Housing Market ‘Racing Into A Downturn’
The Long Island Business News from New York. “As Long Island’s housing market continues to soften, real estate executives refuse to utter the ‘b’ word: Bubble. But one area economist isn’t afraid to use it. ‘In the bubble areas, i.e. long island, things are really coming down quite quickly,’ said Irwin Kellner, a Hofstra University professor and North Fork Bank’s chief economist. ‘You don’t need me to tell you this.’”
“Inventory has soared by as much as 75 percent in some areas, Kellner told the group of Long Island’s key economic development players and real estate developers. ‘The housing market bubbled up in a way that it had not before,’ he said.”
The Boston Globe. “For Barry Bluestone, an encounter in an airport last spring crystallized the high cost of living in Massachusetts. The Northeastern University economist began chatting with the passenger next to him. She told Bluestone, ‘Even on our salaries, we can’t afford it here,’ Bluestone said. ‘If we can’t keep pediatric dental surgeons here, heaven help us.’”
The Boston Herald. “The increasingly troubled Bay State home and condo sales market is racing into a downturn that could take years, not months, to work itself out, experts said. ‘It could get very bad,’ said Bluestone of the impact of a recession on the housing market. ‘We already have a weaker economy (in Massachusetts) and we suffer from this terrible cost of living.’”
“A market that stabilizes this fall, while not impossible, is unlikely, said Chip Case, a Wellesley College economist and top real estate expert. ‘There are so many different scenarios,’ Case said. ‘I don’t expect this to be a long, drawn out thing, but it damn well could be,’ Case said.”
The Lowell Sun. “Marci Rossell, who has worked as chief economist at CNBC and now teaches at DePaul University in Chicago, said the current slowdown — she despises the term ‘bubble’ — had to happen.”
“‘It used to be that mortgage rates were only influenced by long-term (interest) rates, and that’s because the only mortgage you thought about was the fixed 30-year loan,’ she said. Now with all the innovations, adjustables, interest-only and option-pay mortgages, rates are far more susceptible to short-term rates, which are controlled by the Fed.”
“‘And what has the Fed been doing to interest rates?’ Rossell asked, egging on the crowd with an emphatic thumbs-up. Higher rates deplete demand, she said.”
“Rossell closed by hinting that too many homeowners are obsessed with real-estate values, anyway. ‘If it’s where you live, it’s ludicrous to take a short-term perspective,’ she said. ‘I mean, seriously: What do you care?’”
WBIR in Connecticut. “After years of going up, housing prices are now heading south in some places, so has the ‘bubble’ finally burst? Kate and Hans Koning have been trying to sell their Easton, Connecticut house for nearly a year. So far there are no takers, even though they cut their price not once, but twice.”
“‘I started at $875,000 and at the time I thought that was really a reasonable price for the house,’ says Date Koning. The Konings are not alone. Sellers across the country are struggling with a weakening housing market.”
“‘The people who bought at the top and sell out at the bottom can get really hurt and so there will be bankruptcies, foreclosures and people out of jobs, but we will recover from it…this is not nuclear war,’ says Economist Robert Shiller.”
The Times Argus. “Central Vermont’s real estate market is holding its own this year, despite national trends which continue to show a marked decline in new home construction, a swelling inventory of unsold homes, and stagnant prices. However, there is less urgency in the market, according to Nancy Gale, broker associate and president of the Vermont Association of Realtors.”
“‘There’s a lot more inventory available, but we’re not seeing prices coming down as much as we’re reading in the [national] news. It’s giving buyers more choices,’ she said.”
“Broker John Biondolillo said he hasn’t seen prices falling. ‘Except on houses that were overpriced to begin with,’ Biondolillo said.”
“Claire Duke, who has been selling real estate for 25 years, said ‘The thing that’s somewhat different is this extra lump sum that sellers have been adding to the price in hopes of it working is probably changing.”
“‘Some of that reaching is going to stop to a degree, at least for the more ordinary properties,’ Duke said. ‘Sellers need to come to terms with being more realistic about prices than they have been in the last three to four years.’”
‘With his ambitions to build homes around an award-winning golf course stalled and his financing depleted, a Boston developer is selling the unfinished project. A housing downturn and construction delays have disrupted the home sales critical to Turner Hill’s success, compounded by a leveling off of interest in golf and a glut of 18-hole courses, many of them for sale. Turner Hill has sold just 11 percent of its planned 182 residences.’
‘Facing a July deadline on $6.4 million owed a Boston investment firm, Raymond negotiated more time from the lender. He said he also owes $9 million on a $12.5 million loan from TD Bank north Inc., which declined to comment. ‘What we should’ve done is not proceed until we had all the financing lined up,’ Raymond said.’
‘He remains optimistic about its prospects. Prices for Turner Hill residences, he predicted, ‘are going to double.’
If he really believed that prices would double, I’m sure he’d find the financing. Bullshit.
There’s a big problem here. It’s not like some crazies are bidding the price of some dot-com stock up. In that case, you can choose to opt out and simply “not play”.
But with housing, it’s different. Intelligent people who want no part of it are hurt, because the prices are set by people willing to take on unreasonable debt, or “vodoo” loans.
I hate to see the goverment tamper with markets, but they really need to do something here. At the very least:
1. No more MORTGAGE INTEREST DEDUCTION. That only fuels the fire.
2. Anything that’s government backed needs to be a fixed mortgage with 20% down payment
3. Any institution that has government-backed insurance should only be able to write fixed mortgages with 20% down payments UNLESS the borrower can show that he has enough money in the bank, or other assets, to pay off the loan completely.
