‘Owners Refuse To Believe Home Is Worth Less’: LV
The Review Journal from Las Vegas. “Home sales continued to slide in Las Vegas during August, dropping 37 percent from the same month a year ago to 2,097, the Greater Las Vegas Association of Realtors reported Friday. It’s the 11th consecutive month of declining single-family home sales, starting with a 1.2 percent drop in October to a 38.5 percent drop in July.”
“‘What you’re seeing is a few things,’ housing analyst Stephen East said. ‘On the existing (resale) side, while the price may not change, sellers are willing to pay closing costs or put money in escrow. On the new side, it’s incentives. Builders want to keep prices up so people who bought six months ago don’t feel like they suddenly have a big loss on the house.’”
“Sellers are beginning to understand the housing trend and fewer speculative sellers are putting their homes on the market, Rheinberger said. ‘If they’re not players, get out of the way,’ said Linda Rheinberger, president of Greater Las Vegas Association of Realtors. ‘Either delist the house if you’re just testing the waters or maybe sit back and wait.’”
“Dennis Smith of Home Builders Research said Las Vegas is not alone in the throes of a declining housing market. Resales have dropped 25 percent in Phoenix and inventory has surpassed 45,000. ‘Homeowners refuse to believe their home is worth less than it was a year or two ago,’ Smith said. ‘It’s hard for anybody to give up even part of the 30 (percent) or 40 percent appreciation gain realized over the past year or two.’”
In Business Las Vegas. “A growing number of home sellers are mimicking builders in offering everything but the kitchen sink to entice buyers. With more than 20,000 homes on the MLS, a nine-month supply, more and more sellers are turning to exotic incentives to lure buyers.”
“‘In this market, we are competing head to head in a big way with new home inventory,’ said (realtor) Linda Rheinberger. ‘We are responding directly to competitive conditions and assisting the buyer where it counts, which is the wallet.’”
“As the inventory of new homes has swelled, homebuilders became aggressive. Homeowners putting their properties on the market suddenly found themselves competing against builders offering swimming pools, washers and dryers, moving expenses, free lawn maintenance and other incentives valued at tens of thousands of dollars.”
“‘The problem is that the builders are giving away all kinds of things to the buyers and the agents both,’ said agent Geri Monticelli. ‘Resale homes have to be able to compete. If a person is trying to sell a home and a new home is built in the same subdivision, it is difficult to compete with the builder.’”
“Sellers, however, won’t be able to break the bank. Mortgage lenders typically limit the buyer to accepting incentives of no more than 3 percent and other deals would have to be done outside of escrow, agents said. Some homeowners are even turning to sell their homes on contract over time because they can no longer afford the payment themselves and fear a disclosure.”
“Some sellers are being unrealistic in pricing their homes too high, agents said. Rheinberger said some sellers would rather turn to incentives than lower the price of their home as a matter of pride. They have their own idea of what their home is worth and don’t want to go below that mark, even if they have owned it for several years and will profit handsomely.”
“‘They want to tell people at cocktail parties how much they made on their house,’ Rheinberger said.”
“Broker Ron Haze called such incentives ‘flash and sizzle’ that won’t woo savvy buyers. He said a more traditional incentive such as contributing to closing costs is more effective, but there is one incentive that works best. ‘Pricing the home correctly is better than any incentive you throw out,’ Haze said.”
‘There may be other areas to worry about, however. Gordon pointed to the still-flagging auto sales, which dropped 6 percent from a year ago. Gordon surmised that (Nevada) auto dealerships might have hurt themselves in the long run by offering all the employee-pricing incentives and rebates last year. ‘We have a population that has accelerated their automobile purchases and we might be seeing that decline now.’
And In Business LV has this headline in their subscription section:
‘ BLM to cancel land auction’
“…even if the country goes into recession, he believes the Las Vegas economy and its housing market will remain healthy given its job growth.”
http://www.inbusinesslasvegas.com/2006/07/28/realestate.html
If nobody is buying, who and what do they think will keep the housing market strong??? Casino jobs paying 20k to 50k will provide enough buyers to support acres of homes going for more than 300k…I think not.
How shallow is this character that he doesn’t know that all the job growth was due to housing?
Job growth in Las Vegas???? What jobs?? $6-8/hour casino jobs?? There are NO HIGH PAYING JOBS IN VEGAS!!! NONE! In fact the people that are now working at those low paying casino jobs can no longer afford the housing costs.
