‘The Great Housing Boom Is Over’
It’s Friday desk clearing time! The Philadelphia Inquirer, “Local boosters can call it a lull, or a pause, or anything else that sounds soothing. The fact remains that the Great Housing Boom of the early 21st century is over. This isn’t simply a local phenomenon, and it’s not confined to a few formerly ‘hot’ markets on the coasts. The biggest drop last month took place in the Midwest, where housing starts fell a full 12.2 percent. Who knew there was a bubble in Toledo?”
The Toledo Blade. “‘Business and housing starts pretty much [stink] right now,’ said Jim Eloff, owner of Kayo Lumber in Lambertville. ‘There’s an overproduction,’ he explained. ‘The mills are exceeding the consumption and the market pretty much makes them cut prices to try to sell it.’”
“‘Housing has just fallen off a precipice,’ said Mark Zandi, chief economist at Moody’s Economy.com.”
From Atlantic City, New Jersey. “The U.S. real estate market is showing another sign of heading south, while this region remains reluctant to follow. Economist Richard Perniciaro at Atlantic Cape Community College said, ‘The people who are buying are people who have been coming here all their lives and they didn’t look anywhere else. So we have a pretty sure flow of demand. People just want to be here,’ he said. ‘They’ve planned for 10 years to buy into here.’”
The Orlando Sentinel. “The real-estate agents, mortgage brokers and land investors are correct. A lot of poor saps are getting hammered by property taxes this year. And elected officials are spending like sailors on shore leave with American Express Platinum cards.”
“But until recently these same agents, brokers and investors were too busy uncorking Dom Perignon and lighting cigars with $20 bills to take notice. Then the bubble burst, leaving the market with wildly inflated property values, higher assessments and brutal tax bills.”
From Belgium. “The boom in the Belgian housing market has past its peak, a new report indicated. ‘Due to the very favourable mortgage conditions, buyers bought larger houses or in more expensive locations,’ ERA Belgium director Iain Cook said. But that does not mean that a row house with three bedrooms has also increased so much in price.”
“Unfortunately, sellers have not realised this, Cook said. It means that more and more houses are being put up for sale at an exaggerated price and are therefore difficult to sell.”
From Australia. “Welcome to the dark side of the housing boom. The question is, why have we borrowed so much more today? See the point? We took the benefit of lower interest rates and used it to achieve little more than a doubling in the price of homes.”
From New Zealand. “A slowdown in sales of higher priced houses has put a stop to rising prices in the city’s residential property market. The median selling price slipped $9000 in August at Mount Maunganui and Papamoa, and across the harbour the fall was even bigger, more than $12,000. ‘If you scratch under the surface at the moment there’s nothing much happening,’ said John O’Donnell, principal of LJ Hooker Mount Maunganui.”
“‘Life is not as exciting as some people would like. There are no great trends in the marketplace and prices are definitely not going up,’ he said.”
The National Post in Canada. “Royal Bank of Canada singled out the Vancouver market as ‘unsustainable,’ based on the fact the current median household income in the city of $54,912 means a typical family would have to shell out 72.8% of their pre-tax income to meet all the expenses of owning an average two-storey home.”
The New York Sun. “Money manager James Melcher adds that most people believe higher short-term interest rates, increased minimum monthly repayment levels for credit card debt, higher energy prices, the inability of households overburdened with debts to refinance homes in a declining market, the fact that wage earners have had no increase in inflation-adjusted earnings over the past several years, and a variety of other seriously negative factors will only slow consumer spending a fraction of a percent.’”
“‘We suspect that most of them also believe in Santa Claus and the Tooth Fairy,’ he quips.”
The Dallas News. “During the early 1990s, the dirtiest word in the North Texas real estate market was condominium. That’s because thousands of homeowners lost their shirts when the local condo market went bust. Many owners wound up owing two or three times what their homes were worth when property values plunged.”
“One condo deal that’s not going ahead is developer Craig Hall’s planned tower in downtown’s Arts District. Hall decided to wait for the next real estate boom cycle, however long that might take. Hall’s site will soon be in the shadow of construction of the new performing arts center. ‘When those new buildings open, we will be an eyesore and we feel bad about that,’ he said.”
From CNN Money. “When Casey Young and his wife Jaime Ballanco put their Orlando house on the market back in March, they had no clue that the property would not sell. ‘It was a foregone conclusion that we would sell it very quickly,’ says Young.”
“Young and Ballanco have a particularly vexing problem having just contracted to buy a new house. The new house cost $562,000 so they were really counting on profits from the old place to help.”
“They re-priced the house, lowering it to $369,000 and then to $349,000. They’ve had open houses that nobody attended; run advertisements that elicited no responses. In all its months on the market, the house has drawn only two lookers.”
“The couple are increasingly feeling the stress. They have to make a decision soon about whether to go ahead with the purchase and hope they’ll sell the old house, or give up the new place and lose their $28,000 deposit. ‘I absolutely need the profit from my old home to afford the new one,’ says Young. ‘Even with rental income from one of the homes, there’s no way I can afford both mortgages at the same time.’”
Another great week of building bubble consensus, however challenging. My thanks to those who support this blog. Check back this weekend for news, your market observations and topics.
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Breaking news from NJ. It’s different in Atlantic City.
The real estate professionals are starting their steady march into my office for BKs. 3 more houses given back today. I can ask “where will it end” but it has only begun. . .
Criminal defense is going to be busy too.
http://www.johntfloyd.com/mortgage-fraud-lawyer.htm
Criminal defense should get busier too:
http://www.johntfloyd.com/mortgage-fraud-lawyer.htm
MORTGAGE FRAUD INDICATORS
Inflated Appraisals
• Exclusive use of one appraiser
This is so fookin’ huge, it’s gonna boggle the mind!!!
Hang all the bastards.
Want some help? I’m getting the itch to do that work again
Criminal will be busier too.
The system is not allowing me to link it, but John T. Floyd
has an informative page on his site re mortgage fraud (Federal criminal defense).
http://www.johntfloyd.com
Click on Mortgage Fraud on the menu. That page has interesting info on flipping (which is a crime despite what you may have read on http://www.iamfacingforeclosure.com).
From the link: From 2000 to the present, the FBI’s investigations in the financial institution fraud arena have resulted in more than 11,466 indictments, 11,362 convictions and approximately $8.1 billion in restitution orders.
$8.1 billion in four years? That is only the top of the iceberg. I have a feeling lenders are going to start screaming like a smashed cat when those baloon payments don’t come in on time.
wow, what a difference with the Netherlands - I’m sure mortgage fraud is at least as frequent over here, but convictions are close to zero over the last 10 years (probably there are a few without any publicity). Even in cases where some RE agents and attorneys were involved over and over again, in the end no one was convicted. It’s widely known that the banks simply take their losses (and pass them to other customers).
That is an interesting site, as are the terms he defines. However, I think the lawyers’ definition of “flipping” is much different than the the flipping that routinely is referred to in this blog. The latter is the simple, though despised, matter of buying a property and quickly turning it for re-sale, usually at an unconscionable profit and commonly done when the purchase is (was
) pre-construction.
I guess we will have to agree that we disagree.
Flipping is illegal. It was known by another name in the early 90’s, but I cannot recall the name. However, the courts look at conduct, no matter what the term or name of a particular conduct. The FBI was given thousands of tips of flipper conduct in Orange County, CA in 1990. Those flippers did then what flippers are doing now. Perhaps the flippers of today plan(ned) to use the “Well, everybody’s doing it” defense. Or, the “But, I didn’t know” defense. BTW, ignorance of the law is no defense. *shrugs*
I can think of one appraiser who did “drive by” appraisals. He would just drive by the residence and draft an appraisal based upon his gut feelings! Sellers were (obviously) thrilled at this because they could demand (and supposedly prove) that their residence was worth what they demanded.