Housing prices would drop like a rock, but America would be better off.
“In that case, you can choose to opt out and simply ‘not play’.But with housing, it’s different. Intelligent people who want no part of it are hurt, because the prices are set by people willing to take on unreasonable debt, or “vodoo” loans.”
Let me introduce you to this bizarre concept called “renting”.
Oh yeah I forgot, renting is throwing your money away. So do this. Figure out what the difference is between a rent payment and how much the monthly mortgage would cost on the same home. My 2005 calculations show that this is about double. Every month automatically deduct that amount from your income and put it in a high interest earning savings account making 4% call this account “Renter’s Equity”. Then you can live like it was the olden days earning 4% on your home equity per year like you used to when housing was not insane and it’s all FDIC insured.
Of course, you’re right! I didn’t mean to imply that renting wasn’t a good option. Still, it’s sad that homes have become a get-rich-quick ponzi scheme, and not a place to live in.
(And there’s no sour grapes here! I bought a home during the *last* slump the old fashioned way–with 20% down and a 15-year fixed mortgage, now paid off.)
“2. Anything that’s government backed needs to be a fixed mortgage with 20% down payment
3. Any institution that has government-backed insurance should only be able to write fixed mortgages with 20% down payments UNLESS the borrower can show that he has enough money in the bank, or other assets, to pay off the loan completely.”
let’s make it simple: abolish the GSEs altogether.
In his final comment, Raymond got his numerator confused with his denominator.
OT-Just a $.02 comment on the whole golf thing. This sport is doomed when the boomers are gone. At the very least the number of courses will be cut in half. I know very few people my age (mid 30’s) that play golf on a regular basis or even have the slightest interest in it. The main reasons given is that it is too expensive, takes too long to play, and is just not exciting enough. I only play so I can hang out with my father. Somehow I just don’t think the skateboard generation is going to take to the greens like their parents. Golf will follow in the footsteps of tennis in this country in terms of popularity: down. Maybe future housing developments will be built around skate parks? Any takers to start a new project?
SantaCruzSux
Wait til you’re 50 and the broken knees (from skating) ache from the changes in the weather, you fall down every time you even think of a skateboard and an ‘Ollie’ is an old black and white movie character. Golf will look a lot better.
I do agree that it’s too expensive and (here in AZ) too crowded to get on a course when the weather is good.
I’m approaching fifty, with rotten knees. Golf is fun - occasionally - but it’s expensive, and not nearly as fun as mountain biking, dirt biking, hiking, bicycling, skiing, or all those other things I plan to do until age 75 or so.
As well, future 50-year-olds won’t be as well-pensioned as today’s golfers, so fewer of them will be able to afford the game. Disc golf is very popular here in Oregon because it’s good exercise, almost free, and has its own social group.
I’m with you Santa Cruz,
I preferred raquetball to golf. Now I rollerblade which is also easy on the knees. However, I’m not sure your golf observation is the case country wide. My 10 year old is one of the few boys in his class that doesn’t golf. It’s a rite of passage here and treated like a social feather in one’s cap. Then there is the social hierarchy between the different clubs. All VERY IMPORTANT to the local 30 somthings. Funny you mention the decline of tennis. It’s very popular among the local stay-at-home Moms at present to the point where 40 somethings are picking it up for the first time. Many are taking lessons with their young children. Ya gotta go on the other side of Syracuse to find a decent skatepark…maybe that’s why these classic sports are still doing well.
I’m originally from Syracuse, and everyone I know there loves golf, and plays at least once a week when it’s warm enough. Now I live in Florida, very few of my friends play golf, and those that do play only a few times a year. Weird. Maybe it’s because of cost - my brother pays about $1,500 a year for a course in Syracuse that is so nice it would cost $180 for one round here in South Florida. And the $1,500 is for his whole family!
Glad to hear from a Syracusan…do you hear the same feedback that I’ve been posting from your family and friends? Mine is only one perspective from south of town. I’d be dying to compare with what others from the area think.
I believe that golf is the greatest sport in the world. It is the only sport where each hole reflects life. A perfect drive down the middle and the2nd shot shanked into the water! A sport that can be played from 8 to 80. The sport where only 3% break 100 and 97% say they do. I play and so do my kids (in fact a teen that skateboards, snowboards and does extreme stupidity tricks).
A game where on any given day a fat, old, out-of-shape guy can win is not sport but a passtime like knitting or shuffle-board.
I guess it does come down a good bit to location and the underlying social strata that support certain activities. I agree about the picking up of sports like gold and tennis as folks get older but I don’t think the demographics of this country will sustain and expansion of interest in these activities.
I’m actually not a skater, but I’m surrounded by the skate culture here in Santa Cruz so my observationial bias may be overwhelming me.
Santa,
I was a party last night and this very subject came up. I was shocked how down people were on golf. The consensus was that golf is fun, but dying:
1. It’s not really exercise. Anyone under forty should be playing tennis, raquetball, soccer…. It takes an hour, you actually get exercise.
2. It’s an environmental nightmare, taking good forest or land and wiping it out, dumping loads of fertilizer and wasting tons of water (which is precious if you’re in Pheonix or LV)
3. People mistakenly think they’re Daddy Warbucks on the course with cigars. Golf is old. The elitness of it no longer exists.
4. It’s not worth the expense and it takes too long.
A word of warning - do NOT make these same points to four fat guys in a bar wearing Titleist shirts. I was lucky to escape alive. I couldn’t even get them to agree that walking was better exercise than riding in a cart.
