‘Sellers Are Standing Like A Deer In The Headlights’
The Bulletin reports from Oregon. “Joel and Julie Cohen bought their three-bedroom home in southwest Bend two years ago, thinking that, in a couple of years, they would sell and move up. Two years later is now.”
“The problem is, there are more than 1,400 single-family homes for sale in Bend this month, according to the Central Oregon MLS. The market, to be generous, has gone flat.”
“So the Cohens opted to try something different. They put their house up for auction last week. Using a round-robin method, they plastered the newspaper and their neighborhood with $3,500 worth of ads, held a two-day open house and collected bids.”
“The open house drew 200 people and 28 bids, two of them serious. Everything worked except the most important part, the house didn’t sell. No one would meet the $375,000 reserve price. The lone bidder who said he or she would pay it backed out at the last minute ‘to see where the market goes from here,’ Julie Cohen said.”
“‘It’s kind of a general reflection on what the market is doing right now,’ Cohen said. ‘It seems like it’s such a buyers’ market, people are getting cold feet. To tell you the truth,’ she said, ‘it was kind of disappointing.’”
“The Cohens’ attempt merged them with a small but growing trend, as sellers in a broad range of cities look for ways to distinguish their houses amid the rising glut of inventory. Nationwide housing inventories have risen to more than a seven-month backlog, according to David Lereah, the NAR’ chief economist. The abrupt slowdown in sales prompted Lereah to openly call for price reductions this month.”
“David Staley, a Bend property investor, and his wife took the least-expensive approach when they offered a northeast Bend rental house for an auction sale in August. They didn’t get a great price for it, $211,000. The speed of the sale outweighed getting a price that was ‘quite a bit below what I think the house was probably worth.’”
“‘I’m not sure I’d use it (an auction) again,’ Staley said. ‘If you’re trying to get the best price for your house, it probably isn’t the best way to go. But we got it sold, and that’s all that was important to us.’”
“The Cohens, meanwhile, are planning to fall back to ‘Plan B or Plan C,’ Julie Cohen said. They have already bought a bigger house in northeast Bend. But, they see little point in listing it for sale the traditional way, especially since there are five other homes in the neighborhood for sale right now.”
“So, she said, they may put it up for a lease-option rental until things loosen up. They’re not alone.”
“George Cappony, a sales coach who worked with the Cohens, said markets have softened dramatically across the country, quickly turning last year’s sellers’ market into a buyer-dominated field. But most sellers have not yet faced up to that reality.”
“‘I think that sellers are standing like a deer in a Wisconsin road in the middle of the night, and around the corner are headlights,’ Cappony said. ‘Right now, I think it’s a go-cart coming down the road. Tomorrow, it’s gonna be a semi.’”
IMO, someone who buys a house with a two year horizon is speculating, especially when you consider they already bought another house. From USA Today:
‘When Intel, the largest employer in Portland, Ore., announced this month the elimination of about 10,000 jobs worldwide, it sent a chill through people around town…The local housing market looks saner now than it did last summer. Inventory levels have risen to a healthy five-month supply of homes, up from a bidding-war level — a three-month supply — a year ago. Prices slipped in the past two months from June’s record high. ‘We’ve had about 15 years of expansion up here,’ says Ron Goodman, the broker-owner of The Hasson Co. Realtors. ‘The last five have been a bit too much. You can’t sustain that kind of appreciation year after year.’
The Bend Weekly has this report on area incomes.
I think Oregon is beautiful. Have no idea what I could do to earn a decent living there.
I heard you can buy houses and sell them to each in Oregon. They always go up there, it’s a no brainer. Just don’t get left behind, and be sure to use maximum leverage, since returns are guaranteed, no reason to exercise caution or hedging stradegies.
Are you sure you are not talking about San Diego?
I agree. I would love to live there…. the weather reminds me of London (hometown) but i cannot fathom what one has to do up there to earn a decent paycheck.
I don’t think Bend would remind you of London. It’s High Desert, you know. You must be thinking of Eugene and Portland.
Yes, these 2-year “owners” are no longer in the market.
Same for flippers.
Should be interesting to watch the foreclosures roll in as these “owners” get crushed under escalating mortgage payments, or having to bring a check to the closing. Or, they could live in their starter houses for another decade to avoid selling at a loss.
- ‘When Intel, the largest employer in Portland, Ore., announced this month the elimination of about 10,000 jobs worldwide, it sent a chill through people around town…
So, unemployment will go up. Then Joel and Julie find the resale market DEAD. They need to sell…so auction the home.
BUT, Joel and Julie set a RESERVE PRICE that is outside the market.
I hope that their plan B and C are better than their sales coaches first plan.
I checked out Portland. I think the Intel plant is in/near Orenco Station, which is a really beautiful commnuity, mix of small businesses, retail, and housing with a light rail or train station.. Thougt if the Intel plant closes there wouldn’t be a ripple effect in this area, it would be like a tsunami. Decided to pass on moving to Portland.
Stayed in Portland for a couple of days in August. Fun town. Checked out the “Bite of Oregon” festival along the Williamette (is that spelled right?) River. All the local restaurants and breweries there. Summer is great but the winters are too cold.
I grew up in Beaverton. Orenco used to be a lot more beautiful before they put in all the cookie-cutter strip-mall crap and added the “Station” to the name. Houses hidden on big lots behind lots and lots of trees; semi-country, really.
“Willamette.” Rhymes with “damnit.”
Their plan B is as prone to failure as the first, lease-option. Or so they said in the article.
Take a look a the hokey lease-option ads in Craigslist for Bend and you’d have to be dumb as a stone to go for it, plus renting is at 1/4 to 1/3 of the price of ownership.
All they will do is slow the slide towards foreclosure, like so many FB-flippers up here.
