‘That Soft-Landing Is Looking Harder By The Day’
From the Baltimore Sun. “The five-year housing boom that pushed prices up 80 percent in the Baltimore region ended last fall, but as recently as a couple of months ago, it appeared that the market was downshifting for a fairly soft landing. Now, as the market heads into its historically slower months, that so-called soft landing is looking harder by the day.”
“More than twice as many homes are for sale as there were a year ago, and they’re taking significantly longer to sell. Markdowns can be found across the region.”
“The abruptness of the return has taken sellers and real estate professionals by surprise. And on top of it all, sellers only now starting to recognize that they can no longer expect to get more than the neighbor did a few months back.”
“‘There are a lot of homes for people to choose from, a whole lot more than there would have been a year ago,’ said Mooney, who never thought his own would sit this long. And as co-owner of O’Conor & Mooney Realtors in Lutherville, he’s not an uninformed seller. ‘The buyers..don’t feel a sense of urgency.’”
“Average prices fell in nine ZIP codes across the metro area, according to the MRIS. Sales continued to plummet. ‘We’re finding now that people really do have to reposition their properties on the marketplace to get interest from buyers, and sometimes that does mean pricing under the asking prices of last year,’ said Judy Plowman, president-elect of the Harford County Association of Realtors.”
“‘Prices are already declining,’ economist Mark Zandi said. ‘Effective prices are declining as sellers do things to get the transaction done. I think market prices will start falling, too.” “The number of homes on the Baltimore-area multiple listing service, which doesn’t include for-sale-by-owner or most new construction, more than doubled in the first six months of the year versus the same part of last year, returning to 2000 levels. At the same time, sales fell 16 percent.”
“For every home sold during the average month in the first half of the year, there were about four on the market at the end of that month, compared with 1 1/2 the same time last year. That’s the highest since the first half of 2000.”
“When Tricia and Ryan Clendaniel bought their house in the Anne Arundel County community of Arnold in 2003, they rushed to bid the day after the for-sale sign went up. Now they’ve been trying to sell for two months. They’ve cut $30,500 off the asking price for the recently remodeled Colonial, to $429,900. Price drops are the new trend in the neighborhood.”
“‘As we saw people coming down, then we would come down,’ said Tricia Clendaniel, whose family has been living with relatives since her husband was transferred to a job in Delaware. ‘We will just have to wait it out until it sells.’”
“Agents believe that some homeowners, nervous that the market is headed for a fall, want to cash out. ‘Everybody had that idea, I think, in the same month,’ said Stephen Luckett, an agent in White Marsh. That appears to be particularly true for owners of homes worth at least $500,000. In an average month in the first half of this year, there were 9 1/2 listings for every home sold in that price range.”
“To entice buyers, owners have begun agreeing to incentives. Karen Hubble Bisbee is offering a $100,000 bonus to the agent whose buyer seals a deal on one of her listings, a $3 million home in Cockeysville. And cuts are more common now at the higher end, said Katie E. Grove, president of the Greater Baltimore Board of Realtors.”
Two related links:
‘The latest home sales figures for Charlottesville show the nationwide chill on the once hot housing market has arrived, leaving real estate watchers to wait to see if the sales slide will result in a more balanced market or a bursting bubble. According to figures released Friday by the Virginia Association of Realtors, the area’s pending home sales for the month of July are down 23 percent.’
‘In the past five years, housing prices in Fairfax County have grown 12 times as fast as household incomes. There is one clear solution to the affordable-housing crisis: a real estate crash.’
Everyone simply has to read the following power point presentation from David Lereah. Looks like the NAR just owned up to the obvious:
http://www.realtor.org/Research.nsf/files/Leadership%20Summit%20(August%202006).ppt/$FILE/Leadership%20Summit%20(August%202006).ppt
Best part of this slide show is the “bubbles” in the background of all the slides!
That Washington Post article about Fairfax County is maddening. It does not attempt to explain why average suburban houses are unaffordable and pushes gussied-up welfare programs as the answer. The reporter rejects the notion of a steep real estate free-fall by saying that such a fall would reduce construction and keep houses unaffordable. And the Post actually hired this guy? There is plenty of housing to go around in this area, and now that the specuvestors that clogged the market have become desperate sellers, why shouldn’t there be a freefall?
I think that DC-area housing will be comparatively affordable again in about 3-5 years, outside of a few neighborhoods that have gentrified and become permanently high-end.
‘“‘Prices are already declining,’ economist Mark Zandi said. ‘Effective prices are declining as sellers do things to get the transaction done. I think market prices will start falling, too.”’
He makes a false distinction between “effective price” (presumably the sale price adjusted to subtract the value of incentives) and” market price” (the posted sale price which hides the fact that the discount-adjusted price would be much lower). His terminology is thus misleading, as what he calls “effective price” is actually more in line with any reasonable definition of market value than his “market price.”
“I think they’ll start ?”
dude, they started last year
Contemporaneous forecasting (predicting that whatever is happening right now will happen) is a sure-fire way to look smart and get your forecast right 100% of the time.
Just ask Gary Watts!