I believe the only excuse to play golf is to join a club and drink at the 19th hole. And drinking and driving home is really the most exciting part of a wasted 4 hours. And I do mean wasted.
“I believe the only excuse to play golf is to join a club and drink at the 19th hole. And drinking and driving home is really the most exciting part of a wasted 4 hours. And I do mean wasted.”
Agreed, screwing around on internet blogs is so much more useful
Tennis is much better exercise than golf, tennis costs a small fraction of what golf does ($3 for a can of balls vs. $75 greens fees - many free public tennis courts vs. NO free public golf courses), you can work up a good sweat in an hour of tennis vs. no sweat at all in 4-5 hours of golf, and most people look better in tennis togs than they do in plaid pants.
Would you rather have a physique like Federer or Michelson?
They’re both old social-networking things that will be replaced by new social-networking things. If you can figure out what those things are, invest in them. Cigars came back for a while, but they still stink just as much. Who TRULY ENJOYS smoking them?
“It’s not really exercise”
It certainly can be. Try walking up and down hills for 4 miles with 40 lbs. on your back.
Could real estate go into a free fall as did the stock market on Black Monday (October 19, 1987)? And if so, what would policymakers do in response? I recall electronic circuit breakers shut down the stock market on Black Monday in order to give the Fed some time to revive the critically injured paper with a transfusion of liquidity; I am wondering if any similar measures are available to ward off a housing crash? Also wondering if there are any historical precedents for “crashes” rather than “slow leaks”?
patient, not paper…
already has
off 10% in my hood 22151 didn’t happen in 1990
took 2 years- this time 5 months………………..
Can they put in “curbs”? Maybe you won’t be able to sell your house on a down-tick?
A property in Fauquier County, VA, was just sold (”distress” sale) for 700K. Its county property assessment was 597K for the land and 408K for the improvements. The land (50 acres) was purchased in 2001 for 310K. It since had a brand-new house and a barn (with upper apt.) added. The closest thing on the market is 1.6 million.
Dreamy sellers in town are asking that much (700K) for a tract home. (But they’re not selling.)
I think the thing that will immediately bring down prices is a homebuilder opening a brand-new development with lower prices than anyone has yet seen. Right now it seems they’re finishing up old ones with close-out sales and delaying new developments. But it seems likely that they’re going to pursue them next. At least the ones where they don’t want to back out of the deal. (Toll Brothers and Centex have two large ones planned for Fauquier and Culpeper Counties). I can’t imagine they would err on the side of high prices. If I were a builder I’d start out as low as I could in the hopes of raising them later, rather than starting out high and being forced to cut later.
You’re not suggesting developers build high-quality, affordable housing are you, commie?
OT: I seem to remember that the automatic shutdowns were in response to Black Monday, and did not exist at the time. Computer trading was a new phenomenon, and there was unease as to whether the machines could exaggerate price swings or not.
So automated shutdown triggers were instituted (at 200 points?) to smooth out the market. The numbers weren’t in % terms, so the triggers fired over time. Eventually, they were ditched.
I think it’s an interesting thing to reflect on, because there might well be some market regulation that will occur if housing crashes.
Regulation in the lending industry will be the first band-aid. The Fed would be insane to lower rates again and, frankly, it wouldn’t help by then anyway. I bet they’d set up another RTCesque entity and use taxpayer money to swallow the negative equity in foreclosed spec homes.
NewBank already exists.
With the 10 year at 4.6% the FED better make a move sometime. Oh wait, an inverted yield curves has no meaning anymore in the new financial paradigm.
That’s correct. The “circuit breakers” were brought in after Oct 19.
“‘In the bubble areas, i.e. long island, things are really coming down quite quickly,’ said Irwin Kellner, a Hofstra University professor and North Fork Bank’s chief economist. ‘You don’t need me to tell you this.’”
And exactly where are the non-bubble areas?
central VT- gobi desert- antarctica -
South Dakota, Greenland, Siberia and Sudan.
Gobi?- I OWN Gobi! Gobi is the next Vegas, my friend and I got in on the ground floor. I do, however, have a few choice lots left and if you act now I can help you out on the opportunity of a lifetime. You’d better buy now or you’ll be priced out forever, because EVERYBODY wants to move to Gobi. We’ve got yaks, yurts, nomadic tribesmen AND poisonous snakes!! Nobody else has all of this going for them. Yep, other places might go down in value, but not Gobi! We’re special because its different here.
I’m 68 years old and I think a good guaranteed real estate investment is just the ticket. Save two lots for me and the Mrs., and I check back with you tomorrow after I speak to my neighbors who I know will want to join us. They trust my good judgement.
Can I buy some with no money down, option-teaser-variable-rate, stated-income mortgage, and bad credit? Is there a free car and a plasma TV included? I’d also like to give an extra 5% to the real-estate agent if that’s ok.
Hold out for the cash bribe, err, I mean kickback, err, I mean “buyer incentive”, due on signing.
Gordo- I’ve got two lots reserved for you and the little lady in our finest planned community ‘Gobi Vistas’! You won’t regret it, as this is a sure thing- you get instant equity in Gobi. 15% appreciacion is IN THE BAG for the final quarter of this year, which is really the INVERTED spring buying season… Get it? No? Just sign anyway.
