‘A Record Number Of Unsold Completed Homes’
The new home sales numbers are out. “Sales of new homes are down 17.4% in the past year and are down 23% from the peak last July, the Commerce Department reported Wednesday. Sales in May, June and July were revised sharply lower. The median sales price of a new home fell 1.3% year-on-year to $237,000, the first year-on-year decline since 2003.”
“The reported sales price does not account for the massive incentives builders have been offering to close deals.”
“Inventories are up 19% year-on-year. The inventory overhang will put additional pressure on builders to cut prices, said Roger Kubarych, an economist for HVB.’The housing downturn is not about to end quickly and, by the time it does, public awareness of the associated loss of wealth will be far higher than now,’ said HVB’s Kubarych.”
“‘Builders are extremely pessimistic,’ eceonomists Brian Bethune and Nigel Gault said ahead of the report. The number of unsold completed homes rose to a record 148,000 in August.”
“TOUSA announced today that it met with the lenders to the Transeastern joint venture to update them on the financial position of the joint venture and the Florida housing market conditions.”
“‘Our discussions with the lenders focused on the current Florida housing market conditions and the joint venture’s inability to meet its original projections, said Antonio Mon, CEO of TOUSA. ‘The Florida housing market has become more challenging, characterized by weak demand, an over supply of new and existing inventory homes, increased competition, and an overall lack of buyer urgency. These well-documented conditions have caused elevated cancellation rates and downward pressure on margins, due to increased sales incentives and higher advertising and broker commissions.’”
“Blaming a nationwide housing slowdown, Pentair Inc., the water filtration giant based in Golden Valley, announced a spate of bad news. ‘This adjustment reflects the effect of the housing slowdown on spa and bath markets and on new pool starts,’ Hogan said. Particularly bad were its key pool markets of Florida and Southern California.”
The Miami Herald. “CEO Stuart Miller said Lennar will lower prices and continue building homes it has started. But Lennar is also renegotiating all contracts to buy land or even walking away from deposits, and in some cases, multimillion dollar deposits, on properties it previously planned to develop, he said.”
“‘We will be patient and wait for the market to redefine itself and then will look for opportunities to reload and reposition,’ Miller said. But when asked by an analyst if there are any buying opportunities right now, Miller responded: ‘No.’”
“Lennar, which primarily builds single-family homes, has operations across the country but is most concentrated in Florida, Texas and California.”
From Bloomberg. “U.S. homebuilders including Pulte Homes Inc., Lennar Corp. and D.R. Horton Inc. are cutting prices and throwing in a lot more than the kitchen sink to stem a record build-up of unsold houses, even as their profits and shares tumble.”
“Builders are paying closing costs and a year’s worth of monthly mortgage bills to lure buyers, says Joshua Cohen, an agent in Las Vegas. ‘We’ve seen a huge upswing in supply and a huge decrease in demand,’ Cohen says. ‘The builders will do whatever it takes to move a property.’”
“About 44 percent of U.S. homebuilders have reduced prices, says Gopal Ahluwalia, director of research at the National Association of Home Builders in Washington. The median price of a new home dropped 11 percent to $230,000 in July from a 2006 high of $257,000 in April, according to the Commerce Department.”
“More than half of builders, 55 percent, are offering free upgrades, up from 37 percent a year earlier, he says. Four percent are giving away cars and another 4 percent are handing out vacations, Ahluwalia says.”
“‘Builders have to sell their houses or pay the carrying costs,’ he says. ‘There’s more pressure to cut prices and offer incentives for new houses than in the existing-home market, where most people can wait if they don’t like the offers they’re getting.’”
“Much of the decline stems from an exodus of investors from the new-home market, says Ahluwalia. Daniel Rosenfield, a real estate investor, agreed last year to pay $204,800 for a house under construction in Kissimmee, Florida, with the expectation that he would sell it quickly in ‘the low $300,000s,’ he says.”
“Rosenfield closed the deal in June, just as the new- home market was cooling, and listed it for sale at $300,000, resigning himself to a more modest profit. Today, the house is vacant. He’s reduced his asking price to $295,000 and still has no offers.”
“‘I bought at the wrong time,’ Rosenfield says. ‘My assumption was that I’d be able to sell within a month.’”
‘The reported sales price does not account for the massive incentives builders have been offering to close deals.’
And with Lennar reporting a 30% cancellation rate, it is worth noting that those homes are not added back into inventory.
Could you elaborate on this a bit? If they don’t show up in the immediate inventory numbers, wouldn’t they show up in the next month’s numbers? Maybe this explains why downward revisions of sales numbers are so high right now.
They disappear off the face of the earth. The # of sales, due to cancellations, are also not adjusted.
But, does that mean there’s an ever-expanding supply of “ghost housing” out there, on top of all the reported inventory?
I think I get it –cancellations never appear back in the NEW homes inventory numbers. They do reappear under “resale” homes inventory, though. Lies, damned lies & statistics, I guess.
Say what? Someone should check that. If this is true, the average number of cancellations should be calculated and the number should be thrown to the press with the adjusted statistics.
Current Backlog = Previous Quarter Backlog + New Orders - Deliveries
Builders report backlog, orders and deliveries. Formula above
Per Sean Hannity (2 min ago):
Housing doing great. Starts were much better than expected.
Why I am not surprised. Consider the source.
LOL. I have no idea why I listen to that clown.
The same reason we listening to any of the media clowns…to gauge sentiment.
The only sentiment you’ll gauge there is Murdoch’s.
posted Sean Hannity
Bush shoeshine boy.
kissimmee for 300,000. that is a joke right?
the horror!!!
“‘Builders are extremely pessimistic,’ eceonomists Brian Bethune and Nigel Gault said ahead of the report. The number of unsold completed homes rose to a record 148,000 in August.”
How about if we all agree to ignore this unimportant piece of information and focus instead on the fact that new home sales turned out to be higher than anticipated?
Exactly. Higher home sales will be the only item reported for the sheep on the six o’clock news. Record inventories and builder pessimism, combined with cancellation rates running at 30% on average, that can get buried at the end of articles or just completely ignored. Thank goodness for this blog and its many intelligent readers.
Only 148K unsold new homes?
This PDF puts it at 568K new homes for sale.
http://www.census.gov/const/fsalmon.pdf
That number hit 500K for the first time ever in US real estate history as of November 2005 (I am assuming it never went this high before 1963), and has subsequently drifted 13.6% higher. Don’t look for these facts to show up in the MSM any time soon!
