Learning From Yesterday’s Sellers
The USA Today reports on flipping. “The vanishing act of speculators is accelerating the decline in home sales this year. That’s giving buyers a bonanza of choices. It’s also a stark reminder of the cyclical nature of real estate.”
“Short-term real estate investors are learning how hard it is to make money, any money, once For Sale signs begin hanging in yards for months. Sellers cut prices, and builders hand out swimming pools to entice hesitant buyers.”
“Jeffrey Epstein in Florida, put deposits down on a condo and a town house under construction in Miami in 2004, he never actually planned to live in them, or even buy them outright. ‘My strategy was just to put down a deposit and try to flip the contracts when they built the properties,’ says Epstein. ‘But then I ran into a couple of problems.’”
“Namely, a local real estate market with a 17-month supply of condos for sale and prices 11% below last year’s median. In June and July, Epstein had to come up with the money to close on the condo and the town house. Now, to get them off his hands, he’s offering to pay the buyers’ closing costs and homeowner’s association fees for a year.”
“‘We’re nervous about what’s going on in the market,’ says David Kloth, a doctor in Danbury, Conn., who with a lawyer put down deposits on three luxury condos in Las Vegas that will be completed in November. ‘We’ve got two months to close’ on the property, says Kloth. ‘Until we sell, who knows?’”
“‘In the home market, the investors, rather than rushing for the door, are holding onto homes imagining the market will turn around,’ says Edward Leamer, director of the UCLA Anderson Forecast.”
“It reminds him of the last real estate bust in California. ‘In the late ’80s, here in California, you couldn’t go to a cocktail party without somebody admiring their own intelligence about the latest home they just bought,’ he recalls. Then, in the ’90s, deep layoffs in the aerospace and defense industries sent the market into a tailspin. ‘What happened in California is a good lesson’ for investors. Leamer says. ‘We had speculators out of the market for at least a decade.’”
“In Las Vegas, the market was infested with real estate flippers during the recent real estate heyday. Now, in new neighborhoods in the Summerlin area of Las Vegas, about 40% of the single-family homes for sale are vacant, says Bruce Hiatt, owner of Luxury Realty Group. ‘It’s higher than we expected,’ he says.”
“Homes that were selling for $535,000 last year are going for $460,000 today. ‘It’s shocking to see, in a year’s time, the price’s ability to come down,’ Hiatt says.”
“Page Musgrove is done flipping in San Diego, where home prices are now falling and there’s nearly a nine-month supply of single-family homes for sale. ‘I don’t trust the California market anymore,’ he says.”
The Washington Times. “Hundreds of houses get auctioned off every month at the offices of Alex Cooper Auctioneers in Washington and Baltimore, where homeowners grasp at one last chance to make money off their properties. ‘I do find that there has been a greater demand from individuals who are very anxious and who can’t understand why their house has not sold,’ said VP Paul Cooper.”
“Many of his customers bought houses during the peak of the housing boom. Now they can’t keep up with the payments. ‘They borrowed too much, they paid too much,’ Mr. Cooper said.”
“Doug Goldsten, an auctioneer in the District, said his business of auctioning foreclosed homes is up 10 percent to 20 percent since the spring. ‘The banks were making loans with less equity,’ Mr. Goldsten said. ‘People got into trouble if they couldn’t sell their house right away, so they’re getting foreclosed on.’”
The Associated Press. “Now that home sales are weakening, buyers have taken a page from the sellers’ playbook, demanding everything from new appliances to no closing costs to upfront cash to get the deal done. In some cases, what they are doing is down and dirty, sellers have been asked to pay off buyer’s credit-card debt, cover costs of the buyer’s current home or even pay for the buyer’s commuting costs from the new home.”
“This kind of gamesmanship allows buyers to get the most for their money. It also reveals that the housing market’s ugly side may be here to stay.”
“Buyers throw out new demands right before they sign the deal, such as to have their credit-card debt paid off, their closing costs covered or the homes completely repainted with their choice of colors.”
“The buyers of Theresa Liddy Dolge’s Hamilton, N.J., home wanted to her to pay their apartment lease from June through August since they forgot to tell their landlord they were moving. She didn’t agree to that, despite her lawyer and realtor’s attempts to get her to do so. They also asked for her train pass and her parking spot at the train station, both of which she no longer had.”
“Granted, she made money on the deal, selling the home for $275,000, which was well above the $160,000 for which she had bought it. But the buyers’ sense of entitlement still bothered her.”
“Today’s buyers seem to have learned from yesterday’s sellers, when homeowners saw that as an opportunity to inflate their selling prices. Now buyers are watching mortgage rates move up and risky loans implode. They want to make sure they get as much as they can out of the housing market. That certainly sounds familiar.”
“sellers have been asked to pay off buyer’s credit-card debt”
Ha! I love that one! What better incentive to buy a new home? “We will pay off your existing credit card debt.” Some of those new homebuilders should add that one to the incentive list, rather than throwing in the upgrades.
O RLY? Ah ahah heee hee hee haaa. The buyers’ sense of entitlement. Yeah, f-cking, right. I’m very, very sorry to see her sell out with a profit. I hope she was at least heloc’d and I hope she had spent a year dreaming of spending 400K that she thought she was entitled to.