SFC;
“Can I buy some with no money down, option-teaser-variable-rate, stated-income mortgage, and bad credit? Is there a free car and a plasma TV included?” Bad credit is OK, but we got no electricity or gas stations- yet. I’ll tell you what; because you’ve got an honest face, I’ll throw a dead goat into the communal well in the next village over, ‘The Dunes at Gobi Heights’. That pretty much guarantees you the lot of your choice…
OK, but not this goat: http://news.bbc.co.uk/1/hi/4748292.stm
Gimme a Hummer and low payments and I’m in! Where do I sign?
Won’t give you a hummer, but how about some cupcakes?!
Genius. The only thing that could negatively affect this is another scars outbreak.
SARS = Severe Acquired Respiratory Syndrome. I am not sure what “scars” refers to (a symptom of leprosy, perhaps?).
http://www.cdc.gov/NCIDOD/SARS/
it’s a joke - Gary reference
Thanks for the clarification — I forgot about that “scars” reference by Watts. His reputation as a forecaster will have “scars” once the final YOY price decline for The OC is tallied.
They’re not making any more sand.
Exactly! You see, in Gobi we’re different because its special here- and its so special because we’re so different… Finally someone ‘gets it’!
I’ll only buy in Gobi if somebody from my church arranges the funding. “In God I trust” (along with anyone who does his work on earth).
I think I can some of my fellow congregation to buy in too.
Gotta admit, I was a little skeptical at first. But I went to the NAR’s website, and they have a write-up on why the Gobi Desert will never be a bubble (employment growth, immigration, etc.), so … yeah … I want in, too.
I heard Gobi was “sandlocked”. Any truth to that?
dd
Contrary to the Times Argus article, Central VT is frothy in the extreme — it’s where NYC and Fairfield Co. dwellers put their HELOCs to work
“Broker John Biondolillo said he hasn’t seen prices falling. ‘Except on houses that were overpriced to begin with,’ Biondolillo said.”
Good point, that would be approximately be 100% of homes in Orange County. Perhaps when we see 40% cuts accross the board, the price will begin to look a bit more realistic
- WBIR in Connecticut. “After years of going up, housing prices are now heading south in some places, so has the ‘bubble’ finally burst?
- Kate and Hans Koning have been trying to sell their Easton, Connecticut house for nearly a year. So far there are no takers, even though they cut their price not once, but twice.”
“‘I started at $875,000 and at the time I thought that was really a reasonable price for the house,’ says Date Koning. The Konings are not alone. Sellers across the country are struggling with a weakening housing market.”
- even though they cut their price not once, but twice.”
How will Kate and Hans feel when there house sells for 475k?
Biondolillo is one of the lucky ones. When the crash comes he can sell a vowel or two to get by…
Ha!
“Rossell closed by hinting that too many homeowners are obsessed with real-estate values, anyway. ‘If it’s where you live, it’s ludicrous to take a short-term perspective,’ she said. ‘I mean, seriously: What do you care?’”
She’s obviously never heard of the phrase “catch a falling knife” and the impending 5+ year drought in home prices. What a complete moron - I now have lost all respect for anyone who has attended DePaul U. SHE is ludicrous with statements like these - must own some deadbeat property that she can’t unload on some other idiot.
‘I mean, seriously: What do you care?’
I’d care if I was looking for a house to purchase and live in.
I’d care if I was looking for investment property.
I’d care if there was a possibility of a ‘life changing event’ (work reduction, lay-off, disability, death, divorce, hating the area you are living in) happening in the next 5-10 years.
I’d care if I was in a loan that I could barely afford, and the loan payments/taxes/utility bills/whatever were going to increase soon.
I’d care if I had re-financed my house to the hilt in order to afford toys and ‘a lifestyle that I’m entitled to’, and had expected to do so forever.
Am I missing any?
I’d care if my livelihood depended on the housing/real estate/home lending business
Funny.
I’d care if I were a baby boomer looking to retire soon based on my massive equity gains.
I would care if my retirement accounts were invested in MBS’”s or my bank made alot of funny loans .
I’d care if I lost any other opportunities to make money since all of my money was wrapped up in one place - my home. Talk about not enough diversification! May as well have all of your 401-K funds in one HB stock.
Rossell was awful on CNBC. She was so clueless. I can’t believe someone let her teach at a University level.
Teaches?!? She teaches?! Oh my god, I thought she only went there to ge a degree. But if she teaches… then I guess that explains it. :O
We all know she was cheering on the way up.
Open the windows and crawl out onto the ledges Greedy, Fools and Flippers. Your “Come to Jesus Moment” draws near.
I am still amazed that seemingly knowledgeable people have accepted the huge run up in prices as the norm. When they refer to prices ‘leveling off’ and ‘taking a breather’ it’s like they are saying, now we can get back to normalacy. Hey Dude! Your “normal” pricing left us in 2001-2002.
OT from Dataquick. Sales in CA Central Valley are just imploding. Last year city of Merced sales were about 2400 or 200/month - July ‘06, 101; August ‘06, 71. Much more of this and people will question if real estate is actually a business or a hobby. About 3 million people live in the valley, and the effects of these drops will be huge and regional. A local small time concrete contractor just layed off half (8) of his crew. The construction slowdown is starting to eat through the work, and without foundations you don’t frame, no frame no roof, and so it starts…
Nice post! I’ll have to check in with my cabinet making buddies and see how they are doing!
Huh? I thought everyone wanted to live in Merced? Or at least go to college there…
“ but we will recover from it…this is not nuclear war,’ says Economist Robert Shiller.”
Oh, NOW I feel better.
(Why didn’t he just say ‘Nobody Panic’?)
Maybe he wanted to hint that this is a normal process of mopping up after a bubble, and that no government emergency intervention is needed.