That’s exactly what is being done, see wtop.com. Headline article: “Sales of new homes posted the biggest increase in five months in August, raising hopes that the steep slide in the housing industry may be leveling off. Sales of new single-family homes increased by 4.1 percent last month.”
from http://themessthatgreenspanmade.blogspot.com/2006/09/housing-report-that-mattered.html
Top White House economic adviser Ben Bernanke said on Friday strong U.S. housing prices reflect a healthy economy and he doubts there will be a national decline in prices.
“House prices have gone up a lot,” Bernanke said in an interview on CNBC television. “It seems pretty clear, though, that there are a lot of strong fundamentals underlying that.
“The economy is strong. Jobs have been strong, incomes have been strong, mortgage rates have been very low,” the chairman of the White House Council of Economic Advisers said.
The pace of housing prices may slow at some point, Bernanke said, but they are unlikely to drop on a national basis.
“We’ve never had a decline in housing prices on a nationwide basis,” he said, “What I think is more likely is that house prices will slow, maybe stabilize … I don’t think it’s going to drive the economy too far from its full-employment path, though.”
Um…didn’t we just have a decline in housing prices on a nationwide basis? Didn’t the national median just decline? And isn’t it just getting started?
“Um…didn’t we just have a decline in housing prices on a nationwide basis?”
Yes, and only for the sixth time in the last thirty years, according to the NAR
Funny, I don’t recall anyone from the NAR ever admitting that prices have fallen on a national basis before. In fact, I distinctly recall being repeatedly told by realt-whores that prices have NEVER gone down nationally in all of recorded history.
Yes, I’m pretty sure that was a standard talking point last year.
“Yes, and only for the sixth time in the last thirty years, according to the NAR ”
No, you mean for the first time ever. The NAR has said there’s never been a price decline. Real Estate only goes up.
They wouldn’t lie about that.
They either lied about it last year, when they said there has never been a nationwide price decline in the US since the 1930s, or last week, when they said the recent nationwide decline was only the sixth in the past thirty years. These two factoids are mutually exclusive.
These comments were from summer of 2005. However, since it has been one year from the date the comments were made, and prices did decline in that year, it does not look like BB is very good at forecasting. And, I’d really like to know the underlying fundamentals were that he referred to as supporting the rise in prices.
I’d really like to know the underlying fundamentals were that he referred to as supporting the rise in prices.
_____________________________________________
So would I. In fact, I had a back and forth email (8 or so) with a member of the FED in NY. He never backed away from this fundamentals crap. Must be the party line.
Do you think that they really believe that crap, or are they just trying to talk the market into behaving in the manner that they want it to? Personally, I think (hope?) that it’s the latter.
These guys are going to lead us down the trail of no return I fear. Time to step out of your cubicles and take a look around!
I think there is a general disconnect between how the public views economists (especially central bankers) and how economists view themselves. The public sees economists as prophets, with some valuable insight into the future. Economists see themselves as shepherds, who’s job it is to drive the economy toward desirable outcomes.
In other words, I highly doubt they buy their own crap. Any economist I have ever talked to quietly is much more concerned than they will let on in public.
I see economists as douchebags, with neither valuable insight into the future, nor the ability to drive the economy toward outcomes they consider desirable.
Who would have known that Ben Bernanke started out as a weatherman?
These are not real economists–they are just puppets of other people’s agendas. Any real economist would understand that the upcoming housing bubble will be even worse than the nasdaq bubble. Bernanke is just trying to save his as* and downplay the “froth” his predecessor left for him.
“You don’t need a weatherman to know which way the wind blows.”
I believe the fundamentals are called “mid-term elections”. So the Republicans can tell everyone how wonderful the economy is, remind everyone how much money they have made on their houses with a Republican President & Congress looking out for them. I believe that it mainly to do with politics as usual. Also IMHO the Democrats would be using the same tactics / saying the same things if they happened to be the party in the majority.
“So the Republicans can tell everyone how wonderful the economy is, remind everyone how much money they have made on their houses with a Republican President & Congress looking out for them.”
It’s a new thing. The ownership society.
“We’ve never had a decline in housing prices on a nationwide basis,” he (Bernanke) said” …..
I was wondering where I had heard this bit of nonsense. I’ve heard lots of variations: “no decline since WWII”, “no decline since the Great Depression” ….
Bernanke’s comments do not leave me with a good feeling. Do you think he really believes what he said? If he does, Lord help us.
If he believes that crap it’s bad, if he doesn’t believe he’s lying and that’s bad. When someone in that position says something so very wrong that is easy to confirm it’s wrong, that makes me worry a lot.
Should we question Bernanke’s intelligence or integrity?
I´m not one to engage in gratuotous Fed-bashing, but I haven´t been impressed with Bernanke from the start. He seems very unsure of himself, does not appear to be in very good health for someone in his mid-50s, and just does not strike me as a leader at all. During his first testimony in front of Congress just after his inauguration he had a bad shake in his voice, and I was actually surprised that no one commented on it, although Americans have never been very adept at picking up on non-verbal cues.
Bernanke reminds me of Bart Giamatti, the Rose-baiting baseball commish who had a lot of book smarts, seemed singularly unsuited to his position, and was in terrible health.
I expect the Fed to become more democratic under Bernanke, which is not necessarily a good thing. Bernanke´s influence in his own organization will likely decline over time, and I predict he will not be re-appointed .
I´m not one to engage in gratuotous Fed-bashing…
Bash away. If you don’t know why, the Fed does.
since he dsaid it
sept shows a clear decline
Holloween will light up big time
Bubble Boy Bernanke (BBB) was chosen for his “hands off policy” defense of bubbles and spearheading the effort to create Bush re-election Housing Bubble by “deflation threat” talk that led to plummeting long-rates and short rates.
He has already been told to get the recession over with in early 2007 so as not to interfere with the 2008 elections.
Yeah, yeah, free market economy controlled by self-serving Crooks.
Jas Jain
Florida house sale:
http://shopping.news-journalonline.com/ROP/ads.aspx?advid=405282
The cost per square foot on the biggest model is only $79. Builder is either outright losing money [with carrying costs] or barely scraping even.
I would concur. Can’t think it would be much cheaper to build that!
But subtract 10% in building costs for square-footage inflation.
