More Homeowners ‘Desperate To Sell’
Some housing reports from around the US. “Home sellers in Portland, Maine, are having to cut their asking prices by about 10% because buyers won’t pay more than they did last year, says agent Michael Flaherty. The inventory of homes on the market keeps rising. Realtors are also seeing a slight uptick in the number of foreclosures and distressed sales by owners who are ’struggling to sell their home for (the value of) their mortgage,’ he says.”
The New York Post. “Manhattanites are starting to feel the pinch from rising interest rates and fears about the economy. The Manhattan real estate market has always been a law unto itself, but increasingly apartments are sitting on the market, unsold for months. The number of units on the market is at its highest in more than 10 years, according to Miller Samuel. The inventory in Manhattan rose from 3,922 units at the end of 2004 to 7,640 in the second quarter.”
“‘We have a classic stand-off between buyers and sellers in New York,’ said CEO Jonathan Miller. ‘Housing inventory is at the highest level since the late 1980s and demand has cooled off.’”
From MSN Money. “Margot Ray, a radio-ad saleswoman in Stockton, Calif., put her five-bedroom, three-bath house on the market in February for $480,000. There it sat, along with about 3,000 other homes for sale. She dropped the price to $465,000 in April. Nada. ‘We’d have an open house and maybe one or two people would come by. I had an open house where nobody came,’ Ray says.”
“The price is down to $427,000 and, at a recent open house where Ray raffled football tickets and a spa day, 15 groups of potential buyers showed up on a 107-degree day. But it still hasn’t sold.”
“Ray has a new house with its own mortgage. ‘Am I to the point of desperation? Not yet,’ she says, ‘but I want this house sold.’”
“‘We have sellers not only competing with an onslaught of resale houses on the market, but we also have home sellers competing with new developments, where they are offering tens of thousands of dollars in incentives, or even making mortgage payments, buying down loans, putting in swimming pools or paying points,’ says Raylene Miller, Margo Ray’s agent.”
“Real-estate agents are giving stunned sellers crash courses in marketing. In the toughest markets, including the Florida cities, Detroit, Atlanta, Dallas, Stockton, Sacramento and San Diego, incentive is the name of the game. One Florida agent offered a Mercedes-Benz with a house sale. Others dangle vacations or gift cards with thousands of dollars in gasoline.”
“People who bought recently and have little equity are in the most difficult situation, says Vince Rizzo, broker for HungryAgents.com. ‘There are so many people now that borrowed 95% or 100%, and with the market slipping back a little, and you have to pay 6% commission, you are going to have to bring money to the table,’ Rizzo says.”
“Short sales have become increasingly common. Sue Hunt, of Consumer Credit Counseling Service of Greater Atlanta, says that her nonprofit is currently advising ‘50 or so’ clients to short-sell their homes to try to avoid foreclosure.”
“Margot Murphy, a Portland, Ore., real estate agent, trains brokers in short sales through her company. It’s not easy to negotiate a short sale in which the bank must swallow a loss. Mortgage bankers are often slow to recognize how slow their markets have become, Murphy says.”
“Another factor in the stalled market is home sellers’ difficulty in letting go of last year’s prices. ‘If you tell someone in San Diego that they will only get 12% (profit) for their property, they look at you like it’s a disaster,’ says San Diego agent Steve Faulkner. ‘They are so conditioned to a 25% increase that they just think that’s what they should get.’”
“Faulkner says speculators are being blamed for running up San Diego prices. Now, with home sales down by 24%, many investors want out. ‘If you own 10 properties and your interest rate is going up, it’s better to just sell the home and get out of it,’ Faulkner says.”
“A recent search of Craigslist.org’s San Diego’s real-estate listings for ‘motivated seller’ yielded 77 listings. ‘Must sell’ turned up 68. Another 21 listings appeared in a search for ’short sale.’ Some of those desperate-sounding sellers are probably agents like him, Faulkner says.”
“Faulkner says speculators are being blamed for running up San Diego prices. Now, with home sales down by 24%, many investors want out. ‘If you own 10 properties and your interest rate is going up, it’s better to just sell the home and get out of it,’ Faulkner says.”
I thought all the investers had left the market last year while the getting was good? Humhhh…
‘They are so conditioned to a 25% increase that they just think that’s what they should get.’
They are so conditioned to a 25% increase that they already spent that much out of the housing ATM machine through the magic of cashout financing.
“Hey, how else was I supposed to pay for my SUV and my boat, on my measly salary that isn’t even keeping up with the doctored inflation numbers!?”
Mr. FB
Asset Inflation and Debt. The way to prosperity in America!! At least for the time being.
“Real-estate agents are giving stunned sellers crash courses in marketing. In the toughest markets, including the Florida cities, Detroit, Atlanta, Dallas, Stockton, Sacramento and San Diego, incentive is the name of the game. One Florida agent offered a Mercedes-Benz with a house sale. Others dangle vacations or gift cards with thousands of dollars in gasoline.”
Oh for Pete’s Sake! Here is your “marketing” brief.
The housing market was a ponzi scheme that just collapsed and you are caught.
If you want to sell your house you need to immediately lower to below comps by 10% and STAY 10% below any recent sales to catch the very few buyers out there.
If you can not sell at that price then go talk to your banker to try and arrange what they call a “short sale”.
