‘Symptoms Of Speculative Elements’ In Las Vegas
An after hours report from a homebuilder. “Home builder Meritage Homes Corp. on Monday said it expects third-quarter results to be at the low end of its guidance, as net new home orders so far during the quarter are off 38 percent from a year ago.”
“‘Demand has slowed and resale inventories have risen in many markets, making it more difficult for our buyers to sell their existing homes, and in turn causing higher cancellations and inventories industrywide,’ said CEO Steven J. Hilton. ‘It is difficult to accurately project the impact that increased cancellations and weaker prices will have’, or the potential for additional asset write-offs,’ Hilton said.’”
“Meritage Homes Corporation engages in designing, building, and selling attached and detached homes in the southern and western United States. The company offers a variety of homes 14 metropolitan areas in Arizona, Texas, California, Colorado, Florida and Nevada.”
In Business Las Vegas. “Based on the latest survey, Las Vegas home builders have some work to do with increasing customer satisfaction to 2004 levels. Las Vegas ranked higher than Phoenix but below all of the California markets.”
“Beazer had the biggest decline, falling from 101 to 78, KB Home dropped from 130 in 2005 to 111 in this year’s rankings. Pardee fell from 114 to 97.”
“What weight, if any, these latest rankings will carry with consumers in this slow housing market, has yet to be seen. Paula Sonkin at J.D. Power, said the rankings will carry more importance with a soft market. Builders are offering incentives to get rid of inventory and struggling with labor issues and increasing building material costs, Sonkin said.”
“‘As builders fight for every sale they close in this down turned market, a reputation for customer satisfaction becomes more important than ever, as it helps builders differentiate themselves from the competition,’ she said.”
The Review Journal. “When housing values in Las Vegas ballooned 54 percent in 2004, economists couldn’t agree: Was the surge a result of basic supply and demand, or was it a speculative bubble destined for a major burst? Two national analysts say they’ve now pinpointed exactly how much hot air is in local real estate values.”
“Ingo Winzer, president of Local Market Monitor, weighed national and area home prices and the average national and local incomes to generate what he calls the equilibrium home price. Winzer’s calculations show that Las Vegas has an average home price of $296,500, well above the $231,000 average that he said economic fundamentals warrant. That means Las Vegas is 28 percent overpriced, in Winzer’s view.”
“A joint study from economic consulting firm Global Insight and Ohio bank National City Corp. portrays an even bleaker picture of housing inflation in Las Vegas. Their conclusion: Las Vegas home prices, at a median of $282,600, are 41.8 percent higher than they should be.”
“‘I was looking for the nuances in our market, and I didn’t quite see them in that 27-page (Global Insight-National City) report,’ said Linda Rheinberger, president of the Greater Las Vegas Association of Realtors. ‘I found it to be interesting reading, but I didn’t see how it pertains to our market.’”
“However, Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies, said real estate markets nationwide are in for a ‘rocky and rough patch.’”
“‘It was fairly clear to most observers that continued years of double-digit appreciation just weren’t sustainable,’ said Retsinas. ‘At some point, you have to leave time for incomes to catch mortgages and housing prices.’”
“DeKaser said his (National City) report’s population-density benchmark gives Las Vegas ‘the credit it deserves’ for its brisk in-migration. DeKaser likened local boosters’ defense of the market to stock-market bulls’ take on overheated share prices in 1999.”
“When bearish analysts questioned stock valuations, advocates justified share prices by pointing to low inflation and high worker productivity, DeKaser said. DeKaser said similar overvaluation might be playing out in Las Vegas.”
“DeKaser said. ‘Las Vegas has a very strong track record that I personally have no suspicion will end anytime soon. But home prices seem to be more than fully accounting for that reality. When spirits are running high, there’s always a rationale for the discrepancy between what things ought to be trading at and what they are (trading at). Sometimes that rationale will hold up to the test of time. Most often, it doesn’t.’”
“Research from Harvard’s Joint Center for Housing Studies found that 37 percent of all homes bought in Las Vegas in 2005 went to owners who didn’t occupy the properties as primary residences. That’s almost three times the rate of secondary buyers in the market five years ago.”
“‘(Secondary-home buying) is a signal of overbuilding, because you generally want to build enough homes to satisfy demand for the residential population,’ Retsinas said.”
“The number of homes for sale on the MLS reached 20,384 in August, a 32.8 percent increase from the same month in 2005. Las Vegas also has a two-year supply of condominium conversions and a new-home inventory of four months to six months, Salestrac estimated.”
“Those indicators are ’symptoms of speculative elements,’ DeKaser said, and they could soon conspire to pummel home values in Southern Nevada.”
‘Because (homes are) financed, they need to be turned over, and that would in time lead to either significantly slower price increases or price declines,’ DeKaser said.’
It’s sad as LV still has very hugh teacher shortage and teachers certainly cannot afford a $290,000. home without a partner making big time megabucks monthly. Try buying a house when you only make $36,000. a year in LV.
I guess you could take out a second job as an escort to manage that monthly nut.
I don’t believe for one second that LV has a “very huge” teacher shortage. If they did, why would salaries be low? If there is such a shortage of teachers, why do teachers need to form unions?
Teacher in not-for-profit enterprise=no responsibility. No responsibility=no job pressure. No job pressure=low pay. If your job is a government job which could and should be handled in the private sector would you please just shut up?
Sorry.
“Teacher in not-for-profit enterprise=no responsibility. No responsibility=no job pressure. No job pressure=low pay. If your job is a government job which could and should be handled in the private sector would you please just shut up?”
Tell me your not serious. In some cities teachers should qualify for combat pay.
IMO they are not paid enough.
Teacher in not-for-profit enterprise=no responsibility.
You are disgusting and bitter. Obviosly you skipped your classes and now blame teachers.
I am a teacher.
Ooookayyyyy…… I feel a lot better now about writing that check for my kids private school tuition.
I teach part-time on a contract basis. I deliver a product and get paid an hourly rate.
There’s no such thing, really, as being underpaid. I don’t make a lot of money but I don’t bitch about being underpaid. People who bellyache about being underpaid should quit their jobs and compete against the people who they think are underpaying them.