I don’t know anything about the area, but looking at the prices it looks like all but the smallest model are going for under $100/s.f., plus they’re throwing in free washer/dryer and frig. And the price cut on these is pretty amazing in terms of percentage (26-30% off). And, I’m sure they’d be willing to go even lower. That’s putting a lot pressure on FBs to lower their prices.
Those houses could still come down another 20% in order to reach pre 2001 prices.
You’d expect houses to track wage inflation, so maybe they only need to come down another 10% to be equiv. to 5 years ago.
I’d love to be a fly on the wall when the current residents get a load of the deep price cuts. It’s one thing to backload incentives while keeping the sale price afloat; I wonder when the first lawsuit will roll in.
Funny you should post that, my handyman tells me he and his also-Mexican friend are looking now to move to Florida, “because you can get a house there real cheap.”
Perfect!
now the illegal immigrant nation has a better sense of real estate market conditions than joe sixpack/jane soccer mom
He he! Like that one!
And I believe those prices include the lot. People have been bamboozled into thinking that it costs way more than it actually does to construct a fairly basic house, albeit by a volume builder. Everywhere I’ve looked, to date, I figure I can have a home built to slightly-modified bought plans, for well less than the specs and existings were asking in the past year or two.
““‘I bought at the wrong time,’ Rosenfield says. ‘My assumption was that I’d be able to sell within a month.’”
You still can sell it within a month. Just reduce the price by 6% every 3 days till is sells.
David
http://bubblemeter.blogspot.com
“‘I bought at the wrong time,’ Rosenfield says. ‘My assumption was that I’d be able to sell within a month.’”
Reading such garbage from naive investors reinforces my belief that the housing market has a long, long, long time ’til it is safe to buy. I have been in spread positions in the NYSE that took a month to unwind - one of the most liquid markets on earth. Housing has almost always been illiquid. There are plenty of ghost towns in the west and they bulldozed a lot of new housing in the 1980’s in Texas just to get rid of Insurance liability - and this puppy thought he could sell within a month. Morons
- Poor Rosenfield.
- His ‘assumption’ was a cloud without rain.
- Instead of a ‘Dear John’ letter, we will continue to hear and read of ‘Rosenfield Assumptions ‘ for years to come.
The Rosenfield Assumption could be a catchy name to teach in college econ course on the boom a couple decades from now.
What is it with these people. They buy a common enough asset that anybody can purchase mark it up for a 50% and expect to sell it the next day.
Its like going to Walmart buying a bag of potatoes for $3 hauling it out to the parking lot and hawking it for $4.50 to people as they park their car in the lot. Damn! Nobody bought my taters! I guess I give them a stick of gum as an extra. Sheesh!
Get me my 20 pound trout . . .
ROFL!
This guy pisses me off. He wants to sell the place for $100k more than he originally “bought” it for? Insane.
Txchick: you got anything bigger than a trout? Like a tuna. Or swordfish. Maybe a blue whale?
How dumb can you get? He bought it at peak prices for 204. And he wants 295 after the bubble has burst?
Its probably only worth 140 now.
And in Kissimmee. My God. He overpaid when he bought that house.
- Now if those taters were ‘Tater Tots’….
Dude, get your own tots!
agreed last year to pay $204,800 for a house …with the expectation that he would sell it quickly in ‘the low $300,000s,’ he says.” …and in June listed it for sale at $300,000, resigning himself to a more modest profit. He’s reduced his asking price to $295,000 and still has no offers
How insane have people become when 50% profit in one year is considered “more modest”?
Remember that his 50% profit is highly leveraged. He probably only put 5% or 10% down. So he is looking for a 500%-1000% profit on his investment. We really do need an education campaign out there teaching people how to look up prior sale prices in their area and make them feel stupid for purchasing a house from a flipper for more than they paid for it. You know all those infommercials late at night telling you how to buy and flip houses with no money down; well someone should selling a book, video, lecture series on low balling and short sales.
To all prospective buyers in my area, don’t buy anything for prices above 2004 tax assessment value; especially not from anyone who has owned the place for less than 1 year!
Loudoun Public Database:
http://inter1.loudoun.gov/webpdbs/default.htm
Fairfax Public Database:
http://icare.fairfaxcounty.gov/Search/GenericSearch.aspx?mode=ADDRESS
Well “more modest” in the sense that Madonna is more modest than Carmen Electra
So many problems with this. First they say there is NO national housing market or bubble. Then they say the slow down will have no collateral damage and employment will be just fine because economy is indepenendent of the housing boom. This story can’t be true. I’ve been promised so much by the experts on TV over the years.
From Yahoo Finance : “Sales of new homes posted the biggest increase in five months in August” … “The increase in new home sales contrasted with earlier reports showing that sales of existing homes fell in August for a fifth straight month while construction of new homes and apartments dropped by a sharp 6 percent last month.” - AP
Okay, so new homes sales are higher than expected and sales of existing homes are down. Surprise, surprise! Who would go for an existing home when you can get a 25% rebate (not a cut in sale price(snicker, snicker)) on a new home? Plus the builders are looking more desperate as days go by.
from Marketwatch:
“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. “
Nonetheless, all the marketwatch headlines and “sightbites” focus on that data fart as the important news…
Yep, which gives the opportunity to “short” of a lifetime and since you are basically conservative GS - I recommend -
ProFunds UltraShort Small-Cap Inv (UCPIX). Hold on for a wild ride! Whee
This is not suitable for all or any investors, and like any crappy investment advice given after a three Lienie lunch should be researched.
GS - If you can find the time read this speech from Hong Kong last week.
Hedge Funds and Derivatives and Their Implications for the Financial System
Timothy F. Geithner, President and Chief Executive Officer
Federal Reserve Bank of New York
“…Private pools of capital have the capacity to use extensive leverage to amplify returns. This leverage can be acquired in a variety of ways: through repurchase agreements and reverse repos, through secured financing and securities lending and through derivatives and structured financial products.
The ability of funds to take on risk and leverage is constrained by two external sources of discipline—the returns required by their investors, and the terms on which their dealers/financers are willing to extend credit. In other words, the fund is constrained by the willingness of outsiders, collectively, to take exposure to the fund. The willingness of banks and investment banks to take on exposure to hedge funds is in turn influenced by the capital and supervisory framework that applies to those institutions and the discipline imposed on them by the market….The foundations of modern risk measurement rest on a framework that uses past returns to measure or estimate the distribution of future returns. The stability of the recent past, even if much of it proves durable, probably understates potential risk…”
http://tinyurl.com/lzzca
My thoughts a little late to worry about who your loaning money to.