Then just get FEMA to declare an emergency and the cries for help are sure to be ignored.
“(Why didn’t he just say ‘Nobody Panic’?)”
Many economists are still handing out the Peril Sensitive Sunglasses.
Maybe they should switch to handing out towels to wrap around their heads. If you can’t see it, it can’t see you…
LoL, I still have my original “Don’t Panic” button. Warning, don’t wear the glasses while driving. Here, have some fairy cake.
“this is not nuclear war”
Neither was the Great Depression of the 1930s. But the aftermath (WWII) did lead to the first and last dropping of nukes to date.
Are there any squirrels that need to be fed in the Gobi desert when I buy my overpriced, oasis viewed premium sand lot with a negative am, voodoo magic, stated-income loans?
One of the advantages of buying a home in the Gobi desert is that there are no squirrels which need to be fed there — only desert rats.
Don’t forgot that you can also go green and build a solar-powered house out there. Save your utility money and maybe throw a few TVs into that Hummer. Xbox in the dash, TVs in the headrests…MUST HAVES
Don’t forget to we equity vultures (aka mortgage falcons). We have whipped up quite an appetite.
somebody i know bought a sfh in Merced (against my strongly worded opinion) because a builder gave him a ‘deal’. how bad is it going to get there?
The average household income is 45K+/-, the median sfh is 370K. The Merced ‘boom’ is based on a new UC campus, outside speculation money and wishful thinking. I easily see a return to 2000/2001 prices, say 150 to 175k. Bad.
I am looking at listings on ZipRealty for N. Calif and none of the listings have listing date. Do others have the same problem?
Are there any other on-line listing sites where you can set of your criteria and they will email and list all the properties that meet that criteria.
I have been looking at zip for the past few weeks in the Chicago region. my listings all have listing dates.
send a message to their webmaster maybe it’s an html issue.
Laura
who are we going to feed the squirrels to?
The Boston Globe. “For Barry Bluestone, an encounter in an airport last spring crystallized the high cost of living in Massachusetts. The Northeastern University economist began chatting with the passenger next to him. She told Bluestone, ‘Even on our salaries, we can’t afford it here,’ Bluestone said. ‘If we can’t keep pediatric dental surgeons here, heaven help us.’”
I’d just like to add another personal andecdote to this general thread. I’m presently a student at the Harvard Business School, and my wife and I have previous degrees from MIT and Harvard. We have lived in Boston for 10 years, including time as an undergraduate.
We are leaving in May 2007 and never looking back, as are several of my friends. It is a literal disaster in Boston: families are strained and communities are being torn apart. My wife’s family is from Boston, and they are very close. It’s literally traumatic for them to realise that their daughter (and husband) with such educations cannot afford to raise a family here.
Make no mistake: a sizable majority of well-educated young families in their late-twenties and early thirties are contemplating moves to Colorado, Nebraska, Iowa, Tennessee, Missouri, and other places. At dinner parties, people are actually embarrassed to admit that they are going to make a go of the greater Boston area. After such an admission, there’s the customary, “Oh, it’s such a wonderful city with so much history and culture.” In other words, people politely offer condolences.
Having been here ten years, I will say that this occurence within the last two years is dramatic. Keep in mind that these people are the ones most likely to be able to afford the housing prices here. These people should be considered leading indicators.
It is interesting to note, as well, that our education is virtually worthless here. There are so many MIT/Harvard peeps running about that we barely make subsistence. On the other hand, experience outside the area is quite different (I spent 3 years living in Georgia). Provided you are pleasant, humble, and polite, the degree is a significant differentiator and allows for a secure middle to upper middle class existence. (All conditional on good, competent work.)
Same is happening in “It’s Different Here” NYC and its suburbs. Hubby and I both have law degrees and make good money but without some sort of correction, living here is looking impossible because it just does not make sense to pay 50-60% of one’s income to housing - housing that, with both of us working - we spend little time in!
I make over 200k a year, have 1.5 million in cash and I can’t affford to buy in Manhattan. I’ve lived here for 20 years and with a child coming this oct. I’m serious thinking of leaving this area. I refuse to pay 50% of my income to buy a palce for my family to live in. In my heart I believe and hope price will come down. But what if there is a new model for this real estate boom. That boom being that people have permanetly excepted that they will pay 50% or more of their income towards housing. If this trend continues prices can stay high for a long time. Any thoughts on this?
Well, you could AFFORD to buy if you indeed have that much cash…but of course, it will be some 2 bed/2 bath brand new Manhattan version of a McMansion, max 1200 sq. ft., in a blah area. For a family. Which sucks.
But seriously, you could have something GREAT in a suburb with a very short commute. If I had that much cash waiting, I would have a very nice place in lower Westchester, with great schools and a nice backyard - and it would be my forever house. After all, suburban prices are dropping pretty quickly in comparison to Manhattan.
Hate to say it, but it comes off as a tad whiny when you have so much cash and are complaining. Imagine those who have nowhere near that. Maybe it’s because you want desperately to live in Manhattan. In that case, there’s nothing you can do but wait (although again, with that much money, I know people who have purchased classic 6’s on the Upper East for under 2 million).
“I make over 200k a year, have 1.5 million in cash and I can’t affford to buy in Manhattan.”
I call BS on that statement. Maybe you cannot afford the property you feel you are “entitled” to, but if you have $1.5 million cash and that salary, you can easily buy into that market. It think you just enjoy talking about your money.
I lived in apt East 30th @ 2nd Ave (99-02). Not just the housing prices for a two bedroom, its the state & city income taxes. I miss New York, but even if I also had $1.2 MM in cash, go have life with your family somewhere else and visit on the holidays.