Get back to me when that is done and I will list your house under the above rules.
Any questions? Great, now get to work on lowering your price!
That’s funny. You cut through the crap. It reminds me of a story from my high school days (many years ago). We had a real funny teacher that looked like Jackie Gleason. He was talking to a classmate of mine that had already had a baby. He said he saw a book on breast feeding. He said, “I could have written that in one sentence. Grab the kid by the ears and let him at it.”
I think these sellers need to be grabbed by the ears.
That’s funny. You cut through the crap. It reminds me of a story from my high school days (many years ago). We had a real funny teacher that looked like Jackie Gleason. He was talking to a classmate of mine that had already had a baby. He said he saw a book on breast feeding. He said, “I could have written that in one sentence. Grab the kid by the ears and let him at it.”
I think these sellers need to be grabbed by the ears.
The real brutality of the market is coming from the home builders. I thought the individual re-sellers would drop their prices and make life difficult for the builders. Just the opposite is happening. The individuals can not come to grips with the reality of their losses. On the other hand, the home builders, who have been making $250,000/home (80% profit margin) and are quickly dropping prices by $100,000 to $200,000 (ie, JTS “Summer Blow Out”) per home. Margins cut to 30-40%, with more room to cut if/when needed. That is the name of the game now. The home builders are creating a new crop of FB’s every day….the ones they sold homes to last week! Amazing way to kill the food supply, IF the FB’s ever realize how badly they are still getting hosed……
There’re already hitting ercord numbers like the last RE downturn, and we’re only 6 months to a year into it. Amazing. This is going to be HUGE.
Kind of interesting that a couple of weeks ago some on this blog pointed to the fact that the Fed pausing and rates remaining steady could actually hurt realtors who’ve been using the “it doesn’t matter if prices go down because rates are going up. Buy now before rates go nuts!” I’m starting to here a lot in our area are further digging in their heels in the “I’m going to wait” camp. They’re reasoning? House prices are going down and rates are holding steady, if not actually dropping in some cases. “Why hurry?…let’s see where this thing goes” is the reasoning.
Sellers, I think potential buyers have got you by the balls this time. I’m pretty sure I know who’s going to be screaming “uncle!” first.
Rates are coming down pretty significantly. The 10-yr was yielding 5.2% not long ago and is all the way down to 4.8% today!
I have friends that traded up from a townhouse to a bigger house back at the end of May. Not only have rates fallen by almost .5%, larger nicer houses in the same neighborhood have asking prices 15-20k less than they paid.
If the banksters and real estate hens really want to save real estate prices why not just offer 0% financing for 359 months with a final payment of the original price of the home on payment 360 with a prepayment penalty of 25% of the original home price? Now that’s creative financing
Just think of the HELOC market in that scenario!
Who’s going to back that?
Many would have asked the same question in 2000 about the MBS crap being floated today.
Hey now, I said creative not good! But real estate prices would certainly be propped, if not launched, for a good long time!
Coming soon from Fannie Mae, “The no down, low payment, no interest for 359 months loan to make your American Dream come true!”
Free money for everyone!
The yield curve inversion is steepening. A recession within the next 12 months is very likely now. I think rates will remain low for some time now.
http://www.safehaven.com/article-5696.htm
Nice chart on yield curve inversion and Recessions.
We are already in a recession. Look at the new car dealer index.
The fed is buying bonds offshore, driving rates down.
“Margot Murphy, a Portland, Ore., real estate agent, trains brokers in short sales through her company. It’s not easy to negotiate a short sale in which the bank must swallow a loss. Mortgage bankers are often slow to recognize how slow their markets have become, Murphy says.”
Hey, I’ve got a great idea; short agent commissions. This is where at the closing the real estate agent gets a short check. Anyway, my point is that a bank sees nothing but income for decades on the property and has no incentive to change the legally binding terms. Besides, they promised that money to me. I do not give my permission for them to forgive the loan that pays me interest. Of course it is difficult to convince people to give you money and forgive the debt. Stupid realtors.
Can you feel it? 3 more years of these articles, and everyone will know that “RE is a terrible investment.”
And by then it will be a good investment again.
“A recent search of Craigslist.org’s San Diego’s real-estate listings for ‘motivated seller’ yielded 77 listings. ‘Must sell’ turned up 68. Another 21 listings appeared in a search for ’short sale.’ Some of those desperate-sounding sellers are probably agents like him, Faulkner says.”
“God help us” - 9 listings
“Make it stop, it hurts” - 4 listings
“Will throw in firstborn” - 2 listings
“No ‘favor’ denied” - 11 listings
“You can have sex with my wife” - 22 listings
“Includes 100 free medicinal marijuana prescriptions” - 34 listings
“Includes a trip to Vegas with a $10,000 gambling or other ’services’ allowance” - 7 listings
I’ve been tracking the number of ads with either “Motivated” or “Reduced” on San Diego Craigs list.
It is steadily climbing. 220 and 271 a month ago, 406 and 424 yesterday.
And how does it compare to the sex-with-my-wife listings?
With YOUR wife?????
Craigslist SF Bay Area has 231 “motivated seller” listings this morning and 801 with “reduced”.
Dallas on the list of tough markets? Well what’s up with that? I’ve been told repeatedly that everything is great, great place to live, cheap, etc.?