This is very very true. My husband is a craps dealer at the Luxor…and he has a part time job at a locals off-Strip casino…and we can’t even come close to being able to afford the median house. A few years ago we would have been able to buy a beautiful home on our income, even on just the income from the Luxor. Not anymore. We’re leaving, headed for Northeastern Nevada. Las Vegas isn’t a nice place to live anymore.
- 1 Builders want to keep prices up s
- 2 people don’t feel like they suddenly have a big loss
- 3 Homeowners refuse to believe their home is worth less
- 4 It’s hard for anybody to give up 30 (percent) or 40 percent
- 5 Resales have dropped 25 percent
- 6 ‘If they’re not players, get out of the way,’ said Linda Rheinberger, president of Greater Las Vegas
It is all like a game of Celebrity Poker. Just go ‘All In’
Couldn’t agree more Sobay. This is what America has become for so many people. Let’s get back to funadmentals, i.e. producing something, saving money, not looking to make money by moving money around. What a joke we have become!
Excellent post!!
I think our economy has become very easy to define. We give away granite counter tops to entice people to overpay for homes and the Chinese use their labor rates to make Hondas. Tough question now - which economy do you think will win?
This stuff is starting to get good:
San Diego home prices fall for 3rd straight month!! Condo prices now $40K lower than August 2005!!
Article at http://www.realestatedecline.com
From this week’s WHISKEY AND GUNPOWER:
…In the case of the lost Titanic, as fate would have it, a man named J. Bruce Ismay, one of the directors of the White Star Line that owned the vessel, was aboard when disaster struck. Ismay survived the Titanic’s sinking by leaping into one of the last lifeboats that dropped from the doomed vessel into the freezing ocean. Later on, Ismay was greatly criticized from almost every quarter, because he survived the sinking when over 1,500 others did not.
One of the most trenchant critiques of Ismay came from the U.S. Navy’s Rear Adm. Alfred Thayer Mahan, the great historian, strategist, and visionary of sea power. Mahan was more than critical of Ismay’s retreat to the lifeboats. Despite his position as an owner of the sinking vessel, Ismay took to a lifeboat and abandoned hundreds of passengers and crew to death by drowning in the freezing sea. Mahan wrote:
“We should be careful not to pervert standards. Witness the talk that the result is due to ‘the system.’ What is a system, except that which individuals have made it and keep it? Whatever weakens the sense of individual responsibility is harmful, and so likewise is all condonation of failure of the individual to meet his responsibility.”
Amen! To all the apologists for the FBs, who blame “the system” for encouraging and enabling mass individual greed and folly, please read and re-read ADM Mahan’s timely words.
I Agree!!! I once had a boss that had a sign on his desk and it said: ” PRODUCE or PARISH ”
If RE people think our economy is about selling real estate to each other and making big profits, they are in for a big mistake.
Wait, stock brokers got 6 figures bonuses. CEOs pocketed hundreds of millions each. Homeowners are a few hundred thousands richer, each. There is nothing wrong with this country!
“If they’re not players, get out of the way,’ said Linda Rheinberger, president of Greater Las Vegas Association of Realtors. ‘Either delist the house if you’re just testing the waters or maybe sit back and wait.’”
Ah, such arrogance. Like she gets to decide who can sell their house and when they can do it. I guess that’s one way to control inventory levels; just tell people not to sell. That’ll work like a charm!
Funny thing, I asked the owner of restuarant in Vegas why he wasn’t open for breakfast, he said he wanted to be, and had asked. But he “wasn’t allowed” to be open.
Get the picture? Vegas is a nice place to visit. But doing business there is dangerous.
Oh, yeah..try MASS out for fun…
A friend of mine used to own a small restaurant….he needed one dairy permit for milk, cream, etc. and another for ice-cream. Totally crazy here.
I think it’s a safe bet Linda has some she wants to unload first.
I can tell you from experience is that before the builder digs into his pocket to pay for these “Give Backs”, It will be over the backs of the lumber yard, suppliers and Sub-contractors.
If these guys that supplied the materials and built the home get 100% on the dollar owed at this time, I would be shocked.
In the past we had a lumber yard poster here.
He related that during the last boom/bust cycle he had a bunch of new contractors show up and not care about the prices of the materials they bought.
He sold to them and never got paid, almost went BK but survived and kept the business.
He said that recently a lot of the same people showed up again and didn’t care what prices were for the materials.