Today’s “entitled buyers” are still greater fools.
No shit! The BUYERS’ sense of entitlement? That’s rich!
txchick posts “No shit! The BUYERS’ sense of entitlement? That’s rich!”
I agree! Mighty upitty of those buyers.
I agree 100%. I just closed on my house and am now currently renting. Our buyers demanded three different home inspections and a myriad of other incidental things, like replacing a window that had a 1 inch scratch on it.
I capitulated on everything knowing that they were greater fools and I still got my cash.
As of this week - I am debt free - it is an unbelievable feeling.
Congratulations! You’re no longer a creditMachine peon. The buyer, however…
Congrats! Must feel REAL GOOD.
Nice, congrats. My wife and I paid off our mortgage a couple weeks ago, and are now 100% debt-free (save what Uncle Sam takes out of our hide each year). “Unbelievable feeling” is a great way to describe it!
My hope is that between now and the bottom of this housing bust we can save up enough to (ideally) buy the house outright or (more realistically) have a killer down payment…
Why is everything cool as long as the sellers are gouging the buyers but when buyers begin to push the sellers its “ugly” or they (buyers) expect a sense of “entitlement”.
We need to see a serious attitude adjustment. Until sellers, their minions, and the MSM start giving a proper “Yes Sir, No Sir” to prospective buyers and the price rolls back 50%, we should all keep our money warm in our pocket!
P’cola Popper,
I’d love to see an “attitude adjustment” it’s just been my experience that when a seller pulls off a major stunt he’s “brilliant”! (When a buyer has his lowball offer accepted, he’s a dirtbag or “stingy”). A friend recently reminded me of that. It’s always been that way and I don’t see it changing anytime soon. The best that we can hope to do is have the respect of other lowball players. That’s something momentum players will never understand.
“Granted, she made money on the deal, selling the home for $275,000, which was well above the $160,000 for which she had bought it. But the buyers’ sense of entitlement still bothered her.”
I love it! I hope this seller loses sleep and hair over her failed plans to retire off of her crapbox home. Back in the late 80s my parents had to sell their house because of divorce. This was a home my father had designed and built with all of his heart. It was truly gorgeous, with one acre and great views. I think they might have broken even on it, or had very little profit after several years. Were they,and are they bitter? No, that was just the market at that time. Unfortunate, but reality often is. So no sympathy for this bi-atch. Buyers are entitled to offer whatever they want to. Seller expectations are irrelevant. Reap it you greedy bag. Better yet, why don’t you go fulfill your duty as a true American and blow that profit on worthless consumer goods. Ben, keep these sob stories coming!!
- Epstein says ‘But then I ran into a couple of problems.’
- “Namely, a local real estate market with a 17-month supply
- Flippers are holding onto homes IMAGINING the market will turn around,’
What a great investment idea - use your imagination.
south florida is so funny. just drive around and you can see the inventory. you would think that the building will stop. but nooooo. former scripps site is being zoned for more housing.
never learn.
A 17-month supply based on investor-driven past data. What’s the real supply?
Sobay
- Epstein says ‘But then I ran into a couple of problems.’
- “Namely, a local real estate market with a 17-month supply
- Flippers are holding onto homes IMAGINING the market will turn around,’
Yes Doctors, Lawyers et all…. So Sad Too Bad. You buy high and sell Low. Hello Huston this is Epstein… “we got a problem!”
‘My strategy was just to put down a deposit and try to flip the contracts when they built the properties,’ says Epstein.
How could he go wrong with such a unique strategy?
I decree CREDIT not CASH is KING!
“sellers have been asked to pay off buyer’s credit-card debt”
Ooohhh, me likey.
Don’t forget to include a contractual provision requiring the sellers to come back and feed the squirrels
Nah,
Last thing I’d want is the seller I gouged to be coming back around every other day……I’d make them hire someone.
That would still be an agent acting on their behalf. Wouldn’t it be safer to just have them pay you to hire someone? :p
Speaking of credit cards………….I used one today to slip Ben a couple of bucks to continue his good work. You don’t need a Pay Pal account.
Keep it up Ben, I alsmost sold my computer yesterday as it wasn’t good for much else!
There’s a deeper problem here. What’s happening is instead of lowering the price, people are giving money back to the buyer (for closing costs, debt, whatever.) But for mortgage purposes the “value” of the home will be the price paid. The loan to value is being distorted. The lender has more risk than is apparent.
Without Fannie Mae to repackage and off load risk, no banks would be writing mortgages today with such obvious fraud going on.
Well said; don’t forget about all the other goodies like SUVs, bigscreen tvs, vacations, and so on that get wrapped into refis and sucked into the FNM creditMachine vortex.
I saw a $190k house in Lakeland that included an ‘06 Nissan Frontier. I was thinking, why don’t they just keep the truck and drop the price $20k? Then I realized they probably had the house HELOCed to $190k to buy the truck. These idiots probably thought they were being smart using a tax deductable loan to buy a new car, and now they are getting a lesson on why you don’t use long term debt for a short term durable.
Here’s a gem (for free!) for everyone to digest - in personal finance, debt is never a smart move. Live below your means, don’t amass debt. I have no idea how people with HELOCs, credit card debt up to their eye’s, etc., sleep at night….