So many deludnoids, so little time . . .
We personally know of the following situations.
1. In Florida, agents told the seller they won’t take the listing unless it is below the current range of all of the many houses on the market in their neighborhood.
2. In Maryland, seller was told $1.35M is unrealistic, should list under $1M.
3. In Maryland, another house has been on the market for over a year.
4. In a South Carolina retirement community, NO traffic for over 6 months.
5. In another SC retirement community, two homes have come back on the market recently because the buyers couldn’t sell their current homes.
6. In Virginia, seller took a 15% haircut but got it sold after 4 months on the market.
7. In Virginia, sellers took their house off the market after no offers in a full year.
8. In Virginia, a long-time realtor friend who consistently grossed six figures of commissions has had one closing so far this year.
In a couple different instances now, I’ve read about homeowners in Michigan who have had their homes on the market for over 1 year. But then again, Michigan was tanking even when other markets were still booming in 2005.
I read an article saying that Michigan is the canary in the mine. And I had someone else say something similar to me just last week. Michigan’s market is the first to tank and probably the last to surface (if it ever does). And the wife is bugging me for a house next spring. Luckily I found this blog or I might of bought one a couple of months ago.
Thanks, Bill, for all the detail. Today’s anecdotal evidence becomes tomorrow’s statistical realities!
I read an article saying that Michigan is the canary in the mine. And I had someone else say something similar to me just last week. Michigan’s market is the first to tank and probably the last to surface (if it ever does). And the wife is bugging me for a house next spring. Luckily I found this blog or I might of bought one a couple of months ago
I love the stories “the street”. The media often provides a skewed view of the RE market, especially as we enter this deflation period. For example, the housing inventory in Boise is up 67.5% over the last fours months (per http://www.housingtracker.net/askingprices/metro/Idaho/BoiseCity-Nampa/ ), yet the local media has been silent on this subject.
Keep bringing in these great stories!
Madison, WI is a little behind the curve, but not TOO much. The same keyword searches turned up the following:
Motivated=24
“Must Sell”=9
“Short sell”=0
“short sale” = 1 in Madison, WI.
Opps, nice catch
Also, from Capital Times - “County housing market turns ‘traditional’”
http://www.madison.com/tct/business/index.php?ntid=95414
“Short sales have become increasingly common”.
- This will soon become a common topic for the nightly news.
The New York Post. “Manhattanites are starting to feel the pinch from rising interest rates and fears about the economy. The Manhattan real estate market has always been a law unto itself, but increasingly apartments are sitting on the market, unsold for months. The number of units on the market is at its highest in more than 10 years, according to Miller Samuel. The inventory in Manhattan rose from 3,922 units at the end of 2004 to 7,640 in the second quarter.”
when i start reading stories of people desperate to sell here or buildings going bankrupt then i’ll be worried. otherwise things are just getting back to normal in NYC where it takes 6 months or so to sell your place.
same thing happened 6 years ago. people got used to finding jobs in a week and having multiple offers that when they had to start looking hard for work they suddenly didn’t know what to do and complained.
The trend, however, is not your friend!
Back to normal in Manhattan is about 50% off todays prices.
Don’t look at 6 years ago, look at 18 years ago in the late 80’s crash.
18 years ago most of the current co-ops were still rentals and the new owners tried to flip them. today these co-ops are owned by people who live in them and bought them with real money.
those million dollar apartments require 20% - 40% down payments and a lot of net worth after you close. even the negative pledge financing people look at your finances to make sure you can pay the loan back. it’s not like buying a home or a condo which together make up only 25% of the RE market here.
“18 years ago most of the current co-ops were still rentals and the new owners tried to flip them.”
dba, this is simply not true. the huge wave of rental-to-co-op conversions was completed by the late 80s. but whereas inventory simply dried up for about 5 years during the last bust as those responsible owners simply pulled their pads off the market, what’s different this time is the HUGE amt of new/pre-construction inventory that is going to put tremendous downward pressure on the market. it might speed things up a bit on the way down, or it might just make it more bloody when it’s all over. imo we’re headed down for the next 5-8 years, any way you slice it.
“when i start reading stories of people desperate to sell here [manhattan] or buildings going bankrupt then i’ll be worried. otherwise things are just getting back to normal in NYC where it takes 6 months or so to sell your place. same thing happened 6 years ago.”
dba,
this is either simply uninformed, or sheer trolltalk fantasy propaganda! you must have been asleep through the last downturn. it took a good 8 years to reach the bottom, from 1988 to 1996, and many prices dropped up to 47% from the top.
we have already seen at least a 10% price dropoff since the peak a year ago. but it will be a long, long, LONG trip to the bottom, and even at the bottom, the most select manhattan properties will only lose 20% of their value, while the dog properties (even in manhattan, there are plenty!) will lose more than 50%. no bottom before 2012 or 2014 imo — manhattan prices are VERY STICKY.
Prices in Manhattan have not yet declined. OTOH Rents have climbed dramatically because of the less than 0.5% vacancy rate.
“Prices in Manhattan have not yet declined.”
pls. get back to me on this after labor day :0~
the conditions that were present back in the 1980’s crash aren’t there anymore. yes there is a lot of inventory, but compared to the last few years it’s not bad. and the sales rate per quarter is like a yo yo going back to 1989 if you look at the data. for the last 10 years the average days on market is 4 months with spikes up to 5 months a few times.
