‘Nobody Wants To Be Foolish In This Kind Of Market’
Bloomberg reports on the US housing market. “Nancy and Brian Christopherson are asking $389,900 for their eight-room Colonial Revival home in Westford, Massachusetts, featuring a new kitchen with maple cabinets. Even at that price, they’ll lose $14,100. Monthly price reductions since they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. ‘It’s getting scary,’ says Nancy Christopherson.”
“The National Association of Realtors may report on Sept. 25 a decline in existing home sales for the fifth straight month, says David Lereah, the group’s chief economist. ‘For the next couple of months, we’re probably looking at between zero to a five percent drop in prices,’ Lereah says. ‘The only way for home sales to come back, and for inventories to start to diminish, is for sellers to start to bring prices down.’”
“Not all homeowners are willing to accept less. Roxy Allen listed her four-bedroom house in Littleton, Colorado, for sale in May. She dropped the price once to $339,900 from $352,000 and has refused to go lower. She hasn’t received a single offer.”
“‘The Realtor wants you to just make a deal with somebody and sell it for cheap,’ Allen says. ‘Why would I sell my house for less and buy one for more?’”
“Peter Francisco, who owns a three-bedroom ranch in East Harwich, Massachusetts, on Cape Cod, has fewer options. The U.S. Coast Guard lieutenant was transferred in July and put his house on the market in August at a price lower than he wanted: $379,900. ‘If you have to go, you have to take what you can get,’ says Francisco. So far, he has no offers.”
“‘It’s called `How low can you go?’ says Doreen Kelly, who has dropped the price three times on her Westport, Connecticut, farmhouse to $799,900 after listing it in May for $938,000. ‘The gains the real estate market made in the last three years just got wiped out on this particular house.’”
“Edward Brown, a Florida real estate investor, says he’s financially overextended and needs to sell a three-bedroom house in Cape Coral, Florida. He’s asking $579,000. $20,000 less than he paid for the property a year ago. ‘No one expected the market to drop so quickly,’ he says. ‘There are a lot of people like me who are caught in a pickle.’”
The New York Times. “To hear some people in the real estate industry tell it, one of the biggest problems with the housing market is what is being said about it in the news media.”
“Agents and industry executives say reporters, editors and news anchors are making a cooling market sound worse than it is. ‘There was a ‘constant flood of media that is so negative’ that it was discouraging many potential buyers and sellers,’ said Richard Smith, president of the nation’s largest residential real estate broker.”
“‘Nobody wants to be foolish in this kind of market,’ he said. ‘No one wants to sell too low or buy too high.’”
“But exactly how much the press influences mass consumer behavior is subject to debate. Robert J. Shiller, the Yale economist, said the news media played an important role in molding public opinion as markets both rise and fall. He said he generally approved of the skeptical tone of many news reports about both the real estate boom and subsequent downturn. ‘The media has been pretty on top of this story, that this might be a psychological event,’ he said.”
“Many journalists who cover the real estate market said they expected, and were not worried by, criticism from the industry. They said they were more concerned about whether the news media were skeptical enough about the boom while it was continuing.”
“‘We were late to the savings and loan crisis and we were definitely late to the dot-com crash,’ said Bradley Inman, publisher of a real estate news service, who said he believed that the news media have done a better job covering the housing boom.”
“Some critics say the news media did not include enough contrary viewpoints during the run-up in home prices. ‘Obviously, people get carried away,’ said Dean Baker, of the Center for Economic Policy Research in Washington. ‘But if there are voices that challenge it, it stops some people.’”
“But Mr. Shiller said he was not so sure it did. In reviewing historical news clips, he said, he found that the press had frequently questioned the premise of booms, including the 1920’s stock market boom. ‘Newspaper people do that more than their audience demands,’ he said. But it appears, he added, that people ‘read it blandly and it doesn’t sink in.’”
David Rosenberg of ML says:
1999-2001—Boom
2001-2003—Mania
2004-2005—Bubble
So unwinding till 2001 doesn’t seem far fetched.
It seems unfathomable today, but in the late 80s, houses sold below cost. Fixer-uppers were abandoned because you couldn’t recover a dime of renovations. If you’r house was too far from a metro areas (lots of spec houses built waaay outside normal commutes), it basically wasn’t a house, it was just sticks and bricks, you couldn’t sell it at all. Real esate recovered in desirable locations much sooner (if ever) in the outlying spec areas. I kid you not, ten years later there were still abandoned subdivision streets in Texas and Florida. Streets to no where.
I expect that houses in many areas will sell below cost before this bubble is completely resolved and things get back to normal. Can you imagine what that will do to land prices? I see adds here now where people are advertising 5 acre lots for 2.5 million dollars where the highest any have sold for, and this is to developers, is 635k. I figure they will hold out until their property, which includes a house, is back down to 250K or less. (This is in the greater Seattle area.)
Kim-
Yes, I think land prices will drop too. From my research around the Sound, I noticed a lot of land was bought up, particularly anything waterfront. So when the investor craze is finally dead and buried, how long will people want to hold that land?
Another catch is that a fair amount of the waterfront land in some areas is on Native reservation land–you can own your structure but 99-yr lease the land for a hefty fee. A coupla years ago I looked at a small beach cabin near LaConner and the land-use fee added 600/m to the payments.