“When Tricia and Ryan Clendaniel bought their house in the Anne Arundel County community of Arnold in 2003, they rushed to bid the day after the for-sale sign went up. Now they’ve been trying to sell for two months. They’ve cut $30,500 off the asking price for the recently remodeled Colonial, to $429,900. Price drops are the new trend in the neighborhood.”
LOL.
Unfortunately, Anne Arundel County land records don’t seem to be available on the web. But, lemme guess, a toxic waste 3/1 ARM is a suspect in the case and Tricia and Ryan are starry eyed, Toyota Sequoia-driving yuppie “Flip This House!!!” yuppie garbage.
This country is so hosed.
Hey Ryan and Trish. Drop the price $200k, and call me in the ‘morn. Ya’ll have a good day.
Oh, the poor Clendaniels. They bought that house for $269,900 in 2003 and now they’re having trouble selling 3 years later for the *discounted* price of $429,900. Cry me a river…
Pretty much what I expected when I read that. Sounds like the poor saps down here in SW FL that bought a house 3-4 years ago and now “can’t sell it”. Gotta get that six-figure profit!!!
Don’t forget, it says the house was “remodeled”. They probably spent $40k on SS appliances, and bought 2 new cars on the $130k HELOC.
1- taken sellers and real estate professionals by surprise.
2 - sellers only now starting to recognize.
3 - More than twice as many homes are for sale
4 - Average prices fell in nine ZIP codes
5 - pricing under the asking prices of last year
6 - number of homes more than doubled in the first six months
7 - Agents believe that the market is headed for a fall
Sorry, I tried to find anything positive in the article -I failed.
It was a great Party………now for the hang-over
Some of these people are going to drive home drunk. Unfortuately there is a sobriety check point up ahead!
For some, there’s a cliff ahead.
-
. “Arithmetic on the way down and geometric on the way up.” - Say you had $10,000 in a fund at the peak of the bull market and the fund lost 50 percent during the bear market. That left you with $5,000. Then, in the past year, your fund gained 50 percent. So now you have $7,500. In order to recoup your original $10,000 the fund would have had to gain 100 percent.
John Doe had a perma-bull poster at his blog, post something to the affect of: “You idiots, you will sit around waiting, RE has gone up by 300%, do you think you will see a 300% decline.”
That was classic. That would be a true buyer’s market. Pay me 2x of today’s value to take the deed off your hands.
“Agents believe that some homeowners, nervous that the market is headed for a fall, want to cash out. ‘Everybody had that idea, I think, in the same month,’ said Stephen Luckett, an agent in White Marsh. That appears to be particularly true for owners of homes worth at least $500,000. In an average month in the first half of this year, there were 9 1/2 listings for every home sold in that price range.”
Well, that’s one factor but they fail to mention the lax lending standards, the poliferation of I/O loans in the last 3 years and speculation/flippers. They tell only part of the story.
Once the regular Joe and Jane get the other factors and study the fundamentals, this market is burnt toast.
I’m gut-turned scared about what is going to happen.
Kind of OT, but I’ve seen this “scared” a couple of times. Scared is for children. OK, so maybe it’s just a word, but “scared” adults need to dump the religion they’re using.
I don’t get your logic. Adults should never be scared or fearful? Maybe in a perfect world, but ours is imperfect.
From the story and this is why I hope every one of these toads loses their ass:
Tom Mooney figured $645,000 was a reasonable price for his five-bedroom Colonial in Towson - $15,000 more than the last similar house in his neighborhood sold for.
That was three months and four price drops ago. He’s asking $575,000 now, facing a two-mortgage future if a deal doesn’t materialize before he settles on his new home next month.
What is the deal with this 2 mortgage crap? WHy is it so hard for people to get their heads around the idea that you need to sell one place before buying another? Is “contingency” that hard a concept?
Contingencies are why so many are falling out of escrow now. If everyone has contingencies then when the market slows, it screeches to a halt. The only sales now are being made without contingency.
Because Sellers a still so spoiled they won’t accept offers with contingencies. This happened to me when I moved to San Jose in 2000 during the height of the prior dotcom induced housing boom. I had to pretend I had $130K in cash to get the offer accepted when in fact I was waiting for my house in NY to close. It was scary but I had no choice, there were damn few places for sale and they were subject to bidding wars like I was.
“To entice buyers, owners have begun agreeing to incentives. Karen Hubble Bisbee is offering a $100,000 bonus to the agent whose buyer seals a deal on one of her listings, a $3 million home in Cockeysville…..”
Finally the sellers get it !!
Toss a larger bone to my agent and you’ve got a deal! The sellers have finally figured out that the lack of interest was that our agents were not making enough off the transaction…….. This is the kind of powerful and creative thinking that will get this market moving again!
( I need an aspirin ……)
Yeah, incentives to lie to buyers, offered by those intent on cheating…how lovely.
I like the town name though…is it pronounced “Cocky-sville” or “Cockeye-sville”?
I think there might have been an implication that the sellers were not aware, or may not have been aware of this incentive ……. MY A$$ !!!!!!
It was named after John Cocky. I lived there as a child and can’t imagine a $3 million dollar home there.
Blogpower! Isn’t it amazing that no matter how small a town is when mentioned on this housing bubble blog, someone reading chimes in and says “I grew up in this town”?