Point is only a fraction of the suicide loans here than the rest of the country. The data proves this. it’s on the internet for you to see. People don’t have to sell and this means that prices may fall some, but don’t expect to see crazy price drops since manhattan is full of geniuses willing to pay $2500 a month for a studio with no view and that’s no bigger than a closet.
And where do these geniuses work? The financial sector.
Do expect to see price drops and rental vacancies increase when IBs lose their jobs and college students no longer have their parents paying their rent for them.
the conditions that were present back in the 1980’s crash aren’t there anymore.
You’re right… it’s definitely more like 1929!
http://www.millersamuel.com/charts/
look at the pretty pictures, the world is not ending here yet
miller samuel is an excellent source of data on manhattan real estate. and listing inventory for manhattan apts has doubled in the last 2 years. supply, demand, price — they’re all related. just wait until after labor day, then check the nytimes r.e. listings. i’m already seeing “reduced” ads. even the nytimes, in an article a few days ago, recommended buyers offer about 6% less than asking price. and it’s very early in the game. wake up and smell the coffee — it’s way, way overpriced.
and remember … minimum 20% off the 2005 peak for the best properties … in 5-8 years … UNADJUSTED FOR INFLATION.
DBA= TROLL!!
I agree with you, DBA. Prices in NYC are sky-high, but so is the price of everything else (including rents). NYC RE is expensive, but the local economy is very strong (Wall Street bonuses excpected to hit yet another record this year), leverage and buy-to-rent activity is not very high thanks to restrictive co-op rules, and there are plenty of young people living here whose parents help them out with a down payment. Finally, the rental stock in NYC is simply abysmal, making buying more attractive all else equal.
This is not to say that RE prices won’t come down in NYC; they will. Just don’t expect the rapid declines that we’re already starting to see in places like NoVa, Florida, Vegas and Arizona.
By the way, anyone have a view as to what’s happening out in Brooklyn? I have a sense of what’s going on in the other NY boroughs but rarely here anything about Brooklyn. Price increases there have been staggering, and I’m curous if that market won’t fall off more quickly than Manhattan.
Thanks.
I agree with you, DBA. Prices in NYC are sky-high, but so is the price of everything else (including rents). NYC RE is expensive, but the local economy is very strong (Wall Street bonuses excpected to hit yet another record this year), leverage and buy-to-rent activity is not very high thanks to restrictive co-op rules, and there are plenty of young people living here whose parents help them out with a down payment. Finally, the rental stock in NYC is simply abysmal, making buying more attractive all else equal.
This is not to say that RE prices won’t come down in NYC; they will. Just don’t expect the rapid declines that we’re already starting to see in places like NoVa, Florida, Vegas and Arizona.
By the way, anyone have a view as to what’s happening out in Brooklyn? I have a sense of what’s going on in the other NY boroughs but rarely here anything about Brooklyn. Price increases there have been staggering, and I’m curous if that market won’t fall off more quickly than Manhattan.
Thanks.
inlaws live in sheepshead bay, almost nothing for sale
a few crappy new condos that are overpriced and cost more per square foot than a home there. i was driving in forest hills and there are a bunch of houses for sale
have family that sold last year and looking at prices in their building they hit the peak. in rego park prices climbed over last year.
OH, how the mighty will fall.
dba, if you are really a hopeful buyer, then just relax. you’ll get your chance in about 5 years. what’s the rush???
Hey, I’ve got a great idea; short agent commissions. This is where at the closing the real estate agent gets a short check.
I like the idea. Long overdue.
Anyway, my point is that a bank sees nothing but income for decades on the property and has no incentive to change the legally binding terms. Besides, they promised that money to me. I do not give my permission for them to forgive the loan that pays me interest.
Here is where I disagree. There are promises, and then there are promises. You bank was stupid, plain and simple, and at some point, either you, your bank, or someone who bought the rest of the bank notes, is going to pay. What income can you extract from a tract house that will compensate for the fact that it was overpriced by an astronomical factor?
Maybe all the vacant homes can be turned into third world sweat shops where future Americans toil away for long hours making cheap shit for my new line of American-Mart stores that cater to up and coming Asians.
About time we returned to our cottage industry roots.
“Margot Ray, a radio-ad saleswoman in Stockton, Calif., put her five-bedroom, three-bath house on the market in February for $480,000.”
No offense to the good people of Stockton - but in the absence of a real estate mania, an objective evaluation leads to the conclusion that $480K is too much to pay for a house in Stockton. There are certainly no jobs in Stockton that pay enough to afford a $480K house. That means you are probably commuting to San Jose or San Francisco. SJ or SF are about 80 miles and 2 hours each way from Stockton. When you add in external costs of gas and time sitting in the car. . . well, you get the picture.
The only home I’d buy in Stocton would be a bunker. I dig how the fast food drive-up windows in that town are bullet-proof.
How much does it cost to air condition and heat a 5 bedroom house in Stockton anyway?
“The price is down to $427,000 and, at a recent open house where Ray raffled football tickets and a spa day, 15 groups of potential buyers showed up on a 107-degree day. But it still hasn’t sold.”