Criminal? I think so.
MissTrial — my point was that you would confuse the heck out of the bloggers who have posted here since Ben started it, if you continually referred to “flipping” as illegal. In your world of law, that may be correct, but this is not a law blog and we are all, to my knowledge, quite comfy with the merely-detestable-and-greedy definition. It’s nice that you recently chose to join us. And it’s a pleasure to introduce you to the “house” definition of “flippin’.” Whatever, thank you for being polite in your disagreement.
The apprasier did not base is appraisal on a gut feeling, but based it on assumptions. Which was an acceptable practice. Those assumptions should have been stated in his appraisal. Assumptions as to the condition and quality of construction should have been stated in the appraisal. The report should have stated that if his assumptions about the condition and quality were later found not to be than the value could be different. This is not criminal. Driveby appraisals are permitted by law.
Chip:
I am fully aware (and have been since Day 1) that this Blog has a “house definition” of flipping.
My comments/posts/links were in reply as an adjunct to BKlawyer, and were made in that context.
About 2 weeks ago, I predicted, on this Blog, that an increase in Bankruptcies would occur. I suggested that attys who had left the practice of BK Law, to reconsider. So, I found BKlawyer’s post amazing.
As I am assuming she/he may be a legal professional, I made my posts (which Ben chose to allow) with that in mind. My posts were merely provided to add another angle to the way this crisis could be viewed. I, in no way, intended to hijack or obstruct this Blog’s definition of “flippin.”
Some readers may find it interesting that “liar loans” may be criminal. I made the posts with these readers in mind. Sorry that wasn’t you.
~Misstrial (aka Miss Demeanor)
Lastly, Chip, in reference to your use of the word “continually:”
My posts today have been the first time, on this Blog, that I have ever referred to “flippin” as illegal. Not to worry though, I won’t be referring to it as illegal again
Wonder if this os one of those “last word” exchanges.
“Some readers may find it interesting that “liar loans” may be criminal. I made the posts with these readers in mind. Sorry that wasn’t you.”
Of course we agree that lies on liar loans are illegal. Just as truthfulness on liar loans, as occasional as that may be, is not. And yes, you are absolutely correct that I am not one of the lawyers you had in mind in your post.
Misstrial-
I’m not disputing your reference that flipping is illegal. I know that it is heavily frowned upon or forbidden when government loans are involved and the Fed has raided quite a few offices in Los Angeles based upon this activity but in those cases fluffed appraisal’s, phantom jobs and w2’s among other things were the order of the day.
But how does it become illegal when say someone buys a pre-construction and sells it too someone at a higher price if the market has “truly” inflated in a short period of time. Of if someone buys a true fixer (ie: gutted and rotten to the core and put back together not slash-dash but truely rehabbed) at a wholesale price and retails it.
Not asking for legal opinion just further clarity of your posting.
If you define flipping as purchasing a house, with intent to resell quickly for a profit, regardless of whether they doing anything to the house, then I arguee any law that restricts this behavior is morally and ethically wrong.
What such a law does show is the dramatic overreach of governmment buearacracy at its worst. By preventing the market from operating freely, it prevents houses from being priced correctly. This process can lead to short term aberations, such as this bubble, but the damage caused from legislation is much worse than the bubble itself.
Ocasionally markets fail, and then government can and should step in to sort problems out, but flipping is most definately not one of them.
I don’t mean to sound like some right wing nut job, but these rediculous laws which keep restricting what people can and can not do make no sense.
And before anyone starts screeming that flippers are pricing poor people out of the market, remember you have no entitlement to own a house.
I argue flippers are doing everyone a huge favor. When the market corrects, house prices will be forced below construction costs in many parts of the country. This will be an ideal time for everyone, including the poor, to buy.
Now if the poor have trouble obtaining loans, especially when houses are cheap, due to discrimination or a liquidity crunch, this would be an idea time for the government to step in and offer loans to get people into houses.
Oliver
Driveby appraisals are permitted by law.
LMAO…Another way the loan managed to water down and dilute the appraisal process to push the money out the door.
After seein’ the interior of a home which was gutted to the studs, despite assessment records to the contrary, that was it for me, relative to doing drive-by appraisals.
The borrower fought like hell to keep me from going inside, but the loan officer was insistant.
He didn’t get his money-and the L/O saved herself from one big later hassle.
where do your practice BK?
BKLawyer-
I thought with the new bk rules you couldn’t just bk and walk away anymore.
NO!!!! The credit industry would love for you to believe that you could not file anymore but the exact opposite is true. Congress’ changes in the law, in a lot of instances, make it easier to file.
Are you kidding me?? Come’on you have got to be kidding. So what was all the huff about, where folks were standing in line to file by a certain date.
I’m far from being a legal beagle but my understanding and impression were that it would be damn near impossible to discharge debt if you had a job. Or does that only apply for consumer debt and not housing which at the core I thought was the same. Are you telling me that all these folks can simply walk away and leave the banks holding the bag. With no more repercussion than a credit blemish. If that’s the case this is going to turn out a whole lot worse than I thought it’s going to make the RTC fiasco look like child’s play.
If the explanation is deeper than you want to go into I understand but if you could direct me to a reference point it would be appreciated.
If that’s the case this is going to turn out a whole lot worse than I thought it’s going to make the RTC fiasco look like child’s play
LOL-Definitely an understatement.
-
LIVE FREE FOR A YEAR IN
ATLANTIC CITY LUXURY.
BUY NOW AND WE’LL PAY YOUR MORTGAGE FOR THE FIRST YEAR.*
LIMITED TIME OFFER. JULY 1 - SEPTEMBER 30, 2006.
http://bellacondos.com/
How about this counteroffer- I live free in your condo for a year. If I like it, I’ll buy it at 2007 market value. P.S., Don’t call during the first 11 months.
http://www.freecondobook.com (pdf)
Funny front page. Tried to download the linked PDFs, but it didn’t work.
That link takes forever to get through its intro. If I buy a condo there do I get to hang out with the women in the intro slides?
“The U.S. real estate market is showing another sign of heading south, while this region remains reluctant to follow. Economist Richard Perniciaro at Atlantic Cape Community College said,
I was thinking counterintuitively that maybe the good economist would end up at the community college level because, like other fields, the bad ones advance by selling themselves to the highest bidder.
I was wrong. But I have yet another excuse for homeschooling.
I think Mr. Perniciaro hasn’t checked the housing tracker sites yet…or doesn’t have any acquaintances who invest in NJ shore real estate.
I know one investor who has just dumped two homes in Ocean City NJ. He took a 100k hit on each house…but he is smart enough to see what is coming down the pike,and cut his losses.
Yesterday I was chatting with my banker. She shared with me that her Sea Isle City realtor friend said that 80% of the homes he sold in the last two years were ARMs or I/0s. Mr. Perniciaro, not that many people really want to buy at the Jersey shore; most vacationers from the Philly metro area rent for a week or two or a month.
So looks like lots of bargains to be had 2007-2008 at the South Jersey shore.
The new house cost $562,000 so they were really counting on profits from the old place to help.”
“They re-priced the house, lowering it to $369,000 and then to $349,000. They’ve
Now we are talking, reductions like this should really get the ball rolling. Now, as soon as it becomes apparent to all that real estate is on the way down, most of the investors, flippers, speculators etc will leave the market and we will really see some fire works, hey its what we have been waiting for right? I say the real carnage will be 2008-what does every body else think?