That means two things: 1. A whole lotta people read this blog and 2. You have to be careful about slamming the names of some of these places because you could offend a fellow blogger.
By the way, I’m from Intercourse, Pennsylvania. (just kidding)
And yeah, it’s pronounced Cockys-ville, as in people who buy ludicrously overpriced houses one year and expect to make $1 million profit a year later.
There’s already a $180k bone there. How much more do these people need. Maybe some realt-whore refused to list it for that much.
Karen Bisbee is offering a $100K bonus to THE AGENT if they sell one of her $3 million properties? That’s on top of the commission involved in a $3 million transaction?
How about just…. cutting the price so the buyer gets a better deal… forget it. I forgot, Realtors know best!
Right, $100,000 bonus to agent?
$100,000 lower price might help sell the overpriced place.
If there’s that much profit built into a $3.1 million sale that the owner can afford to spiff the agent $100K, I suggest a 2.1 million offer just for starters.
Feels good to be heading towards the driver’s seat again!
$1M
“To entice buyers, owners have begun agreeing to incentives. Karen Hubble Bisbee is offering a $100,000 bonus to the agent whose buyer seals a deal on one of her listings, a $3 million home in Cockeysville.
And yet the rubes still think the realtor is acting on THEIR behalf?
Does this $100,000 kickback have to be disclosed to the buyer? If I was stupid enough to be buying a house right now and found out after the fact that my agent received that kind of $$$ to guide me into some overpriced piece of crap I would be livid.
seller and seller agent could care less, if you are a livid FB.
“‘As we saw people coming down, then we would come down,’ said Tricia Clendaniel, whose family has been living with relatives since her husband was transferred to a job in Delaware. ‘We will just have to wait it out until it sells.’”
The relatives her family is squatting with while they “wait it out” may have other ideas. Fish and company both stink after three days.
- The name Tricia means ‘Noblewoman’. Her mother thinks the world of her and is very proud of her accomplishments. Her mom had doubts about Tricia’s husband - but after they multiplied their home investment, she is also proud of Tricia’s hubby.
They can come and ‘wait it out’ at mom’s.
2007 is going to be a watershed year. I think we have been in a low grade recession since 2001 and minus the phoney housing bubble, next year we will be using the D word. It was fun while it lasted. Best wishes to everyone.
do you think there’s a chance the equity markets have discounted the housing bust ?
They’re starting to but it’s in about the 2nd inning, IMO. The usual rally suspects are rallyling (and being pumped) by Crames. I’d like to see a fall anticipation rally in the specialty retailers to get short in anticipation of horrendous Christmas sales as the FB’s finally have to accept the fact the housing ATM has run dry.
Maybe the Ghost of Equity Past will pay a visit!
I meant usual “recession” suspects. Sorry.
i don’t believe that the broad market and economy must decline in tandem with RE.
No chance. Too many bullish experts have peddled rosy fantasy scenarios continue to circulate on autopilot through the media channels. Only a small handful (including insiders like Robert Toll) have seen the handwriting on the wall and have openly shared their views.
Willie, I agree. This has been a false economy since the Fall of 2001. A debt-based growth only in real estate and a drop in unemployment only to provide jobs for construction people and the lending industry. This has all been due to the Federal Reserve’s loose money policy and the 1997 capital gains tax break on home sales. The Fed claims the real estate bubble is due to the bursting of the tech stock bubble. WRONG!
D word? dream on. maybe a *real* D with a growing economy.
Home prices are going to softly decline 30 to 50 percent depending upon where you live.
Well, you know what happens to a military target when they use the term “soften it up”. You don’t want to be there!
Oh, this is funny. Tom Mooney, the guy who thought it was reasonable to price his place 15K above recent sales is a REALTOR. I thought these losers were refusing listings where the sellers won’t sell BELOW recent comps. It’s ok for ole Tom though!
I’m not so optimistic about the US economy, because the people that are predicting the economy will be just fine seem to be the same people who were predicting that the housing market would ease in to 6% YoY gains after the “boom”.
Unfortunately, right now in the US housing IS the economy.
meant for comment below vvvvvvv
Here’s a couple of linx for ya:
http://www.businessweek.com/magazine/content/06_36/b3999032.htm
http://www.federalreserve.gov/pubs/feds/2006/200629/200629abs.html
That businessweek article pretty much paints the most optimistic outcome for us all - a relatively strong economy outside of housing, wages rising faster than inflation, and a crashing housing market.
It would be the best possible outcome, but somehow my gut tells me it just isn’t going to work out that way.
This was the fatal flaw behind the NAR’s “the robust economy and employment will ensure a soft landing” argument.
It ignores the fact that the housing market was the source of this “robust economy and employment”.
This is why busts always materialize out of nowhere during what appears to be good times. People overlook the fact that in situations where you have a virtuous cycle, all the positive forces are interdependent. E.g. one cannot separate the housing market from the job market. When the weakest link in the chain breaks all these forces reverse course in unison.
Sorry in advance if this is a double post but I waited 10 minutes and my post never came up on the blog so here it is again. I took this off of the housingpanic blogspot. I couldn’t pass up sharing it with you guys/gals!