He still sold to them but cash only.
It seemed like he was from a smaller metro area.
“On the new side, it’s incentives. Builders want to keep prices up so people who bought six months ago don’t feel like they suddenly have a big loss on the house.’”
That’s just delaying the inevitable. Why is it better to feel like you have a loss 6 to 12 months from now than to make that realization now?
They want to keep prices up ,( and give kickbacks),so they can get a higher loan amount because most their borrowers are low on money . I guess they think they are entitled to hide the true risk from the retirement funds that purchase MBS’s.
More MSM reality sinking in - cover story of this week’s BusinessWeek says “How Toxic is Your Mortgage?”
Ruh Roh.
We blogged about it last Friday or Saturday. Check the archives.
Nothing RE bubble related gets missed.
‘Owners Refuse To Believe Home Is Worth Less’ - why is the last word split in half in that title?
good goin’, bg!
Funny.
LOL!
actually, his post is important. A person coming to THIS site, is STILL behind the reality of what is happening. Just goes to show that there are many more people out there who are MUCH more clueless, and that, once they are clued in, the market will get considerably worse.
That’s what makes it so damned funny (in a darkly humorous way, of course).
I can easily foresee them giving away tower condos to anyone with good credit that’ll pay the HOAs. All those SFR developments in the far reaches of LV, PHX, etc.? Ghost towns two years from now.
i just saw in the paper today that there are many advertisements by builders with gimmicks like “no mortgage payment for six months or a year. guaranteed low interest rate. low monthly payment for six months, etc. ” it’s like a car sale. the desperation is thick in the air.
If my father was alive he would be shocked. A child of the depression my father abhorred having a mortgage. He always paid cash for everything else, including some of the worst cars I ever been in. Deathtraps, but always paid for and maintained. Anyway he always wondered who was buying all the cars that you would see along the freeways in LA and the highways, parkways in NY and NJ. Well, now 8 years after his passing, it has become homes. When you have to offer 6 months no payments, we’ll make them for you, then you should realize you have no buyers because the price IS TOO DAMN HIGH! What has become of the once great American economy?
Obviously we focus on housing here, but your father would be doubly shocked at the cars people drive now.
Used to be you put good money down and financed short; now everybody gets money back and finances very long at 0%. Most people have cars that match or exceed their gross annual income, and they’re all upside down on “equity”! Oh, and I’ve been in SoCal for 18 years and I’ve never seen so many AMGs & M-series as are on the road these days.
Remember, this is a huge debt bubble first and foremost, and the bust (burst?) will be absolutely nuclear.
I wrote a check for my current vehicle. I used it as a bargaining chip - I’ll write a check write now if you can
do so and so. After the haggling, I asked him how many people pay cash and he said that no one pays cash for cars. The car is about 6.5 years old now with 120K miles and still running fine. I also stay pretty much on top of maintenance.
It is so strange to see so many people with late model cars that consume loads of fuel driving themselves to and from work or just around town.
Agreed about the AMG’s and M’s. Yes, I live in West Palm Beach, so some of that is to be expected.
However, even in my home town in NJ, I just cannot believe how many 60-120K cars I see.
What do you guys think is going on here? You think this is the lax lending being extended into autos as well? Or do you think this is HELOC psychosis (take money out of my house, spend it on something that will be fully consumed in 5-10 years)?
I am really curious about this; it almost seems like they don’t make anything but M’s and AMGs anymore!
Here in Southeastern Virginia, you don’t see too many M series BMW’s cause people don’t know what they are. But you see plenty of 7 series BMWs, and a few AMG Mercedees.
I have a friend with an AMG Benz and another high end Benz. He bought both via internet auction a few years old (didn’t want to loose all that money buying new). But I do believe he bought both via HELOC. I know one for a fact.
I see alot of “homies” in really expensive cars. Given the rents in the region, they are either military and putting much of their paycheck to their rides, or they have borrowed against property. Given all of the ads when I go to the banks or credit unions for extracting money from home, I can only imagine the auto dealers have the HELOC hookups as well.
I bought my car new, but paid it off. 01, I plan to drive it as long as it will run. There are other vehicles I want, but none new… I really like the 2001 M5 BMWs, but wouldn’t buy a new one, and wouldn’t buy one unless I had lots of disposable income.
“I wrote a check for my current vehicle. I used it as a bargaining chip - I’ll write a check write now if you can do so and so.”