Yep , it will get worst as time goes on . This is how stupid people are . You never make a offer on a house ,if you need to sell a old house , without making it subject to selling your old house . That way you don’t lose a 28k deposit like these people might lose .Only in a frenzy will people write up crazy contracts that arent self-protective . Any real estate agent that allowed someone to do that wants the people to be between a rock and a hard spot . Its all evil and it’s not regular business practice .
Buyers and sellers beware of your advisors ,
A 28k loss on the new house might seem like small peanuts in 6 to 12 months.
“A 28k loss on the new house might seem like small peanuts in 6 to 12 months.”
You betcha. I’d eat it and run. Just drive the jalopy three more years.
I don’t like losing 200 bucks at a casino. I’d likely just end it all if I ever woke up to a 28k blunder.
These guys were not being conservative, not being risk averse. The only way to avoid big losses is to keep your losses small, i.e., control your losses. They are out 20k (on paper), clearly the market is declining. 28k is a 5% drop in the price of the new house, or an 8% drop in the price of the old house. If there is even a chance of a 5% to 10% drop, you have to have contingencies.
Sure, stretch out the closing on the new house, but have a plan in place:
Plan A: Be prepared to walk and eat the 28k.
Plan B: Be prepared to go back to the builder and ask for a reduction (based on new market conditions).
Plan C: Open up the Greenspan box and take out another cupful of stupid (i.e., do next to nothing and hope for the best).
Why in the world does a 30 year old, childless couple need more than a 4 bedroom 2800 ft2 house? They are planning to start a family? Well in three or four years, when they get to the third kid, then they could consider that 5 bedroom unit if they want. They could have added a pool where they were if that was all they wanted. That is just unfettered greed from some spoiled brat kids (and I’m in my 30s and definitely not too old to say that). They need to lose the $28k. Obviously they were not taught financial basics of saving and spending wisely. At least it sounds like they don’t have the house loaded with HELOCs.
“” You never make a offer on a house ,if you need to sell a old house , without making it subject to selling your old house . That way you don’t lose a 28k deposit like these people might lose .Only in a frenzy will people write up crazy contracts that arent self-protective . Any real estate agent that allowed someone to do that wants the people to be between a rock and a hard spot . Its all evil and it’s not regular business practice “”
They probably went directly to the builders real estate agent who simply left out any such silly protections like that, after all real estate is always going up in price and everyone wants to move to Florida.
The bloodbath will turn into a rout starting Jan 1, 2007…just 4 months away. Jan 1 to Superbowl Sunday is the slowest real estate market year in and year out. I suspect that the water cooler talk at most XMAS parties will be gossip about so-and-so losing their house, being over their head in debt, I/O reseting.
Everybody thinks they are the one listing that will find the last living sucker out there to buy their castle. By the time the party season is over, fear will spread throughout the land. And the 24/7 news cycle and the internet, including ben’s Blog, will make sure David Liar and the NAR will be held accountable.
“I suspect that the water cooler talk at most XMAS parties will be gossip about so-and-so losing their house, being over their head in debt, I/O reseting.”
That’s the happy scenario. The unhappy scenario includes the above, plus a retrospective on why so many friends lost their jobs.
I suspect that the water cooler talk at most XMAS parties will be gossip about so-and-so losing their house, being over their head in debt, I/O reseting.
my, my…how quicky things change…
And it was only last XMAS that everybody was talkin’ about how Joe and Sally Dickhead made $100k in a 3 month flip…tsk, tsk…
Umm, like most things, it is now worse than some thought it would be , but will not be as bad as many think it will. The interest rates are still low and I suspect the next fed move will be down in order to keep things from really falling off the edge.
Bill,
I think this is worth reading. I found it very sobering.
http://www.rgemonitor.com/blog/roubini/147839
Thanks, nice read. But I still don’t think the real estate market will go down much more than 20%-30% in most markets. I saw the same thing in 1981 and in 1991. Although for different reasons. I read a lot of gloom and doom articles then, but things bottomed out and the next cycle took prices even higher as they will this time.
“I saw the same thing in 1981 and in 1991.”
As did I. The ponzi then was not as refined or widespread as it is now. There were, for all practical purposes, no Option arms and in the latter cycle, not enough regular ARMs to matter. This one was created with a new Pair of Dimes. Nice to see your thoughts; wish I could wager with you about the outcome. There are too many hedges, too — such as the definition of “most” markets.
Whatever, I’m in the “reversion to at least 2001 and hopefully prior” prices camp. That type of peg has the great virtue of confirmability.
Bill But I still don’t think the real estate market will go down much more than 20%-30% in most markets.
Last time there were no 80/20 IO Loans or ARM Teaser rates. It Will be different this time.
Maybe no ARM teaser rates in the early 1980s but there were plenty of mortgage buydowns for 1-3 years.
Mortgage insurance would be used if your downpayment wasn’t 20%. I remember you had to have some cash in the deal - 5% and closing costs if I’m not having a senior moment.
Well, it will be interesting to see what unfolds. The world didn’t end in Y2K or the dot com crash or even 911.
Nor will a downturn in houses kill the economy. It will however cause a slowdown and a flat real estate market for a few years, which isn’t such a bad thing. Hopefully a lot of these homes will be sold 20-30% lower to more senseable people who have at least 20% saved to put down before the speculators jump back in and run it up again to nosebleed levels. Right now in my part of California homes are 5%-10% lower and sales are few. But at 20% in the summer next year I truly think sales will be brisk. However, some places that are less desirable, like Bakersfield or Barstow may very well see a 30% drop before they get sold.
Hey, 20-30% wil cause a financial nightmare for alot of people.
Yes, as did the layoffs when bases were closed in the early 90’s and the dot.com crash in 2001-2002, but people recover from these things and sometimes are better off because of it, although at the time it seems pretty bleak.
Everybody thinks their area will only get a small decline . Think what you want but in most parts of California the prices need a bigger haircut than 20% just based on affordability alone .If you look at how many people bought for short term that will keep the suppy up for years to come . Currently the conditions are not there for a rallying market upward anytime soon .I know the NAR and Cheerleaders sell this story but it’s just wishful thinking .
Even at bubble-peak prices minus 20-30%, would that be affordable to your typical working American? Would that bring home values in line with rents? That scenario is only plausible if the Fed rolls back interest rates to 1% and people start clamoring for option ARMs a second time. Well, the FBs who did it the first time are out of the market… will we find a new generation of FBs? The speculators who ran things up the first time will still be gone.
Whay you say may be true, Bill, but I’m not convinced by the argument that things weren’t so bad after 1981 and 1991 and y2k and dot.coms and 911 so same thing this time. After each of those, we still had some credit expansion within us. How much more is there? It’s hard to see where bundles of credit might still go (other than war) but time will tell.
Bill, have you seen Shiller’s long term graph of real housing prices? I don’t see how anyone can look at that and still say this bubble is like any previous one.
The Shiller graph is here:
http://en.wikipedia.org/wiki/Image:Barrons_shiller_06-20-2005.gif
The world didn’t end in Y2K or the dot com crash or even 911.
I respectfully submit that these occurances are not even remotely in the same ball-park as this housing debacle.
The outright crime, rackeetering, coercion, conflict of interest, et, el. involved in the lending business during these last 4 years is virtually incomprehensible.
I agree with hd74man. As some commentator above has noted, this event is more like the stock crash of 1929. Recall that in 1929 the margin requirement for stocks was 10%, versus the present 50%. In recent real estate mkt, the margin requirement seemed to be near 0% in contrast to some older requirement of 5% or more often 20%. The option ARMs added to the problem.