“All they will do is slow the slide towards foreclosure, like so many FB-flippers up here.”
Exactly. I find it humorous that a lot of these speculators with hopelessly overpriced homes on the market have a back up plan of waiting for the market to pick up again. This state of denial will quickly erode when they realize prices are rapidly moving in the opposite direction they had prayed for, and panic will set in.
I also hope, for their sake, that they are putting together a plan D, and plan E, and plan F, and Plan….
No kidding, unless you are a builder or rehab homes, real estate has always been a long term investment. Typically if you bought and sold within five years you’d lose money due to the buy-sell expense. Suddenly everyone’s getting rich? Right.
The buy-sell expense? Oh, you mean the 6% wealth transfer tax? You mean that expense? High enough expense for me to never buy-sell anything
What is wrong with me? I am afraid to commit to one house that I could pay cash for and all around me, people half my age have 2 or more with millions of dollars of debt. I know I have commitment issues but WTF? Why do these people buy other “bigger” houses before they sell the current one? Why do they “need” a bigger house? Have they suddenly had 6 kids? 2100 square feet is big enough for anyone.
I resemble this comment!
Welcome to the Age of Entitlement.
All we need are powdered wigs.
Isn’t it the case that when empires reach this stage in their development, the above mentioned “Age of Entitlement”, that decay and eventual demise are just around the corner? Is a world power about to add it’s name to a long list of has beens?
Check out this story at money.cnn.com http://money.cnn.com/2006/09/22/real_estate/help_home_for_sale_young_ballanco/index.htm?postversion=2006092214. A ccouple in Orlando can’t sell their 4 bedroom 2,881 sq ft house for more than twice what they paid for in 02. They put down 28k on an even larger home that costs 562k. WTF? Why would 2 people need a house bigger then 2,800 sq ft? A 4 person family with a growing business run from the home may feel the need to move up from 2,880 sq ft, but a couple wanting to move up from a large 4 bedroom in case they have kids?? Prime example of what is wrong with peoples’ values in the US.
Oh man, that one really pushes my hot button. I’d like to slap both of them across the head with a 20 pound trout. Greedy idiots. I hope they lose both places.
People like that make me embarassed to be an American. No wonder so many people around the world despise us.
It’s becoming increasingly difficult to justify the average American’s actions.
Such self-loathing. Pathetic.
People around the world don’t hate America because of real estate bubbles and greed. Trust me, they have their own greed and bubbles.
It isn’t self-loathing or pathetic pal. This sense of entitlement is not good for America’s economy or image. In the last few decades America has gome from a country of exporters and savers to a country of importers and debtors. I would think less then 95% of the families around the world live in a 2,800 sq ft home.
Don’t even get me started on this growing cult of celebrity. At least the low carb diet seems to be fading.
I meant less then 5% of families around the world. It’s probably more like less then 1% live in a 2,800 sq ft home.
Actually, in my tinfoil bonnet moments, I think that the culture of celebrity is a tool created and used by the Pig Men (as Russ calls them) to distract the nincompoopia from how they’re being pillaged. I mean, why should you worry about how much we’re spending in Iraq or how much the deficit is increasing when it’s far more important to see who becomes the next Apprentice or whether Brittany’s next kid is actually human.
You bet, TX! Bread and circuses. If that does not work, try a war.
My tinfoil hat moments are darker than yours. They are all about the middle class being systematically pillaged to lower the standard of living so we can compete globally against developing nations.
I love you people. I’ve lurked in a lot of forums in my life, but nowhere else have I found so many sensible, like-minded people. I’ve spent the better part of a year grappling with the idea of making a radical shift from my present lifestyle primarily to escape our goddamn popular culture. I live in LA and work in entertainment, so as you might imagine, it’s tough to escape. Our present political system (hey, we just institutionalized TORTURE!) makes me alternately want to cry, puke, and scream. The shameless, godless, pointless materialism that has swept our nation like a virus is so maddening and hateful I can hardly walk into a retail establishment anymore without wishing I had come armed with a few Molotov cocktails.
Unfortunately my wife does not share my vision of retiring early to a small farm in Canada or New Zealand and living tv-, phone-, and internet-free.
If anyone here has actually done this (told society to Fuck Off), I would love to hear about your experiences.
Sorry, torture, for me, began 6 years ago, after the 2000 election results were announced. Now, its official.
Vioviv,
You just became one of my favorite people with the visual image you offered here: “I can hardly walk into a retail establishment anymore without wishing I had come armed with a few Molotov cocktails.”
p.s. For info on those who have actually told pop-society to F.O., do a web search on the voluntary simplicity movement; lots of links on simpleliving.net
Small farm (house) in Nova Scotia - check
TV free - check
Internet free - can’t do that
Feeling of utter contempt for about 70% of the mullets I encounter - check
What I did was train myself to do something I can do alone and without having to work for anyone else. The second leg of the table is to ratchet down the lifestyle “needs” so that we can live on 1/4 of what comes in. It ain’t glamorous and I don’t have a cool pimped out ride but I get to wank on the internet all day while I’m working and then be outside and away the rest of the time.
I think TV has EVERYTHING to do with this American quest for luxury cars and luxury houses and luxury toilets and luxury everything.
TV has always been a big lie. Think about the Partridge Family. The breadwinner in that family was an architect. So how could they afford such a HUGE house? (This was well before the age of the McMansion.)
I was so disgusted with American TV that I actually did without it for about 5 years. No cable, no satellite, just a TV protected from the dust in black garbage plastic wraping.
I moved to a new place and although DSL is oferred I went with cable modem because the worst offender of the do not call list was the TELCO itself.
To get Cable modem you have to buy at least basic cable TV service. So my 20 year old 19 inch TV is doing its thing again. (The “luxury” remote still works - so why buy a new TV?)