Michael, Ironically, the “I’ll pay cash” line no longer gives you a guaranteed bargaining chip with a car dealer … Many prefer that you finance through them because they make more money that way! In another sign of how perverse our economy has become, companies like GM and Ford make their biggest profits from their financing divisions, not from selling cars!! It used to be the big auto makers offered financing only as a means of getting customers to buy their vehicles …. Now it’s like they sell vehicles only for you to take out loans from them!
OCDan - My dad also died eight years ago, also never had any debt, also was a child of the depression (his father died while his mother was pregnant) and would also be shocked. I also miss him
“Anyway he always wondered who was buying all the cars that you would see along the freeways in LA and the highways, parkways in NY and NJ. Well, now 8 years after his passing, it has become homes.”
A few years ago, I was running an errand with someone, he turned to me and asked me, “who is buying all these big houses and how do they pay for them?”, to which I replied, “beats me, I ask myself that all of the time”.
Anyway, at that time this person and his wife had a combined income of about $400K -$500K. I thought to myself, “if someone with his and his wife’s income is asking this question…then we are really screwed”…..
Heard the same sort of type desperation ads on the radio yesterday morning.
Next “Call us today for our 100 year reverse amortization loan with accelerator clause…or the kid gets it”.
And Seattle is one of the dominos towards the end of the line.
I didn’t expect these sorts of ploys so early in the fall.
Hovnanian is offering an “Oktoberfest” sale on the radio in metro-DC. “Up to $100,000 dollars off the purchase of a new home.” “Hurry, sale ends October 31st”. It really is like a car dealership ad!
“Hurry, sale ends October 31st”.
I would like to respond to these companies with a resounding “NO!” followed by a brief but pointed explanation of how I plan on buying their overpriced POS when and only if they go bankrupt and I get it for pennies on the dollar. And should the price still not be right, I will rob it for scrap and build my own home should I find any quality materials…
“Rheinberger said some sellers would rather turn to incentives than lower the price of their home as a matter of pride.”
The pride that goeth before the fall. Think I’ll order a couple of aprons, so I don’t get that humble pie all over my clothes while I’m dishing it out.
I’m sure this has been posted already…but just in case…good article from the LA Times
Playing the Waiting Game
The housing-market sidelines are not a comfortable place to be.
http://tinyurl.com/znvpq
Just remember the weekend newspapers are for PRO real estate stories — all those real estate ads.
Incentives and deals outside of escrow,( which is fraud because your hiding it from the lender if it’s outside of escrow ) ,is screwing up the prices from coming down to where they should be . Really its trying to hide from the lender and appraiser what the real deal is .
Believe me , there are rules and laws against this sort of practice.
Escrows officers and realtors know this very well .
Do you guys think these offers are actually taken seriously? I’ve seen the offers (free cars, trips, cash back etc), but who wants to finance a car or vacation with what is really a 30 year loan? Everyone that stupid already bought a house by now.
I also don’t believe that the builders are trying to hold prices up because they’re afraid of pissing off the existing owners. There have to be some back-door agreements with the municipalities to keep the property taxes high. If phase 3 sells for 10% less than phase 1 and 2, wouldn’t all the previous buyers sue for reassessment?
You bet they would sue for reassesmentI I live in Orange County,Calif and in the mid ninetys many property owners were asking the county to reassess as property values had fallen 35%. It will happen again soon. Do I smell another OC bankruptcy? Time will tell.
A bit of a disadvantage to that is, as I recall, in California assessments that are lowered due to drop in value can later be raised to the original amount when property values “recover”.
All other properties can only have their assessments go up 2% a year due to prop 13.
“Rheinberger said some sellers would rather turn to incentives than lower the price of their home as a matter of pride.”
Pride must be a major part of the pricing process. My opinion is that some owners use their home’s market value as a measure their own value as human beings. Psychologists might have better success at predicting housing cycles than Ph.D. economists. Perhaps they could summarize their findings on the psychological hang-ups of sellers and submit it to The NY Times for publication.
“‘What you’re seeing is a few things,’ housing analyst Stephen East said.”
How does one become a “housing analyst”? It doesn’t appear to require any real talent, other than spouting bullshit. What’s to “analyze”? He can form an accurate opinion simply by reading 3-4 housing blogs and the hilarious Craigs List RE forum every day.