Her web site shows that she has a MBA. Umm… OK. Apparently she slept through the lecture on that supply/demand thingy.
Ms. Stuckey’s comments follow:
————-
Dear Mr. Roubini:
I am a Real Estate Broker in California, and I am concerned about the publication of your comments on your blog titled “The Biggest Slump…” that I read referring to your statements regarding a recession in 2007 due to a slowdown in the housing market. References to comments such as these by professional economists are permeating mainstream media, and hurting both Buyers and Sellers alike.
As a Macro Economist, I am curious as to why you would think there could ever be a recession in the US resulting from real estate depression. Rates are still at an all-time low, and people are making more money than ever. There are available channels that were non existent in even 1990 that enable innovation by our youth and boomers alike to support real estate acquisitions. Lay people now have the internet, cell phones, computers, etc. Believe me, I was 19 in 1990, and I had to learn how to use these gadgets. They have improved productivity, which is the backbone of a strong economy. Creativity reigns and innovation will save our economy.
In addition, the global marketplace is expanding more than ever. If the Yuan is pegged to the Dollar, shouldn’t that guarantee inflation? Isn’t it nearly impossible to see prices decline with the inflation that we are experiencing as a result of global expansion?
And what about our innovative capability which fuels productivity? Consider that we have more and more people flowing into the US than ever; that we are still a superpower; that we have educated people living in the US; that we are free, and will not go back; that we are, though spoiled, dedicated to our professions; that we will always change to meet new challenges; and, best of all, we are free to be innovative.
Severe price declines may be imminent for Builders in some areas, but Sellers will not take major losses to get out of making payments on extremely low interest rate loans with even lower tax bases. There will not be a huge depreciation in the real estate market where prime real estate is scarce. Banks will not sell foreclosures at a loss. Banks will not reduce their revenue outlooks. Demand will not decrease with population increase, because everyone needs a place to live. Rents are just as acceptable to Sellers with the flexible financing options available today.
Consider that California comprises roughly 15% (documented only, not counting the sub-economy) of the national GDP. Our average sale prices throughout the state are still up. Yes, up. I think 20-40% in my city, depending upon the neighborhood. Our economy is too great and variegated to fail on merely one count.
Comments such as these are scaring people, and that is why there is a slowdown. It is sad that you don’t write that the availability of housing inventory combined with great interest rates is now enabling Buyers to buy after many years of being pushed out of the market. Builders may have overbuilt in ridiculous areas and cry that they didn’t receive $1.6M, but had to accept $1.2M, but that is their problem. They were too optimistic about the future of development. That does not mean that people have stopped wanting to have a home of their own, a nice tax deduction, and no Landlord telling them what to do.
Sincerely,
Sherry Stuckey
http://www.LuxCoast.com
-
To the Realtors, Flippers, and FBers -
“Listen and understand. The market downturn is here. It can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity. Or remorse. Or fear. And it absolutely will not stop ever, until you are dead.”
(Adapted from “The Terminator” movie)
nice “Terminator” comment
“I can’t lie to you about your chances, but… you have my sympathies.”
From “Alien.” Ash was a realist.
Now THAT brings new meaning to the term “real estate talking head.”
Yes, FBs, that’s not a heart attack you feel coming on when you think about your finances; that’s a foreclosure trying to birth itself through your rib cage.
Or, to paraphrase Ludwig von Mises:
“There is no @#$ing means of avoiding the final @#$ing collapse of a @#$ing boom brought about by @#$ing credit expansion. The only alternative is whether the collapse should come sooner, as a result of voluntary abandonment of further @#$ing credit expansion, or later, as a total @#$ing catastrophe of the @#$ing currency system involved.”
That poor gal obviously drank enough Kool-Aid for a dozen people at MBA school.
“Builders may have overbuilt in ridiculous areas and cry that they didn’t receive $1.6M, but had to accept $1.2M, but that is their problem.”
You mean ridiculous areas like San Jose, LA, San Deigo, Phoenix, Tuscon, Boise, Seattle, Vancouver, Flagstaff, Florida………… all areas where the median incomes don’t support the prices ? Why is this simple fact so hard for Realtors to understand ?
Now THIS is the funniest quote I have seen here yet:
” Lay people now have the internet, cell phones, computers, etc. Believe me, I was 19 in 1990, and I had to learn how to use these gadgets. “
– quote from Shery Stuckey, MBA
Ummm…what exactly does she mean? My guess is she is attempting to state that kids now in the 21st century are BORN knowing how to use the internet, cell phones, and other fancy technologies. Those of us unfortunates born in the last century had to LEARN how. This is surely further evidence of evolution!
As they used to say about Marlboro, there’s a lot to like in this post, but what I like best is “banks will not sell foreclosures at a loss.” Oh, of course not, they’re banks, they’re protected from taking losses, they’re outside the competitive marketplace, they’ll help control the market for us!
They will when the bank regulators come a snoopin’ around. It’s my understanding that ban regulators take a very dim view of REO since they’re an unknown on the ballance sheet. You have only the vaguest sense of how big a liability or asset they are until they actually SELL. And since banks are REQUIRED to have a level of assets covering their obligations a large amount of “unknown” on the ballance sheets makes regulators quite unhappy.