I knew the NASDAQ was out of control in ‘00 when I saw a message on a Yahoo board for a stock I owned, which had already gone up by 30(!!!) times since I bought it. The message was from someone who had bought the stock a week earlier, and was disappointed that he hadn’t yet made a profit. “I thought this was a rocket” he wrote. I sold 1/6 of my holdings in that stock that day, but unfortunately didn’t have the courage of my convictions to totally liquidate (stock eventually went from 150 to 1). The mentality of Spring ‘00 is the same as someone like Rosenfeld’s–expect a fast short-term profit based on no knowledge of the market, no knowledge of investing, just riding up a “rocket.” Not surprisingly, he, like the poster I noted above, bought at the peak of the market.
’The housing downturn is not about to end quickly and, by the time it does, public awareness of the associated loss of wealth will be far higher than now,’
——————————————————————
couldn’t he have put some sugar on that bitter pill to make it easier to swallow? I don’t think the masses are ready for such a sudden dose of reality
OT… Front page of MarketWatch…
REAL ESTATE
Aftermath of
condo fever
Here’s how to cope with the hangover
http://www.marketwatch.com/default.aspx?siteid=mktw
“‘I bought at the wrong time,’ Rosenfield says.”
———————————————————
noooo, he bought at the wrong PRICE. He was just too stupid to know it.
Brad,
Good point! I’m not afraid to go out and look at listings or even see an open house from time to time. I just know instictively there’s a certain amount I won’t pay above! I haven’t seen a decent entry point yet in the OR market (but we’re seeing a lot of desperation out there!) You’re right, it’s about skill in determining price, not timing.
This past weekend ‘Millhouse’, a Centex project in Merced CA, advertised in the local newspaper price cuts of just under 25% on five home models. Only one was completed, the rest to be finished by the end of the year. No free upgrades, no free appliances, just cold cash. The small print did however indicate that financing had to be done through their affiliate.
I wonder how the first buyers in this development feel after a 25% ‘haircut’?
“More than half of builders, 55 percent, are offering free upgrades, up from 37 percent a year earlier, he says. Four percent are giving away cars and another 4 percent are handing out vacations, Ahluwalia says.”
I am neither a lender nor an accountant, so I am hoping some of you guys can help me to understand this. Suppose a builder sells a McMansion for $800K which includes a fancy sportscar valued at $50K as an incentive. The buyer does an I/O loan at 100% of the purchase price. So then didn’t the buyer actually get a loan for $800K to buy a home worth $750K and to also buy a car (on the home loan) for $50K? Wouldn’t this require fraudulent inflation of the home’s value by $50K? And is it legal to put a $50K car purchase on the mortgage? Or how about amortizing your fancy vacation over the indefinite life span of your I/O mortgage, for that matter? Are these sound financial moves for either the lender or the buyer?
I don’t think the lenders would like it if they knew the appraisal was inflated to cover a car/100k in upgrades /cash kickbacks at closing etc. Its pretty clear that a comparable home without the upgrades or car would sell much lower and that would be the true market value that the Lender is suppose to make the loan on . This is going to be a can of worms down the road . I know that people have expressed different opinions on this matter but mark my word it’s a violation making a loan greater than the actual value of the property pursuant the incentives .
“I don’t think the lenders would like it if they knew the appraisal was inflated to cover a car/100k in upgrades /cash kickbacks at closing etc.”
Is this some kind of big secret that only those who read about it in the newspaper are in on? Why would a lender be unaware that they were helping the buyer purchase a fancy car with a loan earmarked for a home purchase while simultaneously helping the builder post a fraudulent price?
Because “lenders” are far away, in the form of MBS junk buyers. They don’t know the latest developments in the housing market, and will learn the hard way. But it will be too late by then.
I expect mortgage rates decoupling as far as 5% (maybe more) from benchmarks when the pains sets in, and in my opinion the bubble hasn’t really started yet, because lending is still very cheap, in absolute and relative terms.
I meant “the bubble bursting hasn’t really started yet”
Do the initial lenders really care about the appraisal? Don’t most of them dump the loans in the secondary market? Just get the deal to close so we get our commission and then sell the loan asap.
As far as the 50k car goes I would imagine this is simply a carrot to get you to buy. I dont think it has any influence on the recorded price.They give you a car to buy a house that is really worth 50k less. The price is 800k so the propery taxes,property insurance and higher closing costs are higher on the transaction.They are so scared to drop the prices that they dream this crap up. You are getting screwed if you take the bogus incentives instead of a price reduction.
The builders fine print always says, “incetives contingent upon using our lender”. That is how they are assured of building in the incentives, getting the appraisal AND building in rebate pricing back from the wholesale lender (which is very very common).
So if comps aren’t adjusted for incentives, how will we ever get reliable information? Say a house sells for $500K using incentives and the neighbors identical house sells for $450K without incentives on the same day… is the comp for that particular model now $475K? I’m not sure how this works, but it sounds extremely flawed.
Comps for new homes are not used in a resale transaction.So if the neighbor goes to sell they use existing home sale comps in the mls. This is why new builders can undercut the market.I personally think the new home sales should be used in a resale transaction and adjusted for upgrades.The new home market is a better example of real current market conditions. They can’t sit round for a year for a wish price.
GetStucco,
We’ve really wrastled with this one over at patricks. I’m told this is NOT reportable income! The “free” inground pool, BMW and all the upgrades are actually just considered “discounts”. Well o.k, but wasn’t there a huge stink about people cashing in their freq. flyer miles being considered “income”? I suppose the reason the lenders aren’t up in arms about this is b/c they just schlep the loan off on GSE? That must mean the real problem isn’t so much with the “package” you got (but the one your neighbor didn’t!)
Whether it’s within the tax code and whether people follow the tax code are two different things.
To my understanding, if you follow the tax code, either:
a) you bought an $800k home for $800k and were given the $50k car as a gift, and you deduct 100% of the interest on the mortgage and declare income of $50k (which no one would do); or
b) make your tax basis in the house $750k, deduct interest under the mortgage deduction on the first $750k of your loan (which no one would do).
I suspect most will place the basis of their home at $800k, declare mortage deduction on $800k, and take the car free and clear with no immediate tax benefit.
There is ample room for the IRS to go after people with improper deductions - if they want.
