‘Price Slashing And Concessions Becoming Commonplace’
A Idaho Statesman report from the Idaho Stateman. “Price slashing and builder concessions to buyers are becoming commonplace in the Treasure Valley. The triggers have been a triple-digit jump in inventory numbers and runaway home-price appreciation rates during the last 18 months.”
“In the last six weeks, Kent Proesch has slashed more than $70,000 from his initial asking price of $324,000 in hopes of creating interest in a 2,428-square-foot, four-bedroom home he owns on the Boise Bench. ‘If I had a good agent, he probably would have told me to price it at $279,000,’ joked Proesch, who has been a Treasure Valley real estate agent since 1976.”
“‘It’s not doomsday,’ said Proesch, who declined to say what he paid for the house he bought in February from his aunt’s estate. The home was assessed for $162,200 earlier this year.”
“Elsewhere, agent Marilyn Van Dorne said the owners of a 2,969-square-foot, four-bedroom, 31/2-bath home in a gated community in the affluent Highland Ridge area of North Boise have shaved $44,000 off their original asking price of $739,000. The house remains on the market.”
“Intermountain MLS statistics show that Treasure Valley home sales were down 25 percent this August from the same month a year ago. ‘That’s incredibly steep in my experience,’ said Ken Simonson, chief economist for the Associated General Contractors of America.”
“‘It’s obvious that the national slowdown has been worse than some of us wise-guy economists expected,’ he said.”
“52 building permits were issued in Meridian, the fewest since January 2002 and 79 percent fewer than the 251 permits authorized in January, when the city was the hottest real estate market in Idaho. 56 permits were issued in Boise, 42 percent less than the same month a year ago. The inventory of available homes in the Valley stood at 4,863 on Sept. 17, a 173 percent increase since the start of the year.”
“‘Sales are simply coming back to normal,’ said Don Holley, professor of economics at Boise State University. ‘The underlying economy in the Valley remains strong, and there is nothing to suggest that it’s going to collapse.’ But Holley said that as the housing market slows, construction industry employment will, too. Potentially hundreds of additional jobs created at the height of the building boom are likely to disappear, he said.”
“As home sales have slowed, Treasure Valley homebuilders are offering concessions unheard of in 2005. Hubble Homes in Meridian, is willing to listen to offers on homes it’s carrying in inventory, something that wouldn’t have happened a year ago. ‘Last year we wouldn’t have accepted anything less than full price,’ said owner Don Hubble.”
“Most agents also are warning clients that if their homes haven’t sold by predetermined times, it will be time to think about cutting prices, she said. ‘People are used to houses flying off the market,’ Van Dorne said. ‘That’s not the reality now. Now there’s a lot of inventory out there.’”
“Some industry experts say some benefits may be emerging. Michelle Plaschka, a (banker) for emerging markets in Nampa, said fewer sales will put the brakes on runaway home-appreciation rates.”
“Landowners who were able to demand $150,000 an acre for vacant land at the height of the boom will have to bring down their asking prices, Hubble said. ‘I’ve already seen lots prices come down $20,000, and to my knowledge they still haven’t sold,’ Hubble said. ‘So I think some good is going to come out of this slowdown.’”
‘Landowners who were able to demand $150,000 an acre for vacant land at the height of the boom will have to bring down their asking prices, Hubble said. ‘I’ve already seen lots prices come down $20,000, and to my knowledge they still haven’t sold,’ Hubble said.’
Raw land has become the most volatile in Arizona as well, because nobody has any idea what the value is going into a slump. From the Columbus Dispatch:
‘Indiana and Ohio have had the highest foreclosure rates in the country in recent years, according to the Mortgage Bankers Association. Yet the central Indiana median family income is $65,100, $700 higher than it is in central Ohio. And the median price of a house in central Indiana fell $10,000 in the past five years. Over the same period, the median price in central Ohio rose $14,000. Why?’
‘It’s a great question. I wish I had a great answer,’ said Bruce Bright, president of the Metropolitan Indianapolis Board of Realtors. Financially strapped buyers whose homes are being repossessed are part of what is driving median home prices down, he said. ‘I think we certainly sold some homes to people who shouldn’t have been in them. But they qualified under federal guidelines, and if they qualify, it’s kind of hard to turn them down.’