It’s not so bad; I just watch classic movies on TCM (commercial free) and the NY Yankees when they are on ESPN, and that is about it…
You’re thinking of the Brady Bunch. Mike Brady was an architect. The Partridge Family made their living as a musical act.
Hey, tx, remember to set up a webcam when you do that. People would pay to see it.
Even worse… with joint monstrous debt but no commitment to each other (eg,marriage), once the horrorshow breaks them up, and despise each other as they will grow to, they will still be bound together through eternity, and beyond, unto BK court
Excellent observation about the lack of commitment, and the long term consequences both parties will have to endure.
I am thinking about the future 1099’s for loan forgiveness. If they bought for $650k but the bank sells as an ERO for $250k then the IRS is gonna get them for the difference in unreported income, and the IRS couldn’t care less about any bankruptcies. Let’s see, that is 400g’s of unreported income, plus interest, plus penalties, hhmmm….
OK - working with some numbers…
400g’s of unreported income, average 25% Fed Tax Rate over full amount, that is 100g’s of taxes due. (not including initial penalties and interest.)
For every year that a balance is due, 7% interest is paid. So first year alone, carrying costs with IRS is 7 g’s. (Again, not including intial penalties or interest.)
So if they go on a monthly plan with the IRS, the first $583 is just for interest. Actually, when you factor in the initial penalties and interes then it would be well over $600.
Since we are working with 400 g’s then $600 / 4 = $150, or over $150 mo interest carrying costs with IRS for every 100 g’s of undereported income.
I can play with these numbers any way I want; a slightly higher or lower average Fed tax rate, 200 g’s or 300 g’s or maybe even 500 g’s instead of 400 g’s, but any way you slice it these numbers are herrendous.
Now let’s look at just a few IRS tax penalties…
Late tax payments to the IRS:
0.5% per month of the unpaid tax due the IRS (maximum 25%);
Fraud: (Does this apply if they did no doc or stated?)
75% of tax underpayment due the IRS;
Substantial understatements of income tax (tax underpayments that exceed the greater of 10% of the correct tax liability or $5,000):
20% of tax underpayment due the IRS.
And we have not even started to look at the state income taxes due!
So much for IO and ARMs and HELOC during peak pricing as very, very, smart “personal finance” things to do. Too bad nobody asked me for any advice before they did the “smart” thing.
“Fraud: (Does this apply if they did no doc or stated?)”
No. The fraud penalty applies only in those instances in which a taxpayer willfully defrauds the IRS.
Also, the substantial understatement penalty will not apply if the 1099 amount is included on a timely filed return.
All FB’s would be extremely well-advised to include all of their loan forgiveness amounts on a timely filed return. They can worry later about whether or not they can ever afford to pay the tax.
This way, they limit their exposure to tax, interest, the late payment penalty, and interest on the late payment penalty. In many instances, I could probably get the late payment penalty waived, but failing to timely file a return dooms that approach.
txchick,
please make sure release the trout unharmed after you do that! I’m a catch and release flyfisherman, and if it’s 20 pounds it’d do some good back in it’s environment!
your posts make me LOL
Wouldn’t the smack on the head actually tenderize the filet? I do have small hammers designed for that, but they are so small that the intended target might duck and miss all that they deserve! -
And it would take more time to tenderize the trout!
How do you make that offer on the new place without a sale contingency on the old one? I guess they thought a contingency would knock them out of the bidding for the new one.
Who the hell would want to buy that house? The garage is the big focal point from the front. I can’t stand houses like that. The feng-shui garden in the back can’t even make up for it.
Is that Johnny Depp in the backyard?
Orlando is a bubble. I was in a new subdivision built in Oviedo called “The Sanctuary”. All the houses are McMansions. Some had 2 double car garages. The developer is still finishing building homes. Some of them already have for sale signs in the yard as the developer is finishing them. Plenty of investors/speculators in this neighborhood. I must have pulled at least 25 info sheets on homes for sale in the neighborhood. All of them were vacant. And about foreclosures, Orange County Clerk of Court use to do the public sales 1-2 days a week, now it is every day of the week.
She’ll probably end up divorcing her balding real-estate-mogul husband for being such an idiot.
While their current home is one of the ugliest things I’ve ever seen–it looks like a garage with a home attached as an afterthought–it’s proabably fine for them. Do they really need more space just to collect more “stuff”?
I almost did a spit-take when I saw about their “koi pond”
I never “pile on” but I can’t help it. That house is horrid. OMG! Who could live there?
I do not in any way, shape, or form, fault anyone for wanting to change their living conditions. We live in a free society and it’s nice to have choices. Maybe their current home/backyard/neighborhood isn’t the best situation for children. (And it really is an eyesore of a house.)
I don’t really care. It’s none of my business. I do think this couple took a risk, thinking they could sell their home for a certain amount of money without first doing some serious market research. The prudent thing to do would be to sell their home first, of course. But I’ve done this sort of transaction twice and it’s not always easy to time things.
I don’t understand the “square footage” judgmentalism. It sounds like a Soviet way of thinking. Why do I need a bottle of fine wine when I could drink water? Why do some people prefer 10 acres and another a tiny lot?
I think it’s a fine idea to prepare a home in advance for kids. There’s no time afterwards and painting is impossible, unless you want tiny paint footprints all over the carpet.
Ah, but Amurika has morals and values! Remember!?!
It is amazing if you think about it, that buyers do not think twice about signing up for $.5M , .6M, .7M+ worth of debt. …All for the chance to gain $100K or perhaps a bit more.
This is DEBT people! Yes, I know I know, most buyers are putting 1% down, 0% down, etc. But, this enormous debt is still *assigned to you* for 30 years of payments! —until you sell (good luck with that this year)! –or until you die!