I’m not sure many have focused on this but IMHO the credit bubble has also allowed for an increase in education for those so inclined. It’s not just in the cities where you are in such good well-educated company. More men and women than I can count have their Masters here in my l’il ole upstate town. Many have PhD/Masters combos. The boy across the street: Clark, the boy 2 homes up: Harvard, the 10 year old friend of my son: (plans for) Princeton!
My opinion about education is that (unless your parents foot/ed the bill) it’s a huge portion of your future cost of living. It’s impact to bring down your lifestyle has to be balanced against the possibility improving it.
I would suggest that the credit bubble has allowed higher education to raise its rates year after year to bubbling numbers. Unthinking students and their families take out toxic loans to complete liberal arts degrees, with students having no chance to quickly pay off their $65K loan + vig working as asst mgrs in retail. Easy credit allowed everyone to pretend that soaring college costs were not all that bad after all
Seems a coincidence:
Soaring college tuition due to govt guaranteed loans via Sallie Mae
Soaring housing prices due to govt guaranteed loans via Fannie Mae
I am in my early 30’s and have a young family and couldn’t agree more. I want out and most of my peers who have moved on have homes and a good middle class lifestyle. I live in Nashua, NH and its absurb. High prices, 5 grand of property taxes for a tiny house(that I can’t afford anyway) and a job market choked with boomers(who can’t retire) is just too much. Somebody should start an agency dedicated to getting young folks out of the North East an relocating them. Us younger folks are basically a life support system for boomers anyway. Isn’t that what happens when I young family buys an outragousely priced home from older folks? I kick myself everyday for not taking a job in the Atlanta area a few years ago. I congradulate you and your spouse for getting out.
I live in Los Angeles and find the cost of housing frustrating. I’m from Boston and Rhode Island and my family wants me to move back. When I look at Boston I can’t believe how cheap the housing is there compared to here. Even Cambridge is much cheaper than the Westside where I live (Venice), but even those places are actually ridiculously priced. The choices are not very good for a person like me, who likes these areas. People talk of moving to other areas, but there really aren’t that many choices of places to live for any one person. I would like to live where my work, my family, or my friends are. Is this unreasonable? I don’t think so. People write about moving to other areas where it’s less expensive, but only some people really have that option. Your business has to be doable from those places and you have to be able to enjoy the culture/lifestyle. I practice Acupuncture and Traditional Chinese Medicine and one of these inexpensive areas will not support me very well. It would be very hard to relocate from the high-priced zones. I wonder how many others there are out there like me, or variations of this issue. How many people are out there who can’t have their children, parents, or friends nearby because of this. So in what way can this market distortion be healthy for our society?
“I would like to live where my work, my family, or my friends are. Is this unreasonable?”
No. Rent & live in the places that you like. Why would you think that your entitled to home ownership in these areas anyway? I couldn’t afford a house in these places either
so I don’t live there.
I do rent. So do many others. But if everybody has to rent, you don’t have much of a society.
I agree. My wife and I are in our early 30’s, make a combined income in the low six figures, and have two young children. We could have bought into the the mania and put half our income into an SFH in a good school district and played “keep up with the Jones’”, but we didn’t. I couldn’t see being beholden to the bank and our house for the next 30 years with a huge mortgage and no cash.
Instead, we bought a 4-family, live in one unit, rent the rest (one to my sister-in-law). Now my plan is to pay it off (or most of it) within the next 6-7 years and let the income pay the mortgage on a SFH, leaving our regular income for whatever… do I feel bad I won’t provide a beautiful house for my wife and children right now? Yes, but I know our financial future is bright. Are we making sacrafices in terms of a family of 4 living in about a 1000sqft, with a kitchen the size of most people’s bathroom? Yes, but I’ll get over it because when we buy a 2500sqft house I will know that we could afford it as well as our retirement, my children’s education, and all the toys and it isn’t just an illusion brought about by funny money and greed.
Do I have empathy for all the other GenXers that have to make the same sacrafices as I am to get ahead? Yes. Do I feel sympathy for all the FB’s who couldn’t imagine delaying gratification and had to have it all right now? Not on your life…
“I would like to live where my work, my family, or my friends are. Is this unreasonable?”
Hi VeniceGuy-
I think you have to make a call on what matters most to you. There are people practicing those arts locally. When I first moved here I made an assumption that I would be more sophisticated than the locals. It didn’t take long for me to realize I was terribly wrong and in fact many of them blew me away. Seeing as they had done stints in NYC, DC, CA, Boston,the Netherlands, England, and Germany and were well schooled and traveled, the truth is I feel lucky when I have access to some of their minds/insights.
But if you’ve been on this blog long enough you know the struggle I’ve had with the cultural differences. Not everybody should move to these inexpensive areas.
It’s just that those that don’t, IMHO, have to take responsibility for that decision and remember that’s part of the trade-offs people make. Not every decision is easy n’or do they always work out.
My family has been on the shore north of Boston since settlers shared the land with Indians. I got the cheekbones to prove it. And I feel a tug back to that area at least once a week. But here, my kids have a life in a safe town in a strong school district….something I could never have afforded to give them in the Boston area. I’m not sure what price I’ve paid for the move here but when I look at them, for me and for us, it’s been worth it.
We are a DINK couple living in the SF/Bay Area. We have a combined income of $200k and we cannot afford a crappy house in a crappy neighborhood. We’re moving to the Midwest in 2008. Enough is enough, it’s just not worth it to live here at this point.
