How about this?
First, organize a group of people, say 25-50 people, and have each of them call one seller or the agent, and low-ball them by at least 25% off the list price. After a call is made, vote on the next agent to call and do it again. If they say, “Hell no!” then, simply tell them, “Well, you heard what is happening in the (insert name here) real estate market, right? Well, I fully expect that based on the data, I will expect houses to be around that price range in a couple of years. I hope you’ll continue to sell houses, as I’d like to check in on the prices to see if they’re more reasonable in a few months. Have a nice day!”
Wait a few months later, and have the group repeat the process, perhaps low-balling by 30% below whatever list price is at the time. Keep doing this until the market finally crashes. The point is, put that fear into them, make them mortal, make them panic-sell! Teach them a lesson, in that they need to be doing productive work, work that benefits everyone and not just the few with money…
Stephanie Ellison
“‘I don’t want to keep writing offers and insulting people,’ she said.”
Perhaps the sellers should not insult me by asking for such a high price in the first place.
On the other hand, the seller might well “insult” me, I don’t care, I “insult” back with a lowball offer. It’s business. I just need the weeks and months of waiting for buyers to let it think into the seller that my lowball offer might not be so insulting after all.
That some realtors, both for sellers AND FOR BUYERS, have sympathy with the “insulted” homeseller but not the “insulted” homebuyer is to be expected, it’s pity on themselves and their thinner wallet.
“Working in the mortgage business, he is no stranger to how the housing market works”
I almost fell out of my chair when I read this Callahan Clown works in the mortgage businesses (probably a broker) and now he can’t afford his home cause his business had dried up.
if there is a God..HE does work in mysterious ways.
Nothing mysterious about the way God works. The willfully ignorant, apathetic, and downright stupid get mowed under with frightening regularity. Whereas people who actually pay attention and take an interest in their community are almost always way ahead of the game. Lots of people confuse self-interest with self-obsession.
Amen. Kipling’s poem “The Gods of the Copybook Headings” would be a great rebuke to the “new paradigm” bulls.
With the Hopes that our World is built on they [i.e. "the gods of the copybook headings"] were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.
***
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.
As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will bum,
The Gods of the Copybook Headings with terror and slaughter return.
This Condo Developer in San Diego is dropping prices by 1000 dollars a day until the units sell:
http://www.mpcondos.com/
Read the article below:
http://www.nctimes.com/articles/2006/08/14//news/sandiego/81306192551.txt
As a buyer, why even counter at this time unless you just absolutely have to buy a house right now in a falling market. If you don’t like my offer, gimme a call in 6 months and I’ll have a new one for ya. I think “proper” negotiation ettiquette flew out the window with that feed the squirrel lady long ago.
People claim this burst is happening/will happen incredibly slowly, but stories like that one about sellers having ridiculous demands like feeding the squirrels were ubiquitous just 12 (or less) months ago. Extrapolate out another 6-12 months and think where we’ll be.
My parents got their home in the late 70s by making an offer, having it rejected, and walking away. MONTHS later, the buyers contacted my parents’ realtor and asked if they’d still be interested. They were - although at an even lower price. They got the house for that lower price.
this has ALREADY happened to a friend of mine in San Diego. Imagine what’ll be going on in 2007.
Yep, and in a few more months the buyers will have a contract for the sellers. Feed my squirrel, my dog, my cat and wash my car.
eastcoaster -
I love stories like yours.
“I think “proper” negotiation ettiquette flew out the window with that feed the squirrel lady long ago.”
True, but it got me off my duff and I came up with a lot of great squirrel recipes as a result.
Looks like the entire Northwest is in the same boat: inflated home prices, high inventories, lack of buyers, a lot of nervous RE agents and sellers, and a litany of stupid excuses as to why the market is “cooling”.
Yeah Brandon, but like the Bend newspaper says , “Bend may be booming…….but the market seems to hit a soft spot.”
See, here in the NW, our markets can be both hot and cool at the same time. We CAN have it both ways here! he…he..
‘There’s been quite a few price reductions on the market, because things were put at too high a price in the first place. I think the market just went beyond what most people were willing to pay.’”
you mean, “things were put at too high a price in the first place 4 years ago but there were GF out there”
The Dalles should be BOOMING! They just got a big ol’ Google datacenter this year.
How much will those big Google datacenter jobs be paying? They just lost Luhr Jensen’s manufacturing jobs in Hood River, since they sold to Rapala, and that factory’s going to China.
