‘Everything Now Is Negotiated Downward’
A housing report from the New York Sun. “Veteran real estate broker Deanne Esses said eight people in her Upper East Side office on Madison Avenue are leaving their jobs for alternative careers. Those eight represent 20% of the office’s sales staff.”
“That’s only the beginning. Ms. Esses said she thinks more New York City brokers will be leaving the scene. ‘Business here is just not quiet; it has dropped dead over the past few weeks,’ she said. ‘At the same time, there’s a flood of inventory on the market. We run open houses, we run advertisements, but nothing works. There are no buyers, and without buyers, there are no sales.’”
“Ms. Esses made these noteworthy observations: Everything now is negotiated downward from the initial asking price, by a minimum of 5% to 7%. Prices are down at least 10% from a year ago on practically everything.”
“The Upper West Side is moving very slowly. The Hamptons have turned especially soft. ‘We’re in a transition stage where sellers will have to come down in price, and right now it’s a waiting game to see what the buyer will do,’ Ms. Esses said. ‘Since there’s only one Manhattan, I don’t see a crash. But who knows?’”
“Real estate appraiser Jonathan Miller also cites a sharply slowing trend, with actual sales activity flat. There’s a big gap between buyers and the sellers, and more realism will be required by the sellers, he said. His reasoning: swelling inventories, especially condominiums.”
“Early in 2004, Mark Clemente left Detroit to go east and, hopefully, make his fortune in real estate. Shortly thereafter, he became a broker at a small firm in Newark, N.J. Over the past six months he has held a number of part-time jobs. ‘I’m going home; my real estate career is over,’ he said the other day.”
The Lowell Sun from Massachusetts. “There’s more bad news this week for the state’s flagging housing market. When will it end? Not anytime soon, according to economist Larissa Duzhansky.”
“‘It doesn’t seem like things are going to pick up in the next year or so,’ Duzhansky said. ‘I feel like the market is still overvalued, and you have..high mortgage rates. When you put all of that together, there’s no room for it to improve.’”
“Duzhansky said she expects median single-family home prices, which fell to $352,000 in August, according to MAR, will drop at least another 10 percent in the next year.”
“Compounding that pain is the fact that as prices plummet, buyers who find themselves in over their heads no longer have an escape valve. In Lowell, foreclosure proceedings were initiated on 379 properties from Sept. 1, 2005 to Aug. 31, 2006, up from 179 in the previous 12 months. That’s a 112 percent increase, as opposed to 45.6 percent statewide.”
“According to Duzhansky, the increase in foreclosure filings and the decline in prices could create a vicious cycle, prices could be driven down even further.”
From the Herald News in New Jersey. “Gerard Herard was able to finally purchase a home in 2003 through a $225,070 mortgage from Security Atlantic Mortgage. His payments on the quaint Totowa Avenue house in Paterson were a reasonable $1,300 a month. But Herard’s payments have since increased to $2,200 a month and the mortgage has grown, not shrunk, to roughly $300,000.”
“Herard is not entirely sure why his situation changed so dramatically and is struggling to deal with the increase. ‘I’m trying to climb a steep ladder,’ said Herard.”
“The sweet deal is ending for thousands of Americans who took out interest-only and payment-option adjustable rate mortgages, or ARMs. After that initial grace period, homeowners faced serious sticker shock.”
“‘I have had calls from people saying that their mortgage started at $300,000, and now it’s $315,000,’ said Tom Cosentino, a mortgage specialist.”
“Wendy Nastasi of Crossroads Finance Discount Mortgage, said that two out of six calls she’s received within the last six months have been from untraditional adjustable-rate mortgage-holders. ‘Anybody who has one of these now wants out it,’ Nastasi said. ‘They lie to people,’ Nastasi said. ‘They don’t explain the details to them.’”
“The Fed has promised to establish more guidance around the loans since last year, but they still have not provided a timeline for acting on this. But the beefed up regulations won’t save current loan-holders. ‘You have to cut your losses like it’s a bad stock,’ Cosentino said.
From Maine Today. “Corliss Chastain couldn’t understand why her house in Hallowell wasn’t selling. It went on the market in June with a price tag of $192,500. After a long line of buyers traipsed through without making any serious offers, she dropped $3,000 from her price. Still no takers.”
“Now, like many other homeowners in Maine, Chastain said she is probably going to drop her price yet again to see if it will sell in a crowded market. ‘I was shocked,’ she said. ‘My Realtors are, too. We thought it would go really fast, but it didn’t. I’ve had a lot of people look at it.’”
“Maine’s sagging housing market is just now catching up to a national trend in falling sales, according to Don Plourde, past president of the Maine Association of Realtors. ‘I think we follow the curve a little bit slower,’ he said.”
“The number of homes selling in Maine dropped 17.8 percent in August compared to 2005, according to Tuesday’s release from Maine Real Estate Information System.”