“But for mortgage purposes the “value” of the home will be the price paid.”
I have heard here and elsewhere that for undewriting purposes, the appraisers are *supposed* to take incentives, etc. into account.
“Granted, she made money on the deal, selling the home for $275,000, which was well above the $160,000 for which she had bought it. But the buyers’ sense of entitlement still bothered her.”
That’s right - sellers are the only one’s who have a right to feel entitled. Screw you - feed your own damned squirrels. Better yet, if you want me to buy your house, you need to agree that you will come and feed the squirrels everytime your out here to mow my lawn because lifetime lawn maintenance on your dime is part of the deal, OK?
I’d like to pinch this person’s head, she makes me so mad and sick to my stomach.
“The vanishing act of speculators is accelerating the decline in home sales this year.”
The larger concern is the vanishing act of buyers. This includes not only speculators, but also the 100%-financed I/O Option ARM crowd, and the folks who cashed out all the equity from the old homestead and can no longer sell at the 10% premium to last year’s price which is needed to provide for a downpayment. Fundamental demand for a home as a place to live in is all that is left, and the market values supported by this segment of demand are far lower than the bubble price levels which were fueled by the belief in 10%+ annual appreciation forever.
I was at the car wash yesterday and talked to some guy who did concrete. He said business was great and it has allowed himself to own 5 homes. I think the speculative interest in the market is probably closer to 50% in my opinion. the market needs to be flushed to ease the speculative interest.
It’s funny how people have been duped into thinking they “own” something when they have zero (or negative) equity.
Speaking of ownership; never before in history have so many willingly sign themselves into serfdom; in this new supereasy credit economy; the question is who owns whom?
You can’t have serfs without a debtors prison. There are no debtors prisons here. So the conartist mortgage fraudsters will get a way it.
It’s rather cruel, don’t you think? Using the Dream as bait and queitly watching the Sheeple bid more and more for their beds; then, locking them into a deflating asset with prepayment penalties, upwardly adjusting payments, and new bankruptcy laws.
Apparently, Georgia already has a model for “debtors prisons”. Go see this:
http://www.ajc.com/metro/content/metro/atlanta/stories/2006/09/18/0919prison.html
don’t you know? Equity just “happens”. Don’t ask, it just does! I liked the comparrisons made last week to the comments of today’s real estate market and yesterday’s stock crash of the 30s. Has anyone seen the video on that? Quite amusing. Here’s the link in case you haven’t. http://www.youtube.com/watch?v=pLjo7-J1qho
I just don’t know if it’s all hype or what, but maybe the Great Depression will have to be soon called the “first” great depression that will be followed by the “ginormous great depression”.
Chilling.
Excellent video. Spread it around!
I will hammer this home until everyone understands it. You never own a home. Even after the debt, I’m sorry, I mean mortgage is paid off, see how long the house is yours if you don’t pay the property tax person.
Yeah, but where I live anyway it’s about 1.25% so it’s not a very significant part of the cost of ownership.
Exactly, OC Dan. It’s why I don’t believe in property taxes (but if they exist, I support Prop 13-type provisions). Add to that the nazi-like HOAs of today (who can tell you what colors you can paint your walls and where to park your cars, etc. — and foreclose on the property if you don’t pay their outrageous dues), and the difference between owning and renting is very little.
Well of course some us DON’T add Nazi-like HOAs to the mix. When I was house shopping several years ago that was one of the two unalterables that I gave my realtor. No shared walls, No HOAs. I wanted a garage, but you can’t have everything that you desire.
I was on the board of my HOA when I lived in CA. The HOA (in CA) can’t foreclose on an owner if they don’t pay dues, only put a lien on the property. It’s usually easy to get on the board, not a fun job - which doesn’t pay.
Not all HOAs are the same: read the CCR’s before you buy and get a copy of the newsletter. You need to make sure there are no lawsuits going on.
OCDan,
You can address this by saving enough to generate enough interest to cover the property taxes and insurance. For example, a $125K home taxed at a rate of 2% requires $2500 for taxes. Assume homeowner’s insurance is $500 for the year. If you assume that you can get 6% from bonds, then if you put $50,000 in bonds, your annual taxes and home insurance will be covered. So once you have that much set aside for that purpose, you can consider your home “owned”.
“You never own a home.”
I remember reading that “Real Estate” derives not from the property being ‘tangible’ (’Real’), but from the Spanish phrase that means “Royal’s Estate” (aka “King’s Estate”), the ‘real” being pronounce “ree-AL”. The king (government) owns the property, and just grants the “owner” certain rights and privileges. And the governments’ rights to the land derive from the use of armies (force).
Nah. This market needs a giant enema. Then we will get back to being regular.
Bad choice of pronouns. “We” should be “it”.
Reminds me of Jack Nicholson in the original “Batman” movie:
“This town needs an enema!”
I talked to a friend in orlando area last night. last time we spoke was in late 05 when I advised him not to spec build - he has no building experience mind you - and to just sit tight. Turns out he didn’t build but did buy another house. Now it sits empty eating 3k a month. He plans to rent it until the market rebounds.
I tried to shed some light on the inventory situation but immediately started to hear the “this house is different” arguments.
Gonna have to learn the hard way I guess.
Don’t you love that? It’s always sunny in pleasantville.