I have been tracking Puget Sound area land for over 3 years. The rise in prices has been ludicrous and has far outpaced the rise in home prices. It is to the point where one has to ask, “What could I possibly sell or produce here to justify this expenditure let alone make my money back?” Some of these builders and developers overpaying are no different than the FB’s in that they got taken to the cleaners.
I saw what I thought was a bubble starting in Dallas in 1998 and 1999 with the building of unneeded retail and condo spaces in the Uptown area. By 2000 - 2001, the house I used to rent in the M Streets and was offered in 1996 for $105K was selling for $265K. I nearly bought a place in the fall of 1999 but chickened out. What has happened since then everywhere is something I can’t even get my mind around much less participate in.
There was never much of a boom — the term “boom” implies fundamental support. Economic validity. With hi-tech and manufacturing jobs fleeing the country early this century there was never any sound justification for a boom in the building and buying of nice houses.
If anything people should have been downsizing and / or moving in with their parents.
It weas more like a building boom coupled with gold fever everywhere .
We could call it a “ba-boom,” or better yet, “ba-doom!”
How about “blowout” like a tire failure or a party that goes on way too long.
“He’s asking $579,000. $20,000 less than he paid for the property a year ago. ‘No one expected the market to drop so quickly,’ he says.”
No one you know, you mean. Idiot.
- they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. ‘It’s getting scary,’ says Nancy Christopherson.”
- Nancy, honey … reduce price to 299k to get action.
- Roxy Allen — She dropped the price once to $339,900 from $352,000 and has refused to go lower. She hasn’t received a single offer.”
Roxy, swallow your pride. You are toast. Nobody cares about your view of the market … only a buyer at a very low price.
I wonder if honesty could move a house. What if this couple advertised they were selling for the exact price they paid in 2004. I think they’d get more lookers. We’re not buying anytime soon, but I can guarantee the person we buy from won’t make any profit unless they bought before 1999.
Suzzane,
Absolutely! That’s my total feeling on this whole wretched topic. While I visit all of the blogs/sites etc. I would certainly feel a whole lot better had none of this ever happened! Yes, even though I DID profit from it the whole mess just has not been worth it!
As I’ve often said, I grudge no one a “reasonable” profit! Really, I don’t. An owner that’s been in a place for 6, 8 or 10 years should have made meaningful improvements. Lasting improvements. How much “value” can a couple of grand and a few trips to Home Depot really add? I’ve said it before, I’ll say it again, I am not going to buy ANYTHING built, bought or even re-fi’d post 2000! MINIMUM! These people that bought in 2004 and trying to sell now? After only two years? They’re expecting, no demanding to make a profit (and a healthy one at that) after only two years? Most places I’ve lived we were still living out of boxes after 6 mos. a year. How much could these flippers have legitimately accomplished in 2 years? You definitely have the right idea!
“What if this couple advertised they were selling for the exact price they paid in 2004. I think they’d get more lookers.”
Genius idea! And those years will keep ticking backwards as the market falls…
“but I can guarantee the person we buy from won’t make any profit unless they bought before 1999″
Amen! Home sellers feel they are entitled to windfall profits for doing little to no actual improvements to the property. If they’re expecting me to subsidize their unearned riches then they’re going to be waiting for a long time!
Hear ye, hear ye.
I’m not going to go tens (or hundreds) of thousands of dollars in debt to subsidize someone else’s get-rich-for-nothing idea or to pay off their HELOC/refi consumption binges.
1999 inflation-adjusted prices or 3x my income, whichever is lower.
In the meantime, I’m enjoying renting. Nice walkable central neighborhood, nice place, low monthly payments, low utilities, no yardwork, and no Home Depot every weekend.
Westford’s a pretty nice area. Somewhat of a bedroom community (my opinion from driving through it over the years). They probably get soaked on taxes.
Seems like a fair number of articles about this area of MA lately near the Lowell area.
“‘The Realtor wants you to just make a deal with somebody and sell it for cheap,’ Allen says. ‘Why would I sell my house for less and buy one for more?’”
It’s going to be a blast dealing with the Roxy Allens of the world a year from now, when they’re chasing you down the street begging for ANY offer. Another prime candidate for court-ordered sterilization.
“‘The Realtor wants you to just make a deal with somebody and sell it for cheap,’ Allen says. ‘Why would I sell my house for less and buy one for more?’”
Hey Allen - put yourself in the buyer’s shoes. Why would they buy your house for more TODAY and sell it for less TOMORROW? Tell you what - you keep your house, that way you won’t have to pay more for another one.
Burn up that equity and you’ll be begging for a newly reduced, low-ball price in the future.
All they have to do is sell it for less and rent and buy for even less later.
That’s interesting and great advice. Yet I suspect most people in a bad position wouldn’t be able to take it, as it would require making the mental shift from “my interest is in the market going up” to “my interest is in the market going down”.
Look at this listing.
http://www.newenglandmoves.com/Listings/Condominium_Non_NewEnglandMoves.htm?id=1010624096
Condo in a three-family; overall, a nice reno with a couple of strangely cheap shortcuts. This unit went on the market in spring at $850. It’s now $629, and the slightly smaller unit below it is offered at $599.
Problem is, a woman bought the top unit–the smallest of all–at $789! Unless she bought for cash, her downpayment is probably already gone. Evaporated. Poof.