How have we as a society become so comfortable with being so deep in debt?
….oh yeah, this might have something to do with it….
Yeah, I always wondered about that “it’s only debt” mindset. I know a couple people or three that are leveraged up to their eyeballs and they don’t seem to care at all. It’s the same old “I’ll sell for a profit when the house appreciates” nonsense. If you tell them they’re gambling with their financial future they just look at you like you have three heads.
It’s like they lack the ability to connect the abstract concept of huge debt and with the prospect of working their a$$es off for 30 years paying it back. They don’t seem to understand that somebody is going to pay the money back. Whether it’s done all at once via a sale or a little at a time over a long period of time, somebody always pays the money back. That’s kind of how the system works.
Hhmmm….ejamie: wake me up when it is up to ten trillion…
txchick57,
Re: commitment, it might be because, deep inside you, your instincts are saying: I need a location near a well supplied gun shop!
Here’s a hint of who these people are:
Mr. By-Ends, a hypocritical pilgrim who perishes in the Hill Lucre silver mine with three of his friends. A “by-end” is a pursuit that is achieved indirectly. In the case of By-Ends and his companions, it is pursuing financial gain through religion (in their case, Real estate).
You’ve all got me inspired, so I created my first blog:
http://amisharesuffering.blogspot.com/
You’ll find some more character descriptions that might apply.
Hypothetically speaking, isn’t someone only owing $300K on a home “valued” at $500K still a net-debtor?
Let’s say they have only owned for a few years. On a $300K loan, the total payments over 30 years add up to $647K. Maybe they have made $100K in payments over 3-5 years. So, they still *owe* $547K in payments for the next 25-27 years, on a home valued at $500K.
Apparently no one stays in a home for the full 30 year term, but I agree with you txchick, why is it that total debt is almost a non-issue for buyers?
Its called the “present value” of money. Maybe you’ll pay 547k out but, as time goes by and inflation (normally) erodes the value of money you won’t really be paying the “present value” of 547k. It would be some “discount” of that figure. Pick an inflation/discount rate, say 2% and the present value of 547k paid in 2036 is 302k. If inflation is higher, all the bettor for debtor….if there is no inflation……and the asset loses value….very, very bad for the debtor.
Now explain how that present value concept worked out for the Japanese home buyer circa 1990. Of course, I realize that our central bankers are better at inflating away debt and all…
How have we as a society become so comfortable with being so deep in debt?
….oh yeah, this might have something to do with it….
I vote for Alan Greenspan. Our old venerable uncle could have wisely counseled us and financial recklessness and greed. Instead he selfishly wallowed in his fame and destroyed our currency and gave us a really long rope to wrap around our neck.
And sat in bonds the whole time personally! LOL!
Txchick
Is your e-mail down?
“George Cappony, a sales coach who worked with the Cohens, said markets have softened dramatically across the country, quickly turning last year’s sellers’ market into a buyer-dominated field.”
Can someone please tell me this is a joke? What in the world is a “sales coach”? Surely a soon to be endangered species….
A “sales coach” is the business equivalent of a “life coach.”
Okay, everybody: Show of hands. Who has ever hired any sort of a coach to help them with anything?
uh, my tennis coach in high school threw a racquet at me. But, no, I didn’t hire her.
I hired Coach Troy for triathlon training (Spinervals). Does that count? Hahahah
http://www.coachtroy.com
Coach Troy is the man. Great workouts.
You do Spinervals? There may be hope for you yet . . .
you seem to think I’m a young buck. one of a number of your misperceptions…
Feh. One one of them there’s a 70 year old retired judge and a grandmother of 7.
Does being a Martial Arts instructor count?
I think that coach ought to bench those folks, and quick.
I often fly coach - does that count?
‘Right now, I think it’s a go-cart coming down the road. Tomorrow, it’s gonna be a semi.’”
Wrong. Right now it is the semi coming down the road. Tomorrow its gonna be a convoy of them taking up all lanes.
Meanwhile, here’s the story of the Tucson Condo Project That Will Not Die:
http://www.tucsoncitizen.com/daily/local/26999.php
Many of us locals think that the brewery without the condos would bring a lot more people to Downtown. But what do we know? We’re just taxpayers.
At least the new condo owners will have a place to go to drown their sorrows when they lose their condo. Or a place to work a second job to pay for that overpriced condo.
So, she said, they may put it up for a lease-option rental until things loosen up.
She’s not going to like the way things “loosen up”.
Oh I must resist the temptation, the jokes are just springing to life within my head.
Don’t EVEN go there…you don’t want the misogyny police knocking on your door at 2:00am and ‘disappearing’ you.
#2.
“they may put it up for a lease-option rental until things loosen up”
there is a pervasive sense among sellers that the weakness in housing is just a temporary blip and that the market is just about to pick up again ‘real soon’. i’ve yet to hear a logical explanation for this type of thinking. i guess its just human nature to hope and rationalize.
sadly, its going to end up costing these sellers dearly in the pocketbook.
Old adage;
The light at the end of the tunnel may be in fact an oncoming train.
Another oft overlooked aspect:
Deer are cheap, fenders expensive. [Steer clear.]
Roadkill - two house sandwich.
Anybody catch Steve Roach on Bloomberg? I’ve lost the link, it was video, but man, he’s gotten WAY more pessimistic. The man has usually measured his words in a Brooks Brothers kinda way, but I think he said he was “freaked” out.
He should be.
The lone bidder who said he or she would pay it backed out at the last minute ‘to see where the market goes from here,’ Julie Cohen said.”
I think there was a lone bidder who woke up and smelled the coffee.