“For now, many homeowners are holding out for the best possible price, according to Sheryl Gregory, a broker in Winthrop. ‘Some people are ‘optimistic,’ shall we say, in their pricing, and have to come back to the real world,’ she said.” Gregory said this year is a good one to buy a house. With the market flooded with houses, potential buyers can afford to be choosy. Rick Sirois, an associate broker in Gardiner, affirms this.”
“‘From what I’ve seen, there is just a huge housing inventory on the market,’ he said. ‘People are still trying to ride that real estate wave where a lot of people were trying to sell their homes.’ Sirois said many houses on the market are seeing the expiration of their six-month listing agreements or a price discount.”
no worries as capex will replace housing as booster
WHOOPS
category in 13 months.
Orders for non-defense capital goods, considered a good indication of company plans to expand and modernize, fell by 3.5 percent last month after a 0.6 percent decline in July.
That could be seen as a worrisome development given that economists are looking for business investment to help cushion the economic slowdown that is occurring because of a cooling housing market and smaller advances in consumer spending.
You know, I used to think like many here - that these folks gambled on rising prices and lost their bet. The more I read the details, though, I can’t help but wonder if maybe these folks genuinely can’t do the basic analysis needed to price a deal.
Maybe the American education system’s failure is being demonstrated in the most vaunted fashion. Heck, if they can’t do basic arithmetic without a calculator, maybe they really can’t see the folly of their purchases until the “Er, oops, my payment’s higher this month - I don’t know why man” moment hits.
The problem is that they were “spotted” the calculator during the process and still fu*ked it up.
You might be interested in this article:
a population bankrupt in MATH
sorry to post, but this is a classic denial state in south florida
County eases push for cheaper homes
By Hector Florin
Palm Beach Post Staff Writer
Wednesday, September 27, 2006
WEST PALM BEACH — County commissioners reacted to the softening housing market on Tuesday by reducing the number of cheaper homes developers would have to build under a proposed program.
For example, a development of 130 homes at two units per acre would have 22 workforce-priced homes, or five fewer than previously proposed.
But the decision does not affect west-central farmland where the most development is expected, such as Mecca Farms and Callery-Judge Grove. There, 20 percent of the homes will have to fall under workforce prices.
The concessions slightly gratified the local builders association, even if commissioners didn’t drop the number of workforce-priced homes developers must provide to the levels they preferred.
And the program doesn’t guarantee significant headway will be made toward getting many of the 31,000 new affordable homes and rental units the county projects it will need by 2010.
The mandatory program “will have an effect on projects that are proposed,” said Joshua Fowler, executive vice president of the Gold Coast Builders Association. “If they (builders) can’t make the numbers work, they’re not going to submit the project.”
Still, Fowler said the association was “pleased that the commission seems to have taken into consideration some things they hadn’t until this point,” specifically the bursting of the housing bubble.
Developers had said their companies would lose jobs and be forced to build elsewhere under the stricter standards.
The Florida Association of Realtors this week announced the median price of an existing home in Palm Beach County dropped from $411,400 in Aug. 2005 to $386,000 last month. Home sales have also plunged and foreclosures soared.
Commissioners voted 5-2, with Mary McCarty and Chairman Tony Masilotti in opposition, to move ahead with the workforce housing program. The program is aimed at producing homes in the $164,000-to-$304,000 range for households earning between $38,600 and $96,600 a year.
Developers would qualify for bonuses that would allow them to build more homes in certain areas. Proposed county code changes would accommodate the extra homes, including traffic exemptions, changes in housing layout and a quicker permitting and review process.
As out-of-town experts armed with Ph.D.’s defended the positions of the county and the builders, commissioners agreed to reevaluate the program a year after it’s in place to consider market conditions at that time.
But some said it was time to do something about the affordable-housing crunch. “The marketplace has not been delivering the units for the average working person here,” Commissioner Jeff Koons said.
There was also concern relying only on builders to produce cheaper housing.
“We are looking to one industry to solve the affordable-housing issue. I don’t know whether or not that’s fair,” McCarty said. “As it stands, the construction industry is still a third of our economy. I don’t want to be drowning the industry.”
A study commissioned by the Gold Coast Builders Association warned that mandating workforce homes does not guarantee success and shifts some of the costs to regular-priced homes.
In a weak market, “price increases are less readily accepted by market-rate home buyers, and the developer is less willing to build housing, either affordable or market rate,” says the report prepared by housing researcher William S. Hettinger.
On the other side, requiring builders to produce lower-priced homes does not dent a company’s profits, according to a Rutgers University study the county paid for.
Barbara Alterman, director of the county’s planning, zoning and building department, said building permits have shifted toward multifamily developments and away from single-family homes.
The county is looking into luxury-home fees and a fee for commercial businesses to help pay for employee housing. A study analyzing these concepts is expected to be ready early next year.
A county community land trust is in place to help preserve land and existing homes for workers. A bond issue to buy land is possible.
“This is not the panacea of our crisis here today,” said Deputy County Administrator Verdenia Baker, who’s led meetings over the last year between the county and the building industry.
Developers also have several options to meet county requirements, including buying out of the workforce program, donating land or building some units in another development. Commissioners agreed to lower the buyout option from a minimum of $90,000 to $81,000 per home.