Good point! I was neglecting the issue of the homedebtor getting his $50K car with taxfree interest payments to boot…
Oops — maybe not so taxfree if the assessment on your home is artificially inflated to $800K. Oh well…
We have to distinguish between assessment and appraisal. Yes, the appraisal influences the assessment, but (1) if there are a lot of comps, (2) the new assessment doesn´t take place right away, and (3) the homebuyer is willing to contest it (saying, e.g., that he simply overpaid), then an over-appraisal of 50K should not result in an over-assessment of 50K.
Clearly varies by state.
But back to the issue of whether discounts (whether they be closing cost kickbacks or automobiles) result in having the recorded sale price lowered - I am pretty sure that in most cases (today, that is) the answer is no - which obviously results in comp/appraisal creep.
IMHO the incentives are not being reported to the lender and they are being written up on a side agreement etc., otherwise the lender has to take all this into consideration as it reflects on the loan amount needing to be lower . All incentives , kickbacks ,conditions of sale are supposed to be reported to the lender . The issue with incentives is that they have a dollar value that must be substracted from the gross sales price to determine the proper loan amount ,property taxes etc.
Think about it . Lets say a builder says “I’m giving you 200k in upgrades for the same 800k I sold the house for last year .” So the buyer says “No I would rather you give
me 100k off the price of the house “which would equal 700K. So the builder says ok because his costs are about the same . So the 800k house with 200k in incentives is the same as the price reduction to 700k without incentives . If the lender lends on the 800k with 200k in incentives ,the lender would be making a loan on a property inflated by 100k at least ,which would be over 100% LTV. I don’t think the lender or the secondary market investor was wanting to make a loan that exceeded value by over 100k . So the lender does not know the risk factor . Look ,people in the business know this so I’m just saying it’s going to be a can of worms and the lenders or secondary market might sue the builders in the final analysis .
Rental Watch,
That’s a little more in line with my expectations. There’s the right way and then there’s the way most people do it. Just as with any scenario where the IRS is concerned, you can’t have your cake and eat it too! These folks could be inviting a lot of unwanted scrutiny into their lives very soon! The IRS won’t have to audit them per se, just track the builders that offer these over the top incentives! I’ve heard in Vegas the sheer amount of “cash back at closing” offerings is overwhelming.
Don’t get me wrong I’m hardly some “do-gooder” but dog gone it people this is pretty blatant. If the disclosure in the loan doc’s are as legible as the rest of the terms people might just get away with this.
Here’s my question. You buy a house for $800K and a $50K car is tossed into the deal. Do you then have to…
1) Pay sales tax on the car?
2) Pay property tax on the $800K, so in essence you are paying property tax on the car as well as the house?
3) Pay interest for 30 years on the house and the car?
Sounds like…. interest plus double taxation at the minimum. Suddenly, the “free” car has many, many strings attached. Better to get a discount on the house and buy your own damn car. Make it a Matchbox car!
If you are borrowing $800k to buy the package deal, then you will pay interest for 30 years on both the car and the house.
If you are claiming that you paid $800k for the house (and the house was worth $800k), and the car was a gift, then you should be paying income tax on the car, just like if you won it on Wheel of Fortune.
If you are claiming that the value of the car was lumped into the $800k, then you at a minimum, should adjust downward the tax basis of the house by the “value of the car”, and only claim a mortgage deduction against the portion of the loan that was used to pay for the house (not the car).
But people use HELOCs all the time to buy cars, and deduct the mortgage interest improperly, so why will the IRS go after people now?
Rental Watch — you’re leaving out the gift tax, which might be applicable in any event in which it were discovered and would certainly be applicable if the owner claimed a property tax base of $750K.
The person (homebuilder) giving the gift has to account for gift/estate taxes. A gift is not a taxable event for the recepient.
My guess is that the homebuilder does not account for it as a gift but adds it to the cost basis of the house as COGS. It is a discount to the buyer, but just another sales expense for the builder. The 3% or more broker’s coop operate in the same way.
The interest on a home equity loan or HELOC of up to $100K is tax deductible regardless of the use of the funds as long as the the loan value does not exceed the value of the house.
As long as the car is in the garage at purchase
Nail it to the wall and run a faucet through it.
Kinda like this.
If they’re gonna give these poor suckers a car for buying a vastly overpriced home, they should at least make it a nice VAN so the family will have some place to sleep after they walk away from their upside down situation when their loan resets.
Daniel Rosenfield, a real estate investor, agreed last year to pay $204,800 for a house under construction in Kissimmee, Florida, with the expectation that he would sell it quickly in ‘the low $300,000s,’ he says.” “‘I bought at the wrong time,’ Rosenfield says. ‘My assumption was that I’d be able to sell within a month.’”
I think everyone should be entitled to selling their flipper house for 50% more then their purchase price in one month. You mean that increase rate is unsustainable? Let me call my congressman.
Danny boy, don’t you know what happens when you assume? You make an a$$ out of u (u go bankrupt) and me (I get stuck with higher interest rates or bailing out your lender)
Daniel Rosenfield, a real estate investor, agreed last year to pay $204,800 for a house under construction in Kissimmee, Florida, with the expectation that he would sell it quickly in ‘the low $300,000s,’ he says.”
Expected a 50%+ profit in one year? WTF was this guy smoking? Buying a house with intent to flip at the end of the biggest RE bubble in history, and with unrealistic gains does not make one an “investor.” If there is justice in this world he’ll ride that POS down to $100K, which is probably more in line with its true worth.
As is discussed here (recently/frequently), I particularly like the whopping 5K price slash to bring someone off the fence. Who in the hell would have any qualms offering a 100K+ haircut from the 300K price tag?! Even if you bought at the ‘one year ago’ price and paid 204K, today we have the MSM/NAR (his mentors) also saying prices are down, or near down, nationwide yoy. How then is ANYTHING bought since 6/05 going to sell for more than it’s purchase price at best? The best case scenario for this guy is to find the “Mother of all GFs” and sucker him into taking this place over for 204K. Asking 204K is insulting to a potential buyer ….. I’ve run out of middle fingers to express my feelings about the 295K.
I wouldn’t be surprised though, if 295K is pretty close to the other 3 month old properties for sale around him, and as long as they all hold hands and price them close together, it gives the illusion to the new GFs that the price is reasonable.
At this stage of the implosion, I think it takes dramatic price moves by the builders to blow these folks out of the water on their resale dream price. Closed three months ago….. you a funny guy!