Oh, right now it is a gentle little go cart coming down the road. Tomorrow it will be a semi. By 2Q2007 it will be a mechanized Army led by the ghost of general Patton on forced march. Damn if they stop with anyone/anything in the road and if the quickest path is through your house… march on! And those tanks do one hell of a bit of damage…
Neil
“By 2Q2007 it will be a mechanized Army”
I’m still betting on a 2008-2009 Chicxulub-like impact. How’s THAT for a metaphor?
Dang… Talk about a snowball rollign downhill and growing.
I will wait for the dust to settle before investing in that new waterfront property.
Using a round-robin method, they plastered the newspaper and their neighborhood with $3,500 worth of ads, held a two-day open house and collected bids…Everything worked except the most important part, the house didn’t sell. No one would meet the $375,000 reserve price…‘I’m not sure I’d use it (an auction) again,’ Staley said. ‘If you’re trying to get the best price for your house, it probably isn’t the best way to go. But we got it sold, and that’s all that was important to us.’”
Wow. $3,500 just to find out that the true market price of their house is less than they are willing to sell for. Couldn’t they use Zillow or something else to find out the market price?
These people are fools. Auctions ARE a good way to reveal the market price (i.e. what someone is willing and able to pay). Please tell me a better way to get a buyer to reveal what the house is worth to them?
I hope these people realize that every day they wait, buyers are willing to pay less and less. Well, for the foreseeable future, at least.
Since they have five neighbors selling as well, I can only imagine the dread that must have overcome them when they saw the Cohen’s auction waste a lot of time and money and set the buyer’s market price probably way below what they were dreaming of.
The correction is coming. And that right soon.
Yeah, my first thoughts on reading about the auction were:
1) how much lower than the Reserve Price was the (only) serious buyer offering?
2) If the house didn’t meet the reserve price…then lower the price!!
Surely a few thousand below $345K is better than ….nothing?
Especially with another house chewing away at your savings.
As for the lease-to-buy/rent option - I’ve been hearing that more and more FB’s are using this as thier “Plan B”.
Sounds fine in theory, but a) how can you, as the owner, expect to recoup your losses by renting (unless you rent it out at a price over and above what you’re losing on it) and b) eventually you will run out of renters, as more and more houses flood the rental market as ‘lease-to-rents’, and everyone who want to rent finds a place.
I don’t know about OR, but here in L.A its a simple matter of looking up a property on zillow to see the last sale price - almost without exception, houses sold for roughly half the amount asked for now, only 4 or 5 years ago. Surely if the Oregon couple had calculated a small profit (ie 5% per year) and not held out for a doubling of appreciation, they would have sold the first house quickly and unburdened themselves from paying 2 mortgages..
…{tsk} ‘they don’t know they’re born’, as they say in my neck of the woods (South East London)..;-)
I know a couple bought two properties as vacation rentals with toxic mortgages late in ‘05. Expectation was to rent them out as vacation rentals while they continued to increase in value 20% per year then sell them at a huge profit after a couple years and pay off the two interest only neg-am loans. Things are not working out as planned. First they’re not renting, the HOA is on their ass because it says in the CCR’s that renting by the week is a ‘no go’. Also since they started this vacation rental thing the beginning of the year the amount of vacation rentals in their area has doubled. So if you mortaged the house you lived in to get these two rentals, and furnish them, you are now upside down on all three houses.
Reminds me of the scene in Saving Private Ryan when they hear the German tanks coming down the road and the rocks on the ground are shaking and all the American troops are looking at each other scared sh*tless……. I think in our case it’s the sound of all those ARMS about to reset and all the overextended FB’s are pooping in their pants.
oops meant to comment on Neil’s comment….
I know at least a dozen folks using the same formula in their race to become BK. You would think that a prudent buyer, intending to utilize the property as a short term rental, might have actually read the CCR’s just to make sure it was allowed. Oh well, just a small detail.
Okay, I know I sound like I just fell off the turnip truck, but how can there be HOA rules on a vacation home? I thought vacation rentals were in secluded areas where there were few organized developments — that’s why it’s a VACATION home, right?
Are Centex and Beazer now building vacation developements too? Is there NO escape from being herded around by various Powers that Be , at all?
You can have HOA CCRs on just about anything. In some HOAs, renting for any length of time is forbidden and the courts have not disallowed it in some states.
This ‘vacation’ rental in the in middle of metro phoenix. There are a lot of visitors here for spring training and winter golfing. But June - August is a really hard sell!!!
sales caoch “?
I can see this pair of libs w beirkenstocks, but never my money
- damn hippies!
Do a search! They’re Repugs!! HAHAHAHA!!! My sister lives there and knows them!
Flatffplan, wake up! Repugs have become what they fear most! Troughfeeders!
Joel and Julie Cohen!
http://www.always-clean.com/
“‘It’s kind of a general reflection on what the market is doing right now,’ Cohen said. ‘It seems like it’s such a buyers’ market, people are getting cold feet. To tell you the truth,’ she said, ‘it was kind of disappointing.’”
How can it be a buyers’ market if 0 out of 200 looky loos were willing to buy? The REIC needs a new moniker for current market conditions.
Apparently 198 of those folks were there for the free food. I don’t see any reason for homeless or poor folks to go hungry for the next several years. They just have to follow the open house signs to the free buffett.
better get it while the getting’s good, realtwhores won’t spend $2 in about six months.
Why these people think they are entitled to a big profit after only owning the property for two years is the question of the day . They bought the property with intent to sell in 2 years . Do you think the 2 year goal has anything to do with the capital gains exclusion on capital gains ? Pick up quick money using a low payment loan ,avoid taxes on the gain ,move up and make more money . These are the 2 year flippers that look like regular folks but were speculators after all ,(who thought they would get rid of the toxic loan by selling at a 40% profit with no capital gains tax). That’s why the massive inventory situation will not stop .