I would *only* go out there on the outside chance of scoring the football tickets or the spa day.
“Ray has a new house with its own mortgage. ‘Am I to the point of desperation? Not yet,’ she says, ‘but I want this house sold.’”
To wit I say, “dumb s&%t”. Yet another one who bought ANOTHER home before selling the first one. Did she REALLY think she would sell her house for a half million…in Stockton of all places? Oy vey!
BayQT~
“Did she REALLY think she would sell her house for a half million…in Stockton of all places? Oy vey!”
Probably. How much would you guess she spent on the new house?
More.
BayQT~
Tursi vows she’ll rent out the house rather than lower the price once more. “I don’t see a reason to drop it again,” she says. “It’s a beautiful house. If I could pick it up and take it with me, I would.”
But what if no one agrees with you, Mrs. Tursi? What if no one will ever give you what you want? What if you can’t find a renter that can pay enough to at least cover your costs, especially in a depressed economy like Detroit?
You see, this is the sad mentality that will, unfortunately, slow down the pop of the current bubble. Sellers STILL think they have the right to ask any price, and EXPECT it. Only after those delusions are shattered, will the bubble truly pop, and the air blown out will rock cities across the nation.
This barge turns sloooow with all this leverage on board. Once we finally start heading in the opposite direction things will increase.
This is the captain….batten down the hatches we are heading the bow into the storm, man your stations…..
Love it.
“…wait — wrong way! We’re JIBING! Oh nooooo…”
*the Boom swings violently across the deck, knocking incredulous realtor$ and Flipper$ overboard. We Bubbleheads, crouched down on the deck, feel the wind as the Boom swings past us….whew. That was close…we can hear the screams echoing up from the black water below…
Then the sharks show up…..oh wait, the RE agents and flippers ARE the sharks!
The boat’s got a lot of yaw.
Do the Portland Maine ‘for sales’ reflect 2nd homes (ie. vacation property)?
“Faulkner says speculators are being blamed for running up San Diego prices.”
How many other U.S. markets does this statement apply to? The sad thing is that people who just wanted a place to live bought at a time when demand was falsely boosted by speculation and incredibly lax lending standards. Now what’s left to keep these prices propped up? The speculators are going to take everyone else down with them, responsible or not.
Question about “Option Mortgages”
I was just curious - how does the option mortgage work with respect to minimum income? Does the mortgage broker qualify you on the interest only number or on the lower option number? Do they max out at 33% of income or 40% of income? (I am just wondering - I am not thinking of taking out such a loan).
The DTI ratio varies…but it doesn’t really matter when there is ’stated income’.
Look at the ‘popular posts’ on my blog and you will find several on the option-arm.
Most usually qualify on the I/O or fixed payment…but again, there are a million different moving parts and exceptions that can be made. Not a black/white answer to your question. Lots of companies with lots of loan programs…no 2 are exactly alike.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Can someone explain to me why any bank or lending institution would lend money on “stated income”? How hard is it to verify income? And what yahoo thinks lending money to someone who can’t verify their income is a good idea?
Just curious
“Can someone explain to me why any bank or lending institution would lend money on “stated income”? How hard is it to verify income? And what yahoo thinks lending money to someone who can’t verify their income is a good idea?”
that ‘yahoo’ lender is a guy in a sharkskin suit who’s successfully transferred the risk on those loans to someone else — e.g. robert cote — by packaging them as mbs (mortgaged backed securities) of different qualities. i’m sure robert only bought the highest quality aaa ones. but someone’s got a lot of bad paper that will be just confetti after those loans go bust.
or even, worse, they won’t go bust, but will be bailed out — at taxpayer expense. in either case, there’ll be A LOT of properties for sale at bargain prices for a long time to come. many of them will have trees growing through the roofs, though.
They were originally intended for self employed people with good accountants who got to write off a significant chunk of their income to minimize the amount of taxes they would have to pay. The resulting tax returns would show a much lower adjusted gross income which did not really reflect how muych was actually made that year because of such write-offs.
Hence the self-employed would have had a harder time qualifying for a mortgage if the lender were to base their income on the tax returns (as there were no paystubs or W2s to go by).
The lenders realized they were missing out on a significant portion of the public and decided to get creative…… then stupid….. then deranged.
In other words, keep one set of books for the IRS and another for your banker.
In this case the Mtg Broker saves the business-owner the trouble of keeping two sets of books.
Actually, if you structure the business correctly you can legally and ethically write off a lot of your income. One example is a home office. When I buy my home I can spend an extra $100,000 on the home to replace the office I now rent for $720/month. In addition to interest I can write off insurance, property taxes, utilities, HOA’s fees, remodeling, etc. applicable to that percentage of the home used (space 100% used for business of course - not sarcastic - big audit area.)
By taking interest and property taxes on the Schedule C instead of the Schedule A I save 15.3% in Social Security taxes. It also makes my income lower - thus while I have the $720/month to put towards my house payment my taxable income doesn’t reflect it. Thus, the need for stated income. Lots of rules and limitations and a HUGE audit area - but if honest on your taxes a great one to take.