Paul,
I’m guessing you don’t have a teaching credential. If you do what I think you do (putting on shows for schools), then you also do not have the accountability, liability or responsibility that teachers do. Additionally, you do not have to deal with the students, parents and administrators (including politicians from the district offices up to GW Bush) getting in your “business”. It has to be the #1 job where everybody who knows nothing about it is quite sure they know more than all the people who actually do it for a living.
With all due respect, will the people who complain about teachers PLEASE STEP UP TO THE PLATE and take that overpaid, underworked position. Obviously, since you are so superior to the existing public school teachers, you would have no problem obtaining and keeping your teaching job. Wouldn’t it be wonderful if you could take all that knowledge and experience of yours and fix all the problems in the public school system. Since you are so brilliant, I’m sure you’d have everything fixed within a year or so.
Good luck!
MIS,
Thanks for your support, BTW!!!
“Teacher in not-for-profit enterprise=no responsibility. No responsibility=no job pressure. No job pressure=low pay. If your job is a government job which could and should be handled in the private sector would you please just shut up?”
Horsesh*t. Education and health care are 2 things I don’t want to be exposed to when the person providing the service is not thinking about me but about how to maximize their profit off of my hide. Exactly what they should NOT be thinking about. We already see what it is doing to the medical system and there is mounting evidence that for-profit schools are not performing as well as public.
RE: teachers: supply vs. demand = pay. not a bad deal with all that vacation time. so many holidays and the whole summer off? in this country, you get paid what you’re “worth” and you’re worth what you can get. if you feel you’re “worth” more and you want more, go find another job.
Gekko,
That’s one of the problems. See, teaching has one of the highest turnover rates.
“Half of all new teachers leave the profession within the first five years, according to the NEA.
The national teacher turnover rate is 15.7 percent annually compared with the average rate for all professions, 11.9 percent, according to 2004 data from the National Commission on Teaching and America’s Future. The commission estimates that the average cost to recruit, hire, train and then lose a teacher is $50,000.”
http://www.dfw.com/mld/dfw/news/15324205.htm
Many people sign up to teach because, like many naive people on this blog, they think it’s an easy job for decent pay. Some statistics show almost half of the new teachers leave the profession within the first five years. Think that doesn’t cost the districts (much less the students)?
One of the main reasons people leave teaching is because of low morale. Teachers have a lot to deal with, and those who are not in the profession haven’t the slightest clue what really goes on in the classroom.
Personally, I’m out. Quit teaching a few years ago to have a family and will not be going back. Used to be one of the better teachers, as well. Many (most?) of the good teachers are leaving because of the attitude seen here.
Seriously, try it before you bash it. I guarantee you’d come back with your tail between your legs. It’s a very tough job. BTW, those “vacations” aren’t paid. Other than the traditional holidays, teachers get NO paid vacation time. None.
Tell you what, I vote “Fluffiest Font of the Year” for Kathleen Blanchette’s Web page header (from your link). It looks like a time-lapse capture of an Olympic ribbon twirler’s masterpiece.
Whoops — sorry — the link is flatffplans, below. Posted in the wrong place.
or abandoned
check out these interlocking trailer condos
only 700K
http://www.trustkb.com/Condo-LexingtonStation.htm
but they’re in “downtown” Asheville
They built one of the tall hotels in downtown San Antonio this way about 40 years ago. Lifted each room one by one and installed them.
Has anybody figured out yet why realtors plaster their photos on anything within arms reach of themselves?
Because, unlike doctors, they have to foster a belief in their professional competence through Botox, plastic surgery, and expensive leased large cars rather than a hard-earned degree and an earned reputation.
Have to admit, some of my doctors drive really sweet sports cars, though! -
I am hear to remind you that 50% of all doctors graduated in the bottom half of their graduating class.
Oliver
P.S. It is harder to become a vet than a doctor in most states. My cat’s vet refuses to treat me, as I am a human. I guess he does not believe in evolution.
“I am hear to remind you that 50% of all doctors graduated in the bottom half of their graduating class.”
And only a very small percentage of those graduating from college qualified for that distinction.
Yes, I know its a shame how few doctors we have. Its hard to tell if it is a cartel restricting supply by limiting medical school admissions, or if we just use lousy acceptance criteria for doctors (e.g. the grueling hours of school and residency discourages many bright people from ever applying to med school). Personally I think it is a combination of the two.
A few 100,000 H1B visas spent on some talented Indian and Russian doctors could slash our medical expenses, while raising our quality of services in this country. With this new supply we may even catch up with other first world countries in infant mortality rates.
Oliver
Oliver,
You must have missed (Chip’s???) post yesterday about medical tourism (or something like that). People are now traveling overseas to get medical treatment. Often the treatment is much better AND much cheaper. Also, we are hiring a sizable number of nurses from the Philippines here. Seems US workers don’t want that “overpaid” job. Go figure…
We’re busy where the real profit is, trading boxes made of wood set upon slabs of concrete.
I don’t think that it’s that people don’t want the job. The problem for doctors is the limited number of med school admission slots (have you ever heard of one going unfilled?), and for nurses, something similar, that is, the limited number of nursing faculty available to teach new RNs. The RN problem is only going to get worse, as the existing faculty is near retirement age.
“However, Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies, said real estate markets nationwide are in for a ‘rocky and rough patch.’”
Is UCLA going soft and Harvard going hard?
I thought that was odd too. Wasn’t it just a couple months ago that these guys were saying all’s well?
Yep , they were saying all is well . Funny how it changed so quickly . Remember the parties that were supporting them ,the Real Estate Industry .
He who stops paying the piper will soon get a new tune.
Russian proverb:
Who’s wine I drink, who’s song I sing.
“‘(Secondary-home buying) is a signal of overbuilding, because you generally want to build enough homes to satisfy demand for the residential population,’ Retsinas said.”
He is not an economist, but at least he now speaks like a blog lurker…
Harvard has a great record in economic forecasting…
In the rear view mirror.
Or maybe their sponsors told them that it’s now OK to tell the truth?