The more I read on this blog, the better I understand why persons making substantial down payments were happier to take on my 9% fixed rate than to fool with a lot of points and fees and BS and smoke and mirrors.
None of my clients is in default right now (stay tuned?)
I understand why persons making substantial down payments were happier to take on my 9% fixed rate than to fool with a lot of points and fees and BS and smoke and mirrors.
AZ_L-The hypocrisy of the real estate brokerage people I knew never failed to blow me away.
When it came time to doing their own refi/purchase or whatever, they always trotted down to the local savings bank for a fixed rate note with in-house servicing, or complete holding.
No “lost” forwarded payments to XYZ Mortgage Holding LTD. for this crowd
Meanwhile they would steer their newbie buyer clients to a L/O “friend” running a smoke and mirrors show.
The ultimate hypocrites. They made me sick.
I’m calling 2007 as the first big leg-DOWN! This things imploding faster than I thought possible.
- and a variety of other seriously negative factors WILL ONLY SLOW consumer spending a fraction of a percent.’”
“‘We suspect that most of them also believe in Santa Claus and the Tooth Fairy,’ he quips.”
No one can stop the consumer from feeling entitled to wealth and comfort.
There is a saying,
‘Comfort brings Calamity and Calamity brings Clarity.’
ca‧lam‧i‧ty -noun, plural -ties. 1. a great misfortune or disaster, 2. grievous affliction; adversity; misery: the calamity of war.
And it _will_ snowball. When everyone realizes that it is rapidly imploding, that will send a lot of those seller/speculators who are optimistically holding out for top dollar running screaming for the exits.
Jon
They entered a contract to buy a new home with money they HOPED they would get.
Dumbasses.
sounds more like they were convinced like many others that they were entitled to 20% per year gains and planned their lifestyle as such.
This is another phenomenon I’m amazed by, buying a big expensive house before you sell the old one. This used to be unheard of. Talk about optimistic, not to mention downright foolish. The guy admits there is no way he can afford to carry both notes! Like that one redneck comedian says: “You can’t fix stupid!”
Live and learn fool. Casey and Jamie are going to get exactly what they deserve.
Almost forgot! This is a childless couple only 30 years old and their old house at 2800 square feet was not big enough for them! WTF? If anything, I’d be looking to sell and downsize a little. You know, take a little off the table. The size of houses is getting ridiculous. Like Mo Money said below, simple decorations do not a palace make. Crown moldings and tile floors; BFD. Sorry Casey, but you are SCREWED and I feel zero sympathy for your plight.
- ‘This is a childless couple only 30 years old ‘
Well, see - that’s totally different. Wasn’t there a scene in ‘Titanic’ were the guy say’s ‘I am KING OF THE WORLD.’
“Casey and Jamie are going to get exactly what they deserve.”
Hopefully. But I’ll bet even now there’s an idiot out there willing to buy the first house at a price that lets them give up the deposit on the second and still walk away with a profit.
Christmas should be fun in the Casey and Jamie house. I can’t wait to see the look on her face when she opens her gift and says, “oh gee honey, a big vat of Vaseline. Just what I needed.” She then hands him his gift and says, “I got you the same thing.”
Sell your house first or make a offer subject to your old house selling so you don’t lose a deposit . I don’t know who was advising these people but they were bad faith ,self-serving , greedy snakes . These type of agents I would like to see go down hard .
“It was a foregone conclusion that the house would sell quickly.”
Come on, that’s just pathetic - it’s not even a foregone conclusion that Wal-Mart can sell laundry detergent - witness New Orleans.
In fact, the general optimism that pervades the material life - our children will live better than we do, torture and mayhem aren’t likely to happen, people will continue to get smarter and better-looking, etc. - has no good long-term support in history.
The average per capita increase in real wealth per annum since the Industrial Revolution, rounded to the nearest whole number, is 0. The last 50 years have been an unprecedented golden era. It is highly unlikely that the next 50 will be.
Even bloggers on this site making plans to buy at 50% discounts and then go on living lives similar to today are probably being unrealistic about the second bit. It’s probably more likely than not that we WILL see a second great depression or nuclear war in the next 10-20 years.
And I really don’t consider myself a pessimist - just a realist with a sense of history that extends further back than 20 or even 50 years. The whole concept and meaning of buying real estate cheaply may practically vanish in our lifetimes.
That was very thoughtfully put. I take back what I’ve said about there “not being a whole lot of brain activity going on” in Jacksonville.
“It’s probably more likely than not that we WILL see a second great depression or nuclear war in the next 10-20 years.”
How can you be so sure? Both are 20th century phenomena. Not a lot of history to suggest how often a nuclear war or depression come along.
Economic downturns have been around since the Industrial Revolution. They used be called “panics”, but that sounded too “panicky” so in the 20th century they came up with the term “depression”. Then the Great Depression made that term so scary they came up with “recession”.
The 1930’s depression was made “great” by protectionist measures that I think are unlikely this time around, but I still think we’re likely to see a downturn as bad as any in the 20th century, excepting the G.D.
And I really don’t consider myself a pessimist - just a realist with a sense of history that extends further back than 20 or even 50 years.
The adage goes-those who forget history are doomed to repeat it…
The post boomer generation is totally fooked.
These kids today couldn’t recite a date with a connected historical event if their lives depended on it.
With 3rd world scores in scence and math-English reduced to ebonics and text spelling-and no history, I’ve yet to understand exactly WTF are these kids doin’ in these school systems which are bankrupting communties
besides using the physical facilitites as a jock/jockess house, amateur theater, and social center.
Sounds like forfeiting the $28K could be an outstanding investment in the lessons of life for these two. Me, I wouldn’t think twice about walking away from the new home if I hadn’t gone pending on the old one first. Assuming I was foolish enough to plunk down the $28K in the first place.
And given that the new house is more expensive than the old one, they will take a much bigger hit on their net worth if the values decline the same %age - indeed I think the more expensive house may take a bigger %age hit.
I’d kiss the $28K goodbye and consider it a cheap lesson.
A friend of mine found himself in a similar situation with a $10k deposit on a condo (new construction) in Ladera Ranch (Orange County, CA). He wanted out and in consulting someone close to the building industry, he was advised to stop talking to the builder, don’t return telephone calls, return e-mails or communicate in any manner whatsoever. As construction progressed, deadlines for selecting finishes, upgrades, etc… passed. Apparently, the desperate calls form the developer became increasingly more hostile as the time approached the scheduled delivery date/closing. Since the builder was not able to reach the buyer, they were forced to “give” his position to another buyer. He received his $10,000 check in the mail shortly thereafter.
“Young had improved the place over the years, putting in tile floors, chair rails, crown moldings and other amenities. The house has formal living and dining rooms and Young also installed a lovely Koi pond in the backyard with a rustic Japanese bridge.”
Those aren’t improvements, that is decorating and I don’t expect to have to pay extra for it.
I read this as well and was floored. “tile floors, chair rails, crown moldings and other amenities” (other amenities is code for changing builders grade lighting for one step up Home Depot lighting or paintz).
“also installed a lovely Koi pond”
All of these amazing upgrades for only $200,000 profit on their part. Seems like a deal to me. Pigs get fat and hogs get slaughtered. Looks like they are about to take a $28000 haircut from the lost down payment on their other property.
paintz = paint
paintz = quirky paint colors (lol)
Kinda like = :/
Judging by their picture in the article, our friend Casey can’t afford to lose any hair!