Commissioner Burt Aaronson proposed the workforce housing formula approved by commissioners. It is a compromise between what they endorsed in April and what the local builders association wanted.
“I want to encourage builders to keep on building,” Aaronson said. “I want to keep builders employed.”
Mandatory affordable housing quotas drive *up* the cost of housing, as builders raise the prices on other units to subsidize the “affordable” housing (which usually has some nasty deed restrictions on it, making it more like housing that’s rented than owned).
“economists are looking for business investment to help cushion the economic slowdown”
They’ve been looking for that one for at least two years now.
- ‘At the same time, there’s a flood of inventory on the market. We run open houses, we run advertisements, but nothing works.
- There are no buyers, and without buyers, there are no sales.’
- Note to Deanne Esses …. it is just begining.
But then Sheryl Gregory, the broker in Winthrop says this year is a good one to buy a house? And I can afford to be choosy…..
You have to admit, that is a good one …..
Isn’t that how it always goes? People who are not entirely sure about buying seek out not an agent but a broker, then base their decision to buy only on what the broker says. That is indeed cunning insight into how this bubble has occurred.
‘People are still trying to ride that real estate wave where a lot of people were trying to sell their homes.’
Yep, they will ride the wave until it crashes them into the shoreline. I am amazed that TV stations are still running these programs on Flipping homes. I really have to shake my head and wonder how many MORE suckers are out there who see these shows and plan to do what they saw, having no clue of actual market conditions.
I was watching million dollar listing last night. Saw a woman come to an open house with the biggest fake breasts i have even seen. I think the home equity has went into plastics in malibu.
I found it odd that next week is the “season finale” for that show- it’s only been on for about 4-5 weeks. They probably can’t find two houses per week that actually sell these days.
Around here, we call those “Dow Cornings”
That is funny. This woman was also in an extremely short skirt. I guess you really dress up for open houses over there. Most homes were over 2million and one was for 10 million. One condo was next to charlie sheen so you get to see all the hookers coming and going too.
We almost placed a rescue with him a few years ago when he was married to that blonde bimbo (can’t remember her name). Thank heavens, someone came to their senses and nixed the application.
txchick57:
blonde bimbo = Denise Richards
French bulldog? Pug? Boston terrier?
Or ‘Cow Dornings’?
Remember the shows are filmed several months before the broadcast. I don’t think you’re going to see very many more million dollar home sales on TV. It could get very interesting once the sales activity really slows down. I already saw one episode where the seller planted a St. Joseph statue in his yard. Of course he was trying to sell some horribly outdated POS for a lot of money.
I still think they are using the wrong statue. Saint Jude is the patron of lost or impossible causes. No one to blame but yourself if you’re not asking for the right help …..
I don’t get it - I don’t watch those shows, but friends tell me that most of the flippers on TV shows are now even losing money. Who out there could still be drinking this Kool-Aid?
Perhaps the end of those shows will mark some kind of turning point in the entire market. The “capitulation” phase?
Actually the one thing I have learned from those Flipping shows is never to buy a flipped house since the whole purpose is to take a pig and put lipstick on it and often the people doing it don’t even know how to put lipstick on.
A housing report from the New York Sun. “Veteran real estate broker Deanne Esses said eight people in her Upper East Side office on Madison Avenue are leaving their jobs for alternative careers. Those eight represent 20% of the office’s sales staff.”
This means that 20% of their busisness was from people who didn’t NEED housing, but simply wanted to “get rich quick” in real estate.
Thanks for including New Jersey (specifically North Jersey) included in the mix, we’re often overlooked as being part of the bubble. Make no mistake, it’s as bad here as anywhere else.
jb
New Jersey Real Estate Report
“Early in 2004, Mark Clemente left Detroit to go east and, hopefully, make his fortune in real estate. Shortly thereafter, he became a broker at a small firm in Newark, N.J. Over the past six months he has held a number of part-time jobs. ‘I’m going home; my real estate career is over,’ he said the other day.”
So he chooses Detroit over NJ. What does that say about us?
Maybe whats-his-face the anti-flatlander is right about NJ.
That doesn’t make any sense. A 30 yr fixed at 6% on 225k is about 1350 a month. There is something they are not telling us.
Just to add to this, a 30 yr fixed at 6% on 300k is about 1800, not 2200.
What they aren’t telling us is the guy took out a 70,000 HELOC when values were rising probably at a nice rate initially that has now adjusted
Well said. You get an ‘AA++’ for the day.
(1) If that is true, then he is outright lying when he said that he doesn’t know what happened.
(2) Your numbers are too low. Those only work assuming that he has an 8-9% interest rate and has never made a single payment since 2003.
It’s quite possible that he is figuring in his taxes when he says his “payment” is $2220.
I always say my mortgage is $1100 a month, but P&I is really just $800.
Payments usually refer to PITI, so backing out tax (1% annually) and insurance ($100/month) from that, his initial interest rate must have been 3.5%.
cmaxtc must be correct. There is no other explanation. Even with PITI all thrown in, this guy must have a second mortgage or something. Otherwise he would have a 25% interest rate, with most accrueing to principal. Can someone in New Jersey run a real estate check on Gerard Herard on Totowa Avenue house in Paterson, so we can get to the bottom of this?