They didn’t do so well during their last foray into the MSM. IIRC, they were saying fundamentals were strong just a few months ago.
-
IIRC, Didn’t Ben or another RE blogger once have a section entitled something like “Who visits here?” which listed/ranked the most popular domains of people who visited the blog? I seem to recall lots of domains from the RE Industrial Complex showing up. Anybody remember this? Is there a way we can see it again?
ben doesnt kiss and tell nor should he.
It was general statistics, not individual. It was something like:
domain
1. realtor.org
2. nahb.org
3. fanniemae.com
4. mbaa.org
5. goldmansachs.com
etc.
Add Lehman Bros. as of today, based on GetStucco’s piece on sales to Fannie Mae. #6?
Ben won’t tell. Which is cool. David over at bubblemeter however has listed those visiting his site. REIC all over the place. I put a little counter on my lowly site and was surprised at the number of BIG law firms visiting me. Kinda scary!?!?!
do you have a link to David’s section? i cant find it on his site.
Who Is Reading:
http://tinyurl.com/lqpb3
David
Bubble Meter Blog
Ben, how about a “what do you do for a living” and “why do you read this stuff every day?” topic.
Yea, I’d almost pay money to see that.
Several months back someone posted this question and received many reponses. I cant remember when though.
I asked a while back the response was tepid
My score so far (in correctly identifying the bubble) :
Yale : 10
UCLA: 5
Harvard: 0
Isn’t S hiller from Princeton? But, what school did Gary Watts go to?
Heck, I thought retsinas was a wine you drink if you love pine bark or if you lost a bet.
OT…I have small bit of info on the potential recession.
We supply boxes to 5 major TV manufacturers. Wal-Mart has cut all it’s future purchase orders in half for one of our customers. This happend last week. This could simply mean that all future orders are going to come from China or the start of something more problematic. (No more HELOC’s for big screen TV’s)
Box supplier, huh. Well, no worries for you. I think your line of work will do just fine seeing how you’ll be the one providing dwellings to all the future FB’s. In fact, we might as well go ahead and call you a home builder.
All those FB’s will be needing boxes when their McMansions are foreclosed
“In fact, we might as well go ahead and call you a home builder. ”
Too funny!!!
CFO,
Thank you for that very valuable information! It’s this kind of juicy info that keeps us bloggers ahead of the pack.
As a result of your comment I went directly to our design department and asked them to cut on the CAD table a corrugated home model for low income housing. I will post a picture as soon as available on Ben’s site. I have the sales department working on a marketing plan and will put a sample home through it’s paces on a hill side in Tijuana.
PS We will use double wall corrugated with wax imprenated medium as it will stand up to the elements longer.
ROFLMAO! Do it!
If you can make faux granite out of cardboard, I’m in.
Don’t forget a cardboard Hummer for the driveway.
Just so long’s there’s a picture of a stainless steel frig on the outside. Gotta maintain some level of class…
What kind of financing are they offering for the “box” housing???
I travel a lot, and one of my time passers is listening to local talk radio. My favorite is local am stations with “farm and ranch reports” and “swap shops” where locals trade their crap for other crap. That’s the grass root pulse of the economy. I sense that things are not as great as advertised by Wall Street. People seem a lot more desperate to sell stuff. Something is wrong, very wrong, and I’m not talking plasma tv’s.
Stuff like you’ve just shared is the ultimate reason to stay on blogs…the comments from readers are so educational and unselfishly shared that it blows my mind. I’ve made some very very valuable changes in my financial sense of things (aside from housing) that I would have only gotten here.
Seems like a good place to toss this out… Talking to the guy who cleans up my local laundromat, the Dry Cleaner next door just went outta business. One of his comments was “the economy is very bad…” This is in an “upscale” area in L.A. Houses are still ridiculously overpriced… no pop here… just ominous hissing… waiting…
L.A. is going to come down fast hard and heavy. I’m starting to get phone calls from people who are 60,90,120 days behind, no big deal you say, your probably right except for the fact I don’t advertise and haven’t for at least 3 yrs. I have started getting at least 2 a day that have been referred to me. If I’m starting to get those calls there’s an elephant in the living room.
I had one phone call from a very good client. Last year he took out 150k out of his property. Today he is 100 days behind nothing I can do that he realistically can afford. Me: Errr Jim what happened to the 150k Him: silence Me: Dude, why didn’t you call me at the first hint of trouble??. Him: I don’t know.
Option Arm: Nope - Interest only: Nope - 30 yr fixed: Nope
10 yr fixed to protect him from the downturn plus a good rate and he still f*cked it up. Unbelievable
Dude,
What happened to the 150K??? This is the problem with our nation in the last four years. Give every moron 150K and see how he blows it in one year. Geese
Our local coffee place, the Coffee Bean, is cutting back their hours. I found out that the book keeper told the owner to do it. She’s not making as much money in the afternoon.Ten real estate salesmen go there in the morning. Very sad to watch them. No cappucinos, only plain coffee now.
If it’s like my local coffee shop they’ll buy a $2 cup of coffee and sit there for two hours nursing it.
To all you DOOMER-GLOOMERS on the economy - go to any major mall in a major metropolitan area. You will see both children and adults still spending and spending - carrying bags and bags of goods, eating at pricey/trendy restaurants, driving their huge new luxury SUVs, wearing new designer clothes. How they are doing this, I’m not sure (my guess is credit cards and spending everythin they make) but make no mistake about it, these sons of biiitches are still spending like it’s 1999!!!
No kidding. I keep looking for signs of slow downs in OC and I don’t see it. Freeway jammed, malls packed, IKEA packed, Fry’s packed. Costco packed. Target packed. In fact the ONLY store I found to be lighter than normal is Home Depot — which used to always be packed.
i think it’s unsustainable. people can only HELOC and credit card their lifestyles so far - and boy have they stretched it far over the last 5-10 years. It seems that everyone had to keep up with the Joneses. bigger SUVs, bigger houses, bigger swimming pools, bigger TVs, better country clubs, better vacations, more toys, etc. everyone had to beat their neighbor. everyone caught “Affluenza”.
what scares me is what happens when it all grinds to a screeching halt. how much of this economy is tied to this “spend today worry tomorrow” lifestyle. everyone i know lives way beyond their income.
what happens to the economy and how will it affect my cash, bond, and stock positions?