No kidding what a couple of greedy bast**ds. Even with the “lovely koi pond” you are looking at maybe $30K in upgrades at most.
Greed is the number one common denominator among all these cases.
You could argue that if you ad something like a koi pond you immediately lose 50% of your possible buyers as people are either going to lie it or hate it.
The only thing I advise my customers to do when selling a house is clean it up, get rid of any junk, make any repairs necessary, and put a nice paint job on / in it if it needs one.
This is NOT an upgrade. If you happen to like spend $200 per and do MAINTENANCE on this, I suppose you could say it is an upgreade. However, just like swimming pools, this is a liability for at least 50%.
Foolish sheeple!
“Looks like they are about to take a $28000 haircut from the lost down payment on their other property.”
I don’t think so.
I’d be willing to bet $10 cash money that they decide to “make it work”, and hold onto BOTH houses “just until they can sell the little one”.
They still have The Greed.
“Looks like they are about to take a $28000 haircut from the lost down payment on their other property.”
Just had a thought. Jaime– if you’re reading this — cut the price on your existing house by $28K tomorrow morning (because you will need to lose it on the other end oif you don’t sell). If it doesn’t go under contract quickly, walk on the deposit because you are guaranteed less-screwed that way, IMO. In other words, either way you probably have to lose AT LEAST $28,000, but walking can cut your losses to just that amount.
That’s a great, rational idea, Chip.
Probably too rational for these people to understand.
Great hedge.
“We took the benefit of lower interest rates and used it to achieve little more than a doubling in the price of homes.”
Too bad we didn’t use the cheap money to start more small businsses and provide jobs.
“”From Australia. “Welcome to the dark side of the housing boom”"
All we did is transfer more wealth to the bankers. Lower interest rates did nothing for the average person. Sure now they own a house that cost them 500K but was probably no better then the house they owned 2 years ago that cost them 200K. The just enchanced their debt not their life.
And that I think is the crux of it. The creation of fake wealth or supposid wealth soon to evaporate over the coming years, which primarily benifited bankers and other sleaze balls. The prolitariat will soon have the rug pulled out from under him. The root of this bubble economy that has been developing is the Fed itself. The American people need to take back our country from the hands of private central bankers.
Borrowing with these lower interest rates would have been put to much better use into capital for productive ventures. Housing is not a producing venture, it is a consuming venture. A house simply sits in its plot of land and does not produce anytghing, it only consumes prescious man hours and materials in maintenance and endless upgrades.
Most of this borrowing was used for more consumption, and now we can clearly see the results when capital is not put to good use.
A little bit of “bright side” to all of this: A lot of us recently have discovered that renting is not nearly so horrible as we had imagined it would be.
not only that, this housing/credit boom has made business extremely expensive for small companies. In my country rents for office space etc. are up by many 100% over the last 15 years (more or less tracking home prices), while real (business) incomes have hardly changed. Also, all the free money is stimulating business concepts where ‘making money’ is irrelevant, it’s just about who dares to ask the biggest pile of money from the bank. In the EU you can still borrow money at below inflation rates …
And it probably makes people less productive too; why work if (like in the Netherlands) the average citizen can receive more income/capital from appreciating assets (= owning overpriced homes) than from a simple job?
The R.E. taxes brought on buy artificially high assessments are going to hurt the older population the most. These people bought there homes for 10K or 20K
and now there taxes are $5K a year average. WTF
I have done some reverse mortgage appraisals for people that needed to finance to pay taxes.
This is CRAZY!! I live in Orange County ,Calif. and back in the 90’s when RE prices fell by 30% plus we had a lot of home owners asking the county for new tax apprisals and having their taxes reduced. I think when these adjustments get under way everyone should call the county and ask for reapprisals. What OC eventually did was reappraise all home owners to a lower level. Why pay for inflated prices?
2nd this! Very true and I saw this when it happened.
(former NB resident)
Here’s a depressing article. 20 reasons why we’re in for a big recession. Housing is listed as #2.
http://www.rgemonitor.com/blog/roubini/147839
There’s an interesting thread going on there. “Cornhusker” is getting pounded for optimism, but he/she seems polite enough. I like Dr. Roubini’s list of “reasons.” Thanks for the link — I’m not a subscriber, so links like this appear to be my only window to his stuff.
“Cornhusker” will soon meet “Cornholer” in a dark alley if he/she holds to his/her plans.
Nah, I bet Cornhusker is getting pounded for that little event at USC last weekend.
The Philadelphia Inquirer, “Local boosters can call it a lull, or a pause, or anything else that sounds soothing. The fact remains that the Great Housing Boom of the early 21st century is over. This isn’t simply a local phenomenon, and it’s not confined to a few formerly ‘hot’ markets on the coasts. The biggest drop last month took place in the Midwest, where housing starts fell a full 12.2 percent. Who knew there was a bubble in Toledo?”
Holy Toledo Batman!!!!!!!
After the phony baloney wealth created by the FED and the crooked bankers of the world, here comes real poverty. Bubbles create artificial wealth based on nothing. The nothingness of the people at the FED and all central bankers of the world in general is soo evident. And guess who is paying for the fine mess? YOU. Thank you soo much Easy Al.
We cannot afford to let this pass as to why our economic success has been literally mortgaged when it unravels. It wasn’t high gas, it wasn’t terrorism, it was bird flu, it wasn’t e-coli, it wasn’t globablization (per se), it wasn’t global warming, it wasn’t 9/11, and on and on the reasons will flow. The simple reason is the same as it has been throughout history. The lending of money, and attempting to profit from doing so recklessly.
It wouldn’t have happened without all the “safety nets”. Safety nets lead to ignorance and a lack of responsibility for your actions. Look deep enough, and most problems arise due to greed for money. Bankers should be distrusted at every turn. You can’t tell me the banking industry didn’t see this coming at least 25 years ago. Deficits don’t matter? We’ll see about that. Huge debt levels don’t matter? We’ll see about that too.
Unfortunately, we get the government/banking system we deserve. We have been bystanders as this whole thing transpired. A majority of people don’t vote. I am sure this upcoming election will be no different. Politicians have no fear of the people who elect them ever tossing them out…OK maybe some. That alone should be a huge warning sign that things have gone amiss.
If the termination of the FED and fractional reserve banking is the end result, it wouldn’t be a bad thing after all. If it ends up with a more powerful FED/gov’t passing more legislation, that will be one more nail in the coffin of what most people think of a free nation. Sure, you can still vote. So can one heck of a lot of people throughout the world. Big deal. Freedom doesn’t mean being able to vote. It means being able to work hard and enjoy the fruits of your labor as you see fit (in my book). That is NOT what we have today.
> It wouldn’t have happened without all the “safety nets”. Safety nets lead to ignorance and a lack of responsibility for your actions.
Why then had nations with a stronger social safety net like Sweden or Germany less of a housing and credit bubble, but the US with its safety net of holes had a big bubble? The safety net strength seems uncorrelated to the size of a bubble.
> Look deep enough, and most problems arise due to greed for money.
Doesn’t arise economic progress also due to a wish for money? Greed is morally unsound, but working and saving help us to live better lives.
With your premises so shaky, the rest of your posting has little basis, so I want comment on opponents of the fiat money here.
Closer to home, I can point out that Canada has a stronger safety net too, and has only a few local bubbles (Vancouver etc.).
A wish for money is not in itself “greed”. “Greed” is the wish for something for nothing. That’s the crucial difference. A desire for material advancement earned by work and savings is what has built all wealthy societies.
I think you are confusing a ’safety net’ with government incentives for home (&stock) buyers that remove the risk for market players.