I will mention this later but if you want to understand taxes I strongly recommend the H&R Block taxes course. It’s 6 hours a week for 10 weeks so it is quite a commitment but well worth it. You will understand taxes MUCH better after taking the course. (However, unless you have a very experienced preparer I don’t necessarily recommend them for tax prep. If you take the course you’ll see they try to recruit anyone who passes - not just the best and brightest. They need bodies during tax season and the lower levels just follow the software - you can do that with Turbo Tax.) But the class is great.
In an appreciating market, if the “owner” can’t make the payments, who cares? Foreclose, claim the appreciation, pay off the investors, everyone wins (except the “owner”, but who cares about that sucker.) Now if the market turns, that’s an entirely different story.
ot
condo developers confidence index crashes from 61 to 32
http://immobilienblasen.blogspot.com/
U.S. 2Q APARTMENT RENT INDEX RISES TO RECORD 85.0:
U.S. HOME BUILDERS VERY OPTIMISTIC ABOUT RENTAL APARTMENTS
http://immobilienblasen.blogspot.com/
JMF, From the same blog above
” At subprime lender Fremont General, the amount of home loans repurchased and re-priced reached $238.4 million in the second quarter, up from $67.7 million in the year-ago quarter and $107.7 million in the first quarter of this year. The Santa Monica, Calif., company said it had cut back on “certain higher loan-to-value products and lower FICO” loans during the second quarter to reduce early payment defaults and thereby loan repurchases from investors. ”
…Investors ?? Can you see it now? How many investors are going to be crying that they didn’t know their fund was even invested in these?
That should pump the CPI to new heights. The day of wreckoning is getting closer for those ARM holders.
“A recent search of Craigslist.org’s San Diego’s real-estate listings for ‘motivated seller’ yielded 77 listings. ‘Must sell’ turned up 68. Another 21 listings appeared in a search for ’short sale.’ Some of those desperate-sounding sellers are probably agents like him, Faulkner says.”
Funny–I tried repeating these searches on SanDiego.CraigsList.org, and got:
- “Motivated”: 418 listings
- “Short Sale”: 51 listings
- “Must Sell”: 117 listings
Either things are getting worse very quickly, or Faulkner was understating the results. Or both.
Jon
SFH sales are down 17 of the last 18 months in Massachusetts and the median price of SFH’s and condos is also down…..
Those 10% reductions they’re bemoaning in the Portland article are just the beginning.
’ Some of those desperate-sounding sellers are probably agents like him, Faulkner says.”
Realtors have had the inside track in snatching up properties for themselves before even going to market with the added benefit of not having to pay the standard commission. My friend who is in the RE business knows or has heard of many Realtors holding 2, 3, 5 or more properties. Huge carrying costs in a tanking market coupled with RE job loss or at least a substantial decrease in income is going to be rather unpleasant for that lot. No wonder they talk up the market no matter what the realities are. Desperation conveys.
Rainman, you are exactly-100%-right-on-the-money.
I don’t know how many people with RE licences down here who have been making most of their money in the “investment” side, not by representing clients. Makes you wonder how the term “agent” is even being used.
“The price is down to $427,000 and, at a recent open house where Ray raffled football tickets and a spa day, 15 groups of potential buyers showed up on a 107-degree day. But it still hasn’t sold.”
Heh, they just showed up for the free tickets and spa. But to buy the house, forget it.
Folks, on Sunday I drove thru some of the worst bubble areas in AZ…Pinal County….this included San Tan, Queen Creek, Anthem, etc….it was absolutely mind-boggling…even to me, who believes this state is some deep doo doo. HUGE number of homes for sell. HUNDREDS of open houses. BIG subdivisions stopped in their tracks. I spoke with a planning and zoning member and they are accepting NO new building permits, none. He said it will take at least 10 years to clear out the “mess”.
The whole scene was something out of a Kubrick movie…very surreal and scary. On each corner, there were sign twirlers, I am talking 7 or 8 on EACH corner! I’ve lived in this state my whole life and have constantly bemoaned the sorry state of affairs as section after section of land was developed starting in the 80’s…but, this…I’ve got to say is SO BAD, i can’t adequately describe it.
And this is just one county. Compound this by several others in AZ, and add to the 100’s of more areas in the country. There is a very bad situation developing, even worse than I (a confirmed bubble believer) could have seen coming.
Modern age ghost towns? They can open a “bubble museum” and give tours of abandoned subdivisions and homes where the ghosts of home flippers haunt the halls.
The west has a great tradition of ghost towns.
Ever been to Bodie, CA, near Mono Lake on the east side of the Sierras, it is a great example of a ghost town.
Thanks for the report. I really thought that this time the builders would use an approach that approximated the “just in time” approach used in (other) manufacturing industries, so as not to get caught with an over abundance of product, as the builders in the last downturn did. Guess not!
Affordable housing for everyone!
PriceDoubt, I’m from California, so you’ll have to enlighten me…
…what is this “Affordable” — “Housing” — of which you speak? I have been told that exists Only in Legend.
PBS should do a documentary on this. Imagine rows and rows and streets after streets filled with for sale signs. Like a cemetary. Bring your camera, your camcorder, record this once in a life time event for posterity.
What a shock:
“Stockton landed on the top 10 list of the nation’s cities with the highest foreclosure rates in the second quarter, according to a report released Wednesday.”
“The Central Valley city was No. 8 on the list, with 1,228 homes in some stage of foreclosure. That’s 1 of every 154 homes, or 2.3 times higher than the national average, according to RealtyTrac, an online marketplace for foreclosure properties.”