Don’t get me fired up again on this whole spend now, pay later economy of 21st century America. I was once of those people right after college. Rung up a lot of debt before getting some sense knocked into me. Fortunately, never had the house riding on the whole scenario like most of these bird brains do. The bottom is going to fall out. We just have to wait it out. The HELOCs are beginning to reset in a very major way, meaning alotta hurt for some folks. For the last two or three months I have been paying attention to the number of open houses in the RSM, Mission Viejo area and I can tell you that yesterday was a blockbuster. I don’t go to any of these since the sellers are still trying to finance their retirement or get of jail (I mean debt card) with the sale. However, I must have seen about 20 open house signs in a 5-10 mile radius of where I rent. This number has been steadily climbing each weekend. At the rate it is going, I am going to file a report that the signage is a nuisance. In any event, the number of open houses is getting scary.
I remember reading about the psychology of people during the years building up to the Depression…they spent like no tomorrow….that when you start to see outrageous trends (like in fashion) and all out luxury spending, (like jeweled collars for dogs) it precedes a crash. Not just for the obvious reasons, it is more subtle…that people have an instinct that times are about to get bad, and they go for the “live for today” spending spree.
I know of one guy, barely above water (HELOC), just went out and bought new quads for the family, a fancy travel trailer and a truck to pull it. His wife wants to quit work, because they are having issues with a daughter, but can’t, because her income covers the toys. Talk about screwed up priorities.
Just because people are out spending doesn’t mean they can afford it…at all.
-
Fortune’s Fools: Why the Rich Go Broke
http://www.nytimes.com/2006/09/17/business/yourmoney/17broke.html
“But Mr. Foreman confides in an interview that something else actually drove him back into boxing in the late 1980’s, and it had nothing to do with proving the meaninglessness of an AARP card. Having blown about $5 million, made mostly, he says, during his salad days as a young champion, he desperately needed the money he could earn by fighting again. A former street thug from Houston, accustomed to dispassionately cutting down the most ferocious of men, Mr. Foreman was on the verge of bankruptcy in the 1980’s — and it terrified him.”
Foreman had the good fortune of a positive public image that he could turn into a brand name. MJ will not be so lucky. But these guys are in a different league than your typical real estate investor who got carried away and bought ten homes. With no claim to fame other than stupidity-fueled greed, many of yesterday’s wealthy real estate investors will be destitute tomorrow.
“I remember reading about the psychology of people during the years building up to the Depression…they spent like no tomorrow….that when you start to see outrageous trends (like in fashion) and all out luxury spending, (like jeweled collars for dogs) it precedes a crash.”
Funny that San Diego has a baseball park named PetCo Park, isn’t it? Or that a company named pets.com was a darling of the dotcom era?
The psychology of spending ever more money households have not and never will earn is a form of habituation to government policy which has encouraged it through printing and appropriating money in excess of the real value of our national production for over a quarter of a century, except for a brief interruption during the Clinton era. This New Republican philosophy of hoodwinking the masses into believing that they are all rich now and can live off low-interest debt which will eventually be repaid out of the astronomical gains in value of their ole’ homesteads has reached the breaking point. Unless this time is different, the system is doomed to spin ever more out of balance until a brick wall intervenes.
A few years ago, when we were living in LA, the general consensus seemed to be “spend to the limits of your income, the economy may not be going gangbusters, but it’s on track, why save when you can use your monthly income (and credit) to get all of the nice things your neighbor has”.
When we moved to the central coast (almost exactly a year ago), I got this same general feeling (at least from those with good jobs and multiple incomes).
Lately, in BOTH areas, I’m noticing more and more sentiment on the order of “well, maybe we shouldn’t put up that room addition, and maybe we should scale back our vacation cruise, and maybe we don’t really need yet another flat screen TV”.
It seems to have coincided with the flattening of the housing market in both areas…people feel less secure and wealthy now that some of their perceived ‘income’ (phantom equity increases) has evaporated seemingly overnight.
Yes, there are still a lot of people playing “keep up with the Jones’”, but I’m starting to see and feel a sentiment change taking place. And the longer housing prices stay flat (or, Oh My God, go DOWN), the more people will flip that switch in their head from “we are part of the wealthy elite” to “hmmm, maybe we should be at least a little more frugal”.
And we all know what sentiments like that can do to our consumption based economy…
I still say, check the malls Christmas ‘07…that’s where you will see a drop.
Not very scientific, but what we saw shocked us this summer. On our 4th vacation to Acadia National Park/Bar Harbor, ME, there were obviously far less people there. Our family took a 6 mile kayak tour. Our kayaking guide said her company normally does 6 trips per day (20 people each). This summer they are doing 4/day…had to let a guide go. We had no trouble finding a parking spot in Bar Harbor…this has never happened before. A woman whose family has owned a small motel and some rental cottages told me in 60 years she has never seen business this bad…my mom’s friend has rental cottages in Boothbay Harbor, Me. The friend reports worst year in 38 years of business… Acadia National Park can be an inexpensive vacation…there are very nice private campgrounds that are less than $30 per night, admission to the national park is $20 for a week.
I work with a women who spends all day Saturday & Sunday at the Mall buying crap and Monday - Thursday returning it all. Shopping is her hobby.
Just on an outside observation, the Walmart parking lots are always packed full compared to the mall here.
Check out the party atmosphere in 1929, just before the crash and the great depression. Every body was spending like there was no tomorrow, and they were right. No jobs, no food, no where to hide.
CFO — nice intel. Keep it up.
so many articles, good job ben.
Ditto that. Seems like these articles are coming in hot and heavy these days. Nice to finally see that after “watching paint dry” for all these years (bear since 2001).
Yeah it’s funny I can remember cocktail party chatter turning to booming real estate in both California and Texas in 2002. One f-ing long mania as far as historic manias go. Lots of stupid people made lots of money. The invisible hand must have been picking the invisible nose for too long.