Government incentives to prop up the housing market (like zoning, building restrictions, special favors and tax advantages for big developers, free starter loans, HMD, free mortgage insurance etc.) stimulate people to use reckless strategies like mortgages for 10x income, liar loans etc. Such government interference is widespread in the Netherlands, and it has one of the biggest housing bubbles worldwide (by % gains). Similar government incentives are (nearly) totally missing in Germany and probably in Sweden as well. The strong ’safety net’ regarding social security, minimum wages etc. is very similar in these three countries.
“Men now seem eager to vest all powers in government, i.e., in the apparatus of social compulsion and coercion. They aim at totalitarianism, that is, conditions in which all human affairs are managed by governments. They hail every step toward more government interference as progress toward a more perfect world; they are confident that the governments will transform the earth into a paradise. . . . [Governments] have transformed taxation into confiscation and expropriation; they have proclaimed heedless spending as the best method to increase health and welfare. But when the inevitable consequences of such policies, long before predicted by economists, become more and more obvious, public opinion did not place the blame on these cherished policies; it indicted capitalism.”–vonMises
Paul — amen to that.
I believe that the only way to get any meaningful change in government is to vote against every single incumbent. That has the virtue of being nonpartisan. Only when noticeable numbers of them are tossed out, will the rest *even consider* truly listening to the voters. Feep mentioned earlier that he planned not to vote this year. I considered that, but I will do just as I preach and go vote against everyone currently in office. Baby with the bath water? Of course, in a wishful way. We all know that it ain’t gonna happen like that, but until determined people vote, and convince others to, in a manner that will truly generate change, we slide farther and farther down the slope that Paul quotes. All IMHO.
There should be an “against all” candidate as a choice on the ballots. If “against all” gets a certain percentage the whole process should be repeated excluding the candidates that were included in the prior round.
Paul,
Thanks. I guess I’m just paraphrasing in less eloquent terms what von Mises said.
And how does one keep a “free” market free -this is the puzzle that trys capialists’ souls — just as what a fair distribution of wealth trys socialists’ souls. What might be a better study in this day and age is how all govermental and economic systems — when checks are corroded and laws ignored — slouch toward corruption and greed. Those who simply think that cutting captialists loose of all ethical /legal obligations will ensure a truly “free” market ignore human nature. Look no further than my backyard for an example of true free marketers, operating with no restrictions — they’re called the Gambinos and Gottis, and they got your Libertarianism all right, they got it right here.
Any theory of politics or economics isn’t worth a damn to me unless it passes the stress test of corruptability. Both free marketeers and socialists still have a lot of ’splainin to do on that account.
What’s wrong with fractional reserve banking? This isn’t government manipulation and it’s acceptable in a free market.
The Fed is another story.
Fractional reserve banking by its very nature is fraud. But before jumping to that, you have to realize that the size of the money supply doesn’t matter. In other words, the economy works just as well when a cup of coffee costs 5 cents instead $1.50. It’s the transition between those two states that causes all the mayhem. Fractional reserve banking increases the money supply for the sole benefit of the banks. So you deposit $100 in your checking account, and they get to lend out $1000 at interest? Can I do that too please? I’d like very much to make 10 times the interest on my money. You and me get 5%, the bank gets 50%. Why should the banks be favored like this? Why do they get to commit fraud legally while the rest of us would be thrown in jail for doing the same thing? Ultimately, with that kind of advantage, the banks end up with all of the money.
Fractional reserve banking is the cause of all the bank panics. The customers simply wanted their money, which the bank said was available on demand, and the banks couldn’t hold up their end of the contract. They gave the money to someone else. Fraud. Not acceptable in a free market.
“Fractional reserve banking by its very nature is fraud.”
My Idiot’s Guide to the Fed disagrees. So does wiki - it even goes on to explain how the popular view is flat wrong. The way I read it, banks can only loan that which HAS BEEN DEPOSITED - having to keep a fraction at hand for withdrawals. I depost $100, they can loan out $88-90 bucks and collect interest on the use of my cash. They DO NOT, as I understand, loan out $900 bucks - as many freekos (yes, even here) would have you believe.
Of course, I don’t work at a bank - and maybe this crap is going on in the background - but many people argue that the notion of fractional reserves is systematically flawed. I see it differently. I see people who can’t read, reason, or calculate - attacking that which they do not understand.
Again, I do not claim to KNOW the truth of what is actually happening in the banking sector, but I think I UNDERSTAND the way the business of fractional reserves is designed. No money is created out of thin air by local banks.
Be careful when using Wikipedia as a source. It is as likely to have errors as any other internet source. The first poster is correct. Banks can legally lend out more money they have taken in as deposits. As long as their liquid capital divided by their outstanding loans is greater than the fractional reserve requirement everthing is “legal”.
Kerk-
Unfortunately, the system has been totally looted with what has transpired.
The crook’s have pocketed enormous sums and the polticios cook up retirements programs for themselves backed by the Treasury printing press. They have nothing to fear from the coming economic apolcalypse.
Back during the French Revolution all of these people would been rounded and carted off to the guillotine.
Now they all just keep a private jet on charter to bolt to the Cayman Islands and various other hideaways when the SHTF.
As I’ve noted before-where is Madame DeFarge when you need her.
The phony baloney wealth was created by your jackass neighbors with every signature on the dotted line/swipe of the credit card - those living beyond their means via credit cards/helocs/option arm mortgages…
I hope every last one ends up in a cardboard box dining on cat food by flashlight.
While the bubble is deflating around Boise, I am beginning to wonder how far the market will fall. I’m taking my wife to Dallas in November to see if she can put up with the area (TXChk will sure scold me for this) since we could afford to live there without both of us working. Plus the industry I work in pays more in Dallas.
Dallas is cheap but it appears the property taxes are high. So the cost may well be the same. Make sure you look at all the variables - home, maintenance, taxes/insurance, utilities…
Stay inside LBJ. That’s all I have to say. Do not let anyone talk you into Richardson, Plano, Frisco, any of that junk north. You’ll have a fighting chance of retaining some of the “value” of whatever you get. The closer to downtown, the better, so long as it is north of downtown. The Park Cities, Preston Hollow or Lakewood is best.
I moved to Dallas a year ago - and had lived here in the past —
Yes real estate is cheap here - BUT PLEASE NOTE - the taxes are higher than average - and to add to the shock - the local electric companies charge way above average rates - there was a column by Steve Blow last week in the Dallas Morning News if you want to know more. My average electric bill this summer - (are you sitting?) was 950 dollars a month - and I live in a fairly small house with the thermostat sat on 78 degrees. Yes Dallas is cheap compared to the nation - but believe me - there are lots and lots of empty houses out there with signs in front - I am afraid the cheap real estate is about to get a lot cheaper.
$950 is insane. I live in Mobile, Al and my electric bill last month was $179. And I have a larger house (over 3000 sq ft).
August, San Diego: $59 total for Gas AND Electric
(at 780 sq. feet we have PLENTY of space)
That is sick! We had a 2,100 sf home and our average power bill during the summer was no more than $100. a month! So Texas feeds their people’s wallets to the energy companies? the same ones making money off the gulf which we, the people, own?? Hmmmm.
http://www.nytimes.com/2006/09/21/business/21royalty.html?_r=1&oref=slogin
My landlord pays my electric bill :). $950 is almost my RENT!
…come to think of it, when people were paying upwards of $400 in California for energy we were calling it a “crisis”… you sure somebody isn’t tapping in to your account?
Sounds like solar may be a lot more viable economically there than in other areas. Do you see much of it?