GetStucco,
As usual, right on the money. If there are doubters among us simply look at rents! Rents remain tethered to the ugly reality of what people can actually afford. Just ask any LL (it ain’t much). Other than “1st month Free!” or “Free Cable TV!” there’s not a lot of wiggle room b/c this is a commercial loan. Commercial loans need to make sense. Now that we are very reluctantly returning to fundamentals many a bagholder will be asking himself “What the hell was I thinking!”
many a bagholder will be asking himself “What the hell was I thinking!”
I doubt it. Many don’t likely understand what’s happening. More likely, they’ll ask themselves “What the hell happened?!”
There’s no vanishing act of buyers, except investors, ‘real’ i-will-live-here-for-20years buyers cannot in their right mind afford anything (I speak for FL). It just wont happen for me, unless prices drop 50% and propable not even then because of tax and insurance… maybe if theres only a 50%drop I could probably realisticaly afford a condo of some form.
“The buyers of Theresa Liddy Dolge’s Hamilton, N.J., home wanted to her to pay their apartment lease from June through August since they forgot to tell their landlord they were moving. She didn’t agree to that, despite her lawyer and realtor’s attempts to get her to do so. They also asked for her train pass and her parking spot at the train station, both of which she no longer had.”
“Granted, she made money on the deal, selling the home for $275,000, which was well above the $160,000 for which she had bought it. But the buyers’ sense of entitlement still bothered her.”
Oh, poor Theresa Liddy Dolge.
The buyers sound as amateurish on the way down as the sellers did on the way up. Why is THE PRICE so sacred? Keep your extras as they are merely a smoke screen. PRICE my friend…. price.
The only idiots buying right now must believe prices are flat but can never fall — otherwise they’d be waiting. One last round of idiots to clear out. If we can’t clear them out, new credit standards will do it anyway.
‘One last round of idiots to clear out’
Well said.
Very true. I have to admit, it’s been hard for me recently not to cave-in. I’m completely alone - in my group of friends, in my family, amongst my co-workers - in believing prices will once again be affordable. If I didn’t find this site long ago, I would most definitely have been a GF. Now, even against all the opinions that are in my face on a daily basis, I’m still holding out. I ask myself why do I believe a bunch of blogging strangers over people I actually know? The answer is because you all make better arguments and provide solid data (both historical and present) and facts. So, thanks! Particularly to Ben.
It’s easy for me not to cave in. I look at all the the home owners I know and see them working two jobs. I try to tell them that owning a house right now is a burden, but their response is that they are building equity and someday it will pay off ( meanwhile they work two jobs, with no time to enjoy their wonderful investment).
Well part of the problem is that at with a normal amortizing mortgage and sane pricing levels it DOES make sense to scrimp and sacrifice when buying a house. 10 years later, when you’re paying the same P&I for to get an equivalent rent that has risen with inflation it begins to look like a better deal. 30 years later people are forgetting about the opportunity costs and straining their shoulders patting themselves on the back. But of course getting a suicide loan to pay vastly too much for an asset which will in all probability see significant nominal declines in price is just dumb,dumb,dumb.
“Misery loves company” All your overextended homeowner friends are really just envious of your freedom from financial worry. Just mention the nice resturant you went to last night, the good seats you had at the ballgame, the nice vacation you are planning. Living well is the best revenge.
David,
Good point about living well. We only have one shot here on earth. With the substantial $ you can can save by renting now, one can easily enjoy a nice vacation. We’ll be taking one later this year. We scrimp in other areas, but the way I see it, why sacrifice living in order to “own” (and I use that word lightly) an asset that is only dropping in value? People in America should really step back and take a good look at their priorities. If you died tomorrow, would you rather have a house and trinkets, or great life experiences/memories?
(Fundamental demand for a home as a place to live in is all that is left, and the market values supported by this segment of demand are far lower than the bubble price levels which were fueled by the belief in 10%+ annual appreciation forever.)
That’s all that should have been there to begin with. There is a lot of economic upside to prices people can actually afford. The sooner they return, the better for almost everyone.
I agree - affordable housing is one of the keys to keeping inflation under control. With inflation under control, the US can compete globaly by selling products and services. Right now, we are becomming the greatest debtor nation in the world instead of the greatest producer.
‘It’s shocking to see, in a year’s time, the price’s ability to come down,’ Hiatt says.”
I was just as shocked by prices being able to go up based on nothing fundamental. Even with a 10 or 15% haircut in Las Vegas, we really need prices to go to pre 2002 prices for wages to afford housing. It’s not going fast enough for me.
Man, my thoughts exactly. What really bothers me about this whole thing right now is that even though homes are not selling, prices have not really fallen but sellers(flippers) are whinning “why is this happening”. It is like they made a losing investment or even in some cases a “losing gamble” but still think they are entitled to get what they put into it, even though no one will give it to them (imagine going to a casino and losing 100.00 playing blackjack but expecting to get you 100.00 back). This all just has me asking the question when will the bottom really fall out? I think it will start in 2007 with the realization that the great runup of prices from 2000-2005 was a farce and a mania brought on by 1% interest rates and then irresponsible lenders. 2008 will be the real blood bath though, thats when prices will really fall, I think.