You asked and now you shall receive:
“Lookyloo Market”….”Waiting Game Market”…..”Not Stupid Enought to Catch a Falling Knife Market”…….”If you need to sell now, then you are F’d Market”……”Your selling Price is not low enough market”…..”Seller lubing up time market”……..”TXchic bitch slap you in the face with a trout market”
“TXchic bitch slap you in the face with a trout market” — that should go on a Tee shirt!
Don’t tell me you’ve never heard George Cappony, Head Coach of the Bend Sales. They’re playing Notre Dame on ESPN this weekend.
“The abrupt slowdown in sales prompted Lereah to openly call for price reductions this month.”
Last year’s NAR advice: “Buy now or get priced out forever.”
This year’s NAR wisdom: “Lower the price or you will never be able to sell.”
and the realtwhores wonder why sellers are hesitant to lower prices. They’re believed what you said last year, Mr. Liareah.
Also ,why is a trade group like the NAR allowed to attempt to control the market .They think they can say when the market goes up and by how much and when the market will go down and by how much .
If I remember correctly the realtor codes say you can’t make price predictions up or down or induce panic buying or selling .
The reason for that rule was to prevent false markets based on rumors and lies from sales people .
I can’t wait until some sharp attorney reads those codes and nails this trade group on their violations .
“‘I think that sellers are standing like a deer in a Wisconsin road in the middle of the night, and around the corner are headlights,’ Cappony said. ‘Right now, I think it’s a go-cart coming down the road. Tomorrow, it’s gonna be a semi.’”
And the next day, they will realize they are standing in the middle of the train tracks and the headlight is that of a locomotive.
I have hit a lot of deer in the northwoods (even on 4-wheelers) in highschool classmates would buy a beater to go deer hunting - since the advent of CWD - fewer hunters, a lot more fast food restaurants on the side of the road for the scavengers and a lot more car damage.
“But, they see little point in listing it for sale the traditional way, especially since there are five other homes in the neighborhood for sale right now.”
They paid $259K in 10/04 and see no alternatives to their asking price of $375K?
yeah, but they paid $415 for their new place! in this market, you absolutely cannot buy before you sell.
This comment could apply to any of the last three articles. For these people who bought a property two years ago for $200,000, tried and failed to sell it for $450,000, why are they devastated by having to cut the price to $379,000? For that matter, what changed between 2004 and 2006 to even make it worth $379,000. I think there is a lot more trouble to come when people refer to making an 80% profit in 2 years as “giving it away”.
You know the reason for this seemingly illogical stance:
either they’ve heloced the place and pissed the money away or
they have to have the “profit” to buy the bigger place w/same payment
They were counting on the money for their retirement plan or to pay off their HELOC. All they needed was a sucker with an option loan.
I’m guessing that koi pond had something to do with it.
“George Cappony, a sales coach….”
Now I know what all the unemployed real estate agents are doing - become a sales coach ….watch out Tony Robbins!
” In housing, one obvious candidate for castigation is the Federal Reserve, widely accused of having promoted a bubble in home prices.
According to this view, as the Fed cut interest rates to rock-bottom levels in the early years of this decade to stave off the threat of deflation, it over-stimulated demand for houses. The central bank’s target rate for overnight bank loans was below 2 percent for almost three years, from December 2001 until November 2004.
Runaway increases in house prices set off a mania similar to the rush to buy technology stocks in the late 1990s. Just as the stock-market excesses led to a tech wreck in 2000-02, so hopped- up housing has now given way to an inevitable letdown with potentially painful consequences throughout the economy.
Once the supply of mortgage money was no longer so susceptible to interruption, it began to seem a lot safer to pay “too much” for a house. The price, however lofty, would probably keep on rising.
Trouble is, prices began to go so high that fewer and fewer new buyers could pay them. If the housing market must significantly decline for a while now, hey, that’s only fair to the next generation of people who want to live in houses too. ”
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_currier&sid=aaL4xeM02XCA
“If the housing market must decline significantly now, that’s only fair to the next generation of people who want to live in houses too.”
That’s my bottom line and I’m glad to see that somebody has finally brought that point up in a public forum.
While it’s sad to see people become FB’s left and right, suicides, all kinds of fallout from this mess, those people did make decisions and choices that brought that mess to themselves.
IMO it would be a far bigger tragedy if future generations had to end up paying for the mistakes of these fools in the form of house prices that remain stratospheric enough to keep these current buyers and “owners” out of trouble.
Now THAT would be a REAL tragedy.
I was getting laughed at in Q4 ‘02 for buying my home with 23% down and a 30 year fixed @ 5.25%. Who’s laughing now? I guess I’m just one of those stupid people who believe houses are for living in.
I don’t laugh at you, but do you think it was wise to buy while competing with buyers who were willing to overextend themselves with exotic mortgages?
Sorry, I misread the time of your buying - it was Q4 ‘02 (not Q2 ‘04). That makes it prebubble, and you have a nice rate, too.
Yeah well, I’m lauging at you. Why’d you put down 23% when interest rates were 5.25% You’re losing money on that 23%
Didn’t want to pay PMI. I bought pre-bubble in AZ. I paid 280K in ‘02, similar houses are now trying to be sold for 599K. I really don’t care, when I bought it I could afford the payment and plan on living in it until my mortgage is paid in full.
CasaLoco, you did the right thing.
Don’t buy a home unless you plan on staying and put down at least 20% on a fixed rate mortgage.
Perfect!
Casa$Loco, You did things in a reputable way, kudo’s!
Wicket Gate, the entry point of the straight and narrow way to the Celestial City. Pilgrim’s are required to enter the way by way of the Wicket Gate.