“Comments such as these are scaring people, and that is why there is a slowdown.”
I am a nice person. I don’t yell at people, don’t flame and never try to scream my way to a “win” in an argument. But this woman makes my blood boil. This is our fault? Understanding ratios and how out of whack everything has gotten in the last four years. Studying history and seeing the similarities to this bubble and every other bubble before it. Watching as the average American took on ungodly amounts of debt as horrifically lax lending standards became the norm. Yes, this is all OUR fault.
Per her site: “With over 11 years of experience as a Marketer and Financial Analyst at a Fortune 500 Company, and an M.B.A. from Pepperdine University, I possess the strong valuation, marketing and negotiating skills necessary to achieve your dreams in competitive markets. Ask me about strategies designed for you.”
Well, I thought Pepperdine had higher standards in graduating their MBA’s. Wonder where she was when they were teaching about those pesky ratios in comparison to price/income? Or any type of fundamental analysis? I would never call or in any other harass this woman. But the evil part of me will plan to send her a very nice letter in three years thanking her for explaining to me how ignorant all you people were and getting me into a house immediately. And I will kindly request that she refund me the $200,000 I lost based on her advice.
(No, I will not send it – her clients will punish her enough. But I will daydream about it.)
How ridiculous to assume the TINY percentage of us that saw this coming could reverse the money lust ideology of the masses that saw only instant wealth. If it were sustainable we could not have reversed it. Because 20% a year is not sustainable the market is self-correcting. I have little doubt we are helping it along – education usually will do that – but we did not cause the bubble to pop. If we could have we would have done it in 2003 and the consequences would have been much easier to live with.
When I was in college (early 80s) Pepperdine was considered a joke — at least the Malibu campus. We thought it was basically a school for born-again surfer dudes and surfer chicks. I would think that the MBA program’s run much the same way. Certainly, her list of predictions sound more like catechism than analysis (”There will not be a huge depreciation in the real estate market where prime real estate is scarce. Banks will not sell foreclosures at a loss. Banks will not reduce their revenue outlooks. Demand will not decrease with population increase, because everyone needs a place to live.”)
All she has to do is revise by taking out the “not”s, and she’ll be right on target.
Actually I pretty much thought Pepperdine was a richie rich party school too. But before I expressed that opinion I looked it up on the Business Week MBA rankings where it did not score too badly. Third tier but the first two tiers are excellent schools. And even at the worst of the party schools there can still be an excellent program. Regardless, I think Ms. Stuckey is a vicim of faulty thinking, not faulty education.
“Comments such as these are scaring people, and that is why there is a slowdown.”
I am a nice person. I don’t yell at people, don’t flame and never try to scream my way to a “win” in an argument. But this woman makes my blood boil. This is our fault? Understanding ratios and how out of whack everything has gotten in the last four years. Studying history and seeing the similarities to this bubble and every other bubble before it. Watching as the average American took on ungodly amounts of debt as horrifically lax lending standards became the norm. Yes, this is all OUR fault.
Per her site: “With over 11 years of experience as a Marketer and Financial Analyst at a Fortune 500 Company, and an M.B.A. from Pepperdine University, I possess the strong valuation, marketing and negotiating skills necessary to achieve your dreams in competitive markets. Ask me about strategies designed for you.”
Well, I thought Pepperdine had higher standards in graduating their MBA’s. Wonder where she was when they were teaching about those pesky ratios in comparison to price/income? Or any type of fundamental analysis? I would never call or in any other harass this woman. But the evil part of me will plan to send her a very nice letter in three years thanking her for explaining to me how ignorant all you people were and getting me into a house immediately. And I will kindly request that she refund me the $200,000 I lost based on her advice. (No, I will not send it – her clients will punish her enough. But I will daydream about it.)
How ridiculous to assume the TINY percentage of us that saw this coming could reverse the money lust ideology of the masses that saw only instant wealth. If it were sustainable we could not have reversed it. Because 20% a year is not sustainable the market is self-correcting. I have little doubt we are helping it along – education usually will do that – but we did not cause the bubble to pop. If we could have we would have done it in 2003 and the consequences would have been much easier to live with.
Sorry about the double post. Kept sending me to a “This site is not available” message. Had to close IE and come back in to see my posts if anyone else has the same problem.
Dump Internet Explorer, get Firefox, it works.
Except for when Firefox keeps freezing up randomly and doesn’t respond at all….
Agreed. I use firefox because there are some navigation features that I can’t live without now. But, ever since 1.5 there is a horrible memory leak which will cause not only the browser but your whole computer to freeze. Not sure what causes it but I don’t use it for anything critical now (ie taking a test in an online class.)
Sounds like Ken Star might have some work to do there at Pepperdine.
I have one word for Sherry:
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Holy $%&*. Now there’s a graphic that says it all. I think that will become my new scren saver!
Interesting chart–it appears to understate the 1980s boom by exluding the speculation in unimproved land, but has the advantage of focussing on the used housing stock that most of us are invested in just by owning a house.
Lok. Out. Below.
Ms. Stuckey,
Thank you for your opinions. I hear that economics will become part of the Pepperdine MBA curriculum beginning this year. Too bad you missed it, but it appears that you will be doing a practicum for the next several years in any case.