CrazyintheOC,
I always at least make the attempt to think in “pre-bubble” terms. It helps me keep a tenuous grip on what little sanity I have left in a world gone mad.
2007/8 will show as you suggest that 2000-2005 was a F A N T A S Y! Remember though that even with all of the liquidity in the stock market it took from the 10th of March 2000 until October 2002 to find a bottom. What’s surprising where RE is concerned is just how quickly this thing is cratering! What RE lacks in liquidity (it’s making up for in leverage).
I no longer feel any great sense of urgency to “bottom fish” and take comfort in the knowledge that what I was once longing for there is another 1,000 people dreading it! Every month.
Dinor and Crazy in the OC,
You guys nailed it. My wife and I have been debt free and renting since January. She stays at home and my commute is 4 miles. We love it. I have no regrets. The rent is about what the mortgage is, but we don’t have all the extra responsibility that ownership brings. I don’t dread the mortgage anymore and I don’t dread the monthly rent either. I go home for lunch and the stress level in the family is much much lower. I also don’t have to worry about mowing lawns, retiling blown off tiles from my roof, weeding, watering, praying their are no pipe breaks under the house, etc. It is hard to listen to all these fools talk, but come ‘08 we’ll be the ones many of these people come to for advice.
And this is how the psychology changes…even among us bubbleheads. (same here, BTW)
I’m there with you Dan. My wife hasn’t worked since our kids were born (outside the home, that is) and we cashed out of the bubble while the cashing was good. Been debt free, renting, and sitting on a large and growing down payment ever since. We have far more peace of mind than many of our friends who live paycheck-to-paycheck in houses they can’t afford. We feel no anxiety or distress whatsoever at the prospect of a housing bust, as for us, a return to sanity and value is good news.
As Tyler Durden said in FIGHT CLUB, the things you own, own you — especially when you’re leveraged in debt up to your eyeballs.
simmssays, my brother-in-law lives in Vegas, teacher. Lives in an overpriced 2-bdrm apt with his wife and 2 kids. I don’t know how they make it on his lowly teaching salary. And Clark County wonders why they still have almost 600 teaching jobs not filled and we are a month into the school year.
Again, the resentment and nastiness towards buyers surfaces. Flag-waving market believers have no qualms being an entitled seller, but buyer entitlement really bothers them. F these people. Scumbags.
And then this gem:
‘It’s shocking to see, in a year’s time, the price’s ability to come down,’ Hiatt says.”
Shocking — if you’re a moron.
“…the resentment and nastiness towards buyers surfaces.”
I think that is temporary — the angry denial phase. As grim reality fills the screen, soon enough we’ll be moving into the “What can I possibly do to make you nice folks buy my house?” phase, with relief and hope at even a tire-kicker replacing the anger. Remember the exercise bicycle you bought, long ago?
hehehe…
Not one word about the new “downsizing” paradigm going on as legions of baby boomers find out they don’t have nearly enough money save for retirement, especially with their coveted home equity positions gettin’ flushed.
Salem Mazz now has a work program for senior citizens who can’t
pay their property taxes.
Sure-gimme one them thar McMansions with the $10k property tax bill; and $5k per year fuel oil bill; and $20k long lived depreciation.
My kingdom for a 30’s vintage 1200SF bungalow!!!!!!!!!
White elephants anybody?
I live in a 1942, 1100 sq ft. colonial with one story and no basement in Worthington, OH. I paid $127,000 for it in 1998. My kids walk to school. I can walk to the library and supermarket. In fact, I can walk to Target. The commute to work is 5 miles and takes 16 minutes on a bad morning. People should realize that what matters is not the size and features of the house, it is the total package. The art of living well, if you will.
You’re so right.
Too many consumers, not enough artists.
If we could just be grateful for what we have, rather than ungrateful…you can’t be grateful and unhappy at the same time.
“The art of living well, if you will.”
I stopped at an open house a couple of days ago in Sun City West, one of the older Del Webb retirement communities in NW Phoenix area. The realtor stated that last year the listings in SCW had dropped to 36 and today are over 400. The snow birds are beginning to return for the winter and they are listing houses, as they do every fall. The listing numbers are rising daily. The only problem is that they all insist on listing at last years market peak. He said the median sales price has dropped significantly but largely due to the fact that buyers are buying the low end properties in the greatest numbers. Although my wife and I could afford a lot of house, we too feel the better life for us may be in a comfortable, small, well located place–freeing up money for savings, travel, and helping the kids along the way.
This realtor said the number of interested buyers is still strong but they are refusing to pay for the price run-up that took place during the last several years. He stated that if buyers started making low-ball offers on these houses, realtors would have a chance to talk some sense into the sellers. Most bought their houses at a third of today’s listing prices some years ago and will sooner or later drop their prices if they want to sell. This realtor publishes the 10 lowest sales in SCW each week on his web site to begin this process of bringing down the prices. Of course he is looking for falling knife catchers. However this is a definite sea change in marketing tactics. Good days ahead.
Thank you for this site Ben. You have saved us a bundle of money on our retirement home purchase. I made a donation on Paypal to help out with costs.
“This realtor publishes the 10 lowest sales in SCW each week on his web site to begin this process of bringing down the prices.”
That is a very smart move. Wonder if it will catch on. “How loooow can it go!”