“DeKaser said. ‘Las Vegas has a very strong track record that I personally have no suspicion will end anytime soon. But home prices seem to be more than fully accounting for that reality. When spirits are running high, there’s always a rationale for the discrepancy between what things ought to be trading at and what they are (trading at). Sometimes that rationale will hold up to the test of time. Most often, it doesn’t.’”
Beautifully stated, Mr D.
“Based on the latest survey, Las Vegas home builders have some work to do with increasing customer satisfaction to 2004 levels.”
Based on gleeful conjecture, Las Vegas home sellers have some work to do with reducing customer prices to 2004 levels, provided they want to work off that bloated for-sale inventory.
To the point:
“The number of homes for sale on the MLS reached 20,384 in August, a 32.8 percent increase from the same month in 2005. Las Vegas also has a two-year supply of condominium conversions and a new-home inventory of four months to six months, Salestrac estimated.”
“Las Vegas also has a two-year supply of condominium conversions…”
Barf, yack, hurl, whatever the verb, I cannot imagine what a condo conversion in Las Vegas, the Home Of Everything Sparklingly New, would be like. I suppose these are targeted at the worker-bees in Vegas, but of all places in the world, such people ought to know a sucker game when they see it.
“Builders are offering incentives to get rid of inventory and struggling with labor issues and increasing building material costs, Sonkin said.”
Rising costs and falling sales prices — hmmm, I wonder if these factors could affect future profits? How about homebuilder stock prices? Yep — I bet they will go up tomorrow, especially Meritage, Beazer, and KB, on a contrarian rally.
GS,
Somehow, I get the feeling that if we all said we sold our short/put positions, we’d see those stock prices tank again.
It’s quite a stretch, but I often wonder if some people aren’t lurking on this blog trying to get a feel for what “amateur” investors are doing. Someone stated here last week that we ought to stop talking about our investments. I’m beginning to agree (much as I love commiserating with all my fellow shorts!).
I don’t think they will get a representative sample of what amateurs are up to by lurking here. Besides, I am sure the big boys on the Street can easily conduct their own research in that department by using surveys or industry data. Further, with enough money and leverage available, I believe it may be possible these days to create your own self-sustaining profit stream (e.g., use profits from writing puts and calls out of the money to drive share prices back into a trading range every time they start to sneak out). No need to conduct any research to execute this kind of play.
Yeah, no doubt. Meritage warned tonight, but gave numbers that actually meet analysts’ estimates. For sure, Meritage will be up tomorrow, and if PPI comes in as expected and new starts aren’t way below expectations, all the rest of the HB’s will be up, as well.
Interesting to watch them today, though. They were up big this morning, then did an abrupt U-turn when the NAHB numbers came out. That didn’t happen last month.
Next Monday’s NAR numbers probably won’t be very good. Last month, the HB’s actually fell when existing sales were released. I may put on a few put positions this Friday.
“‘It was fairly clear to most observers that continued years of double-digit appreciation just weren’t sustainable,’ said Retsinas. ‘At some point, you have to leave time for incomes to catch mortgages and housing prices.’”
I think this is the crux of the failure of the so-called “experts” to predict the bust and its magnitude. The belief that prices would stabilize until incomes caught up was just pure and utter bullsh-t. Incomes are not going to catch up to the sky high prices. Prices are going to fall to come down to the level of incomes. Either way they will meet. The big difference is in how you think they will meet. People on this blog sees prices coming down whereas the real estate jackals stated that they saw incomes eventually going up. That conclusion, in all honesty, was plain stupid or dishonest. I believe some were dishonest but others were just stupid. Either way, they were dead wrong.
The reason incomes will not catch up anytime soon is because of China and India since they add to the deflationary pressures of real wage increases. Prices of one kind of asset will be coming down, while some other type of asset will take the place of R.E. and will be inflated accordingly. Divergence in asset prices can not last forever in a global economy.
“Incomes are not going to catch up to the sky high prices.”
Perhaps there is a bit of hubris at the Fed which supports a belief that since housing prices have been successfully inflated to a permanently high plateau, they will be able to withstand a few years with slightly-higher-than-usual wage inflation to let incomes catch up. Gonna be hard to achieve this against the giant sucking sound of cheap outsourcing alternatives, though…
It’s difficult to imagine wages catching up in a place like LA. According to the LA Times the median priced home for first-time buyers in Los Angeles was $489,860 in the second quarter of this year. The required income a family needs to afford a house at this price, according to the new C.A.R. criteria, is $100,320. The median household income in California rose 1.7% last year, to $51,755. How many years of 1.7% annual increases does it take to catch up? And this is all based on CAR’s weak assumption that a $100K income actually affords a 490K house.
I call BS on that one!
100K for a 1/2 million dollar home? No way, I think that number needs to be AT LEAST 50% higher. I would not feel comfortable buying a 1/2 million dollar home without an income of about 175K, and very little/no debt. I am overly conservative, but I think that 100K is just nuts, you would be spending more then 1/2 your take home income servicing the debt/household expenses.
I agree 100%. CAR is insane.
BTW, CAR claims 40% of income. Here’s the link to the Times editorial with their numbers…
http://www.latimes.com/news/printedition/opinion/la-ed-affordability26aug26,1,4047533.story
40 freakin’ percent?!?!? That’s just sick. Whatever happened to the tried-and-true 28%/38%?
There are soooooooooo many people living in homes that shouldn’t be.
NYCityBoy — good call, IMO.
“… 37 percent of all homes bought in Las Vegas in 2005 went to owners who didn’t occupy the properties as primary residences”
How much HELOC money from the primary residences were used for the down payment on the Option ARM loans for these second homes?
I live in Vegas and there are new developments on every street still under construction. It could be a real disaster here.
“‘I was looking for the nuances in our market, and I didn’t quite see them in that 27-page (Global Insight-National City) report,’ said Linda Rheinberger, president of the Greater Las Vegas Association of Realtors. ‘I found it to be interesting reading, but I didn’t see how it pertains to our market.’”