Thank you, JR
Comment by IL_NC_IN_CA
2006-09-27 08:01:17
Payments usually refer to PITI, so backing out tax (1% annually) and insurance ($100/month) from that, his initial interest rate must have been 3.5%.
Taxes on a house like this in Paterson NJ would easily be twice that much (probably over $5,000/year).
he probably refinanced at least twice.
But he has a shiny 8-MPG SUV parked in his 3 car garage!
these newly unemployeed actually add to the EMPLOYED stats as they get retail jobs etc…..
20% unemployment in RE jobs already imo
Ms. Esses said. ‘Since there’s only one Manhattan, I don’t see a crash. But who knows?’”
Uh…there was only one Manhattan in the late 80’s. Still had a crash.
but it was different back then! Now Manhattan has lots of rich immigrants from south of the border streaming in every week, looking to buy up every $2 million walk-up in sight.
There’s a tiny grain of truth to there being only one manhattan. Manhattan prices probably won’t fall to “zero”. At some price, you’ll probably be able to sell it.
Now condos build in the middle of Florida, or 35 miles from Boise or the LV Strip, or in Gilbert AZ could probably go without a buyer at any price—because the only people who EVER were interested in them were spec-u-vestors.
Hey Reuven, prices do fall to zero. I grew up in Manhattan, and I remember in the 1970s and 1980s when buildings were just abandoned, and many set on fire by the landlords for the insurance money. These were mainly rental properties that stopped producing income for the landlords, but there were a number of former townhouses, brownstones, and mansions that were also abandoned because the owners were unable to pay taxes and probably mortgage. Some areas of Manhattan will always be immune from it, but a large percentage of Manhattan is still vulnerable to this (especially the now “trendy” areas that were dumps 20 years ago)
I remember statistics that showed Manhattan as having the highest percentage of abandoned buildings out of the city.
The whole squatter movement of punks who claimed brownhouses and tenements that were simply abandoned is an example of prices falling to zero.
I think that musical Rent was about something like that, but I don’t know, since I never saw it.
Well, I said there was a “tiny grain” of truth! It’s possible that you won’t be able to sell some R-E until you drop the price 50%, and it would be more profitable to fill it with welfare cases or burn it down.
But even people on welfare would probably rather live in Manhattan than 20 miles from Gilbert, AZ, or 30 miles from the LV strip in 120 degree heat.
I think that musical Rent was about something like that, but I don’t know, since I never saw it.
Nope. OT: Rent was an updated La Boheme, with AIDS replacing Tuberculosis, and was an amazing show @ the Nederlander, IMHO.
Can’t remember that well as I saw it back in Aug ‘01 or early Sept ‘01, but Squatters were using an open space as an Arts venue (slated future home of Cyberarts) and the main characters were living rent free in a building owned by Benny.
I also tend to agree with this comment. Manhattan, due to its incredibly small size, iconic nature and universal attraction won’t suffer the same fate as most of Florida and ridiculous places like Bakersville, CA. It’ll suffer some, to be sure, though.
Read again what Joey just said. I grew up there too, in the ’70’s and ’80’s. Manhattan is NOT different.
Manhattan will suffer exactly the same as every other place will, the only difference is that there the roughly 5x income/100+x rents settling point will continue to be far above other markets because of the persistently strong incomes of the Wall Street and Madison Avenue sets.
“Hey Reuven, prices do fall to zero.” [even in manhattan!]
i agree 100%. in 1994 i offered to take 6 rent stabilized apts off my landlord’s hands — for nothing. (there was 1 mkt rate rental, but it was still a longterm losing proposition. the convenience made it possibly worthwhile though. i’m glad he turned me down. ya know what??? it would still be a bad deal — today!
those were OCCUPIED rent stabilized apts. by now, i’d not only be broke but insane if he had ’sold’ me the apts. as it turned out, he eventually did sell them — not sure how much — but i think the current owner seriously regrets the purchase, even though he managed to finally sell the 1 saleable apt a few years ago for $275K. i doubt he’s barely broke even and burning cash every month from now till eternity.
What? He’s not converting them all to personal/family use, evicting the tenants, and then deciding not to live in them and sell them? That seems the standard tactic last I checked.
it’s in a co-op. tenants who elected not to buy at conversion. they are well protected.
I bet the people in Miami were wishing that there was only one Miami too… and the people in LA, and the people in Boston and the people in DC and the people in______________.
“Corliss Chastain couldn’t understand why her house in Hallowell wasn’t selling. It went on the market in June with a price tag of $192,500. After a long line of buyers traipsed through without making any serious offers, she dropped $3,000 from her price. Still no takers.”
Another example of the biased language used by real estate people, and reported by the MSM … The bad buyers are not making “any serious offers” … In other words, the seller is somehow insulted by the offers that were made. Guess what? If these are the only offers you have received for your house after months on the market, maybe they are as serious as you’re going to get!! Why don’t we ever read that sellers have listed their houses at ludicrous (i.e., not “serious”) prices?