GeorgeC that was an excellent post and just about sums up the whole mess this country is in. Who was it that said greed is good. That was a farce. You have a quality of life that few will ever experience in this life. I posted higher up that I go home for lunch to my wife and daughter while my school is at school less than 2 blocks away from where we live. The stres level is so much lower now than ever before. George keep up the good work, you are a man who knows the value of a life well lived, “not well spent” (on comsumer junk).
I realize writing this is going to make me sound really old, but what’s up with the young people buying a home immediately after getting out of college/grad school? How can they afford it? Everyone in my age group (about 50) rented, paid off any school loans, had numerous roommates to cut expenses to the bone, and saved for years before being able to buy a small, in need of repair, starter home. My husband’s nephew finished grad school, immediately got married, and within 8 months bought a 3br/2ba home in AZ. We can’t figure out how they (she still in school part time) could afford it. But, what they did seems common today.
It stems from the “buy now or be priced out forever” mantra, the “real etate is the only way you will have enough for retirement, so buy now” mantra, the “real estate never goes down” mantra, and all of the no “money down, no income verification, low monthly payments” loans.
Hey, if real estate always *did* go up at the past high levels, they would all seem very smart.
I liken it to all of the geniuses in my generation that filled their stock portfolios and retirement accounts with high-flying internet and tech stocks during the late 90’s. It seemed ’smart’ and ‘responsible’ at the time.
beautifully said.
How can we get other Americans to realize this?
white elephants in 2008 —> mcdorms by 2014.
Comment by manhattanite
white elephants in 2008 —> mcdorms by 2014.
AENewman adds white elephants in 2008 —> mcdorms by 2014. -> TJ Gettos 2020…..So Cal for sure.
We sold our 1927 1200 sq ft 2/1 CA bungalow in May (started reading this blog in Jan). We now rent a relatively spacious 80s 1600 sq ft 3/2 SFH in a nicer community (3 kids). Walking distance to the county’s top elementary school. Proceeds from sale are spread around several CDs. My wife has gone from reluctantly agreeing to rent for 3 months to suggesting we should rent for 2 years.
“Granted, she made money on the deal, selling the home for $275,000, which was well above the $160,000 for which she had bought it. But the buyers’ sense of entitlement still bothered her.”
The sellers had a sense of entitlement on the way up. The buyers will have a sense of entitlement on the way down.
That sense of entitlement is only going to grow. Inventory must grow a little bit more in most areas for seller compitition to be strong enough to push prices down at a steady clip.
With the small 2nd round of broker layoffs and the start of realtor layoffs… its not here yet. It will take a bit for the builder layoffs, more mortgage industry, and realtor layoffs to add to the inventory.
Is it wrong to feel schadenfreude when a realtor with multiple flips is about to lose their job?
‘Suzzane, I researched this’ said it best, we have to clear out the last round of idiots or else the new mortgage rules will push them out. September is the last strong month for the housing market.
Neil
- Don’t forget the third round of lay-offs;
- Burger joints
- Car washes
- Lowes and Home Depot
- Olive Garden’s
- Pier One Imports
I’m surpised anyone is buying right now. I’m glad there are a few, just to drive the comps down.
Actually they aren’t driving comps down, they are taking 10%-30% in under the table concessions in a conspiracy with the reamtors and builders to keep up appearances and commit loan fraud to the mortgage holders who didn’t agree to 120% financed mortgages.
Yep I agree . I’ts going to be a can of worms . The real estate industry are a bunch of fradulent _________.
“‘We’re nervous about what’s going on in the market,’ says David Kloth, a doctor in Danbury, Conn., who with a lawyer put down deposits on three luxury condos in Las Vegas that will be completed in November
If you ever see a doctor investing in something, run, dont walk the other way…As a group, they have the worst business IQ going.
Ha! So true. What is even funnier is that they think they do. Buddy of mine (who used to work in the oil field) got is doctorate in pharmacy. He was working with a pharmacist who was past retirement. The man lost a butt-load on the dot-com bust and had to continue to work. Can you imagine?
I am one an I couldn’t agree more with your statement.
Apparently the joke runs that if you have a real dog of an investment to sell, you sell it to doctors. If even doctors won’t buy it, you sell it to dentists.
Why don’t they just walk away?? Is it just me or do these people border on a psychotic obsession with buying the property even if it means a bigger loss.
Say after me…it’s only an (bad) investment.
Heh heh. Reminds me of a joke I heard somewhere:
Q: What’s the difference between a stock trader and an engineer?
A: The stock trader knows he’s not an engineer!
I think the same could be said for any professional, doctors and engineers included!
Q: What’s the difference between God and Larry Ellison?
A: God doesn’t think he’s Larry Ellison.
That’s funny. I was at a BBQ where I was the only male along with six guys who were all engineers and worked at the same company. They all spent the whole time talking about their stock picks! Eep. How is that any different than gambling (i.e., throwing money away)?
Mutual funds? Sure. Index funds? Ok. Paying someone who has the time and contacts to do the stock picking after research? Maybe. But “picking” stocks as a “hobby” seems about as likely to be successful as throwing darts at a board.