Apparently, none of you have been to a datacenter.
I have been to a couple and it is very hard to find employees.
IIRC, 12 employees (2 facilities people to keep the AC running, 2 Mgrs, and maybe 10 techs).
I find it pathetic that the same people who are now telling sellers to “price their property realistically” are the same ones that sold property a few months ago telling buyers “hurry or be priced out forever”, “real estate never goes down” and “10% YOY appreciation is in the bag“…and lets not forget “it’s different this time”
These Realtors and mortgage brokers are worthless shills that sing the popular songs. They cheerleaded this thing all the way up and now they are talking it all the way down.
Talk and bullshit. That’s all these damn people are good for and they are the ones primarily responsible for shoehorning many innocent people into this mess. Alot of folks are living in overpriced homes that they never should have gotten into in the first place.
When this thing is near the bottom, “Realtor” and “Mortgage broker” will be dirty words. I look for them both to go the way of the Travel Agent circa 1999 —– these jobs are unnecessary and can be replaced with the advent of the internet.
Pretty much agree except for “innocent” buyer part. A lot of non-speculative FTBs bought into the FUD being spewed by industry shills, no doubt. Even so, to turn a phrase: “ignorance of economic law is no excuse”.
Besides, Even the NAR admits up to 40% of 2005 purchases were speculators, which means the real total must be a lot higher. So, we have easily half the buyers being “victims” of their own greed and stupidity.
Moral: Never depend upon mercy/honesty from people whose livelihood depends upon you purchasing their product or service.
Talk and bullshit. That’s all these damn people are good for and they are the ones primarily responsible for shoehorning many innocent people into this mess. Alot of folks are living in overpriced homes that they never should have gotten into in the first place.
———————-
Yep. That’s all they’re good for, as they don’t know what it means to work hard for your money and have to save it to get something you want or on a long-term basis. They have completely lost that.
Stephanie Ellison
“But sometimes buyers are making offers below recent comparable sales, which can be hard to justify to the seller.”
People, recent comparable sales are becoming insignificant. The boom years are over- tell that to your clients.
What is recent ? Property has gone done in the last 2 months . I think buyers are entitled to put in a lower offer for the declining market risk ,or at least they should split the difference with the seller .
Sorry …down not done
article: Warning signs of the housing bubble crash (part two)
This article has no doubt been mentioned before on this blog, but I just found it. It is dated 1/1/2006 and basically says sell your house & other real estate and run for cover. Now many of us (Ben’s bloggerati) have been saying this for a longer period of time, but perhaps not as eloquently. I don’t know anything about the author but he’s pretty convincing.
The article is very long, I just grabbed something from the beginning, something from the middle, and then his RUN FOR COVER conclusion.
Some excerpts — go here for the entire article. “This is Mike Adams talking about the looming housing bubble burst in the U.S. real estate market. It’s coming. As I said before, I predicted the dot-com bust, but I was three years early. It’s impossible to predict the exact timing on these things, but when the signs are there, you know it’s coming. Eventually, it will go so far and people will get sane, and then things will start to unwind. It will accelerate towards a price collapse because there is a cascading effect. Once the housing prices collapse in one region, it can spread to another region. That’s what’s going to happen in the near future. This bubble market cannot stay propped up for very long. Now it may be three months from now or it may be three years, or even five years, before this happens. I can’t say for sure. I can tell you, it’s coming. I see a major correction in store for this trend. So what are the warning signs? Why am I so sure this is happening? There are a lot of signs. … How do you know when there is a glut of houses for rent on the market? You know because rent prices begin to fall relative to the price of buying a place to live. It’s standard supply and demand economics. … For example, let’s say five people each own one share of a company that has only five shares. Let’s say each share is worth $10. How much money is there total? Well, it’s five times 10, so that makes $50. Related article Taste inflation revealed: why sugar, salt and fragrance make you stupid Now, let’s say that one of these five people decides to sell his share to his friend, but he’s convinced his friend to buy it for $20 (a profit of $10 to the seller). He sells one share to his friend for $20. What’s the share price now, for the whole company? The share price is $20 because the share price is based on the last sold price. Now there are five people and each of them has one share that’s worth $20. Suddenly, there’s $100 total instead of $50 total. All five people think they’ve just doubled their money! … Take your money and flee the housing market Friends, I believe it is time to take your money and exit the speculative real estate market. The average person doesn’t understand anything about finances and never will. The average person can’t even calculate a 15 percent tip at a restaurant, and he or she is buying real estate because he or she wants to double his or her money. Are you kidding me? Take your money and run; that’s my advice. Run from the inflated real estate marketplace before you become another victim. These super hot, speculative housing bubbles and stock market bubbles cannot continue. They always correct. Gravity kicks in, and, eventually, things unwind. A lot of people get hurt. They lose their money. To some of those people, I say, “That’s a really expensive education you just paid for.” A lot of life’s lessons are hard to learn, but some of them can be rather expensive. That’s my personal advice. I’m not trying to play your financial adviser. You can make your own decisions in these matters. This is my personal opinion based on experience and analysis of the market. I’ve been watching this thing for quite some time, and the signs are now becoming very, very clear. Actually, I’ve been watching this thing for a couple of years. I saw it get overheated. I was seeing it in my own city. When you see property prices going up 25 to 30 percent a year, for six years in a row, that’s pure speculation. House values don’t normally go up that high. There’s no justifiable reason. The population isn’t increasing 30 percent a year. There’s not that many more people bidding for the same house. There’s something else at work if prices are skyrocketing that quickly.