Well, let me explain it to you, sweetie. See, you’re about to get smacked. REALLY hard. Right in the face.
NOW do you see how it pertains to your market?
She read that report with gloves on, carefully turning the pages so as to not infect her mind with any negative “nuances.”
Someone wrote those lines for her.
Maybe this is another step in the bubble propaganda:
When the spinners run out of spin, they resort to semantics.
I have a good friend who is a General Contractor in Bullhead City which is about an hour from Vegas. In a conversation last weekend he mentioned that getting sub-contractors was much easier recently because they are all coming over from Vegas. He also recently cancelled the order for a new house purchase that was supposed to be done last memorial day in Bullhead. The Builder promptly raised the listing price by $30k after he cancelled, probably to cover a lot damaged materials that were damaged by rain and sitting in the garage.
HIVtv just had a condo sell at 5% over asking
weeeeeeeeee must be aprill 2005
in DC
now 10-12% less
weeeeeeeeeeeeeee
OT a bit, but I couldn’t resist posting this from the SDCIA board:
I overextended myself a bit by buying a home in Garland a suburb of Dallas Texas. The flip has holding costs of $2000 a month and is priced at $174,900. It was a renovation that I am flipping for a possible profit. It has been on the market for 8 weeks and has very little MLS traditional Realtor driven traffic as is the case for much of the Garland, Plano and Richardson areas north of Dallas.
The market is flooded with record available housing and the competition is fierce. Prices have dropped a bit as well. But the buyers are just not out “in force” at all and the traffic “viewings” of my flip are practically at a stand still. This could be temporary but I do not have time to wait to see if it is. I have to DO SOMETHING !!!
Follow up to this:
I am not considering renting. I am attempting to compensate for losses in Buffalo New York and a one other I am currently experiencing on a flip in Fort Worth. (Look for my book on how to lose your shirt in Real Estate while working really hard at it!) I think the lessons I learned is was never assume a low price is a good deal, never improve a home beyond its demographic market family profile and never buy ghetto property especially when you do not live close by.
In my experience the “gurus” leave out a lot of problems that crop up in the real process of your odyssey of owning a property. I also believe that Real Estate courses are an industry filled with fragmented information when the best path to success is one to one mentoring along with choice educational materials.
The last thing I wish to mention is that Real Estate as in any business has a lot of people in it who have no problem taking your money for what ever reason. It is sad but true. The greatest pitfall is when you are working in a group or with professionals is when they prove to have been “self deceptive” regarding value either going in or cashing out. Making decisions and value judgments in Real Estate is a lot harder than I expected. Just when you think you have it right the market informs you that you do not. That is where experienced mentoring plays a crucial part. Paid mentors are possibly okay, but in my opinion it takes individuals as close to you as family to really perform the role of mentor. Those who take your work as seriously as they can while not actually being in at risk for loss are rare and very special people. And finally you have to be tough. Really tough especially if you are working with life savings - hard earned money. The fear can be gripping and the challenges daunting and the sense of powerlessness over a market very destructive. Certainly the successes shine through the failures. But the failures can and do happen - quite often. And they are terribly sobering. In the end should you survive you can join an elite group of the very few who actually succeed. The statistics show that very few people actually do. So if you are reading this and are looking at how tough and how committed you are to real estate investing… look harder. Be honest and do not deceive yourself as to your ability to flourish in this business. For there are no magic deals, few good ones that turned out well without a lot of work and the bad ones require nerves of steel. A failure can stretch out for months, many nights of sleep interrupted by fearful thoughts. And many hours of work you never expected to have to dedicate to your investments.
And I am still a novice. Perhaps others have done better than me. My journey in Real Estate spans the purchase of only six properties in two years. I have been more fortunate than some in my inner circle. But we have all lost money and now with this Briar Hollow property looming over me with $2000 per month holding costs… I need some very creative ideas from you fine folks here. I have a few, but always open to the brilliant minds here.
—————————————————————————–
TxChick is right, these post’s are hilarious!
I will probably drive out there and do a sign campaign using the Kirschner method.
I am looking for creative advice on getting traffic through a home in this hopefully brief time of slow traffic.
Sounds like someone got shark bit squarely in the a$$. So sad *snicker* happens in every stage of the market. Folks still haven’t figured out that the mentors and late night guru’s are looking for suckers and that sucker is usually you when you bite the bait.
MIS,
I am truly impressed with how far you’ve come to the other side! That party you went to really changed things. You sound just like the rest of us now!
LOL, Yea as the weeks go by things have become interesting to say the least.
But as far as the late-night guru’s and mentors they deserve a special place in h*ll. I have seen those guys first hand burn off someone’s golden parachute or severance package and look at the guy and tell him it was his fault and we’re not talking about small change. I tried to help one guy during the last downturn but his “mentor” told him brokers were the devil he winded up losing close to 500k in severance and retirement money.
I go through great pains to avoid those under the trance.
Yea ,Mr incomestream what really did happen at that party ? Anyway , I agree with you that the late- nite real estate guru’s are the scum of the earth . That scum created the locust and half of them were on the take from the developers .
Garland??? hahahahahahahahahahahaha….
OMG. Garland. LOL! Wet keyboard already and it’s only 5:30?
Garland is the land of the Randy Travis groupies. Where people buy their clothes and furniture at Walmart. Where the five basic food groups are Cheeze Whiz, Lunchables, Doritos, Beef Jerky and Wonder Bread. Where they name their kids things like Brandee and Coyt. Where a man could be shot dead in his driveway for daring to have a Michael Moore DVD on the front seat of the car. Where men are men and sheep are nervous.
$2K per month for a flip in Garland? Get that dude a box of Depends, quick.
Winzer’s calculations show that Las Vegas has an average home price of $296,500, well above the $231,000 average that he said economic fundamentals warrant.
Las Vegas home prices, at a median of $282,600, are 41.8 percent higher than they should be.
I have family with the median / average LV home, and it’s true worth is a little north of $125K at best. Come 2007, I doubt it’ll be worth half that.
Well there you have it, a drop in LV of somewhere between 22% and 42%, plus overshoot.