These people are making pipsqueak price drops…. $3K from $192,500 is 1.6%. When you’re waiting for a 30 - 40 - 50% price drop, less than 2% is insulting.
I wouldn’t switch supermarkets for less than 2%, why would I bother checking out a house with such an insignificant decrease in price?
Bring on the “let’s roll back to the 70s” pricing and I might deign to drop into an open house.
I might deign to drop into an open house.
Really? I’d go for the CUPCAKES! (Of course, I won’t buy anything. I’m happy with my paid-up house, and don’t care what its “worth” because I’m living in it!)
“Million Dollar Listing” does anyone know how recent that show is ? summer 2006? spring 2006? Just wondering because the RE agents on the show are still saying how hot RE is in Malibu.
yeah, it’s hot…and every episode at least one of the houses profiled doesn’t sell.
Interesting how most Buyers’ RE agent’s use the Home Inspection as a lever to negoiate a big discount. Offer full price and then inspect for the discount. “Old beat up million dollar listings” is what the show should be called.
In last night’s episode, the agent and homeowner bet on the NBA Finals that the homeowner will list his home. So I’m assuming the Malibu place last night was listed around July 1, give or take a week.
OK good thinking. Thanks
One good way to do this is to ding the seller for square footage, which makes a huge difference in condos. A 780 SQFT condo advertised for $400K - after inspection, found that condo really has only 720 SQFT, that’s 60/780, a 7.7% discount = $30.8K discount right off the bat.
that’s a great idea, thanks!
You are really seeing the psychology of this situation turning. Good Morning America had a piece this morning with a realtor who they challenged to sell a house in New Jersey in a week (the house hasn’t sold as of yet). The realtor who was selling the house emphasized how sellers have to be prepared to lower their price and that was the first thing she did with the house in question when she got the listing.
In the same way expectations created enormous appreciation they are now in the process of creating a deflationary spiral. Sellers who need to sell are lowering their prices in greater and greater increments, while buyers are taking their time in the expectation that prices are going to continue downward. With the media coverage of the median price drop and pieces like the one on Good Morning America it is starting to penetrate the public consciousness that the price of real estate is going down. This is process that will most likely play out over a number of years.
That Realtor is Barbara Corcoran (sp?). The famous Fox guest who guaranteed the market would turn around by the Super Bowl earlier this year. Now she is telling everyone to lower their price. I guess she is going back to selling homes and leaving market forecasting to others.
Yep, she did a 180 from “prices always go up” to plan B, scare the crap out of sellers. This is a quote of hers from a couple weeks ago on Cavuto’s show:
“Barbara Corcoran: I don’t think people are aware that every housing statistic out there right now reflects closing prices. Deals being made now won’t come out in the statistics for another 3 months. If we could look at the actual sales prices, you would see that prices have already come down.”
Will it take years? The 90s bust came about with a veritable vaccum of information. Now you can do all kinds of research on property pricing, recent comparable sales, without leaving your PC.
When home price information was effectively “hidden” before, the price discovery process today is INFINITELY easier. Making decisions, “seeing” the direction of a market exists today on a scale unimaginable in 1990.
I suggest that this visibility ADDED to the recent, rapid, appreciation in prices. It propelled it faster and further.
While the same dynamic NOT come into play on the other side of the process?
Think about it, in the 90s there was no “blog” like this conveying the other side of the “investment” story. Sure, there are many people still “in the dark” as to using the internet but how many of them are there compared to the better informed (generally higher income) people who DO know how to search for information?
I think this is what they mean when they say a “paradigm shift” has occured.
‘Since there’s only one Manhattan, I don’t see a crash. But who knows?’
There seems to be this delusion that if something is good it cannot be overpriced no matter what the price is. The higher education industry has the delusion — since college is good, why not raise tuition double digits every year? The health care industry has the delusion — since health is most important, why not spend 100% of GDP on it (because we’ll starve).
Let’s say that last year, the average Manhattan apartment sold for $200 billion. Might this broker accept that since virtually no one could afford that, the price would have to be lower next year?
Now that we’ve established the fact that even desirable things can be overpriced, how about $1.2 million for an apartment? Still sound too high? It does not me too, but that was the average price last year according to Miller Samuel.
health and college are gov subidized yo
hence have their own inflation,built in
this fall voters will vote for FREEer healthcare and college
This is off-topic, but college has followed real estate into the ridiculously overpriced sphere (an education bubble). Middle class families can no longer afford to send their kids to even state colleges but the kids can borrow almost unlimited amounts of money from the government to pay for the inflated tuition costs. What a deal, you get your college education after all - but you immediately become a debt-slave after graduation. Between housing and college loans how many Americans are already debt slaves? It must be tens of millions.
Think there is a connection?? You have Fannie Mae backing housing loans and you have Sallie Mae backing student loans.
Govt guaranteeing both types of loans reduces the risk to loan holder therefore inflating prices.. in both cases of homes and tuition.