So, it’s December 2005. I’m going on the record as saying this bubble is going to pop, folks, and you can call me a pessimist or a doomsayer if you want. The fact is, if you understand math, you know I’m right. If you want to protect your own finances, you’d better take a good, hard look at this and make some decisions about what you’re going to do. Do not leave yourself over-leveraged in speculative real estate. You thought you were going to retire on the beach, and it ends up you’re flipping burgers as a second job to pay off what you owe the bank, and they garnish your wages on top of that. That’s what happens to people who don’t get out in time. By the way, I have nothing for sale here. I don’t sell home loans, and I don’t have a book on this subject. I’m just passing this along, because I don’t want to see people hurt again. A lot of people will never hear this message, and a lot of people who do hear it will say, “This guy doesn’t know what he’s talking about. He’s not a real estate investment guru. He’s not a banker. He’s not a financial expert. What does he know?” That’s why I’m going on the record. We’ll find out.
We will find out what happens to housing prices in the years ahead. We’ll come back and revisit this, and we’ll disassemble the popping of the bubble after it happens. It will be interesting to see if anybody gets away unscathed in this big scam. The best way for you to escape unscathed is to make sure you are not over-leveraged. Have some equity in your home. If you can pay extra to pay down your mortgage, you should do it now, and don’t go out and buy an overpriced home just for speculation.
Don’t compromise the roof over your head. Don’t compromise your family’s residence just to try and make a quick buck in the overpriced housing market. Protect your residence and your family. If you have extra cash, put it into your own house right now. Own your house. This has been a rule I’ve lived by for many years. You should owe nothing to any bank on a house you live in. In my opinion, until you have 100 percent equity in your own home, you have no business investing money in a second home. You should first give yourself the financial foundation of owning your own home free and clear. Once you have taken care of that, you can afford to risk cash in the housing market, if you so choose.
Until then, you’re crazy to do so, and I know a lot of bankers and financial people will strongly disagree with this line of reasoning. They’ll say, “No, no, no. Mortgage everything. You should highly leverage your first home and mortgage your way into a second or third home, and you’ll be rich when things go up.” What they’re not telling you about is the potential downside. What happens when those prices you just paid for those second or third houses are cut in half because the housing market pops? Then you lose your third home, abandon your second home, have to sell your first home, and you still owe money. Don’t let that happen to you. Be smart. Pay attention to what’s going on. Don’t follow the sheep. Do you know where the sheep are heading? They are headed to the slaughter, just like they did in the dot-com boom. People were led right into a financial slaughter, and they got taken, too. Their life savings were taken away virtually overnight. Don’t let it happen to you.
Here’s one more thing: what if I’m completely wrong about the timing on this? What if it takes five years for prices to correct rather than five months? My answer is simply this: it’s better to be out sooner rather than later. It’s better to miss out on some gain (opportunity cost) than lose your life savings in a real estate crash. And if you think the housing market will always go up — forever — then you have no business investing in the first place. The laws of economics have not been rewritten. When interest rates rise, this real estate balloon party is history.