“Broker Ron Haze called such incentives ‘flash and sizzle’ that won’t woo savvy buyers. He said a more traditional incentive such as contributing to closing costs is more effective, but there is one incentive that works best. ‘Pricing the home correctly is better than any incentive you throw out,’ Haze said.”
Sorry Ron, “savvy buyers” are prepared to wait years for prices to correct. Anyone that gets lured into signing because the selller is covering closing costs or the property has been “priced correctly” is a fool. It will be at least a 2-3 year wait before people will be able to buy homes and not kick themselves in the @ss a few years later.
‘It’s hard for anybody to give up even part of the 30 (percent) or 40 percent appreciation gain realized over the past year or two.’
Obviously, this clown means “unrealized.” If the gain were already realized, it would be impossible to give up, by definition.
Excellent point that gets to the heart of a speculative frenzy. What make these things ‘bust’ is the inability of the last holders to cash out.
“A growing number of home sellers are mimicking builders in offering everything but the kitchen sink to entice buyers.”
Uh, most people do want that kitchen sink.
lol
Especially if we’re to belive the kitchen sink ads on the Home & Garden channel. People want their house designed around a kitchen facet, they’ll live in a haunted house for a bathtub.
LV_Landlord, please come back so we can laugh at you- er, I mean so we can hear what you have to say.
They’re not making any more desert, ya know!
My husband and I drove through Utah (I70) on our way back from SoCal in August, after I started reading this blog. Mile after mile of fabulous scenery: and some of the most desolate land I have ever seen. Even the inhabited parts didn’t look particularly inhabitable. All I could think was: “what were they thinking?”
The captain of the Titanic, a skilled mariner named E.J. Smith, once said, “I cannot conceive of any vital disaster happening to this vessel. Modern shipbuilding has gone beyond that.”
Sound familiar?
things are getting crazy.
just so everyone knows, google news archives is out. you can search going back decades!
google news archive search
Five years of falling housing prices, coupled with the increasing popularity of mortgages with low down payments, have caused slightly more than 300,000 California homeowners to have negative equity, according to TRW REDI Property Data, a real estate research firm based in Riverside, Calif.
This quote is from the Washington Post July 1995. Who says RE cannot fall. Get ready Orange County. Bend over and take your punishment!!!!
We are ALL onboard the Titanic, time to rearrange the deck chairs AGAIN?!?
“Iceberg straight ahead, Sir!”
‘They want to tell people at cocktail parties how much they made on their house,’ Rheinberger said.”
my favorite quote..
I am telling people @ weddings,funerals and general get togethers “How lucky I was able to find a sucker to unload my condo in Boston”
I am actually making more $$ on a 1 month CD then renting it.. and having to babysit a tenant.
Thank you
Lord.. Thank you
One of the TOP things that “investors” forget. It’s not whether or not you make money per se. It’s also what the amount you make is in relation to the increased risk/work.
The returns on being a landlord of late have not been much more than what a CD would return, even including leverage. It only worked while appreciation was present. (obviously, old time owners excluded)
““Some sellers are being unrealistic in pricing their homes too high, agents said.” This might be an acceptable statement if the property is FSBO, but if it is in reference to a brokerage listed property, then it is more the agents fault than the sellers. While I don’t agree with it, I can understand a seller having a “wishing price”, but the broker should decline the listing if the “wishing price” is not right.
Evidently it’s a ‘wishing price” for the broker too…
Reality = SpaceCadet Seller’s Asking Price - Earthbound Final Offer with 24 Hours to respond Take it of or Leave it..End of Messages !
I HEARD a Loud “POP” ! Take Cover - White ELEPHANT SPAMPEDE !!!
WOW!..This Real Estate Jungle IS A DANGEROUS Place David !
Was looking a place today here in ATL that is a condo conversion. I spoke to the agent and looked at a 2/2. Asking price is $180k
I balked at that, and she mentioned they would also rent me the unit in the interim for $1,000.00
I thought, this woman must not be that swift in math, or maybe she figures, I’m not. With HOA fees of $300, and taxes of about $200/mo, They are netting $500/mo in rent. Why would anyone buy a condo for $180k if you could rent the exact same unit for $1,000/mo.
Cost of ownership I figure is about $1,500/mo with 10% down at 5.75% with taxes and HOA fees. Now consider you are paying down the principal a bit each month, I still don’t see how the math adds up. Your putting an additonal $500/mo or $6,000/yr in your pocket by renting. That’s not a trivial amount, especially if compounded over the years.