I agree. There’s simply a limit as to what people can or will pay for something, even if it is Manhattan RE.
“Real estate appraiser Jonathan Miller also cites a sharply slowing trend, with actual sales activity flat. There’s a big gap between buyers and the sellers, and more realism will be required by the sellers, he said. His reasoning: swelling inventories, especially condominiums.”
like i been tellin’ you jon: it AIN’T different in manhattan!
If you think higher education is arbitrarily raising prices or that health care is raising prices, then you’re probably not taking into consideration that these entities do not control their pricing, and are, especially for universities, providing you services at cost, probably subsidized. Even private Ivy League schools are educating students at subsidized costs (yes, that $40K a year at Harvard does not cover 100% of the costs of a student - that’s where the endownments come into play).
Health care is the same way - what you as a patient pays is the cost the hospital incurs. Some of the hospital vendors may be making huge profits, but most are making marginal profits.
Residential housing is different, because the appreciation of the last few years is pure profit into the sellers pockets, completely unrelated to costs.
Yes, but one reason higher education and health care are so expensive is that they are among the most bloated employers around. There is a veritable horde of administrative staff at universities and hospitals. If they were’nt government subsidized, I’m betting their staffing levels would be lower and costs would be less.
I suspect based on the numbers of hospitals in financial distress you are right about the costs thing. Too bad our government cannot pucker up and tell the truth about the ACTUAL inflation numbers. Based on my experience over the past five years, I would put inflation at 15% per year in terms of cost of living and 4% in terms of wage inflation. There is a “Walmart” factor where vast quantities of good from China are imported and sold cheap, which is keeping a cap on inflation for non essential goods and wages. It sort of leads the question in our wage driven society… why do we really need to work at all?
According to Bloomberg Online, “Sales of new homes are down 17.4 percent from the same time last year. The median price of $237,000 in August compares with $240,100 in the same month last year.”
You forgot to add the positive spin part… Revise down the summer month figures so you can fabricate up this months figure… What a concept… You would think that revising DOWN the three previous months would be a negative on the HB sector… but because they can now put out a positive number for August… up we go…
Makes no sense…
WASHINGTON (MarketWatch) — Sales of new homes unexpectedly increased 4.1% in August to a seasonally adjusted annual rate of 1.05 million from a three-year low in July, the Commerce Department reported Wednesday.
Sales in May, June and July were revised sharply lower. July’s sales pace was revised to 1.009 million, the lowest since March 2003, from an earlier 1.072 million.
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B4A9E1C6E%2D3542%2D41E0%2D9537%2DD116DAC97F8E%7D&siteid=mktw
…thanks for pointing out downward revision…downward revision expected, common, and predictable…I’ve complaining about it for a long time on this blog….hence, I pay attention to price, inventory in pipeline, and invenory for immediate sale…
if you take the revision difference of july sales = .063 and subtract that from todays figure 1.05 mil your left with the actual aug sales of aprox .987 mil much lower than expected
Marketwatch.com adds, “The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common…. **The standard error is so high, in fact, that the government cannot be sure sales increased at all in August….** The 4.1% increase is statistically meaningless….It can take up to six months for a trend in sales to emerge.”
A graph of the preliminary and revised data can be found here:
http://njrereport.com/index.php/2006/09/27/new-home-sales-rise-median-price-falls/
New Home Sales (in thousands)
January
Initial - 1,233
Revised - 1,173 (Down 4.9%)
February
Initial - 1,080
Revised - 1,038 (Down 3.9%)
March
Initial - 1,213
Revised - 1,121 (Down 7.6%)
April
Initial - 1,198
Revised - 1,121 (Down 6.4%)
May
Initial - 1,234
Revised - 1,101 (Down 10.8%)
June
Initial - 1,131
Revised - 1,091 (Down 3.5%)
July
Initial - 1,072
Revised - 1,009 (Down 5.8%)
Thanks; that was very helpful.
In addition to falling prices, Bloomberg.com reports, “The number of homes that are completed and waiting to be sold rose by 7,000 to 148,000 in August…”
off 10-12% here on price and 25%+ off on sales /units
in the bullet proof fed taxpayer subsidized N VA market
It’s moving into the phase of the “dead market zone”. Buyers don’t want to buy ,sellers waiting for a positive turn in the market with realtors spending alot of time and not getting results .
Now you see them rooting for a all time high for the stock market today . Is the bubble going to move to the stock market?
I really think money is now moving out of real estate back into the market.Look how tech is doing.CSCO is up big time in past 2 months.Check out HOG, this thing is breaking out. I made a bet on consumer staples and utilities via etfs such as xlf and xlu.
…and only one Santa Monica, San Francisco, South Beach, La Jolla, Newport Beach, Bellevue, Austin, Las Vegas, Sedona, [insert N. VA town in DC area here], Ashland, Whitefish, Flagstaff… How can we choose which of these to buy? It’s obvious that due to their limited supply, one must make a purchase, but what if we let an opportunity to own a limited asset pass us by?