I’m geting some of the bubble fall out now. The home I live in (a 2 on 1) is going into short sale at auction this Oct. 8th. 295k start bid, no reserve, lady thinks she should get btween 450-550k. She’s been trying to sell/refi the ENTIRE time I’ve been here. It’s gotten so bad that I thought about puting a restraining order on her.
So what happens now? She is gonna lose big, and she has my deposit. I don’t think I dare pay rent for Oct. until I see how this shakes out. Why give a bankrupt person another big chunk of my money? So I can sue, then go to the back of the line?
Worse, I’m running a very shaky house cleaning business at the moment, and without a cheap, suitable place to run it from, it may go under (and that might be a blessing).
Any suggestions?
“This kind of gamesmanship allows buyers to get the most for their money. It also reveals that the housing market’s ugly side may be here to stay.”
Oh, please. Just like eternal annual appreciation rates in double digits was here to stay? Get the market back down to “normal” and everyone will be happy (except those who way overpaid only because they expected to make a quick profit). Even those who did overpay, but are planning on staying put will eventually be ok with a normal market. Really wish it were as easy as ripping the band-aid off.
What bothers me about that statement is that they call falling housing prices the housing market’s “ugly side”. Affordable housing = ugly side??? WTF?????
“Homes that were selling for $535,000 last year are going for $460,000 today. ‘It’s shocking to see, in a year’s time, the price’s ability to come down,’ Hiatt says.
How come nobody was shocked to see $460,000 selling for $535,000 one year later or in some places just months later? If prices can jump that much, they certainly can drop that much.
People were shocked, it was just every story of the shock written was accompanied by several paragraphs of realtors and “economist” explaining why it wasn’t shocking but the norm.
How about the folks at YouTube saying they won’t sell for anything less than $1.5B? Do they make any money?
Now that’s shocking.
They have eyeballs — young eyeballs. Youtube could do to the TV industry what Napster did to the music industry — render their distribution channels obsolete. Better for Viacom and the like to get out in front.
1998 called. They want their overused anatomical “it’s different this time” metaphors back.
Though you post makes no sense, it sounds like you’re bitter over some crappy investments you made in the stock market — sorry dude. As for your tired “1998 called” line, you should demand a full refund of the money you forked over to jokes.com.
Sorry, I wasn’t being antagonistic. I just remember that “eyeballs, eyeballs, eyeballs” was the big scam through the dot.com era. Websites had no plans and no revenue, but man did they have “eyeballs.” Maybe YouTube is different, but I’m skeptical. And I submit that many of the eyeballs will be gone if they can’t find ripped copyrighted content (e.g. TV shows) for free
Yeah, and look how Napster turned out.
“According to Bloomberg, Napster, originally a free file-sharing service, sought bankruptcy protection in 2002 after being sued by record labels. Roxio Inc. purchased Napster that year and used the name to start a paid music-download service. The market is now dominated by Apple Computer Inc.’s iTunes, and Microsoft Corp. this year plans to start a new service for its Zune player.”
http://www.allheadlinenews.com/articles/7004903817
Seriously, though, if YouTube sells out for that much $$$, whoever buys it is going to be kicking themselves unless they are very clever and manage/grow/monetize it correctly. But chances are it will get overmanaged, be buried in layers of management, and become stale, old, and unhip.
You guys are right about the fate of Napster and may be right about the fate of Youtube. Who knows which company will make it work. My point was that “making money” today is not the only consideration and that media companies need to keep their eyes open. They have too much at stake.
I just heard a newscaster yesterday say that NOBODY wants to see home prices go down. Nobody (guess she never read this blog)? I think that is where the media has also not provided the complete story. The media has promoted the idea of overvalued homes being good and any correction to fundamentals being bad.
Post from yesterday. i sent this idiot an email. here was his response. Please give him a few more emails. (SCalif20@aol.com)
Here is hopin’ that you lose your ass on your very overpriced and quickly falling condo.
Note: forwarded message attached.
From: SCalif20@aol.com Add to Address Book Add Mobile Alert
Date: Wed, 20 Sep 2006 23:03:47 EDT
Subject: Re: interest in your house
To: housingbubblesobstory@yahoo.com
hahahahahah…got a full price offer……jackass
(Here we have a panic sale for $480k: http://sandiego.craigslist.org/rfs/209424391.html
And his neighbor trying to sell the SAME thing for $580k! http://sandiego.craigslist.org/rfs/208642632.html?
Yikes!!!!
Reply to this comment
Comment by txchick57
2006-09-20 17:05:57
Looks like No. 2 had No. 1 whacked.
$580/square foot)
What is up with No 2’s choice of paint for the kitchen, Institutional Pea Green, it looks like something out of a 1940’s prison.
Dateline: San Diego. One neighbor in my complex tried selling six months ago for $565k. No bites. Took it off the market three months later. Now? Another person in my complex is trying to sell their exact same unit for $595k! Maybe they’ve wallpapered the place with gold…
““Homes that were selling for $535,000 last year are going for $460,000 today.”
…and in a year they will be going for $300,000.
“…and in a year they will be going for $300,000.”
That would be a 35% drop in 1 year..dont’ count on it extremist.
jdog,
On the way up, prices in our area would easily go from $300K to $400K+ in a year. Why not go down the same?