From TD Ameritrade’s website:
Dow Jones US Sectors
1-week Best and Worst Performers Select…1 week1
5 Best Performing Industries
Industry name % Change (over selected time)
DJ US Tires Index 8.97%
DJ US Home Improvement Retailers Index 8.31%
DJ US Home Construction Index 8.28%
DJ US Specialty Retailers Index 7.70%
DJ US Airlines Index 7.08%
5 Worst Performing Industries
Industry name % Change (over selected time)
DJ US General Mining Index -12.36%
DJ US Gold Mining Index -11.65%
DJ US Mining Index -11.23%
DJ US Coal Index -10.45%
DJ US Platinum & Precious Metals Index -8.83%
———————–
Anyone else think this is weird???
DJ US Tires Index 8.97%
DJ US Home Improvement Retailers Index 8.31%
DJ US Home Construction Index 8.28%
Those three sure stand out against the backdrop of bad news for automakers and homebuilders.
Methinks nothing but counter-trend rallies to part the most amount of money from the most amount of people.
Anyone trying to flip in TX is a complete moron. Except for a few select areas (Frisco, Austin) , home prices do not appreciate in TX. Maybe if you buy a foreclosed property, you can sell it for a nice profit. Anything else will be a wash (after fees, repairs) or loss.
Add to that the property taxes (~3%) one of the highest in the nation. You will have to make at least 10% appreciation to have a tiny profit at best. Also rents are very low, since N.Texas has not really had any job growth since the dot com bust.
As a long time watcher of Ben’s blog and a local government employee here in LV I can say that the builders are scared sh*tless. In fact, its so bad we didn’t have 1 lot record for permit in august(we averaged about 800-1000/month in 2004/05). A big fat 0. I know theres a few developers that are gonna have thier heads handed to em.
Thing is the authorities permitted the wild excesses of greedy out-of-staters coming here buying up all the homes with zero tax penalties and now the chickens come home to roost and all you hear is crying by stupid realtor broads who are gonna have to go back to waitressing and stripping. Live by the sword, die by the sword I suppose.
Oh well, LV can always use a few more strippers…
You know if they stripped at the open houses they would get some more traffic, don’t you think? Plus a guy could just pop over to the neighbors open house for a lap dance in between poker hands on guy’s night. Wow, this has possibilities!
Misery is the best breeder of humor.
– Jas Jain
Not miserable here, just a little bitter…
I love gallows humor — think it is some of the very best — dry, with a twist.
Where is LV Landlord?
It isn’t any fun when they don’t come back for their beatings.
I wish Ben would track a few of them down and get them back here for the humiliation.
Met a couple of realtors while dove hunting a couple of weeks ago in golden valley, AZ. As I do with all realtors, I asked them how the market was looking, got an earful about the new Vegas burb being built by Rhodes Homes in golden valley. I was informed that everyone priced out of vegas wants to commute from Golden Valley….30,000 Homes. I let them ramble on for a bit about this next boom town.
When I heard enough, I gave them the bubble-speak-spanking. Among other comments, I told them the only investment I would ever consider in their beautiful valley would be water trailers for the dumb S.O. B.’s that buy these crap boxes. They got kinda mean wandered back to their truck.
If they’re there on opening quail, I believe I will just shoot them instead of listening to R/E bull.
Watch out, don’t let them do a Cheney on you.Shoot low!!!
I know theres a few developers that are gonna have thier heads handed to em.
________________________________
Like a good bed time story… See you guys tommorow!
Night, Crispy!
Gekko: “what happens to the economy and how will it affect my cash, bond, and stock positions?”
The economy will be in Greater Depression; Cash will be King; Treasury bonds would do fabulously well, but junk bonds would be junk; and your Scam positions will teach you not to fall for Scams runs by Corporate Crooks of America. The same goes for Scam Mutual Frauds.
What part of Corporate Crooks run corporations these days solely for their own interests don’t people get? It is not you grandfather’s stock market.
Jas Jain
Jas Jain – Thank you ……
Sometimes I wonder if half the posters here are not suggesting (or baiting) the other half into the next scam faze of “investing”, since they, themselves, didn’t hit the homer on the fraud housing boom. My only argument is ……it IS still your grandfather’s stock market, he just wouldn’t have gone for this crap. It would still be in a pillow case until the tar & feather was ready for application……
“My only argument is ……it IS still your grandfather’s stock market, he just wouldn’t have gone for this crap.”
I used to work for Cisco and retired in March 2000. I first used the terms Scam Options and Scam Market in 1998.
I know the detailed history of how the stock market was turned into Scam Market. Scam Lovers are a bunch of morons if you ask me and they have no clue as to what did happen.
It is a sad thing, but we can’t not talk about it in terms that are appropriate.
Jas Jain
Hey lefantome, you seem like a smart guy, and I know that you could use a little extra cash. I found this system of buying foreclosed properties and buying them with options on gold mining and tire maker stocks.
It’s a little complicated to discuss here, but if you’re interested, e-mail me. 30%’s in the bag!
Too funny, but I now expect to see that on a late night informercial any day now.
OK, I’m in …….
Jas –
How do you know that Scam Crookery has not reached a permanently high plateau?
Easy. After all the money that can be scammed is in the hands of the Crooks it would be Game Over. Don’t laugh, but there is a good chance that the Scam Market could be shut down for all practical purposes. It happened in jolly old England in 1700s after the South Sea Bubble burst.
Corporate Crooks of America would be running for their lives during the Greater Depression that they caused.
Jas Jain
Treasury bonds would do fabulously well
But for how long? The U.S. can’t pay it’s bills now; how is it going to pay them when income, property & sales taxes plunge during the coming depression??
Given the likely ongoing weakness of the dollar, I think some non-dollar government bonds might make more sense.
You need to study what went on in Japan on the past 16 years. Their govt. debt as a % of the GDP is the highest in industrialized world.
At 0% a govt can borrow all it wants at no cost! At least for 5-10 years.
For diversification I also recommend Swiss franc and Swiss govt. debt (that haprldy pays any interest!) for safely. When looking for safety greed is NOT good.