Now, tell me why a buyer would walk into one of these units right now, knowing their value is dropping like a rock?
That’s a registration site. Have to take your word for it.
Yes, it’s not “How low can you go?” It’s “How low must you go” in order to sell. People don’t think they “can” go any lower because they still expect to make money on their “investment.”
On a bike ride in western Boston this weekend, I counted 85 houses for sale and 6 under contract or sale pending. If the “pending” sign stays up a month, does that mean that the unsold ones may stay on the market 85/6 or 14 months?
You either a long-distance biker, or you’re up the wazoo in inventory.
I think a month is pretty normal for pending. That was how long our house was pending, and it sold in 3 days.
Didn’t one of the insider advice columns to reamtors say leave the sold signs up EVEN LONGER. These signs might just be propaganda. Heee heee hee
True story: The “For Sale” sign was still up in my yard when I moved in. I had to call my agent so he could inform the seller’s agent that the sign needed to be removed. A few days later, it was.
Speaking of “for sale” signs, we have a governors race for Nov. and all the lawn signs for govs look like “for sale” signs contributing to the overall madness.
- The New York Times. “To hear some people in the real estate industry tell it, one of the biggest problems with the housing market is what is being said about it in the news media.”
Absoulutely true. But completely Wrong! The media created the bubble with ‘no more land’, ‘1000 new illegals in Flordia’, etc.
I’d say credit created this bubble, but the media’s cheerleading certainly didn’t help. Along with the NAR, they created a panic market of buyers.
Some critics say the news media did not include enough contrary viewpoints during the run-up in home prices…
Is anyone really that surprised? Do you think the media had anything to gain from their cheerleading?
Yes , lets get real .The media did not publish many contrary views to the unheard of housing appreciation for the last 3 years . Why couldn’t they of publish articles on how unusual this uptick was or how low the affordability levels were ,or even print articles on manias ,booms etc.
I use to read articles in the papers interviewing flippers talking about buying more real estate as a no lose thing . I can’t tell you how many times they interviewed a realtors who went into the whole rah rah spin .
“‘We were late to the savings and loan crisis and we were definitely late to the dot-com crash,’ said Bradley Inman, publisher of a real estate news service, who said he believed that the news media have done a better job covering the housing boom.”
So true, so true….. somebody should have started a Blog or something!
The media was at least 2 years late in covering the madness in housing.
They should really have started sounding the alarms in 2003.
Freeloader,
At a minimum! Even here in lowly Oregon we were starting to see blatant and undeniable signs that things were getting off kilter! Actually our “boom” started much earlier (assuming anything above CPI and a point or two constitute legitimate price appreciation). Between 1994 and 2000 my house basically doubled in value! (True, we may have been a little undervalued, but double in six years?)
By 2003 I was completely beside myself with utter disbelief. I said no way. 2004 is “it” and that’s final! Well to bulls delight I was more than a little early but by fall 2005 it’s been pretty clear that all of this unrestrained monkey business is nothing more than a f a n t a s y!
Had anyone in the media the courage to blow the whistle earlier think of the pain that could have been spared! Had things come to a screeching halt by 2003 wages/incomes/inflation could have somewhat filled the hole. Now? I see little cause for hope.
“‘We were late to the savings and loan crisis and we were definitely late to the dot-com crash,’ said Bradley Inman, publisher of a real estate news service, who said he believed that the news media have done a better job covering the housing boom.”
When, oh when, will people stop considering the MSM the oracles that must be relied upon for all decisions, political, financial, etc.
As quoted above, the MSM is reactionary. They will always be late to the party and always infused with journalistic jeer du jour.
Catherine, ..and really telling they are comparing this correction
to one of the greatest default in US history, and it’s just starting…
what do they know we don’t?
Too, true. News media should be relied upon what they do best - reporting the news. Since, when were they in the business of predicting markets. MSM should never be relied upon for making finacial desisions. I believe most people couldn’t have imagined how crazy this was going to get back in 2000. Most people don’t realize how crazy it still has to go - down. What house prices dropping? Unheard of!
Actually, I should have said, “… Too, true. News media should be relied upon what they do worst - reporting the news…” I don’t really care for MSM in the first place.
“…journalistic jeer du jour.”
Clever — I like that.
Amen, Catherine. The mass media, aimed at the lowest common denominator — i.e. the lowbrows who can’t read without moving their lips — is never going to be the first to challenge or expose popular delusions.
Slap me silly. Did DL say we should expect price drops? Did I read that right? It must be misquote; are you sure about that quote Ben?
He said that we would expect price drops until some time next year, when prices will resume their normal upward trajectory (real estate always goes up in the long run, ya’know).
Never mind his powerpoint talking points (”Reality Check” 8/2006) which include a slide showing a minimum of four years for prices to bottom out in previous downturns.
$579K for a 3 bedroom house. I give up.
Unless that house was designed and built by Richard Meier or Hugh Newell Jacobson, I don’t think so.
txchick, you should see what people are willing to pay for a home in Oak Park, IL just to live NEAR a house designed by Frank Lloyd Wright.
I live in Oak Park, IL. It wasn’t the Frank Lloyd Wright houses but Oak Park-River Forest High School and a quick commute to the Loop that attracted us.
You can buy a Frank Lloyd Wright house now for $500K (in Minnesota); there’s one on the market.