I watched in wonder as all these lots on the Oregon Coast got cut up and houses put on them. I thought to myself, gee, that hasn’t happened in all the years that coast has been here, and now, suddenly, there’s all this huge demand? It never quite set well with me. After all, those places get 100″ of rain every year. So… I will be surprised how many people buy - or bought - all these places… and how many will be for sale a couple-three years from now. Maybe I WILL be able to retire on the beach after all (the rain doesn’t bother me - I get 50″ now).
Admittedly, I’m a novice since I’ve never actually bought real estate. But I have shopped. And made a few offers over the years (or considered it at least). Had I foreseen this boom, I would have bought for sure - but that’s a whole `nother topic.
However, I seem to recall a time when it was just assumed that a buyer would offer you less than your asking price. I seem to remember 90% was the standard starting point. Does anyone else remember this as being a pretty common practice?
Absolutely! I sold my first house (a duplex) in 88/89. Bought for $39k in ‘79, we had originally lived in one of units, but we bought another house and moved, filling it another tenant. Fast forward to “time to sell” and we sold it to one of our tenants. Asking was $240k, but we agreed on a sales price of $208k…everyone was happy. At $199k we would have been alright, but when our tenants came back with the $208, how could we really (in good conscience) say “no can do”?
Even at a flea market (tag/garage/rummage sale) you price a little higher *expecting* to negotiate. Sure, this is a “small money” example, but you get my point. People just got MAJORLY spoiled with the potential of instant riches in this run-up.
BayQT~
I’ve been thinking the same thing re: flea market negotiating. I also like to cite the example of going to buy a car - used or new. Does anyone really expect to walk on the lot and NOT haggle at all? Come on!
Yes, that’s another excellent example. In 2003, I had a $10k budget to work with but was well aware of the games and add-on fees that the dealers would try to put me through. But I was determined to pay ONLY $10k, and that’s what I did. I saw a car for $10,250 that I wanted and I KNEW that I could get it for my price if I just stuck to my guns. Now, mind you, here I am, a single woman going to a car lot alone that is crawling with male salesman. I’m sure they thought they had a sitting duck. HA! They found out differently. (I do my homework for months before I go in for the kill.) They tried to get me to sign on for about $12,000 (with all the fees and additional BS), but I wasn’t having it…I was prepared to walk and they knew it…I held my ground, and got the car for MY price. $10k, out the door. Score 1 for BayQT.
doing the cabbage patch dance (Go, me..Go, me…it’s ya birthday)
BayQT~
So what you’re saying is that houses are not Toyota’s? That’s the only purchase we didn’t haggle on this year. Tried, but no takers.
I got a used Toyota a couple of years back. Low-balled the kid hard, but offered cash. He took about thirty minutes and accepted.
I hear ya. Mine was cash, too. Another reason why I was ready to walk. I knew someone would take my cash, I didn’t have to waste my time with those guys if they weren’t interested. And they knew that, too.
BayQT~
Dude, internet car shopping (fleet sales).
I did my research, closest dealer fleet sales contacted me. Walked in, explained what I wanted, dealer showed me the closest on the lot, gave me the keys and said “take a nice long test drive”. No pressure, no haggling or need to ($300 over invoice - sure, maybe I could’ve saved $200, but my time is worth money, too). The fleet sales guy didn’t try to talk me into more expensive options, their financing, or any upgrades. And he did quite well - considering how much time it took.
Rule #1, If your first offer is accepted, you offered to much.
Rule #2, You have to be willing to walk away, and the seller should get the impression that you have no problem walking away. Buyers are scarce. You have the money and they want your money. Don’t let your emotional desire to buy a house cloud your judgement.
Vmaxer — took a while, but I finally convinced my wife of this — that there are many desirable houses almost anywhere we care to look and, in our relative modest price range, there is no one perfect must-have house from which we are not willing to walk away. Two years ago, we might have countered, but not now.
Yes, it’s totally standard practise to offer less than asking.
In ‘96 or ‘97 when people started over-bidding for houses in Seattle and driving prices up, I was completely dumb-founded. I’d never seen such a thing before.
Talk about buyers shooting themselves in the foot. Just plain stupid.
I hope to never witness such a thing again in my lifetime. Idiotic.
Yes, it’s totally standard practise to offer less than asking.
In ‘96 or ‘97 when people started over-bidding for houses in Seattle and driving prices up, I was completely dumb-founded. I’d never seen such a thing before.