‘Low home-appreciation rates have produced a new way of thinking for some central Indiana residents, said Drew Klacik of the Indiana University-Purdue University. ‘It depends on what you want from your house. If you view it as an investment, in parts of Indianapolis, it doesn’t work.’
Seems like vacant land is first to suffer declines, then condos then finally single family.Condos seem to be more of a choice when sf gets too expensive.
New builders typically decline in price because of the build time involved. People thinking about buying figure that in a year of build time what will happen to the market. In a falling market they figure they will be able to get something cheaper at that point. I will say that you can get a real good deal on inventory homes of new builders where a deal has fallen through. They need to move the inventory so they slash the prices quick.
Remind again, this freakin’ Idaho? With nothing but land? And even the local population — the salt of the earth — is now and greedy, entitled to 100% profit in a few years?
This really depresses me. My wife and I were discussing how this bubble has destroyed the morals and integrity of this nation through the greed and fraud. It’s almost bibical.
It really is. I drive around and see the houses for sale and just get a wave of revulsion.
There was a guy in Dallas who built a million dollar plus place starting in about 1990 and ending several years later. He was an eye surgeon or something like that and supposedly built the place for cash piece by piece as he could afford it. In the end he had a fancy place totally paid for. Now it was an eyesore for sure (for anyone in Dallas, this is the “castle” on the corner of Inwood and Royal - SE corner) but it had the best of everything in it. I like that idea.
you can get a lot in Pocanos for $ 1200
was 12k
land= leverage
“‘It’s not doomsday,’ said Proesch, who declined to say what he paid for the house he bought in February from his aunt’s estate. The home was assessed for $162,200 earlier this year.”
It’s not doomsday, it’s not a hard landing, it’s not a crash… notice how the REIC experts quoted in the press compulsively make disclaimers about the severity of the situation? Keep whistling past the graveyard, boyz…
“‘Sales are simply coming back to normal,’ said Don Holley, professor of economics at Boise State University. ‘The underlying economy in the Valley remains strong, and there is nothing to suggest that it’s going to collapse.’”
But if you guys keep saying collapse, hard landing, doomsday, etc., the sheeple will get very, very suspicious…
I keep hearing that the economy reamains strong. Isn’t real estate the main driver of the economy lately? When all the new jobs that were created by the speculative boom dissapear, how strong will the economy really be? The real good jobs seem to be in the medical field because they have real pricing power.Should have been a doctor but I hate the site of blood.
The home was assessed at 162K just this year , and the guy decides to list it at 324k originally , exactly double that amount? Is this common for the area?
To be fair, county assessments in many areas are often very low. Especially during boom times. My county specifically says that the assessed value is not meant to reflect the actual market value. A house that sells for $150,000 might have an assessed value of $100,000 on the county page.
“‘Sales are simply coming back to normal,’ said Don Holley, professor of economics at Boise State University. ‘The underlying economy in the Valley remains strong, and there is nothing to suggest that it’s going to collapse.’ But Holley said that as the housing market slows, construction industry employment will, too. Potentially hundreds of additional jobs created at the height of the building boom are likely to disappear, he said.”
Hmm wonder why the economy was so strong, then. Think those “hundreds of additional jobs” that disappear will affect that strong economy? Add in the RE jobs, mortgage jobs and the likelihood of HP layoffs and there may not be such a wonderful economy over the next few months.
This (from my blog) is absolutely jaw-dropping: REDUCED CHEVY CHASE.
When you can’t sell a house in Chevy Chase MD, hell has indeed frozen over, angels are weeping, and the sun will never rise again.
Stifling a giggle here.
Ben, I saw this via the housingcasualty blog. This is incredible. I mean, this has got to be a goof. He writes:
“It’s true I got into some shady loans this year including….
“1) Calling investment properties OWNER OCCUPIED
“and
“2) Stating a high income that I can’t prove”
Does this guy realise that he is admitting to fraud w/his real name IN PRINT? On the Internet? Where it can be cached and screen-shot-saved?