Wow, that would be considered a Bargain Basement price here in LaLaLand…
….although, to be fair, if comparable houses in that area were going for 150 - 200K a few years back, then its a ridiculous markup.
Very OT, but you wouldn’t happen to be in the video game industry, would you?
“Edward Brown, a Florida real estate investor, says he’s financially overextended and needs to sell a three-bedroom house in Cape Coral, Florida. He’s asking $579,000. $20,000 less than he paid for the property a year ago.”
$579K in In Cape Coral?? Unless it’s on the water (and not just one of those stupid drainage ditch “canals,” Ed isn’t going to unload his investment at anywhere near that price. At foreclosure, it will probably go for the low 200’s. Maybe low 300s if it’s on the water.
there has to be something wrong with these numbers for them to go up 30,000 in a few days
mid may was 799,000
6/10/06 was 836,471
6/14/06 was 840,935
6/17/06 was 846,120
6/20/06 was 850,317
6/22/06 was 855,892
6/24/06 was 860,647
6/29/06 was 866,037
7/01/06 was 858,675
7/09/06 was 870,854
7/11/06 was 882,239
7/13/06 was 886,055
7/14/06 was 890,896
7/18/06 was 895,022
7/21/06 was 900,000
7/25/06 was 905,170
7/28/06 was 910,001
8/01/06 was 903,718
8/12/06 was 915,336
8/19/06 was 920,755
8/26/06 was 925,176
8/29/06 was 951,242
9/15/06 was 955,352
9/18 ZipRealty shows 984,557 active homes Nationwide
I noticed that as well. It wasn’t a few days actually, it jumped all at once just yesterday. I think Zip only contains a subset of actual houses on the market, and the number jumps up when they add a new market. I think the real number nationwide is somewhere around 3.8 million homes on the market.
e.g. it doesn’t include Leesburg VA for some reason, even though there are over 1,000 homes listed there; it does include other towns in the same county however. Weird.
So basically, these Zip nationwide stats are useless, i.e. ignore them.
I agree. I was tracking ZipRealty for a while, but then it became apparent to me that they were probably adding new ZIP codes, in effect making their numbers useless for statistical purposes.
Thanks Stan, Looks like his may actually hit 1 mil. soon. I’m not sure how Zip gathers their numbers ,vut thought it was 3-4 million for sale nationally….
All I know is that Zip went nuts the other day in my area and cut out about half the homes in the MLS. The next morning they were back, and now inventory has, in the zips I track, jumped about 8%. I was fully expecting this here. In Baltimore, since we haven’t seen actual price declines yet, people still think they can get what they want. Most of the new inventory is in the $380-$450K range, which is well above the median of about $320K, and nothing in that range is moving at all.
My sister’s stepson just bought a house in Cape Coral a few weeks ago. (His father was one of the relatives telling me I was a fool for selling my property there last year.)
When I heard about the purchase, I just said, “That’s nice.” Hey, they’re family. I just didn’t have the heart to tell them what I really thought.
I’ve been warning (scaring) potential buyers in my family and beyond since 04
cape coral scks - when you fly over you see the truth
…also in current account deficit is up 218.4B for Q2
Ameranth Hedge lost 35% on Natgas …
Only their clients will take the hit. They pay themselves up front.
We did fine on natgas here. Now we’re on a sugar rush
what % of the RE market is back to 2004 pricing ?????
opinions
we’re still 05 here in N VA
There are a lot of places in Northern VA, mostly the outer suburbs that are already at 2004 prices. The 600k+ single family homes have fallen faster than the cheaper houses, condos or townhouses so far.
where you at ?
I’m in 22151 ans turnover is at early 2005 prices
close in and cheap so still moving
2004 = wow !
I was checking the prices of some Leesburg neighborhoods, potomac station and tavistock farms. Many houses are now getting contracts in the mid to upper 500k range there that sold for as high as low 700ks in in late 2005. Not back to January 2004 levels, but back to fall of 2004 levels from my records. Loudoun has a pretty good database for looking up all of the prior sales and tax assessments here http://inter1.loudoun.gov/webpdbs/default.htm
I don’t have the exact %, but looking around the neighborhood. In some areas of san diego, some sellers have dropped the price from 1.3 m to under 1m, and the houses are still on the market. Some lowered the price to the 2004 level, still not selling.
I am renting in the San Marcos area, (North San Diego) and have been watching the local housing market very closely for two years.
I the last couple of months I have visited three or four open houses every Sunday afternoon and nearly all of the homes I looked at were unoccupied.
Houses in my neighborhood are still selling for more than the asking price.
http://www.imrmls.com:8080/servlet/lFullDetail?proptype=RESIDENTIAL&ml=C614262
Highly unlikely - sold price almost certainly includes all closing costs and probably some repair costs and maybe even just some incidental “fun money” - all of this once considered highly unethical - bundeled into a 100% loan.
Somebody please correct me if I’m wrong, but incentives and closing costs are not reflected in the actual sale price of a home.
People on this blog talk all the time about how home builders offer incentives to buyers in order to avoid dropping the actual sale price.
Last house I sold $xxxx in closing costs and repair allowance were “paid for” by me and taken out of my side of the proceeds sheet and added back to buyer’s side. Sale price was increased by this amount and that was the recorded sale price. (Of course, I made sure commission paid to my broker reflected the real, lower price.)
Anyone who would buy a house in Upland has to be nuts! So, the sold price doesn’t surprise me.