Regards,
Dr. Roubini
Ms Suckey is why so many people are in trouble. If I was half as stupid as her, I’d never leave my house.
“There are available channels that were non existent in even 1990 that enable innovation by our youth and boomers alike to support real estate acquisitions.”
She is even touting the toxic loan programs that her customers (fb’s) were talked into. What a clown.
“Her web site shows that she has a MBA.”
I’ve got an MBA. I’ve found it to be totally useless. My MBA program had 1 course in economics, and it was basically a review of undergrad econ. My girlfriend teaches more economics to her second grade class.
“Consider that California comprises roughly 15% (documented only, not counting the sub-economy) of the national GDP. Our average sale prices throughout the state are still up. Yes, up. I think 20-40% in my city, depending upon the neighborhood. Our economy is too great and variegated to fail on merely one count”
Hey, she actually comes out and achknowledges the SUb-economy. Can you folks out here in Cal figure that one out?
I will answer it . In LA County. there is a huge underground economy, roughly 25% of all economic transactions in LA are UNDOCUMENTED AND UNTAXED!!!
guess what is fueling this black market sector? Drum Roll please!! Yes, it is THE HUGE POPULATION OF ILEGAL IMMIGRANTS AND FAKE GREEN CARDERS WITH FAKE DOC’S OUT HERE IN LA COUNTY. I KNOW EXACTLY HOW THIS WORKS AND BELIEVE ME, THE LCAL, COUNTY . STATE, FED AUTHORITYS ARE GETTING SCREWED OUT OF BILLONS IN YEARLY TAXES RECEIPTS HERE IN THE UNDERGROUND SCAL ECONOMY.
“Comments such as these are scaring people, and that is why there is a slowdown.” per Sherry Stuckey at Luxcoast
Yes, and comments such as “buy now or you’ll be priced out forever” also scared people, and caused an absurd run-up in prices.
You can’t have one without the other - but, thanks for playing. We have some nice consolation prizes for you.
Like a career change ?
“Comments such as these are scaring people, and that is why there is a slowdown. ”
Way to put the cart before the horse.
(He makes a false distinction between “effective price” (presumably the sale price adjusted to subtract the value of incentives) and” market price” )
He’s using commercial real estate lingo. My real estate research company provides data on “asking rents” and “effective rents,” the latter excluding concessions and tenant improvements.
Who knows. Perhaps this is a permanent addition to home selling. But I hope not. As someone else pointed out, that Lexus is probably not going to worth as much to the average buyers and the money it took to buy it. Unless the car industry is so desperate that it sells tens of thousands of cars & SUVs to desperate realtors below comps for two for one deals — excess cars with excess homes.
Much like “Suggested Bidding Range” this bit of subterfuge and attempted market manipulation will go away once buyers start openly and deresively laughing at sellers prices and their agents. Those who don’t plan to buy now can hurry the process along by attending open houses and making some loud comments about the price and condition of the property. Parting shot to Realtor “You gotta be kidding”.
My sentiments exactly Mo Money! Buyers have been far too passive throughout this bubble. I would love for future prospective buyers, while attending open houses and after hearing of the wishing price, to loudly remark “HAHAHA, are you kidding?! I don’t think so!!” And while laughing on the way out with spouse, “Can you believe what they are trying to get for that place?! AAAAHAHAHAHAHA!!”
Just today, as we were doing some more RE “trench work”, a Realtor asked what I thought of a house, and I replied, “It’s waaay overpriced!” She just laughed nervously and mentioned that prices are “very negotiable” right now.
Let’s keep up the pressure!
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Ben - Thanks for everything, it is all appreciated, but WHY does it take FOREVER for posts to show up on this Blog? I think this is the slowest site on the internet. Are you personally screening every post? Or is it the host/server? The software? I thought you changed hosts/servers recently? I think this Blog would be a lot better if it didn’t so often take upwards of 1+ hour for posts to show up.
A friend is retiring from a civil service job in NY City and asked me where I thought he should retire to. He wants to stay in the U.S. in a place with a very low cost of living and he doesn’t want cold winters. He’d also like there to be a college nearby where he might take courses.
Any ideas would be most appreciated. Thanks.
Austin,Tx
I doubt he could tolerate the rednecks after living in NY all those years.
Plus, Austin is not cheap. I’d suggest Gainesville FL or Birmingham AL
txchick57!
I need your help. My sister wants to bid $800k in Helotes.
Here is the house: http://tinyurl.com/mbjsr
Wow, nice house but I don’t think 6 years in honolulu and 1 year in Boston gives her the “Texas” perspecitve. What can Ido to scare her straight?
2006 Taxes on that spread are over $13 grand/year
http://www.bcad.org/clientdb/Property.aspx?prop_id=241863
And Helotes is running out of water.
I was down in that part of San Antonio a couple weeks ago and was amazed at how much new construction is going up along the 1604. More new construction in one spot than any place I’ve seen in the DFW area except for maybe Frisco.
Sounds like one of those bull market geniuses who is just begging to have someone take their ill gotten gains away. She’s come to the right place.