Another choice quote: “I am $2.2 million in debt but if you subtract the value of the real estate I am actually only about $200,000 in debt… only!”
For more details, check out the last couple of day’s bit buckets.
SoCalMtgGuy actually got the story from here.
The scary thing is that txchick, who’s over this one like a rash, has checked things out and it appears NOT to be a spoof.
Here’s the Dallas property:
http://www.dallascad.org/AcctHistory.aspx?ID=00000792898000000
and he was “assigned” this dump by a guy named “Myles” (his last name). I know who he is. Another real loser. I took particular interest in this because I know the area this Dallas place is in very well and it pisses me off this worm thought he could pawn it off as a “multi family” (read: illegals) place.
Looks like JONES MICHAEL WILLIAM &
DEFANG LEE did well on the deal though.
Yes, this kid is screwed. But in reality even if he loses everything he will probably be getting credit card offers in a year.Then in a few years the mortgage lenders will probably be offering him a loan. Hopefully he can do short sales and just get out of the mess.I’m sure there are several thousand people in his shoes hideing in shame.
My campaign pledge of 2008, “Bring Back the Troops, Bring Back Debtors Prison” — anyone want to elect me?
as a Dutch citizen I can’t vote for you, but sounds good to me; the Dutch government always blindly follows US policy, both for the troops and economics
don’t know about the US, but in Europe this kind of fraud is so common that nobody cares. I’m sure the tax authorities etc. have better things to do than checking out a few hundred thousand fraudulent homeowners; they prefer to look the other way.
As an example, in my country there are over 100x more investigators for social security fraud (people who do paid work while on social security, who live together while reporting as single to the social security office etc.) than for bankruptcy fraud investigations - while the total amount of money involved in bankruptcy fraud is more than 10x higher … it is both fraud, but the deciding factor is the type of people that are committing the fraud.
In my current rental, there’s several Section 8’s (supposed to be single with child) who certainly aren’t single. One asked me for tax guidance as the IRS was looking into her. She files as single and collects the full earned income credit… Not single… Obviously I said she should speak to her accountant who helped her file in the first place as this is fraudulent.
Her accountant is probably Jackson-Hewitt or one of the other Cash Advance operations masquerading as a tax preparer.
yes, that happens a lot in my country too, and many of those people feel ‘entitled’ to get a higher income this way. Of course it is fraud and it is good that government goes after them if they can; but it is very unfair that nearly all people who commit mortgage or bankruptcy fraud (for an amount that is usually 10-100x higher) can get away with that unharmed because government is totally uninterested in their ‘white collar’ crimes.
“Price slashing and builder concessions to buyers are becoming commonplace in the Treasure Valley. The triggers have been a triple-digit jump in inventory numbers and runaway home-price appreciation rates during the last 18 months.”
Price slashing sounds rather gruesome…
Its a super-crash, its all about affortabibity, and the last tool of affortability which is flipping, is long gone.
The higher end is getting smacked pretty hard here, some areas homes over 500K have more than a year of inventory. Lower end isn’t as bad. Last year 40% of SFH in the Boise area were sold to investors. As of end of Jul 2006 20% were to investors. Yeah this is going to end up well.
yo Proech
try getting under 2005 assesed value then your talking
MA>FL are there now
Yes, down from sale prices of 50% OVER assessed value (and higher) in Boston from 2005 prices.
“And there were almost 13,000 new jobs created in the area between August 2005 and August 2006″
I can tell you that a lot of these jobs are in RE, mortgage, construction, retail, and call centers. The companies that form the foundation of the local economy (HP, Micron, Simplot, and Albertsons) economy have not been growing like gangbusters lately. Hiring at Micron is usually for lower paying production jobs and Albertsons has been bought out an nobody knows how many jobs will stay in Boise.
Does anybody in Boise who is not a California equity locust make enough money to buy an 800K house?
Anyone I know who lives in a house that expensive either comes from old money, equity locusts, or they own a company or work in a profession like law or medicine. The average person around here makes $16 and hour.
Brandon,
Is the correction there becoming obvious?