The used home realtors are taking buyers to new home tracts to get a extra high commission . This is what the builders are willing to spend to get the help of the MLS . Better to go to the new home tract yourself and get a better deal by dealing with the builder directly .6/7/8% off the price for the builder to save a fee to the realtors will get you more upgrades or something .
Used home sellers rest assured that your realtor is taking buyers to the new home tracts ,so set back and ask them where all the call in business is going to .Builders will do anything to get that used home buyer business at this point .
These comissions are another stealth way to cut the price. Most realtors in my area are advertizing cash kickbacks to buyers when they use them to purchase a new home. I have to hand it to the builders they are really creative in their pricing.
Examples of discounting without cutting the price that is reflected in comps:
1) free BMW
2) free 2/1 interest rate buydown
3)below market 30-yr fixed like 5.75% (as of last month will probably be 5.5% soon)
4) 5-8% realtor commisions most of which is returned to the buyer as a cash
5) Closing cost assistance
6) Upgrades galore (pool, granite, finished basement, etc.)
Wouldn’t it be better to just have the prices cut accordingly so the property taxes reflect the proper price and as a buyer or seller you don’t have to worry about a IRS letter in the mail down the road taxing you for a unreported gift or something like that .My point is they are making these deals in some cases outside of escrow which is fraud to the lender and the IRS for that matter .It’s not smart to be put in a position of having surprises down the road or being sued because you took part in a undisclosed kickback .
An update from the banking commissioner on the use of stated income mortgage programs, riot act due to be read to the broker community on Tuesday, October 3, pretty shocking;
“As you know, the Division of Banks, through its examination force as well as
its investigation of consumer complaints, will continue to take immediate
and severe action against an entity for any mortgage loan transaction
including a reduced documentation loan upon finding or obtaining any
evidence:
That income was intentionally overstated by the entity;
That borrowers were encouraged to overstate income;
That consumers were steered from a conventional, full documentation loan to
a reduced documentation loan because the consumer did not have the income to
qualify for a full documentation loan;
That an application was processed where the entity had reason to believe
that the income provided was not accurate or the source of the income
originates from individuals not listed on the application; or
That an application was processed where the entity had reason to believe
that the borrower’s income was insufficient to repay the loan.
The Division cannot over emphasize the seriousness of the matters discussed
herein or the recent regulatory action taken. Violations of law have the
effect of undermining the entire mortgage industry including all constituent
parties.
Hence ~ the Division has issued emergency regulations as articulated below
and are effective immediately. They will hold a Public Hearing on Tuesday
October 17, 2006 at 10AM in Hearing Room A on the 5th Floor of One South
Station in Boston.
The purpose of the public hearing will be to afford all interested parties
regarding emergency amendments to 209CMR 42.00. The following are the
emergency regulations:
Emergency Regulations Regarding Prohibited Abusive Acts and Practices
Emergency Regulations Governing Mortgage Brokers and Mortgage Lenders
Note: These amendments to 209 CMR 42.00 et seq. were filed on September 8,
2006 and become effective immediately. The Division will hold a public
hearing on October 17, 2006 during which it will take public comments on the
regulations.
209 CMR 42.12A is hereby amended by striking out 209 CMR 42.12A(6) and
inserting in place thereof the following:
(6) It is a prohibited act or practice for a mortgage broker or mortgage
lender to have a consumer sign a blank or incomplete mortgage loan
application or mortgage loan documents.
(7) It is a prohibited act or practice for a mortgage broker or mortgage
lender to sign a mortgage loan application or mortgage loan documents on
behalf of a consumer.
(8) It is a prohibited act or practice for a mortgage broker or mortgage
lender to falsify income or asset information on a mortgage loan application
or mortgage loan documents.
(9) It is a prohibited act or practice for a mortgage broker or mortgage
lender to make false promises to influence, persuade or induce a consumer to
sign a mortgage loan application or mortgage loan documents.
(10) It is a prohibited act or practice for a mortgage broker or mortgage
lender to pressure or coerce a consumer to sign a mortgage loan application
or mortgage loan documents by misrepresenting or omitting crucial
information about the terms of the mortgage.
(11) It is a prohibited act or practice for a mortgage broker or mortgage
lender to discourage a consumer in a mortgage loan transaction from seeking
or obtaining independent legal counsel or legal advice.
(12) It is a prohibited act or practice for a mortgage broker or mortgage
lender to engage in a pattern or practice of failing to make any disclosure
to a consumer required by and at the time specified by any applicable state
or federal law, regulation or directive.
(13) It is a prohibited act or practice for a mortgage broker or mortgage
lender to fail to disclose the type and number of its license in an
advertisement.
(14) It is a prohibited act or practice for a mortgage broker or mortgage
lender for an employee or a person associated with and acting under the
direction of a mortgage broker or a mortgage lender to advertise mortgage
services without naming the licensee and disclosing the license number of
the mortgage broker or mortgage lender under whose license the individual is
acting.
(15) It is a prohibited act or practice for a mortgage broker or a mortgage
lender to require a consumer to use the real estate services of a particular
entity, agent or broker.
(16) A violation of 209 CMR 42.12A shall constitute grounds for the issuance
of a cease and desist order under M.G.L. c. 255E, s. 7 and shall constitute
grounds for license suspension or revocation under M.G.L. c. 255E, s. 6.
Please provide me with any of your comments by Friday, October 13 as I will
collate for distribution to the DOB. Your attendance and your opinion is
encouraged.
Kevin M. Cuff, MPA
Executive Director
Massachusetts Mortgage Bankers Association”
The regulators are about 3 years too late. The damage has been done, but isn’t apparent yet. This is a part of a long process setting up the “fall guys”, preparing the battlefield so to speak, for the attorneys.
So, this is for the State of Massachusetts only? Will there be more sweeping, nationwide regulations?