(Bluestone said. ‘If we can’t keep pediatric dental surgeons here, heaven help us.’…“The increasingly troubled Bay State home and condo sales market is racing into a downturn that could take years, not months, to work itself out, experts said. ‘It could get very bad,’ said Bluestone.)
Okay Barry, which is bad for Mass, high prices or low prices? The answer, for almost everyone, is high prices which are killing the state. If the state “races” into a downturn “it could be very good” not bad.
It seems that Bluestone is involved in the Governor’s race between Healey and Patrick. Neither really has solutions to MA’s problems.
MA needs lower housing prices or much higher wages. But what politician is going to come out and say that?
Its not just Mass. Right now, Los Angeles has a large number of professional jobs in the 1.5X to 2.5X median salary. While some of my friends are above this group, there are friends of mine all the down to 0.8X median salary (teachers). Thus, I look around at how many can afford to buy… not many.
Quite a few are starting to talk about taking career opportunities in other areas. At my company, workers will just get too frustrated, walk into a managers office, and demand transfer to a lower cost of living area. (Ok, it hasn’t happened for two weeks in our group, but it tends to be in cycles.)
Neil
There is a looming shortage of doctors in MA. My Dr. has an article about it on his wall. Part of the problem is that MA has very high malpractice insurance and other high business costs. I had to call several different pediatric practices before finding one that was accepting new patients (that were not newborns).
Yeah, as commented before, VT is bubbly - we’re just at the stallmate stage. (Always a little behind the curve here…)
I update a local realtors website in Northern VT. Ever heard of Belividere, VT? I’ve lived here most of my life and never heard of it until I moved 2 towns south of it. There’s a house on the market, a 1800’s farmhouse 4bd/2ba, that needs work, selling for the bargin basement price of $224K. It takes an hour to get into Burlington from there, mostly on non-interstate roads. The local area is mostly supported mostly by agriculture and lumber. Median incomes are $20-$30K.
Another property sold recently at the bargin price of $144,000. A *mobile home* on less than acre in “beautiful” condition in Waterville, VT. (just south of Belividere!).
We do get the “equity” effect from the New Yorkers and Bostonites who come to Vermont and think that they are cheap second homes or first ones. Vermont has had an affordability problem for a long time and the last 5 years hasn’t help.
The actual housing supply doesn’t seem to be tight. The list of rentals in the paper seems to get longer every time I look. I can rent a 1 bedroom apartment in the Burlington area for about the same price I could 10 years ago, when there was a rental squeeze.
We don’t exactly have rapidly growing economy, either. The biggest employers are in the Burlington area and the largest private employer (IBM) has been shedding jobs for the last two years (just another round this summer).
We’ve seriously thought about selling out at the top because our own house needs work and we’re very busy. (Our small house would sell very quickly.) We did the math and it was a wash even adding money for improvements. We also have a 15yr fixed at 5.25% and love the location even though it’s a commute.
Anyway, thanks for this blog - I wish I had found it sooner. It’s nice to know that I wasn’t the only person who thought there was something totally insane with housing prices.
Anywhere near Swanton? Spent my early childhood there and St. Albans Bay.
OT, from “With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones,” an article in today’s WSJ (sorry, don’t have link):
“The French fashion brand known for its brown and gold LV logo has also multiplied its presence in the U.S., recently opening a boutique in Nashville, Tenn. Vuitton has tried to whet consumers’ appetites in the U.S. by bombarding them with flashy new products, such as 2003’s colorful Murakami logo bag or its recent denim styles incorporating the brand’s monogram.
“The idea is to make the changes alluring enough that women will buy a new handbag every year, even when times get tough. Analysts say luxury-goods companies are, in part, succeeding.
“If American women buy many more handbags every year now than ever before, says HSBC Holdings PLC luxury analyst Antoine Belge, ‘it’s not just because the value of their houses has gone up, but it’s a cultural trend.’”
“If American women buy many more handbags every year now than ever before, says HSBC Holdings PLC luxury analyst Antoine Belge, ‘it’s not just because the value of their houses has gone up, but it’s a cultural trend.’
Eat your hearts out developing nations, who needs a traditional culture when you can get a new handbag every year! That’s a culture right?
It’s pathetic. I know many of these women. I have to hope that eventually people will realize that there’s more to one’s self worth than a new handbag.
But ..but …Paris Hilton said those handbags were cool .
Is it me, or does PH look like a female impersonator?
“PH look like a female impersonator?”
If so, she’s not doing a very good job.
I was the only boy growing up with three sisters. I love them dearly, but have been disappointed to realize, over the years, how materialistic they are. It seems like they are most satisfied when spending money. The amount they waste on handbags, shoes, clothing, jewelry, etc. is just mind boggling. And when you add in vehicles, home furnishings, kids toys, etc. forget it. They are the ultimate consumers. I, on the other hand, am happy in an old pair of jeans enjoying the outdoors with my dog. Possessions mean next to nothing to me, although my computer and vehicle offer me lots of freedom.
What I find unfortunate is the movement among women today to make men like you into women like them in terms of the clothing, etc. that they buy! I know men who wear Seven Jeans, at $150 a pair. Maybe it’s just me, but I don’t like men who wear designer clothes or use more hair product than me.
Where have you been all my life?
Another OT, from the WSJ:
Giving Back: Helping the Poor Register Land (page W2)
“ESTABLISHING LAND rights for the poor in developing nations turned into the sleeper issue at the second annual Clinton Global Initiative in Manhattan last week, where celebrities, heads of state and the super-rich gathered to raise funds to help solve the world’s problems.