P.S. I just found out there is only one London, Sydney, Tokyo, Barcelona, Milan, Zurich, Vienna, Munich, St. Martin (well, OK, there are 2), Tahiti, Maui, and yes, even only one Alhambra!
But there are several Paris cities, although one is a nasty craphole and the other is in Texas.
and yes, even only one Alhambra!
Actually there are at least 2: the photogenic 14th century Moorish fortress in Spain, and the predominantly Chinese suburb in L.A. County.
OK, where’s the rest of the story?
Gerard Herard was able to finally purchase a home in 2003 through a $225,070 mortgage from Security Atlantic Mortgage. His payments on the quaint Totowa Avenue house in Paterson were a reasonable $1,300 a month. But Herard’s payments have since increased to $2,200 a month and the mortgage has grown, not shrunk, to roughly $300,000.”
This (as mentioned up above) just doesn’t make sense.
Was he so completely stupid as to accept a mortgage at 15.75%??? That’s what he would have to be paying to make that option ARM ballon to where he says it is after 3 years. Even if we push it back to Jan 2003, you’d need 13.75% to get there.
Something’s not right. If the rate is that high, the journalist should be hitting on the rapacious interest rate, and THAT should be the story, not the recent payment adjustments. Or was it an oversight that they neglected to mention home equity loans added later? If so, then he’s misrepresenting the situation. Bad math, bad journalism.
Maybe the guy just had a three year ballon due and roled it onto his Visa card.
But that’s the thing! Asuming he actually was paying the $1300/mo at first, even with a 3-year balloon I just can’t get the numbers to go from $225k to $300k in three years, not without that really high interest rate I calculated.
Then again, I’ve seen as bad before, and the guy really could be that stupid. My brother-in-law sells mortgages, and he says some people don’t even flinch when he hits ‘em with 5 points on the loan. Oh, the pain!
They don’t teach math in journalism school.
“According to Duzhansky, the increase in foreclosure filings and the decline in prices could create a vicious cycle, prices could be driven down even further.”
Holy crap, somebody out there gets it.
Vicious or virtuous is in the eye of the beholder. The bubble run-up made foreclosures rare: speculators bought the houses pre-foreclosure and sold them with a surcharge. This drove prices further up. That was vicious, too, or virtuous.
‘I was shocked,’ she said. ‘My Realtors are, too. We thought it would go really fast, but it didn’t. I’ve had a lot of people look at it.’
Still a lot more progress to be had when people are still being “shocked” like this….
Sorry, Ms. Chastain: as I have prevously commented, I was REALLY shocked when the buyer who had contracted (in May) to buy my Maine cottage actually went through with the deal on the scheduled closing date (September 15th). Be REALLY shocked if you now get an offer of any kind.
I just listed my studio apt on the upper east side. First open house, only eight buyers, but one person made an offer for the listing price of $259K. We are going into contract today.
I have been following Ben’s blog for a long time, and knew to price the property right. I paid $29k ten years ago, so I am happy. Don’t try to be greedy and understand we are at the edge of a big downward slide in prices. I’ll rent in Florida for a year or two, while my quarter million is in a nice CD.
Thanks Ben. Gordo nyc
Nice job! Have fun with all the desperate landlords you find trying to rent to you in Florida! And don’t forget Ben’s “tip” via the PayPal link on your top right — let’s keep this blog rolling!
Nice job, Gordo. When you say you priced it right, were there other apartments similar to yours sitting on the market at higher prices? If so, how much did you undercut them?
Gordo, nice one. Where on the UES are you selling? Thanks.
how much cheaper than the ‘comps’ did you price it? good show!
…‘You have to cut your losses like it’s a bad stock,’ Cosentino said.
Bad metaphor. Last time I sold a loser stock I didn’t have to cut a check. (or move out
)
Bearnanke,
I agree. It was by no means a perfect analogy. However, the psychology involved is somewhat similar. At some point you have to call it a “dog” and move on. Unless it’s the $35 IRA annual fee there aren’t any carrying costs either! Additionally just having a margin call or selling a position at a loss can’t “ding” your credit rating like a foreclosure or late payments!
“Gregory said this year is a good one to buy a house. ”
NOT! Try fall of 2007 or 2008 after the 50% clip!
“Early in 2004, Mark Clemente left Detroit to go east and, hopefully, make his fortune in real estate. Shortly thereafter, he became a broker at a small firm in Newark, N.J. Over the past six months he has held a number of part-time jobs. ‘I’m going home; my real estate career is over,’ he said the other day.”
Detroit to Newark and back to Detroit. That’s like “The Grapes of Wrath” without the happy ending.
Over the past six months, he became broker.
You put an extra “r” at the end of your comments.
lol
Could the guy have picked two more depressing cities to chase his dream s in?
Flint to Lowell and back.
Uncle!
Damn, and I had few even worse pairings all lined up!
Grapes of Wrath didn’t have a happy ending.
The movie did. You caught me:)
“Detroit to Newark and back to Detroit. That’s like “The Grapes of Wrath” without the happy ending.”