IE posts Anyone who would buy a house in Upland has to be nuts! So, the sold price doesn’t surprise me.
What about Chino and Fontucky? LOL LOL
“Fontucky”
Fontana and Bloomington…ewwwwwww! With all of the trucks and trains, and that topsoil with the consistancy of very fine flour, so that it sticks to everything. Blech.
“‘Nobody wants to be foolish in this kind of market,’ he said. ‘No one wants to sell too low or buy too high.’”
How is that different from any other kind of market?
It is different because buyers suddenly realize the risk of of making a foolish mistake of buying too high. Since last year, the emperor’s missing clothes have become apparent to everyone who is paying attention.
As for the sellers who don’t want to sell too low, good luck! You can either drop your price to a level where you can find a buyer now, or wait 1, 2, 3, or more years to sell even lower. Pick your poison.
i’ve concluded that there is a huge swath of sellers — and buyers — who simply cannot comprehend the notion that prices could go down. and then down further. and then down even further after that. ‘price deflation’ is just not in their vocabulary.
so this will be a learning experience.
good observation. They’re confusing historical appreciation (always up) with bubble valuations that will collapse.
Similar situation with the dot.com bubble - though that appears obvious lunacy now, many then couldn’t conceive of falling prices.
That is precisely what makes the current situation so annoying. Idiots clogging the exits.
I am able to access the MLS in real time in Las Vegas. I have been in Ben’s camp close to a year, and the number of listing houses entering contract stage is below low…I mean absolutely nothing is selling. I am watching a $399,000 listing in a good area drop to $350,000 and is still on market. The house was bought in Aug 2003 for $265,000.
….. The Sept 25 NAR report on existing housing sales will bring a chill to every seller out there. It can’t take much more doom and gloom from the Media to push the sellers over the cliff.
Front line reports are always appreciated.
From contract to actual sold is still another can of worm. Wonder what the percentage of contracts going through all the way to sold.
None of the RE market will go back to 2004 pricing. Instead, 100% of the market is going back to 2001-2002 pricing. In some areas that may be just a 15-25% correction. In the really bubbleicious areas, it will be more than a 50% drop.
excellent!
(and an excellent observation.)
Bill,
Let me make that a “third”. I agree. 2005 is already off the table. God forbid you bought or “invested” in “05″. 2004 buyers (turned seller with the “miracle” of 24 month cap gains exemption) are finding they can’t break even either. (So their little cap gain “play” doesn’t even matter. Well we’re just past Labor Day 2006 and in many areas 2004 buyers are under water. Question is, with the explosion in inventory and lack of sales can we wipe out the 2003 buyers before this year is out?
It’s hard to predict whether the drop will be sudden, or a prolonged “water torture.”
But sales haven’t stopped altogether, and they never will. Two of our friends now have contracts on their houses, after a relatively short time on the market. One was priced over a mil but in a desireable location, and sold in less than 2 months. Owner says the final price was down about 10% below what he could have gotten last year. Other house is low end, but in Florida. They put it up FSBO and it sold through a “co-op” realtor in less than a week. Price was just 5% below what they hoped to get. Both owners have been in their houses for over 6 years, so they will still profit nicely.
We are very surprised, but obviously pleased for them. It just shows that not all the news is bad. I think it’s very easy for readers of this blog to get too negative.
“have contracts on their houses. . . so they will profit nicely.” Bill - let’s hope so. But,
I never thought that way when selling a house (I’ve done a lot of fixer-uppers). In the old days (pre-2003) I always assumed the worst and never considered a house sold until I had cleared funds in my account. I had several contracts fall through in the 90s and never could get a dime of satisfaction. When someone congratulates me on “selling a house” I have under contract I always tell them that I haven’t sold anything yet.
The last couple of years have made us forget that the buyer is in complete control right up until the closing. Complete control. In this climate especially I would consider a contract nothing more than a promising first step.
Define “negative”. Negative to me is buyers going bankrupt over time trying to afford adjusting payments on toxic mortgages. Businesses unable to recruit anyone because the cost of housing is too high. Neighborhoods being ripped apart by transient owners and long-terms renters thrown out on their butts when their buildings are sold and/or torn down out from under them. That’s negative. The sooner this madness stops, the better.
Well put.
The remark about renters being thrown out hits home with me, as it happened to a lot of my friends here in Seattle.
Also, historic buildings and small businesses are being affected. For example, a highly popular Chinese restaurant / dive bar here in central Seattle just closed down after 50+ years in business. Why? The landlord jacked the rent up on everyone in the strip to kick them out, presumably to sell the space for demolition and rebuild.
What gets built eventually? Cardboard condos for $350,000+. Crap that will be lucky to rent for $1000 when this is all over.
It all seems so pointless. Hopefully some of these greedy bloodsuckers will lose their shirts.
Well put.
The remark about renters being thrown out hits home with me, as it happened to a lot of my friends here in Seattle.
Also, historic buildings and small businesses are being affected. For example, a highly popular Chinese restaurant / dive bar here in central Seattle just closed down after 50+ years in business. Why? The landlord jacked the rent up on everyone in the strip to kick them out, presumably to sell the space for demolition and rebuild.
What gets built eventually? Cardboard condos for $350,000+. Crap that will be lucky to rent for $1000 when this is all over.