Brandon — unless Idaho has very high property taxes, tell TxChick the size & cost of the house you plan to buy in Texas and ask what the property taxes might be. She wrote about property taxes in Houston not long ago and they were so awfully high that it immediately killed any thought I might have had about moving there. I am older, though, so if you have a job with raise potential that may not be as much a scare for you.
Don’t mess with Texas…real estate. We sold a 4/3/pool near Campbell/Hillcrest in 1985. In 2004 I saw our old house on realtor.com and the asking price was LESS than our selling price. That’s 19 (yes, nineteen) years later!
At least rent for the first year in case you change your mind. If you decide you like Dallas, then you can use that time to familiarize yourselves with various neighborhoods and wait for the “ideal” house to come on the market.
Thanks for all the feedback. High property taxes are a concern in Texas, but you need to remember they have no state income tax while Idaho does. Among metro areas, Boise has the 22nd highest tax burden in the country with 9.4% of income going to income, sales, property, and auto taxes. http://money.cnn.com/pf/features/lists/taxesbycity2005/index.html
Among states, Idaho has the 27th highest tax burden while Texas ranks 43rd.
I will yield to the fact that power rates are much higher in Dallas: 14.2 cents per Kwh while Idaho is 5.4 cents.
A big motivator for me is that the median home price in Boise is now 264k while Dallas is a 166k. Plus, I have a lot more opportunity in my profession in Dallas.
Brandon,
One of the biggest drawbacks about being alandlord in ID vs Texas are the foreclosure laws.. It’s relatively easy to evict someone in TX… incredibly diffiuclt in ID.
Not even the “different” NYC, outerborough markets can escape the bust. It was but a short 2 months ago that a house in Rego Park shot out “The lowest priced house in Rego park!” It was a ranch, beater, with just 2 beds, 1 bath? A garage and priced for a lump sum of $525K. All of the sudden, just about 4 days ago, I have begun to see a number of houses that were quietly put down from $649K to $599K, as well as a house that began its listing life at $545K, now listed at $499K, a house that was originally listed at $535K to $475K.
Now, if people do not know, upper 400Ks in Rego Park are Condo territory. Guess where the condo market is going?
I still remember a RE Agent not wanting to take my very reasonable bid for a old, old, house at $450K… If things are bad now, you will see what Winter and a terrible 2007 will do for you.
I predict a major correction at the end of Summer 2007, especially when all the Baby Boomers realize that they need to unload then, rather than wait for the market to rebound. What about the ARM crowds?
NY, even the outerboroughs, I do not mean shoulder boroughs, are not immune to the bubble.
I’m also in Queens. I’ve seen a 10% - 12% correction so far from 2005 prices. I remember around 1997 when those one family attached in Astoria, Rego Park and Forest Hills were in the $250,000 to $350,000 range, now they are $500,000 to $700,000. A return to the mean would put them 20% - 25% over their 97 price. Anybody who lived here after the 1987 crash knows that NYC is definitely NOT immune.
So much truth and interesting analysis in the Sydney Herald article. These caught my attention, “At the level of the individual, the leap in prices redistributed wealth to those who owned homes at the start of the boom from those who didn’t, but have wanted to buy in since - including our children or grandchildren.” … “But whereas the boom redistributed money between individuals, from the viewpoint of the community as a whole the doubling of house prices leaves us no better off. The rise in our wealth is an illusion.”
Finally they write the truth is that there is no value gained in rising house prices. Using residential housing to increase economic activity is akin to a farmer eating his seed corn. Maybe we are at that point in the economic cycle where this was the best option. Let us hope it is not so.
please note that the rise of wealth is NOT an illusion for those who own more than their primary residence (or building land), and have gradually sold of some of their properties during this once-in-a-lifetime boom. A few years ago in New Zealand I heard countless stories about individuals who had retired early because of the RE boom. In my country (NL) probably more millionaires have been made by investing in real estate than by anything else; of course some of them will loose their wealth when the bubble bursts, but I’m sure most of these people are ahead of the crowd and have by now sold off most of their extra properties.
Other examples are big corporate investors. There is a development outside my city from the 1950’s where rental homes were built for +/- 5000 gulden (EUR 2200) each. After collecting a nice rent (thanks to huge government rental subsidies) for nearly 50 years, these homes were sold around 2000 for around 200.000 euro (again with significant government subsidies to enable the renters to buy their own homes). That works out at 10% appreciation per year for 50 years, plus all the rent they collected in those years. For some the rise in wealth is real …
The experts will finally admit that this housing boom was not based on a true demand for housing ,(like in the 50’s ), but rather it was based on high speculation demand causing over-building caused by cheap ,easy money . Instead of the buyers backing off as buyers would do when prices go to high ,buyers/borrowers were encouraged to go on loans they couldn’t afford and get in on the speculation game .As far as I’m concerned the Lenders have alot of explaining to do regarding the part they played in this unheard of National run-up in prices .
- this housing boom was not based on a true demand for housing ,(like in the 50’s ), but rather it was based on high speculation demand
Agreed.
When I bought my home in Manhattan Beach Ca in 1985, my wife and I drove to the house after work and bought it immediately for 187,500.00. The market was exploding at the time. However, we put 20% down. There was no ‘Zero down’ and the market had nowhere near the ‘Flip’ mentality.
This market is flooded with ‘Weak hands’ with NO financial staying power. They are toast.
PS….I sold in Jan 1990 @ 420k - the market peak.
“Local boosters can call it a lull, or a pause, or anything else that sounds soothing. The fact remains that the Great Housing Boom of the early 21st century is over. This isn’t simply a local phenomenon, and it’s not confined to a few formerly ‘hot’ markets on the coasts. The biggest drop last month took place in the Midwest, where housing starts fell a full 12.2 percent. Who knew there was a bubble in Toledo?”
Holy Toledo! Now that the Great Housing Bubble is history, the next question is how long and painful will be the aftermath? And also, will historians refer to it as the Great Housing Boom, the Housing Bubble, or maybe the Irrationally Exuberant Period of Frenzied Froth?
What a mind!: “Irrationally Exuberant Period of Frenzied Froth?”
GS, you’ve put me in a “conundrum”, sitting here drinking my red red wine, I can’t decide on Jimmy Buffett’s: Vampire’s, Mummy’s or the Holy Ghost’s or McLean’s: Bye Bye Miss American Pie.
They were singin’
Bye-bye, Miss American Pie
Drove my chevy to the levy
But the levy was dry
And them good old boys were drinking whiskey and rye
Singing this’ll be the day that I die
you have the words wrong…the words were…
The were refin’,
buy, buy, what can we buy,
drove the Hummer through the summer,
but now what a bummer,
and those FBs were hummin’, now they’re bummin’,
and they’re just gonna fry!
Quick catch & return.
I live in Forest Hills, and I’m starting to see flyers for “desperate For Sale By Owner.” One agency had a ton of listing in their window for months, then they marked every single one down in red marker, and now all those residential listings are out of their window and some commercial properties in Brooklyn are there instead. I have no idea what is going on with that.
I say, until these RE people are serious about convincing the greedy owners about what will it take for their houses to move, NO AMOUNT OF RED INK, I call it a marking ploy will get something sold. I think the average NY, I do not mean the Wall Street types, know what a real value is and do not think what is happening to real estate in decent neighborhoods is reasonable. Call NY Middle Class, the most demanding customers.
I think unrealistic sellers are in for a rude awakening, and I am sure a boat load of RE brokers will walk the plank…. There is no telling how much RE will fall. 10-15% Correction so far is not sufficient. I think a house priced at $645 K now should reach upper 300Ks territory, only then, I will call the market today, half way balanced.