Close bold
Close bold again…
This seller thought the same thing, now he’s a bagholder:
18 Meadowbrook Rd, Short Hills
Jun 15, 2004 - Closed $755,000 (MLS 1671861)
————————————–
Mar 05, 2006 - $879,000 (MLS 2253723) Coldwell Banker
May 01, 2006 - $829,000
Jun 05, 2006 - $795,000
Jul 13, 2006 - WITHDRAWN
Jul 14, 2006 - $795,000 (MLS 2299446) Coldwell Banker
Sep 07, 2006 - WITHDRAWN
Sep 09, 2006 - $745,000 (MLS 2317848) Coldwell Banker
http://www.realtor.com/Prop/1067710048
I think the agent missed a couple of letters in his description “VACANT AND READY FOR IMMEDIATE (RE) POSSESION”
think the agent missed a couple of letters in his description “VACANT AND READY FOR IMMEDIATE (RE) POSSESION”
LOL LMAO Excellent!!!
The Staleys are the smartest sellers I’ve read about yet.
Huh? Smart? They also bought ANOTHER bigger home and are planning on lease option/renting it out until things lossen up.
No, they’re the ones who dumped the place for 221K
Here’s the problem.
Thanks to the internets, we can see that these folks are looking for a 40% return in 2.5 years.
Current house was purchased (new?) on 10/26/04 for $259,085.
$375,000 is ~40%
And the real problem is that they paid $415,000 for their new place!
Sales Date 08/23/06 Adjusted Sales Price $415,000
Check it out at:
http://www.co.deschutes.or.us/index.cfm?objectid=65F1110A-BDBD-57C1-91D726DBA942A9E5&OP_T=T&OP_A=A&OP_D=D&OP_N=N&OP_S=S&OP_I1=I&CMD=NAME&DATA=cohen&B1=Submit
So are we supposed to feel sorry for these folks? It is tough, I guess, but anyone who makes %16/yr over the last 2 years in housing is doing quite well. In Massachusetts, median sales price will hit 2004 levels pretty soon.
And we also know that they’ll be getting desperate in a couple of months–after they’re into double-mortgage payments. Be interesting to see how long it takes them to get more reasonable than $375K.
Jon
2002 was before most of the really wacky appreciation, he is probably doing ok…
“The Cohens, meanwhile, are planning to fall back to ‘Plan B or Plan C,’ Julie Cohen said.
Does it work as with hurricanes? After Z do they go on with the Greek alphabet?
Also when they have the NAR and realtors telling this couple that the market is going to get better they won’t sell now at a discount like they should . They are going to end up getting less . The realtors are screwing with people in a self-serving way and its not right .
And here’s a case in point:
http://www.azcentral.com/arizonarepublic/business/articles/0922biz-realestate0922brown.html
Boy isn’t that the truth.
Friends want to put their home on the market in Seattle now. While it’s definitely slowing here, they still have a chance to sell if they get it out there PRONTO! and aren’t too greedy with the price.
So what does their realtor advise them to do? Wait until January because the Fed will lower interest rates and everything will pick back up!
Guess this woman’s on the inside track with the Fed and all the big world players to be privy to that info. Not sure why she’s going it inconito as a lowly Realtor in Seattle.
Wait until January because the Fed will lower interest rates and everything will pick back up!
Sorry, but that realtor is a moron! How briskly do homes sell in Seattle over January? It all hinges on more appreciation in 2007–I have my doubts.
I think instead of calling realtors the cheerleaders we should call them the soothsayers now that they are predicting a market upward turn in 2007 .
Also I think there is a self-serving attempt by realtors to control the supply of housing by advising people to rent or hold off selling when they should be selling . To tell people that the market will be better in the near future is wrong wrong wrong .
seeing if the bold font can be closed..
test
let’s try italic now
‘Right now, I think it’s a go-cart coming down the road. Tomorrow, it’s gonna be a semi.’”
Nope. In a Bear market no one comes down the road….every “buyer” is hibernating. Sellers won’t get hit by anything and that is very, very scary. No wonder so many people go into denial. Frankly, its hard to imagine a marketplace going completely empty after being so active for so long. But, if you don’t understand that it takes a crowd to make a reasonable market, you probably won’t understand what didn’t hit you.
It won’t be long before the prices fall, very drastically, due to the the plethora of unqualified and overextended borrowers that are caught this time with no resonable hope of a lifeline. Too many will be forced to sell and as median prices clearly decline even MORE potential buyers will chose hibernation. Why?
Its always difficult, even for pros, to know when to enter a market but EVERYONE knows when to avoid a falling market.
Actually, it’s very easy to know when to enter the real estate market.
You buy a house to live in, period. Because of the transaction costs, it has to be a relatively long term thing.
Of course, if you’re speculating in r/e (or stocks, or bonds or options) good luck. The poor fools in Florida with that absolutely horrid house they are trying to sell for $375K - they will lose both houses, and go bankrupt…
Two points to the Cohens & the like:
1. Why did you buy a new house before selling the current one?
2. Getting it rented and maintaining tenants are a full-time job unless you hire a property manager. Negative cash flow will eat up their savings.
I wonder if George Cappony is going to give them double their money back, as his website promises. See: http://www.5day.com/learn/about.php
The Cohens mentioned 5 other houses for sale in their neighborhood? Hell, that’s just on their block. Go out 3 blocks in any direction and the builders are hammering up new ones and listing them daily.
Let’s see now the steps are: Plan A-try the auction, Plan B-Try the lease-option, Plan C-Chasse the market down, always one step behind, and Plan D-File for foreclosure
Here’s where the rubber meets the road. Just substitute “housing” for “oil” or “commodities” here. This is a snip from an article in the International Herald Tribune about the commodity meltdown:
“Still, veteran traders say the commodity markets are full of Brian Hunters: traders in their late 20s or early 30s who have never traded through severe conditions like the gasoline crisis of the 1970s, or the plunge in oil prices in the 1980s. Instead, they have watched as natural gas prices, as well as those of many other commodities, rose - unevenly, but with clear annual gains - since 2001.”
except housing is a bubble and commodities aren’t.