Talk about buyers shooting themselves in the foot. Just plain stupid.
I hope to never witness such a thing again in my lifetime. Idiotic.
I believe when I first purchased my home in 1999 the Home Buying for Dummies Book suggested 7% off asking was the average reduction.
Just wait a year or one and a half and everything will be affordable again.
Do you really expect such a fast return of the market to its fundamentals? I would say 5 to 6 years, from past housing busts.
Peter t- Yes I do. The wonderful thing about the US of A is things happen faster than other countries. Wonderful opportunities in the RE market will present themselves in 12 to 18 months
Actually, a realistic time frame for going peak to trough is probably closer to 5-6 years, just basing it on previous RE cycle (early 80s & early 90s crashes). RE is notoriously sticky, thanks to long transaction times, red tape (esp. if foreclosure is involved), plus varying reset time-bombs for option-ARMs (2006, 2007, 2008, 2009, etc.) and FBs’ escalation of commitment. 12-18 months will bring lower prices, sure, but you may be catching a falling knife way too early.
In other words, I agree with Peter Gerard.
Arrgghh….
In other words, I agree with Peter T
This may be a double post. But for those new to the blog, or those who haven’t seen this, repeat link posting for play-by-play of news headlines/articles of the 80s crash.
http://nnjbubble.blogspot.com/
http://marinrealestatebubble.blogspot.com/2005/09/of-bubbles-past-chronological-listing.html
BayQT~
Thanks. This link was very helpful.
You’re welcome. The first one was from Grim’s Northern New Jersey blog, and the second one from Marinite…Ben has links to both blogs on the right. But if you don’t know where to look for this info, it’s hard to find.
BayQT~
My guess is 80% of the decline will take place in the next 12 to 18 months. Corrections in the 80’s and 90’s lasted longer but back then information was not as widely available and many buyers/sellers were in the dark as to what was happening.
With the internet you can watch the situation unfold in real time which tends to speed things up.
Right on. Let the sellers bleed to death for a few years then offer 20% of the asking price. It will still be higher then before the bubble started. Auction it. Start at the very bottom and work your way up. If every smart buyer did it the sellers would have to cave in.
“‘I’ve been here since 1992 and I’ve seen houses sit for a year, easy,’ realtor Rena Hunley said. ‘Now, if it doesn’t sell within a few days we ask, ‘What’s wrong?’ Nothing’s wrong! It’s just real estate, and that’s how it goes, up and down.’”
Oh come on honey, if it been on the market a year let alone 90 days it’s simply overpriced. How hard is that to understand ?
I think she’s quite right.
Sorry if anyone has already posted this, but check out the letter Countrywide is sending to its Neg Am clients:
http://www.baltimoresun.com/business/realestate/bal-bz.re.harney18aug18,0,3179443.story?coll=bal-realestate-headlines-1
from the article:
The letters explain that “this is an early message to alert you that, based on your current payment trends and potential future interest rate changes, the monthly payment you will be required to pay may increase significantly.”
A model letter provided to me by Countrywide includes this hypothetical example of what could be ahead for a California homeowner currently making only minimum payments monthly on a $402,000 loan.
The current full interest rate on the loan is 7.6 percent, but the borrower has been paying just $1,348.47, far less than what’s needed to fully amortize the mortgage over its 30-year term.
If the loan reset at today’s rates, the letter explains, the full payment required would be $2,887.50 - more than double what the homeowner has gotten used to paying. Future reset rates could be even steeper, making the potential payment crunch much worse.
Translation: If you can’t handle the reset, look for a part time job. Mickey D is probably hiring.
BayQT~
Countrywide’s helpful advice to its customers who want to prepare for their resets:
1.YARDSALES EVERY WEEKEND !
2. 2nd and 3rd Jobs Recommended
3. Bloodbank
4. Strap Mattress to back and head to seedy side of town.
Allow me to translate:
Countrywide’s helpful advice to its customers who want to prepare for their resets:
• Switch their payment option out of the minimum if they can and move to either a 15-year or 30-year standard amortization plan.
- Now that we’ve scared the living excrement out of you call now and talk to one of our friendly loan consultants. We’ll charge you higher-than-average origination-, title- , escrow-, appraisal-(etc.) fees and refinance you into a new Countrywide loan we both now you will default on because you can barely afford to make the payment based on the 1% start rate so how on earth will you be able to cough up the extra money needed for an interest only/fully amortized loan?