Boulderbo — as I read it, this is an internal set of rules being adopted by the Mortgage Bankers Association of the state, not a public law or regulation adopted by the state’s division of Business and Professional Regulation. It is similar to the NARs rules. The worst that can happen for violation is the offending broker is kicked out of the association.
http://www.massmba.com/calendar_events.html
chip,
the letter is from the mass mba regarding the banking commissioner’s stance on the matter. please refer to item #16, revocation of license and cease and desist order, in other words “put your hands on the desk and close the doors”. a little more forceful than throwing you out of the mass mba.
on the street, most brokers are not writing stated income loans to w-2 employees until the rules are clarified and probably won’t do any stated deals if the current restrictions are enacted, effectively shutting down more that half the business written (the other half being option arms and 80/20 subprime). this will REALLY throw some sand in the gears of the real estate machine, imho.
boulderbo,
Thank you, thank you, thank you! Let’s hope this will make a difference.
boulderbo,
Just looked it up and it seems to only apply to Mass. Is this correct? Are other states (or federal regulators) moving in the same direction?
http://tinyurl.com/rojds
A slowing US could brake the world
“The world economy is enjoying a glorious run. In 2003, 2004 and 2005, it had its best years since the early 1970s. Yet that is no encouraging parallel. The torrid expansion of the early 1970s led to a period of inflationary turmoil. We must ask whether the extraordinary growth of recent years also hides dangers – different, perhaps, but still significant. The answer, alas, is yes.
“To doubt the resilience of the world economy must now look perverse. Since 2000, it has overcome so many obstacles: post-bubble traumas in Japan; the bursting of a global stock market bubble in 2000; the terrorist attacks of September 11 2001; a US recession; years of stagnation in the eurozone; wars in Afghanistan and Iraq; real oil prices at levels close to those of the late 1970s; and the failure to complete the Doha round of multilateral trade negotiations. Yet, in spite of all this, world economic growth was 4.1 per cent in 2003, 5.3 per cent in 2004 and 4.9 per cent in 2005, measured at purchasing power parity exchange rates. …
“How has it been possible for the world economy to leap over so many hurdles?…
“The current housing slowdown may, however, induce households to reduce their spending sharply. … Consumption will no longer grow faster than incomes, but more slowly instead. … [T]he economy would slow and unemployment would rise. One response – another big fiscal boost – would seem irresponsible. Persistently high inflation might curtail another possible response – a sharp cut in short-term interest rates …
“Imagine that these events occurred in the run-up to the next presidential election. The calls for a weaker dollar and protection against imports would jump to deafening levels. This pressure would be directed against China…
“What we are discussing then is the possibility of a disorderly unwinding of the external deficits, the trigger being a sharp slowdown in US household demand that would stimulate domestic pressure for both a currency realignment and protection.”
They spelled “brake” incorrectly. The proper phrase is “A slowing U.S. could break the world.”
Any word on the Atlanta market? I see there is over 60k homes for sale.
Ha ha ha! My friend gave up trying to sell his Treasure, his Precious… er, I mean, his empty house in the suburbs that sits there since his job transfer almost a year ago! Can’t even rent it out for enough to pay his monthly mortgage.
He “knows” his house is special, and it’s worth what his agent told him in 2005, and he’ll not settle for a penny less. OK, he’ll settle for 3% less, but no more than that.
But he’s holding on for the long term! Seriously. That’s what he says, at least so long as he has money he can raid out of savings to feed that gator.
Multiplied by 10,000,000 (or more,) that is the story that will play out across the country IMO.
New home builders will ultimately be able to slash price, while current homeowners will simply feed the gator in an attempt to hold out.
Now what will the net effect be on aggregate demand?
CHeck out this article Ben
“Costly homes enrich region”
http://www.sbsun.com/ci_4401799
Thats why house prices are really high, so that it will enrich the rigion. HAHAHA
The IE is going to crash hard. And the folks in the IE don’t have any savings to fall back on, so the foreclosure rate out there will skyrocket as the ARMs reset. The HBs out there are building huge houses (which require huge A/C bills) on tiny lots. It will get very ugly for a lot a people in the IE.
I can’t wait for that to happen, because i’m tired of telling people about it and them looking like what are you talking about?
As one who lived in the Fontucky for 10 years I can tell you it will look like something out of the twilight zone when this hits. I won’t bore all of you with my anecdotal evidence as I have posted it many times, but suffice it to say I have seen more and more families have the wives go back to work in order to keep up with things. Don’t get me wrong, women should be allowed to work, I am just saying that neighbors who originally had one bread winner all of sudden have two, and on top of that both bread winners are working more and longer hours to keep up the economy. When the IE finally hits the skids it will be brutal. Put it this way, 10 years ago my wife and I bout at 145K, we then sold at 400K. Nice, the house increased 2.7 times in 10 years. Suckers!
posted “The IE is going to crash hard. And the folks in the IE don’t have any savings to fall back on, so the foreclosure rate out there will skyrocket as the ARMs reset. The HBs out there are building huge houses (which require huge A/C bills) on tiny lots. It will get very ugly for a lot a people in the IE.”
Ground zero for destruction. My ex-boss had/has a 2 story 4,000 Sq. foot house. He told me it had 2 air-con’s 1 for the downstairs and another for the up. The Summer is long and hot out there. 400.00 dollar bills are common then.
At least, with tiny lots, their water bills won’t be bad! -
funny quotes from that SBSun article:
“It’s the final flowering of the Inland Empire economy, the addition of the high-end,” said John Husing, a Redlands-based economist”
“There’s a migration of wealth into the San Bernardino-Riverside county area”
“what is drawing more retailers and other service providers is the large group of people buying the region’s many $500,000 houses, Johnson said.”
“Those people are able to afford those houses due to the growth of the job base in the region. Many are able to upgrade to such houses due to the equity built up in their current home”
The final flowering of the IE economy? The additon of the high end? What a bunch of flatulent BS! Yeah, I see Beverly hills malls springing up all over the IE too. John husing is the biggest IE BS promoter of the IE. period.
The IE has been fueled entirely by construction and disribution warehousing operations. very shortly there will be vast tracts of unfinished construction sites, tons of for-lease signs and gazilions of unfinished.unsold new homes. The final flowering of the IE economy will be a gogantic mushroom cloud of toxic mortgaged, over priced foreclosed properties being radiated all over the IE.
At the moment folks think that they “own” $500,000 IE homes. This paper wealth will adjust downward to 1/2 value in next several years.
Note: Went to standard homes at 255 Rincon in Corona:the place was dead, no activity.
The MarketWatch story Ben linked to was one of the few to note all the revisions. The WSJ, NYT and Bloomberg all missed it. Every month this year has been revised down, most of them more than once.
New home sales are counted when a contract’s signed.
1.) more people are walking away from contracts and losing deposits…
2.) to increase “sales”, builders are lowering deposit requirements…
3.) this will increase the likelihood of people walking away from contracts…
What’s interesting is homebuilders shares have fallen. It’s possible we have have just seen the Dow peak for the year.