It all seems so pointless. Hopefully some of these greedy bloodsuckers will lose their shirts.
i love it. i love it…geee!! ha!
Good call. Sellers will hold on as long as they possibly can, and they can hold on for a few months most of them probably. So instead of the market correcting as markets do, asking prices are staying where they are, with sellers hoping for that miracle FB with a bucket of money and a box of stupid. Eventually, there will be that critical mass that HAS to sell, and the whole chirade will come tumbling down to fundamentals. That’s how I see it.
So the question is “when?” We still seem to have a good supply of GFs in San Francisco.
“But Mr. Shiller said he was not so sure it did. In reviewing historical news clips, he said, he found that the press had frequently questioned the premise of booms, including the 1920’s stock market boom. ‘Newspaper people do that more than their audience demands,’ he said. But it appears, he added, that people ‘read it blandly and it doesn’t sink in.’”
I think the problem (described by Shiller himself in Irrational Exuberance) stems from the media’s standard practice of uncritically representing a diversity of viewpoints. During the bubble runup, the occassional op-ed piece from Shiller, Baker or Krugman questioning the durability of the boom was vastly outweighed by the standard industry quotes (real estate always goes up, etc.). Now that pretty much everyone is saying the housing market is toast (especially industry insiders), it must come as quite a shock to readers who were comfortable with a balance of opinion.
To me, the problem is that the MSM held out people like Babette, the former stripper-turned real estate agent, as a “real estate expert” on the same level as people like Shiller, Krugman, etc. How many times have we read articles with headlines like “Experts say buy now or be priced out forever” and an opening paragraph like “Local real estate expert Babette (who looks very familiar to this reporter for some strange reason) says this sellers’ market will last for 10 more years, with prices appreciating at least 10% per year each year. ‘I’ve been in this business for 12 months, and every house I’ve listed has sold within a week. I’m so glad I’ll never have to go back to lap dancing again.’”
Remember last summer (’05) the Playboy bunnies who were quitting to become realtors/property flippers? Hope they didn’t get any weight.
txchick57,
LOL! That’s right. Who’d have thought you’d be able to do a “Where are they Now” piece on someone 11 months after their last career change? Anyone recall exactly who that was? It’s Monday (and I could use a laugh)!
yes, my post was intended to be farcical, but just a little bit so.
Sorry, but Krugman’s been right about just about everything, unlike the nitwits inhabiting the Wall Street Journal Ed. page.
I meant farcical in terms of the quotes from the stripper, weiner.
Yes — the MSM has the tendency to level the playing field between big-boobed bimbos and soft-spoken savants.
GetStucco,
True. That and the fact that everyone that could “fog a mirror” was cutting a big fat hog at the time. When John and Jill McDebtor are seeing their home “appreciate” with regularity Robert Schiller’s best analytical work sounds like so much sour grapes to them. I’ve got to admit, even at 47 years old I’ve never seen anything this bad. And it’s only going to get worse.
“‘The Realtor wants you to just make a deal with somebody and sell it for cheap,’ Allen says. ‘Why would I sell my house for less and buy one for more?’”
No, no, no. You will be selling your house for more and buying one for less!
“Nancy and Brian Christopherson are asking $389,900 for their eight-room Colonial Revival home in Westford, Massachusetts, featuring a new kitchen with maple cabinets. Even at that price, they’ll lose $14,100. Monthly price reductions since they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. ‘It’s getting scary,’ says Nancy Christopherson.”
Nancy, why did you buy this place if you didn’t expect to keep it? Oh, I see, you thought you could “put-it” to someone else. Here’s to hoping (praying actually) that you and Brian get an IRS form 1099.
Exactly, you should always expect to lose money buying and selling within a few years period. The transaction costs are simply too high to do these quick flips unless the market is ramping up at an unsustainable levels, but then you’re just market timing and can expect to lose then as well.
She read about a billion articles in 2004 telling her to buy now, don’t worry about ARMs resetting, when they do either refinance (oops, sorry) or just sell for 50% profit.
“fair and balanced” certainly has nothing to do with morality — or reality.
these articles still show a tremendous amount of denial among sellers, yet we’re at least 1+ years after the broad peak of this bubble. by spring 2007, 4+ years will increasingly seem like a remarkably short time to hit real bottom. THERE WILL STILL BE DENIAL IN 2007, although by then the msm will be starting to approach such denial as the mental illness it will indicate. but in fact, many will remain in denial until the moment they MUST sell — or lose — their house. and not a moment sooner. that’s why many markets will simply seize up for many years as this bust plays out, with only the developers’ units and the foreclosure/auction market remaining active, possibly for quite a few years. the possible “sharp, quick correction” that shiller postulates (as opposed to a japan scenario) seems almost as fantastical as the astronomical prices at the peak. it’s gonna be slow. going. down.
maybe this blog will speed things up a bit.
“that’s why many markets will simply seize up for many years as this bust plays out”
If financing were old school — i.e. if the housing market hadn’t been deluged with toxic mortgages for the past 3-4 years — I’d agree with this. But I don’t think a lot of sellers (at least in my neck of the woods, the SF Bay Area) are going to have the luxury of waiting it out a year, never mind three. I have countless anecdotes to share of people who will be screwed when their rates adjust. IO *is* a mortgage to many people of my generation (X) around here. Sure, this isn’t everybody, but it’s enough to drag those comps down fast.