But hey, don’t worry…. you can rest assured you will still be with Countrywide: the nation’s largest lender…..
Feel better now?
• Switch to an interest-only option if full payments are not feasible at the moment. At least interest-only payments will not result in still-higher principal debt balances to pay off later.
- Now that we’ve scared the living excrement out of you call now and talk to one of our friendly loan consultants. We’ll charge you higher-than-average origination-, title- , escrow-, appraisal-(etc.) fees and refinance you into a new Countrywide loan we both now you will default on because you can barely afford to make the payment based on the 1% start rate so how on earth will you be able to cough up the extra money needed for an interest only/fully amortized loan?
But hey, don’t worry…. you can rest assured you will still be with Countrywide: the nation’s largest lender…..
• Explore alternative refinancing options sooner, rather than later.
- Now that we’ve scared the living excrement out of you call now and talk to one of our friendly loan consultants. We’ll charge you higher-than-average origination-, title- , escrow-, appraisal-(etc.) fees and refinance you into a new Countrywide loan we both now you will default on because you can barely afford to make the payment based on the 1% start rate so how on earth will you be able to cough up the extra money needed for an interest only/fully amortized loan?
But hey, don’t worry…. you can rest assured you will still be with Countrywide: the nation’s largest lender…..
EXACTLY!
“‘I don’t want to keep writing offers and insulting people,’ she said.”
Awwwwww, I hear the worlds tiniest violin playing for someone who has to finally put some effort into their job. And your job is so simple , JUST PRESENT ALL OFFERS !
yeah WTF does she care if the price it sells for is insulting as long as the buyer accepts the offer??
Better get used to those insults you hag because that may be all you are going to be seeing.
If you are afraid to make a low ball offer or insult the seller you are paying too much to begin with and have no business buying the property. Too bad if the seller’s are insulted it’s all about the price not there feelings.
The worst that can happen is that the seller says no. Offer another low-ball offer next year.
Amen. Hell, if you can’t handle lowball offers, you have no business being in business period.
> If you are afraid to make a low ball offer or insult the seller you are paying too much to begin with
I think she who didn’t want to make low ball offers was a real estate agent not the buyer. With the lower offer of HER client, she looses commission - no wonder she resents that and her mind finds excuses why it’s bad.
Yeah. She’s fighting for about $500. Now that’s a reputable thing to do to an innocent buyer making a life decision. (NOT)
Does anyone smell a rat here? Callahan isn’t even shown as the owner of this house by the Deschutes County Assessor’s website? There is an address, but no sales info. So if he owns it, he had to close really recently and may even be a flipper with a story to sell.
Also the second Bend seller has only been in it since March of 2005 and seems to think he is entitled to a $179,000 profit for his less than 2 year ownership. I smell a flipper here too.
“The back-and-forth forced her to try to come up with reasons to try to justify the price, she said.”
Why in the world do you think you need to justify the offer, lady? It is what your buyer is willing to pay. Do your job and pitch it.
“‘I don’t want to keep writing offers and insulting people,’ she said.”
The I believe you’re in the wrong business, Sugah.
“‘I don’t want to keep writing offers and insulting people,’ she said.”
She must me a complete moron.
Where has she been in the last few months. It’s an insult to present an offer? She has a fiduciary duty to present ALL offers and it’s not up to her to decide which may or may hurt the precious little feelings of Joe or Suzy seller.
August 18 (UPI) - Skilled cult deprogramer Ben Jones today arrived outside the fortified compound where members of the SDCIA doomsday cult were holed up making final preparations for what can only be described as mass financial suicide. Reports from inside the compound say that Cult Leader Gary Watts is growing increasingly desperate and hysterical, leading his Flipper minions in round-the-clock chants of “Real Estate only goes up!” and “12% is in the bag!”
While most of the empty-eyed SDCIA cultists are still clinging to their delusions, a growing number are starting to feel a palpable sense of unease, thanks to devastating forays into their camp by TxChick57 and other Housing Bears. Their feeble attempts to stage counter-strikes against the Ben Jones partisans have quickly collapsed as Sammy Schadenfreude and his intrepid Housing Bear brothers-in-arms (females included) have swooped down to club them like baby seals. Several “it’s different here” bubble stalwarts like LV Landlord have tried to make a stand, only to ooze away under a barrage of bad news as their soap-bubble dreams of easy money come to a Hindenburg-like end.