“don’t count on it”
I wouldn’t count anything out at this point. In just the three months of summer I have seen a solid 10%+ decrease just in the asking prices for homes in our Central Coast “upscale” neighborhood. Seven homes for sale in a 100 home development, with nothing moving.
At some point these rising inventories will have to resolve themselves. The overhang is creating a lot of pressure. Unless a lot of sellers all of a sudden decide they can wait to sell, it is not hard for me to see how a 30-35% one year drop will not be the necessary resolution to the situation.
And every month that goes by is another round of ARM holding FB’s facing financial destruction having to come out of the woodwork.
A NASDAQ style collapse in housing is not an impossible scenario, given the imbalances and extremes that have been created. An overall 50% off of the peak values of late ‘05 seems pretty reasonable. I see plenty of homes around me that listed in the $800’s that would still be overpriced in the $400’s, given normal loan requirements.
Was on foreclosure.com yesterday while waiting for this blog to get up and running again and what did I see….Yes, the first SFH listed in Rancho Santa Margarita for less than 500K (okay its was only 499K), but anywho the winds are a ‘changin. By ‘08 you should be able to pick up McMansions for real cheap. Just be patient.
“In Las Vegas, the market was infested with real estate flippers during the recent real estate heyday. Now, in new neighborhoods in the Summerlin area of Las Vegas, about 40% of the single-family homes for sale are vacant, says Bruce Hiatt, owner of Luxury Realty Group. ‘It’s higher than we expected,’ he says.”
This is one of the more disturbing legacies of the housing bubble IMHO. All these hundreds and hundreds of empty homes. Who is going to live in these? It’s a bit creepy just imagining all these subdivisions of empty 4000 square foot houses.
Just imagine if you were the only occupant owner in the housing development, all those empty windows staring at you every day, it would be like something out of the twilight zone. Or even worse if you were the only occupant owner in a big condo, just waiting for when the whole condo building goes bankrupt because there are not enough people to pay the condo fees.
Hey at least in Vegas you won’t have to worry about their unmowed lawns.
I remember back in the early 80s there were two high-rise condos built in then-moribund downtown San Diego. Only one sold in the first six months - the owner was interviewed on television and said he took his trash out naked because no one was around to see him.
They wouldn’t be totally empty, of course. Vagrants, crack addicts, and High School partiers would all gravitate to them.
actually it could play out like Blade Runner -one underlying current in that film was that there was a population shift and much vacant real estate..as far a Las Vegas some of those developments could end up with squatters, become full of crime and grime and look like parts of modern day urban Brazil…
All these hundreds and hundreds of empty homes. Who is going to live in these?
I’m guessing our dear departed LV Landlord is probably a squatter in some flipper’s empty house. Maybe she scuttles from house to house under cover of darkness, stripping copper wires and pipes to make just enough daily cash to buy a bottle of Thunderbird with which to drown her sorrows.
LMAO. The ‘Thunderbird’ was a nice touch.
“In the late ’80s, here in California, you couldn’t go to a cocktail party without somebody admiring their own intelligence about the latest home they just bought.”
I think this quote aptly describes the toxic lure of this bubble. For some buyers it was never about the money/investment; it was more about owning a status symbol and bragging rights; for others, it was about dodging shame and ridicule at social gatherings; still for others, it was about succumbing to the whims of group think and peer pressure; above and most of all, however, it was about feeding that nagging little fckr, the id.
After reading this collection of articles I really have to contain my feelings of schadenfreude!
“‘In the home market, the investors, rather than rushing for the door, are holding onto homes imagining the market will turn around,’ says Edward Leamer, director of the UCLA Anderson Forecast.”
I would like for the “Ivory Tower” economist to meet Bruce Hiatt, the Las Vegas agent , who actually sells Real Estate for a living, and has his nose on the market in real time, to explain that sellers ARE rushing to the door in Las Vegas. Another PHD economist who should be required to get an education at the “school of hard knocks”
Agreed. Either Leamer is way behind the curve, or, if he’s correct, and the investors haven’t rushed to the door yet, then we haven’t even begun to see the worst of the downward spiral. Very scary thought.
“But the buyers’ sense of entitlement still bothered her.”
Me in 2-3 years (?): “If you want me to buy your house, you have to eat this squirrel.”
Ah, the return of contingencies. Trust me, it is even more satisfying to tell someone to fix the roof, foundation, or both as a condition of sale.
Fear Factor, Home Buying Edition!
I’m not surprised that a lot of the buyers who think they’re getting a deal because houses are 5-10% off their peaks, are obnoxious as well as stupid. They’ll be roadkill too, before this plays itself out.
In my condo building ( conversion in North Bay Village Miami) there are currently 58 units for sale by owners and another 70 by the developer ( 550 units in total). On MLS you can see that many of the units have been for sale for over a year , some for 2 years. Amazing price differences for identical units and these units were sold 2 yrs back for 200K and now on the market for 350K (more or less). What gets to me is the talk in the elevator of how the market is so impossible now … what the *%#! they all want to make at least 100K profit in 2 years!! THAT is what is making the market so impossible. If they would try to sell at a 30,000K profit they would sell in a heartbeat.
Just a very BIG Thanks for this blog Ben, I would have gone mad had it not been for this blog, I hope you realize what a great service you give to us l iving in bubble cities.I have given your web sites to many people and I know they are equally grateful. Really, thanks