It is obvious by the amount of for sale signs everywhere along with rampant construction. I live in bubble central- Meridian Idaho, and this town of 62,000 has over 1300 properties listed on the MLS. I suppose the most obvious sign of the market turnaround is the new construction that is not selling. Meridian has some really big projects underway and you can tell that builders are really slowing down the construction. I would not be suprised if some subs are not finished- why keep building if the houses you already built aren’t selling?
Brandon,
(I was wondering how long it would be before you would jump in this one with both feet!)
This speaks volumes as to what we may well see in Bend, OR and other “special” places who’s boom has been almost entirely dependent on equity locusts picking that particular spot to swarm. As txchick says, who up there that ISN’T a locust could afford 800K?
I love ID! We vacation there every chance we get. I’d hate to see how this could decimate their economy when locusts decide to leave en masse. They’re great people but I guess the lure of easy money has a very strong appeal. What will ID look like “post impact”?
Brandon,
Do you know about how much the realtors house could fetch in rent?
Ben,
I do. I lived outside Boise from 2002 to 2005. I wanted to buy there in 2004 before i moved to Europe since we were leaving two kids in college there. I had all the right incentive to buy there and still couldn’t justify it. Rents at that time were ;
200k house renting for 750-850/month.
Of course I was looking at downtown Boise near BSU. small 900 sq/ft dingy cottgaes. Friend who sold for 150 would have got 900 month .. house went to 200K in columbia division. 130K is fair value. I’m basing this on the modest runup from 2002 to the ealry 2005. I know it went up steadily from 98 or so (reaosnable–ahead of inflation 6% vs 3%), but 2005 was flat out silly. now my guess s it’s payback time is my guess.
Ben,
Tough to tell without knowing the exact area, but probably would not get more than $1000 a month. Our home is less than a year old and rents for $895 a month- including HOA fees that included lawn care. Same floorplan across the street is listed for 189K.
The “ALL IS WELL” mantra of the sellers and RE Industry is grasping for straws of good news to keep the “Neverland” housing Investment Alive.
Let’s see if REALITY in the form of a Housing Recession, Re-Sets Holding Costs, Higher Taxes, Energy as well a a few other housing related expenses change their CHANT in these national economic tightening times of 2007-2008 .
They can Shout ” We Believe” all they want..Tinkerbell and the all the RE Pixie Dust in the world won’t save them in a downward housing trend !
Long time lurker here looking for off-topic assistance:
I have had several conversations with ‘bubble doubters’ about reversion to the mean recently, specificaly with regards to the ratio of median home price to average household income. What I don’t know is what the historical mean is in my region (SF bay area). I know Piggington has done this kind of work for San Diego, but I’d like to have the same for up here.
I assume that my region has always had a higher ratio of home prices to income than the rest of the country ( say 4x vs. 2x), but most towns on the peninsula are now 9x to 10x.
Does anyone know if 1) the historical mean has already been calculated for the SF bay area, or 2) where I could get the data to do it myself?
“Knowledge is power.”
Francis Bacon
I suggest you start your search at http://www.patrick.net which is oriented towards the Bay area.
If you’re a long time lurker here you will find several familiar post-tags on the blog over there.
http://www.housingbubblebust.com/92SoCalRecession.html
Here’s what may happen.. could be years before you see a reversion to the mena.. at least San Fran has tight land.. but Boise ?????????
I had some family out last week, we drove for about 5 minutes and they were amazed. There were a few houses and land as far as the eye can see. When the county talks about zoning land for development they usually use terms like 10,000 acres. There is so much land here its silly to think that people would pay 150K/acre in Meridian.
Granted I have run into some old timers here and their take is if the fools want to buy it, let em have it.
I have a family member in escrow in boise. $45k income, purchase price is $200k. No assets, no savings, $20k in credit card debt. Home is less than 900 square feet and has a pool.
I give her 2 years.
I cannot understand who makes these loans. Is anybody at these banks paying attention??? 4.1x income, no assets, tons of debt, no history of savings. It’s a foreclosure waiting to happen, particularly when Boise is so overrun with speculative buying, coupled with low overall incomes and education levels. It will take 5+ years for her to approach a breakeven level.
it’ll take 8-12 years in Boise.. look at the historical appreciation. Last time they had double digit gains it trended down for many quarters following the boom then just stayed there.