There’s no “daily reckoning” of accounts with houses, either. The leverage in the futures markets is just as fantastic as with houses, except you gotta pay up at the end of a single, bad day.
I don’t know. Commodities are starting to look bubbly to me. Too many people in them because of recent returns.
Sorry, who was or is Brian Hunter?
OK, I got it - Google helped me with “Brian Hunter” and market.
The weird thing is, here in San Diego there are plenty of people who lived through the last bust, yet they can’t or won’t connect the dots. I am actually starting to see lots of people that realize the market is going down, but they somehow thing it won’t be bad this time. Unlike the comment by txchick57 where she emphasizes that these young traders have never seen a down market, lots of people here have.
I know, I know, its different here, its different this time.
Josh
Trust me as someone living in bend it is way worse then that article implies. You have to remember the Bend Bulletin gets a very large part of it’s revenue from realestate ads. The last thing they want to do is panic the market. Of course it is different here. Last week there was snow mixed with the rain. We have at least 20 golf courses that are open 5 months of the year. And a community college full of students just begging to rent a house from a flipper. But apparently (according to the experts) there is no land, plenty of jobs (at $10 an hour) and everyone in California wants to move here.
Identical in Bozeman, MT. Unemployment is low, but underemployment is extremely high. Summer is gorgeous, perfect weather for all 1.5 months of it. Mixture of rain and snow right now. RE sales went over a cliff early this summer and speculators have vanished.
But of course, “everyone wants to live here.”
“It seems like it’s such a buyers’ market, people are getting cold feet.” I’m tired of hearing it’s a buyer’s market. I consider it a buyer’s market when prices are relatively stable, but not much is moving, so there are lots of choices. Right now, prices are not stable, they are dropping quickly. That’s why people are getting cold feet. Why would a buyer be in the market at all under such circumstances? Once prices start making a bottom, then it will be the time to buy.
Yeah, it seems like we need a new term for a market that is DEFINITELY not a seller’s market, and is biased towards the buyers, except no one wants to buy.
Jon
“Unfortunately my wife does not share my vision of retiring early to a small farm in Canada or New Zealand and living tv-, phone-, and internet-free.
If anyone here has actually done this (told society to Fuck Off), I would love to hear about your experiences. ”
vioviv,
Liked your rant. I too feel the same in many respects. Last new years’ holiday I spied a woman trying to demurly exit a Hummer in a dress in the grocery store parking lot. Went in the store and observed “signing, plastic wall-mounted deer heads” for sale, you know, like the stupid wall-mounted singing fish. That’s when I knew things have really gone awry.
Myself, I feel pretty good. I moved in 2001. Got rid of ALL THE EXCESS CRAP!! I mean really trimmed down. One couch, one bed, a computer, one TV, went through my clothes and discarded things I’ll never wear. Nick-knacks, gone; CDs I don’t listen to, gone; etc…
I have a good income and am renting a nice cozy, (little) clean and safe home for 10% of my income. Saving, but still enjoying life without going nuts like everyone around me. Just living on the cheap and watching things unfold.
This has been an incredibly liberating experience for me. My girlfriend, on the other hand has more difficulty with the retail issue. I think the word SALE somehow taps into women’s hardwired “gathering genetic instinct.” Lord, the crap she buys. She has a storage room full of the stuff. I’m hoping she’ll evolve out of her retail therapy fog, but only time will tell. Meantime, it’s one hell of a nice feeling to look at something and say to oneself, “hey, I could buy that if I wanted”–and then walk away.
DOC
In my experience, people usually want what they can’t have.
So if you can actually afford something, there’s a good chance that when you see it, you don’t have the urge to buy it.
The folks who can’t actually afford it are the ones who most often land up doing the purchasing (on credit) as a result.
I have lived in both NZ and Canada but recently purchased a loft flat in Argentina. I can live for one third of what I can in either of those countries although NZ is more reasonable than Canada. I liked Russell on the North Island NZ but now it is too expensive. There are lots of places to retire to and get away from the rat race. Look at Argentina and Uruguay both very European and safe, although, some Spanish is necessary. But your money goes a long, long way.
Its going down
Fri Sep 22, 2006 at 04:51:44 AM PDT
A picture is worth a thousand words. In the case of the current economic environment, a picture is worth a thousand words. Below are some charts and graphs of the current housing market and the households who purchase housing. These graphs indicate there are problems ahead.
http://www.dailykos.com/storyonly/2006/9/22/75144/3774
David Staley, a Bend property investor, and his wife took the least-expensive approach when they offered a northeast Bend rental house for an auction sale in August. They didn’t get a great price for it, $211,000.
Only five or six years ago (in a normal housing market), $211,000 would have bought a median-priced house in Los Angeles. What did a house in Bend cost then? I’m guessing $70k to $80k.
There _is_ something “special” about Bend, by the way. It has the highest appreciation of any city in the US over 30 years.
20 years ago, when we were still in our first house, the house next door sold to someone who wanted to use it as a rental property. Their first tenants never paid any rent after the initial first month plus deposit. I watched them being evicted by marshals, with all their stuff on the lawn and the children crying.
The next renters were 2 single women and a 9 year old boy. That situation ended when one of the women allowed into the house the boyfriend of a friend and he raped her and slit her throat. The 9 year old boy was hiding in the bedroom and called 911.
Then the house got sold again.
I’m sure there must have been plenty of damage that had to be repaired and, obviously, the landlord made no money. I would never want to be a landlord.