Does the movie end well? Because in the novel the chick who just gave birth to a dead baby ends up breastfeeding a starving old man she finds in a barn.
“Wendy Nastasi of Crossroads Finance Discount Mortgage, said that two out of six calls she’s received within the last six months have been from untraditional adjustable-rate mortgage-holders. ‘Anybody who has one of these now wants out it,’ Nastasi said. ‘They lie to people,’ Nastasi said. ‘They don’t explain the details to them.’
The Fed has promised to establish more guidance around the loans since last year, but they still have not provided a timeline for acting on this.”
The Fed will probably keep talking about establishing guidance until all the air has leaked out of the bubble, but nothing will happen until the mop-up operation, at which point new lending standards will be adopted to make sure that “it never happens again.” Nonetheless, they will retrospectively point to the cheap talk on proposed guidance as evidence that they took early action to stem the problem.
Guys, I meant to post this one yesterday, but did not get around to it…Front page of the Chicago Tribune was: “Home prices falling nationwide” (I dont remember the exact headline, so that was a paraphrase)…I do not have the link to it and I am looking for it, but I did read the article while sitting in Starbucks; it appears that this is finally making big news!!!
Crash, baby crash!! Condo inferno!! Crash baby crash, bring the prices down!!!
I’m seeing more and more of these kinds of articles. This actually reminds me a lot more of the 1980 time period than the 1990’s.
I find if fascinating that the very same pressures that drove prices sky high are now all working to drive them into the ground.
“‘From what I’ve seen, there is just a huge housing inventory on the market,’ he said. ‘People are still trying to ride that real estate wave where a lot of people were trying to sell their homes.’ Sirois said many houses on the market are seeing the expiration of their six-month listing agreements or a price discount.”
Surfers will attest that it is awfully hard to ride a wave that is crashing.
Those waves you pass on and dive under… Pretty much like avoiding buying real estate right now.
Don’t like the surfer analogy. Surfing is hard. Brother has tried to teach me a dozen times. Surfing requires skill and strength. Above all , surfing requires lots of practice. Those surfers who are ‘riding the real estate wave’ will end up okay. Most of them likely have some of those qualities, as well as deep pockets.
Now , the flippers and specu-tards?
That’d be more your boogie-board ride waving equivalent :-). As in - anyone can just jump in and try it. It can be a hoot even if you’ve never done it before and don’t know what the hell you’re doing.
Problem may occur though if big wave crashes down and you lose that flimsy little piece of styrofoam(3% DP?) that was your flotation device.
WIPEOUT!!! Dude.
Well right now, the water has receded to the horizon and the speculators are all sitting around waiting to see if it will come back. I like to think of those of us here who wisely stayed out of the game of bubble madness as sitting oh high ground.
The budding RE agent Mark Clemente said, “‘I’m going home; my real estate career is over….’”
That pretty much sums up industry sentiment today. Moreover, some of the new entrants to the mania won’t just lose money; they will also lose their dream of becoming the next RE mogul and ultimately a part of their delusional identity…
Joe Soccer Mom’s Well is Dry:
http://www.xanga.com/home.aspx?user=russwinter&nextdate=9%2f27%2f2006+23%3a59%3a59.999
It just boggles my mind how people behave. The women in Maine doesn’t even get a nibble but expects a 3 grand reduction is going reel them in? 200000 grand is alot in most of maine, there is not much of an economy. Households don’t make 70 grand/year to afford that mortgage. It’s not even greed, its an utter lack of common sense. If nobody bought my car is lowering it 300 bucks going to help?
Just a thought, the stock market may actually get juiced up for a bit. That investment money may go there instead. It went the other way 5 years ago.
This is the new meme for fad chasers: “money from real estate will go into stocks”.
Right, real estate and associated businesses (furniture, consumer durables, building materials etc) tank massively, shrinking the economy and depressing all business activity. You are betting that “investors” will be happy to pay more for companies making less profits. Does that really sound like a good idea?
My rent went up from $1400 a month to $1565 a month here. A $165 increase. ( for 1 year lease) 2 months back other people had the increase at $100.
(if No lease, it is 1880! and for six month lease it is 1535, less than that of one year lease! Indicating they intend to keep on increasing the rent.)
This is in Thousand Oaks area, Socal area. Any idea if this can be negotiated down or something can be done.
Thanks
“Any idea if this can be negotiated down?”
Yes! Everything is negotiable. We negotiated with landlord to charge him every time we had to shovel our own driveway ’cause the plow came after we went to work. He gave us a $50 per month decrease in our rent forever, not just the winter months and he still sends the plow, so we don’t have to shovel on weekends!
Any idea if this can be negotiated down or something can be done.
Simple refuse to pay it and give your 30 days’ notice. Thousand Oaks and surrounding area is probably awash in vacant flopper/specuvestor property. Just take your pick.
No I doubt it. I moved to Phoenix when I sold in that area (TO)because of a extreme shortage of rentals figuring rent increases would be extreme. Bunch of older prop 13 protected rich people live there. Maybe you should consider moving out of state? Unless you make a very good salary that place is a killer for renters.