“If there’s a little glitch in the market and an owner loses a job, there’s no wiggle room,” said Dave Konesky, a Realtor with Prudential California Realty in Tracy. “Values are not rising like they were, so you can’t just go out and refinance.”
Source: Inside Bay Area (California), August 10, 2006
Did anyone listen to KPBS San Diego this morning? I didn’t catch the 9:05AM “These Days”. It was about San Diego RE. Maybe it’s on their pod-cast? They presented it as: “Is there a bubble or is this just the normal slowing in the summer months?”. What slowing? I thought May to August was the strongest season? So now we have back to school slowing, holiday slowing, spring slowing and summer slowing…… hmmm, why not just call it slowing?
Check out the KPBS “Full Focus” archives, some excellent SD Real Estate melt down footage. It also does a segment on “Human Directionals”.
Here it is. It’s a big file: 11.5 MB.
Thanks!
“Some lenders are great with it and others, you just beat your head against the wall and say, ‘What’s wrong with this guy?’” Agents must make the case that a foreclosure could cost the bank even more. Since foreclosures yield no commissions, agents are motivated to achieve a short sale, in which the mortgage lender pays the commission.
That explains alot.
I think some super-model should come out with a designer cologne or perfume called “Desperation”, in honor of the bubble.
A new fast-food joint - Stucco-Bell.
The wife and I had one of our clearest views into the impending downturn this past weekend in North County San Diego. Went to the “Bay Collection” development that is close to completing its final sales of new homes. We had first visited two years ago when we were relocating from L.A., when prices were “from the mid-900’s.” In actuality, with upgrades, landscaping and lot premiums, most homes were $1.1-$1.3 million. Not for us.
Since moved from L.A., selling our house in October 05, and renting a nice place by the beach in North County (for a fraction of what payments are on recent surrounding home sales). Went back to the Bay Collection Sunday when we saw steep discounts on the MLS.
They have a list of 20 completed homes for immediate or very quick close of escrow. We were let in to see two of these homes (both listed at approx. $1.2 mill) by their realtor/rep, who told us before we got out of the car that we would be doing them a favor by closing escrow on one of the houses by the end of September. In exchange, they would be willing to do us a favor, whether that be a buy down of our interest rate or money off the price (the house is already loaded with “free” upgrades and landscaping at the listed $1.2 price). I told her we’d be potentially interested in a discount, but she pushed the rate buy down, explaining that “young people like yourselves often benefit more from the lower rate, when a price discount only works out to like a $35 a month payment decrease.”
I told her that we’d seen their houses before, and they are nice, but there is a lot for sale out there. She quickly agreed, and said they understood there is a lot of competition and that the market is saturated. She told us we were smart to sell and rent, and had saved ourselves a lot of money already because of it. She confessed that she had purchased 18 months ago. “Imagine that, me being in the industry, and I buy at the top of the market.” I told her I am a pretty active reader on RE, and it didn’t surprise me too much. She was surrounded all day by other people doing well in a great market, and its easy to start to believe the collective optimism. She didn’t give my theory too much creedence, and instead suggested she bought at the top because she “was too busy” to go through the long process of buying a house, like getting outbid and putting in multiple offers. I didn’t understand her explanation, but it seemed like a sensitive subject and I get no pleasure in pointing out other people’s failings to their face.
House was nice, on MLS they are offering up to $100,000 off as a starting point, and most of the sales in the last 8 months happened at least $100k lower than asking price, so they have further to come down. Couldn’t possibly spend more than $900k on it and feel any safety in the investment at all, knowing the builder is going to keep slashing prices, and seeing all the brand new hummers and escalades in the neighborhood, knowing those debtors would be controlling our comps.
On our way out of the complex, we saw an open house of the same model on a bigger lot, but in a worse location. That was being offered at $950k - $1.05. The guy paid $1.05 8 months ago, and had spent at least $25k making the house $50k less valuable through some terribly planned and executed “improvements” like added walls and do it yourself wine cellar. Listed it at $1.1-$1.3 for two weeks before slashing the price. Ouch. With costs and broker commissions this guy is going to be out at least $100k, and could be much worse. Of course, he does have a beautiful Mercedes in the garage, so hopefully that is some comfort.
Sorry to go on so long, but one of the most concrete examples we have seen of 20% discounts (when you add in landscaping and upgrades and lot) since two years ago.
“[...] Vince Rizzo, broker for HungryAgents.com [...]”
Wow. Go check out that site for a minute. My schadenfreude meter went off the charts.
“I think some super-model should come out with a designer cologne or perfume called “Desperation”, in honor of the bubble.”
How about this one here:
http://www.engrish.com/detail.php?imagename=deeppresso.jpg&category=Drinks&date=2006-08-07
LOS ANGELES LEAST AFFORDABLE HOUSING MARKET IN U.S. INDIANAPOLIS MOST AFFORDABLE HOUSING MARKET: NAHB
U.S. 2Q HOUSING AFFORDABILITY INDEX FALLS TO RECORD LOW 40.6
http://immobilienblasen.blogspot.com/
short sale = 1099 passive income from forgiven debt = tax liability down the road. The bubble is the “gift” that keeps on giving! IRS recently started ramping its contracted use of outside collection agencies.