It seems to me there is a good chance that there will be the equivalent of a parallel market for a while, one in which housing bought pre-2002, and not highly HELOC’d or re-fi’d, is brought to market at “relatively” reasonable prices and sells fairly briskly to those impatient for the bottom. All the while, the stubborn and/or mortgage-screwed sellers who already are in the system will sit on and rot with theur unsellable properties. I wish realtor.com showed date of listing and had a way to sort thereby. While the list would be cluttered by those oh-so-clever regurgitations of withdrawn or expired listings, it would make the winnowing process a lot easier.
Fortunately, in any of the three or so non-urban areas that I follow, there are never more than 120 properties for sale at any one time that fit my price criteria, so it is easy enough to spot the fresh listings.
Bloomberg reports on the US housing market. “Nancy and Brian Christopherson are asking $389,900 for their eight-room Colonial Revival home in Westford, Massachusetts, featuring a new kitchen with maple cabinets. Even at that price, they’ll lose $14,100. Monthly price reductions since they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. ‘It’s getting scary,’ says Nancy Christopherson.”
I’ll bet she’s losing more! Most of the people whose brains are wired for “howmuchamonth” spending are like gamblers and they underestimate their true losses.
Did she account for the cost of her “new kitchen with maple cabinets” in her loss?
And, there are second order costs, too. Like overpaying for a house means overpaying for property taxes. There’s a loss, though harder to quantify exactly.
‘Nancy and Brian Christopherson are asking $389,900 for their eight-room Colonial Revival home in Westford, Massachusetts, featuring a new kitchen with maple cabinets. Even at that price, they’ll lose $14,100.
Monthly price reductions since they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. “It’s getting scary,” says Nancy Christopherson.’
I am trying to impute the math here. When the writer says they will lose $14,100, is he implying that they blew $35,000 on a new kitchen and maple cabinets ($389,900 - $369,000 - $35,000 = - $14,100)?
“implying that they blew $35,000 on a new kitchen and maple cabinets?”
only $35K??? sounds quite reasonable. my kitchen is beautiful. almost every piece of it was retrieved from the finest trash on the upper west side of manhattan. trump quality! and no granite. only the best butcher block counters for this cook….
Granite is so 1995. And most of these idiots can’t even cook. But we must have a $8,000 stove to stick the reheated pizza on!
txchick57,
When you’re on a roll…… My perception exactly! My wife and I have looked at so many new const. homes where they have gone all out with high end “fru-fru” until it’s coming out your ears.
LOOK! We’re basically empty nesters. My wife and I eat out about 5 nights a week. When we do have dinner in it’s simple and to the point. What the hell would we do with an 85K “chef quality” kitchen? When it’s my turn to cook, think Mac n’ Cheese.
I always thought that the frozen “calif pizza kitchen” pizza’s tasted better when they are heated up in those $8,000 stainless steel ovens. But now I think it’s just because I’ve growin’ used to those $5.00 carryouts from PapaJohn’s.
True story: When I was house-hunting three years ago, I came across a fix -n- flip that had granite countertops installed over the original 1950s casework. The effect was incongruous, to say the least.
What’s worse, this house was billed as being freshly painted inside. And indeed it was, as long as you didn’t look in the closets. I opened one closet door, and was greeted by the original 1950s paint — and numerous dust bunnies.
I passed on that house.
Original 1950s paint?? That must be rare –they should’ve charged you EXTRA for that
.
I confess I am a “newbie”. What does “MSM” stand for that I see used often on this site?
Hi garrett, “MSM” stands for mainstream media
Main Stream Media, I think
MSM: Main Stream Media.
mainstream media
Bill O’reilly and Fox News
LOL.
LOL! You can add ABC to that list now! Pathway to homeowner hell!
It seems that a number of markets are reporting in with rather substantial home price declines (5% to 15%) from summer 2005 highs even though the major tacking indexes are showing minor increase yoy to date. In addition we know that both HB’s and FB’s are giving rather substantial discounts that are not getting picked up in the national tracking indexes.
We may very well have in reality registered a real yoy decline in the area of 5% to 15% in the major markets and have passed from the “bubble” stage to the “burst” stage. Updating/adjusting the IMF Bubble Report (that calls a “burst” a price correction of 14%) for financial shenanigans of recent years including the precarious financial position of FB’s and the public at large, we may be farther along the “bursting” slope than we think.
“in reality registered a real yoy decline in the area of 5% to 15% in the major markets”
I’d agree…unfortunately, the YOY numbers tend to lag this reality, so quite a few people are *still* making a case for a “soft landing”.
That is true and the better for us because between us and The Shadow a.k.a The Invisible Hand lay the winnings!
“‘The Realtor wants you to just make a deal with somebody and sell it for cheap,’ Allen says. ‘Why would I sell my house for less and buy one for more?’”
- Cheap is such a relative word.
MSM generally means the bureau of propaganda…whoops…I mean mainstream media.
““Some critics say the news media did not include enough contrary viewpoints during the run-up in home prices. ‘Obviously, people get carried away,’ said Dean Baker, of the Center for Economic Policy Research in Washington. ‘But if there are voices that challenge it, it stops some people”.