Jas Jain
The dean at my children’s Las Vegas middle school told me last week that they are so short on their registration, they have had to let go of three teachers, as well as some programs. She owned up to the school being 150 children short for each teacher…that’s 450 short. Two years ago this school was severely over populated. There is so much talk about the 5000 who move here, but almost none about the masses who are leaving. There is also tons of talk about the booming economy here and all the jobs. My husband is a craps dealer at a good Strip casino…our family income is right at the states median income. Last summer we were somehow approved for a $250,000 loan. We couldn’t find anything. Nothing at all that was worth living in. What was available in that price range were houses that two years before weren’t even worth $100,000. Junk. I literally cried. We kept renting. And renting. And now we’re leaving for a small town in Northern Nevada (Ely) that has decent schools and affordable housing. We can rent a house there for 1/2 what our rent is in Vegas…and in a year or two, when the market settles, we’ll be able to buy a home that we’ll have some hope of paying off in our lifetime. There are lots of jobs in Las Vegas…those jobs have no impact on housing, because the people who work them can’t afford to buy a home. The whole situation here is ugly and I’ll be glad to get away from it.
Congratulations in not jumping on the house bubble train, Shaunta. Hope things work out well in Ely.
I was reading this book called “Wealth & Poverty” the other day to see what they had to say about the Great Depression.
This book is not written from an American perspective, so they had a slightly different take from what we are taught here. Their central premise is Europe ended up in a liquidity freeze because it had become dependent on American short term loans.
As the stock market headed south in the US, and Banks started to look a bit shaky from the margin lending to punters, they stop rolling over the short term loans to Europe.
The problem was Europe was using those loans to finance capital expansion especially after WWI. Because businesses could not quickly sell assets to pay off the loans Europe started to default. Needless to say, this quickly caused business activity to contract in Europe which in tern slowed American exports, which hit the US banks yet again.
So, assuming we believe this story what is different this time round. This time we are borrowing short term Chinese (and other Asian) money to finance a long term asset (house). When we default, the Chinese demand high interest to compensate for the higher risk, which slows the American economy further, which slows the Chinese economy, which leads to less money being available, which … feeds back on itself in a vicious cycle causing an international currency crises.
Ironically America, the source of money and trade imbalances in the 30’s, was worse affected than many parts of Europe. However, no major country was unscathed by the depression. Could this mean that China is heading for a bruising?
Thoughts?
Oliver
Think Japan…..
“Could this mean that China is heading for a bruising?”
The difference is that the Chinese ownership is held by their central government and controlled banks, not as much true private capitalist investors and banks as was in the US.
The Chinese central bank has a different mentality. They are not out foremost to make dollar profits on their holdings as would be a for profit bank. They are tasked to implement the strategic policies of the Central committee, which is first, to maintain employment stability in China so as to avoid political disruption to the elite, second, to ensure long term strategic destruction of US manufacturing capability, and hence, eventually political and military power. These two goals happen by the same mechanism, mercantalistically holding yuan below fair value for decades and exporting the bejeezus of their industries. As they aren’t a democracy the resulting suppression of standard of living for average Chinese (compared to a full free market capitalist prescription) isn’t a policy issue and since they are getting rich enough anyway people aren’t complaining.
When the deep recession hits the USA the Chinese know that it’s outsourcing to Asia will double even more. Companies will be hurting for profits any way they can and cost-cutting by killing good jobs is the usual strategy (see 1980-1982), and with US earnings hurting the powers can argue “DO you want to raise the prices on all your stuff?”, and ‘protectionism’ will be defeated to the huzzas of the WSJ.
All the Chinese need do is keep the yuan nearly pegged during the recession/depression, which means buying bonds and not worrying about the losses.
After the depression is over, the US will be a 3rd world exporter only of raw materials with no advanced capability left: a colony.
tell me this is a misprint… the “Lied Institute of Real Estate Studies at the University of Nevada, Las Vegas”
ATTENTION!!! THE SKY IS FALLING IN LAS VEGAS!!!
I am a LV native and in my senior year of dental school. My wife and I almost bought a KB home here last year in Mountains Edge ( a masterplanned community in the SW area of LV) We signed at $285,000 and with upgrades it would have been 297,000 (1600 sq ft with a decent yard for vegas) Well, my wife was inspired in my opinion and we backed out of the contract. The house then went up to 317,000. A few monthe later it dropped to 289,000. Are you ready? KB’s web site this weekend had the house selling for $254,000!!! They dropped all of their homes in that sub division by at least 30,000. I then checked on other neighborhoods in vegas and I saw that they had lowered the prices in almost ALL of their developments in the Vegas valley. Funny that this is never reported any where in the media here. Everyone is still clueless. My buddy who bought a KB townhome last year for 200,000 didnt think it would affect his resale when i told him that his condo is now selling for 185,000.
The bubble has now officially burst here in vegas. I am so glad that we didnt buy. Now my wife and I can move to Denver when I graduate in May with nothing holding us down here. My dental school buddies who bought will have a hard time selling and it will be hard to leave vegas.
Don’t forget the good advice that HIClouseau gave you when you get there…
But, but, I thought the “little people” were going to be commuting to LV from Kingman, Ariz… After all, there are hordes of people all over the country who want to live in a $300,000 1br condo in LV. I just know they’re out there…somewhere.
http://usmarket.seekingalpha.com/article/17087
I have to ask…………
The American fed……are they all b/s ers?
As the saying goes………only in America.
Love ya all……hang in there
“The American fed……are they all b/s ers?”
They are agents of Bankrupters and Fraudsters (aka bankers and financiers) of New York City (BFNYC). Fed, especially, since Greenspan, would do whatever that is necessary to promote the interests of BFNYC.
“As the saying goes………only in America.”
Yes. With the most thoroughly brainwashed population from birth onwords. Power of propaganda in action. BFNYC and Corporate Crooks of America make Nazis look amateur in the propaganda department.
Jas Jain
I’m half tempted to start a price war among sellers. Take out an ad in the local paper and ask for the lowest price on a 3/2/2.
Mike,
I like that!