(the conditions that were present back in the 1980’s crash aren’t there anymore.)
Sure they are. The price is too high, and too few people can afford it.
I say that even though (unlike Cote) I think viable urban places are rising in value relative to their suburban counterparts, and the city is in very good shape. Even so, it is overpriced. Something valuable can be overprices as easy as something with low value.
When I’m out bicycling around Tucson, I like to play a game called “Count the ‘For Sale’ Signs.”
On a recent ride that totaled 11.2 miles, I counted 35 signs, plus one attempted condo conversion of a 1950s/1960s-era cinder block apartment complex. The condo conversion didn’t appear to be going well, as the complex looked to be empty.
That’s nothing! I went on a three mile walk here and counted 47 SFH ‘for sale’ signs.
“In a couple different instances now, I’ve read about homeowners in Michigan who have had their homes on the market for over 1 year.”
My brother is one of these. I warned him a while ago not to chase the market down, but that’s exactly what he’s done.
“Real-estate agents are giving stunned sellers crash courses in marketing. In the toughest markets, including the Florida cities, Detroit, Atlanta, Dallas, Stockton, Sacramento and San Diego, incentive is the name of the game. One Florida agent offered a Mercedes-Benz with a house sale. Others dangle vacations or gift cards with thousands of dollars in gasoline.”
Hey A-hole, How about just lowering your oner inflated price?? I know it is an extreme concept.
It’s not a standoff between buyers and sellers, It’s an only sellers market. Buyers have evaporated.
“This seaside town (population 64,000) attracts a large number of retirees and vacation-home buyers, who together account for nearly 40% of the pool of buyers.”
Portland indeed attracts a large number of retirees and vacation-home buyers. However, most of the “vacation homes” are snowbird residences where part of the year is spent in Maine and another part in places like Florida. Most of the snowbirds we know spend most of the year in Maine and about 3-4 months in Florida, but the split varies considerably and sometimes it varies year to year. Those who spend more than just the summer months in Maine are usually retired with grown up kids which allows them the flexibility. Many are well established financially, although in rural Maine it’s amazing how many folks of very modest means manage to get to Florida trailer parks each winter.
In the old days I’d say the snowbird group was not your typical vacation home owner that sells the vacation home the moment financial trouble hits. That was because pensions and bank interest assured that fixed rate mortgages would get paid. But in 2006, many retirees haven’t saved enough which keeps them in the stock market - high potential and high risk. And I would think retirees may also be at the mercy of readjusting ARMs, although I’m not sure to what extent.
So this will be a real interesting one to watch.
Where you’ll see an incredible number of vacation homes go on the market and plummet in price is at the overbuilt ski areas like Sunday River where hidden inventory abounds. When you see that 75 lots in an 80 acre lot ski area development are “SOLD”, don’t believe it for a second. They’ve been sold alright - to builders and investors who are about to be immolated.
We have been looking to buy a house in the Portland area for the past six months and it has been amazing to see the what the seller is asking for. Usually the seller is asking over 10% from last years overly inflated comparable sales. I can not justify buying a house considering that the average spec house in the Portland area (4 bedroom house 2400 square feet, no upgrades ) is going for half a million. Houses in this price range are lucky if they have granite or appliances. The average salary in the area is $34000. The jobs in the area do not justify the housing prices. Most large companies are fleeing the state as we are #1 for taxes in the USA. Who is going to pay a $3000/month mortgage and this includes a $100000 down payment . The first time buyer is completely priced out of the market. It just amazes me on sellers asking prices. One house we looked at was asking for $499000 and railroad tracks were within 30 feet in your backyard. It has been reduced to $475000 after being on the market for 6 months. It is worth about $250000. Another house was asking for $524000 and the highway was in the backyard. A third house we looked at was asking $470000 and it was located in a center of sand pit. These were all new homes and did not include appliances. I wouldn’t even consider buying a house until the prices are more realistic. Based on the research we have been doing we have decided have signed another year on our rental lease. I have a feeling I will be renting for another two years before the sellers asking prices are more realistic . The just reduced price of 10% not significant to buy right now.
In tow years prices will have likely dropped, but what will have really dropped is prices in real dollars. The stock bubble spawned the housing bubble. Now a freefall in absolute home prices will be escaped because of coming inflation caused by manipulation of oil prices. After inflation, including higher than usual income increases, those home prices will seem more affordable.
What is totally driving the Portland price boom is people from out of state - retirees and people who have been able to move their well paying jobs with them. This latter group includes both telecommuters working for corporations, entrepreneurs with their own small companies and part time consultants. Portland and its suburbs are teeming with 50 year olds from Mass, NY, California etc. who have been forced out of their corporate jobs and are returning to the same industries as consultants. Many make less money than what they made in the rat race but don’t care because to them Maine is dirt cheap. They also bring along their savings and home equity.
What are low prices to them are huge prices to most native Mainers. Even those staying put are affected when valuations go up and they can’t keep up with property taxes. Maine now has one of the highest net-inmigrations in the US (# 6 I believe) and demographics say this trend will continue for at least the next 10 years.
I did notice a lot of “refugee”s at open houses. If out of staters can’t sell their home in Mass who’s going to buy a house in Maine? It will be interesting wait and see what happens here.