Here In La county, the LA times is the single Dominant newapaper which in effect has a monopoly in the newspaper coverage for greater LA area. My opinion is that they do report accurately on dataquick figures for Scal RE prices YOY when it comes out(always 1-2 monthes behind the curve). Problem is LA times has not done any real investigative in-depth reporting on the current Scal massive RE bubble. They really need to probe and report on what I believe are massive problems related to the selling and hyping of exotic loans to the immigrant community, and on other issues/problems stemming from this massive Scal RE bubble runup. As the LA times is beholden to the REIC for much of it’s ad revenue this may effectively preclude any real probing by the LA Times into questionable RE lending practices.ect.
You’re right. While the LA times real estate section is not worth reading, it works well in my charcoal chimney. Never a negative article on the market now that it’s going down, but boy did they wet themselves on the way up. The business section is better, but as you say, no in-depth reporting on bubble causes and consequences.
LA Times was a bit late on the RE cheerleading, but when they got on the bandwagon, they got on in a big way. I remember when the real estate section was added to the paper, filed with “OMG, can you believe how much prices are going up” articles. I agree, they should really do an investigative series ala the King Drew Medical Center articles on how people have stretched to far (percentage of incomes, risky loans, mortgage fraud) in order to buy homes in LA.
If reports start filtering in about how homebuyers are getting “victimized” by toxic loan products, especially the recent immigrant purchasers, then the LA Times might run an investigative series on the bad lending practices of the REIC. It has to be the poor” innocent” buyers getting victimized by the greedy rapacious Realtors, Brokers, banks , lenders:anotherwords the greedy large lending corporations.
Seems like someone wants to be foolish in this market:
http://realtytimes.com/rtmcrcond/California~San_Diego~lisablanchard
“*** PLEASE READ THIS TO UNDERSTAND THE DIRECTION OF THE CURRENT MARKET CONDITION*** DEMAND for housing in Southern Calif. will continue to GROW. As Demand rises, home prices will also rise, but by a smaller percentage amount (3-5% annually). DO NOT expect to see double digit appreciation.
Here are some reasons why the “Housing Bubble” is bogus.
1) Employment is the key driver of home purchases. With an unemployment rate of only 4.8% in July - the lowest since 2000, we are at near full employment. This is because even if they were given a job, 3% of the population wouldn’t work.
2) After 17 consecutive rate increases the Fed finally stopped and mortgage rates have been moving LOWER.
3) In June 2006 UCLA’s business school of forecasting admitted that not only were prices not headed downward, but that they felt that today’s prices are at their lowest point for the next 5 years!
4) Over the next decade, there will be a 25% increase in the population who are over 50 years old. This group is spending $1.7 trillion dollars annually!
5) Last year 27.7% of all sales were for investment purchases while only 12.2% were for 2nd homes.
6) In the US incomes are growing 6 times faster than the population. There are over 1 million people living in $1M(+) homes and 1/3 of them own a 2nd home!
San Diego Recap
In San Diego County, buyers had the best selection of homes to choose from this summer than at any time in the past two years. Prices are still going UP, though the number of sales has gone down. In fact, sales are down 29.3% from a year ago (July). But sales PRICES are only down 1.8%. This is not really that significant because last year was the highest sales year in San Diego County history. Now, we are just returning to a more normal market. Some experts say that there are more properties for sale RIGHT NOW than would have normally come on the market during the ENTIRE summer. In other words, we have a flip-flop year, with more homes TO BE SOLD in the second half instead of in the traditional first half
Here’s what Marshall Prentice, DataQuick president had to say about the decline in sales.
“Our sense has been that many who bought homes in recent years purchased them sooner than they otherwise would have because of very low interest rates and a great sense of urgency, given the fear of being priced out forever or missing out on a great investment. That phenomenon helps explain why there’s not more demand today. Whether July’s data also signal something more ominous at work in the market– something that would cause a severe correction in home values– is unclear to us. We’ll know a lot more in a few months.”
My prediction -The next few months will be telling as to the direction the market will take us. I’m predicting that interest rates will continue to decline and be at their lowest point by year end, possibly as low as 5.8%.”
What a load of…..
Here are some reasons the Realty Times needs to be renamed the Unreality Times.
“Realty Times needs to be renamed”
Spiel-ity Times…
Its going to be brutaful baby!
Desperation! She is lying and spinning!
When a piece of text is filled with exclamation points and lots of all-cap words, it’s not analysis; it’s b.s.
Just visit any realtor’s web site and you’ll find plenty more examples.
What gets me is the RealtyTimes local market conditions where the agent rates prices as “falling” and then explains why “now is the perfect time to buy!!!”
The New York Times. “To hear some people in the real estate industry tell it, one of the biggest problems with the housing market is what is being said about it in the news media.”
IMHO
The biggest problem is and was that property prices rose too high and the rise was supported soley by toxic loans which gave sheeple the false belief that they could afford the high prices. The REIC herded the sheeple into these lending instruments because it increased the REIC profits. Now that the market has turned the sheeple who failed to use common logic when they purchased will not be able to recover their original purchase price because that was never a realistic nor fair market value in the first place. Prices will drop or revert to 199 - 2001 levels (or further if they over correct) because they are returning to fair market value and buyers know it. Some sheeple will be able to hold on by tooth and nail, many will not.
I hate to tell ya but the only people who are really aware that there is an issue with the housing market around here are sellers, buyers and real estate agents and possibly bankers/financers. So the media is not the problem, IMHO.