Regardless of what people say about rents going up and landlords rigging the kaching sound…It more of a sign that at today’s prices, RE is still ridiculously overpriced in NYC. Even at today’s exhorbitant rents, I guess NYorkers find value, thus, what does this say about RE in general in NY?
I thought it was the sign of End Times when I read in the NYT that house prices in Bensonhurst had doubled since 2002.
Hahaha - LOL Lex - and great NYC comments. I get a lot of “Brooklyn is immune” talk - even as I see co-op prices lowring ever further (20 percent already for many) in my neighborhood.
Everyone who has this idea that NYC is filled with high-roller execs needs to google up the demographic data on median income of homeowners — still around 60 thou. That is not enough to justify 500,000-600,000 home prices everywhere here.
> They have to make a decision soon about whether to go ahead with the purchase and hope they’ll sell the old house, or give up the new place and lose their $28,000 deposit.
It seems to me that 28k is not too much paid for a valuable life experience: asset prices go up and go down, and you can feel first like a genius and then like a fool. Their decision is easy, and the 28k lost shouldn’t tip them over into bankrupcy, if they were thinking buying a new house for 562k.
Again, you are assuming that they will make the intelligent choice of giving up the deposit and just walking away…my money is on them “trying to make it work”.
And owning two plunging assets! That is beautiful. Stupidity should have a price. I will sleep better knowing that Casey and Jamie will be eating those koi by February, just to save on grocery bills.
Stupid is, as stupid does.
Koi salad,
Koi soup,
Koi chowder,
Koi pie
I forget what it is called, but if they were to request the mtge co to do an appraisal while the property they are buying is in escrow?
I would think it would come in low enough to blow the mtge commitment..thoughts?
Worth a try, if they are committed to walking.
It could work as long as the contract had financing contingencies and they had not yet expired. Also no lender will directly issue a decline letter due to the home not appraising unless the buyer doesnt have adequate cash to cover the spread example 250K appraises at 200K, downpayment based on the 200K value and costs…. Ballpark figure with 20% down would put that somewhere around 95-100K.
I would personally bargain basement price the koi house and if that doesnt work walk from the deposit. As I have told numerous “specuvestors” in the last few months that have called my office (well, those who would listen anyway) better to walk from a loss than incur a liability on a flawed asset…
It’s a lot when it’s all you have.
dd
They would have their credit still.
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It is almost impossible to keep up with this site. All the news and posts are pouring like a waterfall.
You’re leading a more interesting life than I am, apparently. My wife just shoves in the food tray at appropriate times and I get most of this read.
Ben, on the other hand, must have a factory full of elves.
Or Oompa-Loompas.
“Irrationally Exuberant Period of Frenzied Froth”
Now that has to be the quote of the week!!!!!
Good one GS
Colorado Springs is still building houses at an insane rate. Over 8000 homes are projected to start in the next 2 years. And, there’s already 8000+ on the market…not moving a bit.
I noticed that when visiting a couple of weeks ago. There is quite the sea of McMansion sprawl to the NE of the Springs, across I-25. I guess the California exiles will need some place to settle.
On a lighter note, I just came across this beauty on eBay. I see the headline: “Desperate sellers crashing the used furniture market”
On a lighter note, I just came across this beauty. I see the headline: “Desperate sellers crashing the used furniture market.”
Sorry, the link disappeared. Let me try again (and check the seller’s other items for sale).
(This is my first time. If it doesn’t work, go to eBay, search for “womb chair ottoman”)
Noice. Damn that beyatch who bid 2K for it. That’s just stupid.
What the fudge? My posts are getting eaten again.
My degree is in economics, and I have read about (but not old enough to remember first hand) the 1987 bust in the NJ/NY condo market.
Bubble advice has been met with derision and scorn for the past few years . . . now, as another poster mentioned as well, half the people are listening. There is an enormous amount of capacity still coming into the market in NY, Jersey City, Hoboken . . . there simply aren’t enough wall street millionaires to fill them all.
But where is a safe place to put money in the meantime?
“I have read about (but not old enough to remember first hand) the 1987 bust in the NJ/NY condo market.”
several apts in my bldg lost about 45% of their nominal value between ‘87 and ‘96 ($158K -> $80K), and much greater loss if adjusted for inflation.
(one of the same apts recently sold 6 mos ago for $550K!)
Put your money in T-bills with a little extra for ramen soups and shotgun shells. A guaranteed 5% T-bill return is pretty darn good in these days of uncertainty.
“From Atlantic City, New Jersey. “The U.S. real estate market is showing another sign of heading south, while this region remains reluctant to follow. Economist Richard Perniciaro at Atlantic Cape Community College said…”
Believe me, if he had said anything negative about AC, he’d be buried in Red Hook tomorrow.
OT..
But how about a reality show, where the producers find really FB’d couples and have them compete to get out of debt?
Howe about they compete to get out still married?
I suggest a reality show with financial makeovers for FBs — help them work out their new, low-spending post-BK lifestyle so that they don’t end up maxed out on credit card and HELOC debt again. Maybe too boring, though useful…
Look at this. Unbelieveable. I seriously doubt this loser cared about “helping out” any buyer they priced out when they bought this:
http://bend.craigslist.org/rfs/210217455.html
Here that sucking sound?
That’s another FICO score swirlin’ aroung the drain……
WTF txchick?
there you go again with those commitment issues…
why not buy both of the lots as therapy to help you resolve those commitment issue?
For someone’s sake, please slap me. People knew they had this sort of non sense coming. Now, going out to the net to litter it with cyberads showing how dumb they were. “$1 to foreclosure.” How about, “dumb as a rock and let you rot where your greed led you?” >:)
The verbiage in that ad is very, very, very — too — similar to one that was linked in a post here recently. Has to be the same guy.
he’s “so highly leveraged with properties all over the country,” if there’s any justice he will be foreclosed on these 2 lots and all the other properties will fall like dominos.
Imagine a million dollars lent on a couple pieces of crummy desert…
And people don’t think there’s gonna be a hard landing??????????
Now here’s a clever way to still make money on your house in California: turn it into a pot farm.
http://cbs5.com/local/local_story_265211526.html
More international news. An article from Sweden said that the average duration of housing loans today for condos is 77 years and 54 years for houses. I guess the duration of the loans are flexible ranging from “normal” to interest free (infinity?). To be honest, I have no idea how they generated this number.
However, in Stockholm it’s over 100 years. Remind you of Japan in the 1980s? The article had a wild debate among readers commenting on the article. “Nothing wrong with dying with a heavy debt load”. “What’s the point of paying down the principle by $100 a month when you owe $400k”.
“The U.S. real estate market is showing another sign of heading south, while this region remains reluctant to follow. Economist Richard Perniciaro at Atlantic Cape Community College said, ‘The people who are buying are people who have been coming here all their lives and they didn’t look anywhere else. So we have a pretty sure flow of demand. People just want to be here,’ he said. ‘They’ve planned for 10 years to buy into here.’”
How many ways can you say “But, It’s different here…” ?
Crisp responds to rumors:
http://bakersfieldbubble.blogspot.com
I think the quote from New Zealand is very selective, and the region mentioned is not representative for the country. The NZ RE market still looks healthy, average prices are 2x higher than 5 years ago and August 06 prices are just 1% below their all-time high; time-on-the-market has even declined relative to previous months. And in ‘Speculation Central’ Auckland it is mostly the same.
Check the statistics at http://tinyurl.com/zp4w8
Again, in most EU countries there is NO sign that the bubble is topping. It ain’t over until the fat lady sings, the credit spigots are still wide open.