Also today, durable goods orders fell, with non-defense capex down 3.5%, .3% less aircraft. Rising capex was supposed to be one of the main factors mitigating a slowdown in housing.
I think the next report to watch market-wise will be the jobs report a week from Friday. Last month was 128K, market expects 125K. If it’s much lower then the already low recent levels, it will be another hole in the balloon. Jobs were supposed to be one of the other mitigating factors.
You can buy puts on SPY for next to nothing if anyone is looking to hedge a little.
‘You can buy puts on SPY for next to nothing if anyone is looking to hedge a little.’
Maybe the Big Boyz know why SPY will stay at or above the permanently high plateau better than the rest of us chumps? Otherwise, why would those puts sell for next to nothing?
That’s what they were asking in May too, right before the VIX broke out big time.
Stay tuned.
Geithner at the NY Fed has been worrying out loud about the potential for low volatility to give way to a crash. Since the NY Fed controls the price of money, maybe they have “diversified” into controlling volatility as well, given how worried they are about systemic risk?
From Ben’s link on Pentair:
“Pentair joins an increasing number of industries feeling pinched by the slumping housing market. In recent weeks, Minnesota lumber mills, oriented strand board manufacturers and logging firms also have announced layoffs and earnings setbacks because of the reduction in housing starts and higher interest rates on home and remodeling loans.”
And fewer products moving from Minn. to Florida and the coasts mean fewer railcar loadings, fewer truck miles, etc….
Exactly. But the economists seem to miss this point when they try to calculate job losses from the slowing housing market. Of course, the effect on other non-RE businesses (restaurants, travel, autos, etc.) that rely on disposable income that will be hit by layoffs in all of these sectors are also not counted correctly. It will be a vicious circle - the only question is how vicious.
“Pentair joins an increasing number of industries feeling pinched by the slumping housing market. In recent weeks, Minnesota lumber mills, oriented strand board manufacturers and logging firms also have announced layoffs and earnings setbacks because of the reduction in housing starts and higher interest rates on home and remodeling loans.”
I’ve said this before:
but this is one reason why none of us are as immune as we’d like to be.
MN has high wages, and relatively low COL overall. (at least for a bubble area, obviously it costs more than say Iowa)
But the housing slowdown that is taking down Fl, Ca, Az, etc is hitting our economy too.
thus, fewer jobs and lower wages. in other words, less ability to afford housing.
which is why we will fall too, even though we didn’t see the runup that the coasts saw.
People say “if California catches a cold, the US will get pneumonia”. this is dead wrong. However, when california (i.e. the bubble markets) get pneumonia, it will definitely give the whole US a pretty bad cold.
You make the point a lot of people miss… that collateral damage will be huge. Normally a healthy economy would help to offset a housing bust (as it did in CA in the 90’s); however, with so many other sectors weak, exhausted and/or over-extended, housing is the lightning strike on a tinder-dry forest.
Housing is the 12 inch rainfall on the already-burned San Gabriel mountain timber stand above the heavily-populated canyon below.
“However, when california (i.e. the bubble markets) get pneumonia, it will definitely give the whole US a pretty bad cold. ”
With the world watching our bubble pop . . .
http://www.theherald.co.uk/business/70783.html
perhaps we can amend the aphorism to: When California gets antibiotic-resistant tuberculosis, the US will get pneumonia and the rest of the world will get a cold??
I think science has unwittingly discovered the answer:
http://news.yahoo.com/s/nm/20060927/hl_nm/testosterone_dc
That, combined with beer, is why we are the way we are.
SAN FRANCISCO (MarketWatch) — Brian Hunter, the energy trader whose big natural-gas bets cost Amaranth Advisors LLC roughly $6 billion earlier this month, has left the firm, a person familiar with the situation said Wednesday.
Amaranth has told investors in private meetings that Hunter wasn’t given any termination payment,
go figure…wonder if they took the company credit card away from him
He’ll get another job in a heartbeat. I’ll bet his email box is full.
txchick57 - You’re right he will get another job in a flash. That is the part that has always amazed me about the corporate/finance world. No matter how much a person screws up or demonstrates their incompetence, as long as they know the right people they will always have a job. Just look at the LTCM guys, they were all employed almost immediately after almost crashing the US economy. Makes me wonder how long this will go on before something really bad happens and there just aren’t anymore places for people to go?… I also like to think about what would be the real cost for products and services if all of the really incompetent people were not supported by this system. I bet in most cases the prices charged could be lowered by somewhere between 20 to 40%.
Why is that? If he isn’t to blame for the loss, he is being pegged for it. If he is who would want to hire him?
Josh
Damage control:
http://bakersfieldbubble.blogspot.com
“Much of the decline stems from an exodus of investors from the new-home market, says Ahluwalia. Daniel Rosenfield, a real estate investor, agreed last year to pay $204,800 for a house under construction in Kissimmee, Florida, with the expectation that he would sell it quickly in ‘the low $300,000s,’ he says.”
“Rosenfield closed the deal in June, just as the new- home market was cooling, and listed it for sale at $300,000, resigning himself to a more modest profit. Today, the house is vacant. He’s reduced his asking price to $295,000 and still has no offers.”
“‘I bought at the wrong time,’ Rosenfield says. ‘My assumption was that I’d be able to sell within a month.’”
What the heck was this guy thinking? That he was privvy to some super-secret deal of the century, and that there would be people lined up to buy this house for more $$ than he just paid a month ago?
Yes, I know this has happened for some people in the past, but that still doesn’t make it a Good Idea.
“Those who fail to remember the past are doomed to repeat it”
hey rosenfeld paid a lot of money to go to those seminars by trump,and got what he paid for,a hosing.
Note from flyover country in the Ozarks (SW MO).
Local banker here says there are 400 unsold new homes in Republic, MO; right outside of Springfield.
http://www.republicmo.com/index.php
And on the local TV news tonight a story about the housing bubble has burst in Springfield (MO). No factual info but a homeowner whining about how his house isn’t selling when it would have quickly sold last year. Interspersed with his sob story the reporter said that of course, it’s different here. Springfield is special. We aren’t really having a housing bust like the rest of the country because…well…because…this is a special place!
An news on Lennar incentives in the Reno area? Just curious because they were always the worst at sticking it to buyers when I lived there. How far have the mighty fallen?