Ken, The 13K a year property tax you are referring to is based on the current owner’s tax basis. If this lady pays 800K her tax will be a MINIMUM of around 20K (2.5%) and if this part of Helotes is annexed into San Antonio, then she could be looking at close to 3.5% or a whopping 28K!!! Of course, if she has a huge income that she isn’t paying state income taxes on, then maybe it works out for her, but it sure doesn’t work for a guy like me.
But how can that compare to ‘Flores Country Store’? What a great place. Hope it’s still there.
North Carolina has some nice universities, and it’s an inexpensive place to live.
The Triangle area (Raleigh-Durham-Chapel Hill) is home to NC State University, Duke University, and UNC-Chapel Hill. There are a lot of people who’ve moved from the northeast here.
Not to mention Wake Forrest, the alma mater of the king, Arnold Palmer, along with Duke, State, and N.C. is a travesty.
east stroudsburg,pa
He might try checking small towns at random in appealing areas, using price as a guide.
For instance, a town I lived in as a boy has lost a third of its population since the primary industry (mining) dried up 20 years ago. Two of the four elementary schools have closed, and I’ll bet it’s because the young people move away and raise families elsewhere.
Houses there are cheap — though not as cheap as they should be, or (I’ll wager) not as cheap as they will be in a year or two. Quiet place. Serious crime is practically nil, and a dollar goes a long way. There’s hunting and fishing for the locals, but no tourist industry.
The most expensive house in town currently for sale is $275K, and some dreamer is trying to flog a lake cabin for $400K — but that’s an exception.
Take a look at Seattle. Winters there a pretty tame by NY standards — hell they’re tame by DC standards. Several colleges in the area, and relatively cheap housing within driving distance of them all. And in a few years, housing will be even cheaper!
relatively cheap housing?? I don’t think so. In the Seattle area, to get anything reasonably priced you’re looking at a charm-less condo 40 min. minimum commute into town or a SFH that’s 45 min or more into town. Tacoma has more reasonable prices and some good colleges but only a couple of neighborhoods that have any charm.
I’ve been researching the area, and I can find all sorts of dirt cheap rentals within a stone’s throw of the city — or even in the city.
But perhaps my perceptions are skewed from living in NoVa.
Nashville Tn
Hmmmmmmmm. Looks like Ernesto is going to take out whats left of the ” Buyers market “
I doubt he could tolerate the rednecks after living in NY all those years. Plus, Austin is not cheap. I’d suggest Gainesville FL or Birmingham AL
Bwah haa haaa
Gainesville and especially the surrounding area has a LOT more rednecks than Austin. And I suspect it’s more expensive. There are plenty of reasons not to move to Austin (traffic, overcrowding) but rednecks aren’t one of them. I used to go to the Gainesville area every spring to do cave diving as the limestone caves in the area have world class diving. But the backwoods areas around there are as redneck as any place I’ve ever seen.
Based on the very limited criteria provided, I’d say Las Cruces New Mexico might be worth a look. My wife interviewed for a job there a couple years ago so we spent a few days there and I killed time looking at real estate. It’s a college town (New Mexico State University) and has that high desert air feel to it. I liked it. The Sangre de Cristo mountains are nearby so it’s quite pretty. I think the bubble may have hit Las Cruces recently but that only means good bargains should be available in the next couple years.
I love Austin, reminds me of SF.
Politically speaking
Oh, well thats a plus….Not.
The mountains east of Las Cruces are not the Sangre de Cristos, they are the Organs (different mountain range entirely). Easy to get confused, though. One problem with ‘Cruces for someone used to NY is the lack of easy airport access. Actually, strike that - driving down to El Paso (45 miles away) is probably faster than taking a crosstown cab to JFK. Living in the big city now, I could see ‘Cruces being a culture shock. Everything moves slow. Real slow. Watch the Milagro Beanfield War (filmed in Truchas, about 350 miles to the north) to get an idea of what the town is like.
I spent the best five years of my life in ‘Cruces in the early 90s. If there were jobs, I’d move back in a heartbeat. There’s a reason real estate is cheap - little jobs and the lack of real amenities that boomers are looking for: close airport, “critical mass” of perceived cultural activities, and the required density of healthcare. It is an automobile dependent city in an automobile dependent state. ‘Cruces is changing, but cities such as Albuquerque, Pheonix, Tucson, and even Hell Paso are doing a far better job of attracting seniors. Which is fine by me.
Go Aggies!
Some other suggestions would be Fayetteville Arkansas and Asheville North Carolina. Although Asheville does get some winter snows and might be bubbling more than I remember due to the overall beauty of the area.
But heck, if I was retiring and had no particular roots or family rooting me to a particular place, I’d get a laptop and GPS and just hit the road for a year or so to find the place that really worked for me.
I live 2 hours from Fayetteville and have gone there several times. It’s a wonderful place, reminds me of Sonoma, CA for some reason. But that whole area — Fayetteville, Rogers, Bentonville, is very housing bubbly right now. They are even building high-rise downtown condos in the Fayetteville Square!
Therein lies the problem. Personally I doubt very much that there are any really nice warm-climate college towns in this country with good quality of life that are dirt cheap right now. All those places that get ranked in the Money Magazine rankings as best places to live are just bubble magnets.