More and more disillusioned, fearful Flippers are slipping past grim-faced minders like Suzanne, ignoring her proffered Kool-Aid, breaking ranks with the lemmings and rushing to unload their “alligators” before the onrushing crash. Some have even defected to Ben’s Housing Bubble Blog, embracing their new creed with the zeal of “born-again” neophytes.
More on this fast-breaking story as it develops….
Funny.
Good stuff Sammy
“Debora Runnion-Jessup, an agent in Clackamas, said one buyer client wanted to offer $20,000 less than the asking price for a house on the market for $480,000. ‘On a resale, that’s a big gap,’ she said. But the buyer wanted to negotiate.”
No, No, No…
$20,000 off of a $480,000 asking price is NOT a “big gap”. It’s only about 4%.
Despite recent (how recent matters these days) comps, it was also probably just overpriced to begin with…
.
Some early casualties from this RE crash
IPIX made most of their money from RE and surveillance businesses. Most of the 3D virtual tour photos used by realtors were taken with their special lens.
Nasdaq crash didn’t kill them, but RE crash does.
” … But sometimes buyers are making offers below recent comparable sales, which can be hard to justify to the seller.”
Here is the crux of the matter. Sellers and RE continue to hope that the properties have the high “values” (and I use that term very loosely). IMHO, the comps are not going to represent “value” as they are a lagging indicator.
But if we recall, sellers ignored “comps” when the market was hot and prices were rising. So now that prices are falling they are suddenly looking at the comps as a line in the sand. Sorry folks, ignore em on the way up and you can’t rely on them ont he way down.
Here is a tip for the realtor…she should try
“Out of the 15 houses..that my buyer likes..they decided to make an offer..on your home ..first.”
I’m gonna luv this market.
Ever since the market turned this spring, I’ve noticed that the squirrels in my back yard no longer give me that “feed me you bitter renter” look. Now I think they are saying please.
Jon
the Bend one is hysterical. In the mortgage biz, and his job situation changed? Yeah, no one wants any new mortgages! And now he can’t pay for the house! But he doesn’t have “patience.” Well… maybe he’ll learn some!
According to the seemingly logical broker Scott Mikel the following reasons are why he thinks the real estate market is cooling:
1. This year, we’ve got builders coming on with new product that missed the market.
2. We’ve got sellers reacting to last year’s market.
3. We also have fewer qualified buyers than we had last year.
4. I don’t believe (higher) interest rates have slowed the (local) market.
…lastly and my favorite..
5. I believe the saturation rate has slowed the market.
In other words, this genius thinks the effect ( slower sales / market saturation ) is the cause of the effect ( slower sales ).
If Mr. Scott Mikel’s logic seems puzzling to you don’t worry, he’s just dumbfounded. He is still searching, albiet in the dark, for a way to explain his industry’s slowing sales. IMHO, outlined below is what really happened in the housing industry:
1. Record 40 year low interest rates increased buyer demand.
2. Increased buyer demand increased seller pricing power.
3. Increased pricing power stimulated overbuilding.
4. Meanwhile, higher prices stimulated creative financing, more overbuilding, and drove seller pricing expectations through the roof.
5. Now that interest rates are increasing, even with creative financing fewer buyers can meet seller pricing expectations.
6. As a result, sales transactions are slowing.
Currently the entire industry is faced with a dillema: (1) either prices need to drop to a point where buyers can afford to buy or (2) buyers need to start making more money, the latter inflationary. We all know how the feds react to inflationary presssures, they continue to increase interest rates.
A dark storm cloud is looming over the entire housing industry and things are going to get extremely ugly for all its participants including home builders, land owners, real estate agents, mortgage brokers, mortgage backed security holders, current and recent buyers, sellers, property tax collectors, appraisers, get rich quick selling real estate peddlers, house hunting television producers, closing attorneys, and sub contractors.
This statement just boggles me: “‘Right now our housing prices are relatively flat,’ explained Jim Wilcox in The Dalles. ‘There’s been quite a few price reductions on the market, because things were put at too high a price in the first place. I think the market just went beyond what most people were willing to pay”
Translation: housing prices are flat [are not coming down], and the ones that are coming down aren’t really coming down because they were overpriced to begin with.
That’s such a stupid amount of doublespeak. You have to be an idiot (or a superb actor) to keep a straight face while making such a ludicruous claim.