But that doesn’t mean they don’t meet the critera. Who says you have to actually BUY your retirement home, at least right away. In fact, why buy at all if you’re retired? Most of these college town bubble markets are going to be renters paradise in a year or two if they aren’t already. And college town landlords will wet their pants at the chance to rent to a retiree rather than a group of 6 students looking to share.
On the other hand, if cheap, warm weather, and college town are the ONLY requirements then there are plenty of places in Texas that fit that description. For example, it doesn’t get much cheaper than Waco. Lots of older houses in the central city going for less than the price of a new SUV. People are moving out to the suburbs to get to the better school districts but then schools aren’t much of an issue for retirees.
On the down side, I don’t think we’ve have a single day so far in August that didn’t break 100 degrees.
I’ll be retiring in Chattanooga, Tennessee. Beautiful area, nice people, and you don’t have to hock your soul for a very nice house. I’ve been a roadie for twenty years and I’ve seen a lot of places. That’s my favorite in this country. Just my two cents (please don’t tell Money magazine).
For better weather and a college town, they could consider Lubbock. Dirt-cheap real estate, big university (Texas Tech) with “colorful” sports teams (Bobby Knight as coach) and no humidity. Just make sure you buy your house with a basement for tornado season, and you realize it’s quite a Bible-belt city.
Okay, I was unable to fall asleep, so I found this to help me get my zzz’s.
Are high taxes pushing Lake County residents from their homes?
“People are literally abandoning their homes, and politicians are trying to candy coat it and act like nothing’s wrong,”
“…If that trend continues, it will be the largest number of foreclosures in 11 years of record keeping.”
http://www.indianaeconomicdigest.net/main.asp?SectionID=31&SubSectionID=117&ArticleID=28666
A great find. This is another sick part of this bubble. Raising taxes from $2000 to $6000 on a poor family will most certainly guarantee they lose their home. These people can’t afford another $300+ per month. I think it is time for the public to wake up and start protesting these extreme tax hikes which these local politicians cram down our throats. Time to start calling for their heads.
Regarding the Southern California market, my friend (who owns in Las Vegas but is in great shape, mortgage-wise) had this to say:
It sounds reasonable on its face, and of course I don’t want to believe it and hope he’s wrong, but what do you think? I looked at the historical graph someone linked to in a previous thread and it’s obvious that there is always a correction (and and overcorrection at that) after a boom. Is he just, you know, wrong?
Yes, because “it’s different this time!” You know, that phrase can cut both ways!
Your friend is “in too deep” to think clearly. Believe me if I had put $500,000 into some home I certainly wouldn’t entertain thoughts that the price would crash like a rock.
Things are different this time but in the most frightening way.
First of all the rate situation in 2004 was ridciulous (40 year lows) if interest rates reach even a relatively normal level (i.e. 7-9% for a thirty year fixed) kiss current housing valuations goodbye.
Also another factor is the complete and utter dissavings in the United States. At least in 89-92 we had a positive savings rate.
Now the country is in a situation where it is spending more than it saves and relies heavily on foreign creditors. First it was the Japanese, then the Chinese and now its the arabs and Russians. With all this violence in the Middle East I’m sure they probably aren’t thrilled with US foreign policy.
I guess the point is this the US is now relying on regions/regimes that normally aren’t inclined to be friendly towards it to finance these mega deficits.
If this financing dries up the dollar collapses. If this mega financing game continues-inflation and then hyperinflation occurs as the world drown’s in American money.
In other words interest rates will probably be high and there its quite unlikely we will ever return to the gold old days of 2004 and its low rates (at least within the next two decades.
Your friend is dreaming if he thinks property values will hold up. All the important statistics imply that something will happen, probably not good either.
I suppose it depends on his definition of “collapse” vs. “correction”. If he defines “correction” as 30-40%, then I’m all aboard. The problem with this mother-of-all-bubbles we are currently waiting to pop is that it is just so large that I don’t believe we will need any kind of external economic collapse - housing-related industries already account for more 40-50% of economic activity in some areas. It’s like an extremely overweight person - after a certain point, you don’t need to shove an 800 lb person to have them fall down….eventually their own weight will do the job (not an intentional bash to overweight people - just an illustration). If this were back in 2003, then I would agree with your friend. But here and now in the start reality of 8/2006? Fuggetaboutit.
(A friend is retiring from a civil service job in NY City and asked me where I thought he should retire to.)
You mean the quality of public services and tax burden in NYC isn’t so wonderful that your friend wouldn’t even think of living somewhere else? Especially since we not only have a state income tax but also a local income tax here, but the pension income of civil service retirees is exempt from both (the pension income of private retirees is only exempt after age 65).
BTW, to pay for the escalating cost of nation’s richest public employee pensions, which were dramatically enhanced at the peak of the dot.com bubble (the stock market will pay for it all!) NYC and its unions have agreed to cut the starting salary of cops and firefighters by 40% and most everyone else by 15%. If I were one of these rich retirees, I’d try to get out of town too.
Yep - and there is a huge drop in the number of entries for the NYPD & Firefighters as a result of the new low starting pay - NYPD is down to around 25K - who would run into an east new york drug gang fight for that?