“Former President Bill Clinton secured commitments totaling $7.3 billion at this year’s conference, up from $2.5 billion last year. But the buzz in the hallways centered on a topic that until recently most philanthropists all but ignored: registering poor people’s property so they could borrow against it to build businesses, pay taxes or for other purposes. Many citizens of developing countries don’t formally have title to their land, and many economists — including Peruvian economist Hernando de Soto, another conference attendee — see this as a key source of urban poverty. According to Mr. de Soto’s research, the value of unregistered land in developing countries totals over $9 trillion. Mr. Clinton told the audience that these assets “cannot be converted into collateral for loans — wealth locked-up and locked- down — keeping people in grinding poverty instead of being an asset that can lift them up.” Up to 85% of urban land parcels in the developing world are unregistered, Mr. Clinton said, citing Mr. de Soto’s research.
“But standing in the way of widespread land-ownership records are insufficient legal frameworks, confusing procedures and corrupt property registries. And establishing land ownership is all but impossible in communist and socialist countries, where property usually is owned by the state, said John Bryant, chief executive of Operation Hope, a nonprofit in Los Angeles that provides financial services to the poor.
“Calling land ownership “the cornerstone of economic stability in any region,” Craig DeRoy, president of First American Corp., a seller of title-insurance and credit information, said his company would commit $1 million in cash and in-kind services to develop a “template” to give the poor in developing countries a way to establish land titles.
“More foundations are beginning to think about land ownership. Patty Stonesifer, chief executive of the giant Bill & Melinda Gates Foundation and another conference attendee, called the discussion about land registration “intriguing.” Though her group hasn’t announced any involvement in the effort, it said earlier this year it will move into funding financial services for the poor.”
I’ve read about Hernando de Soto’s research, and agree with it. Definitely worth a read.
How long will housing slump last?
Headline of article appearimg in MSN today..
“..The decline, which has seen the median price of a home drop 1.7% over the past year, could extend into summer 2007, experts say…”
“…..Pessimists say a speculative “bubble” had built up and now needs to unwind, possibly over several years.
“….Merrill Lynch predicts a 5% home-price drop in 2007, while Goldman Sachs, another New York investment firm, forecasts a 3% decline nationwide…”
“As Draconian as that sounds, a 5% price decline would only reverse one-tenth of the price run-up over the previous five years,” Merrill Lynch economist David Rosenberg says in a recent report”….
“Additional price declines should not be surprising,” says Asha Bangalore, an economist at Northern Trust in Chicago. “We have a recession in the housing market. … Usually, it takes two to three years to stabilize.”
It is here:
http://tinyurl.com/q3sj3
Investing
Housing Headed to the Woodshed
By Doug Kass
Street Insight Contributor
9/29/2006 10:14 AM EDT
URL: http://www.thestreet.com/p/newsanalysis/investing/10311968.html
Editor’s note: This column by Doug Kass is a special bonus for TheStreet.com and RealMoney readers. It first appeared on Street Insight on Sept. 28 at 8:29 a.m. EDT. To sign up for Street Insight, where you can read Kass’ commentary in real time, please click here.
“We do expect an adjustment in home prices to last several months, as we work through a buildup in the inventory of homes on the market. …This is the price correction we’ve been expecting — with sales stabilizing, we should go back to positive price growth early next year.”
– David Lereah, economist, National Association of Realtors
The New York Times, September 2006
Wrong!
Lereah, whom I debated on CNBC’s “Town Hall Special: The Real Estate Boom,” in April 2005, is a very nice man and a capable economist. I recently had a most pleasant conversation with him at CNBC studios two months ago prior to a CNBC Survival special on housing hosted by Bill Griffeth.
Lereah is also the author of the book Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investment Will Climb Through The End of the Decade — And How to Profit From Them.
Not the most timely publication, Lereah’s book was published within four months of the statistical peak in housing activity and prices in 2005. In fact, the paperback version came out in February 2006, when the down cycle was beginning to escalate.
I am in no way trying to embarrass Lereah. I am just stating the facts and my opinions, like I try to do when I admit my (many) views and mistakes on Street Insight. Don’t think for a minute that the National Association of Realtors’ Lereah was expecting a price correction last year, as stated in this month’s New York Times interview above.
Back in April 2005 (on the CNBC special), Lereah and the managements of Hovnavian (HOV) , Prudential Realty and LendingTree were fully convinced (you might say glib) that the housing market was destined for a long boom. They saw a new paradigm of uninterrupted, noncyclical growth. One month later, Lereah was quoted as saying, “We simply don’t have enough homes on the market to meet demand.”
That was then, and it doesn’t pay to dwell on the past. So let’s look into the future. Unfortunately, many within the homebuilding business continue to talk their book despite clear trends that do not support their bullish view.
Forgive my preoccupation with the housing markets, but it has had a disproportionate role in economic growth since 2000 (and maybe before). This merits a continued discussion as to the possible slope of the decline, and the nature of the inevitable recovery. The housing cycle, among other variables, is a key influence on aggregate economic activity.
I expect a hard landing, and I have roughly quantified my expectations as to when the housing market will bottom (2009). It is folly to think that an unprecedented rise in home prices (in real and nominal terms) will be over in relatively short order. Yet this has been suggested by Lereah and others.
Housing cycles are long, and they play out over many years. We have learned that the peaks are surprisingly high and the up cycles unexpectedly long. Unfortunately, so too are the depth and duration of the down cycles.
Days/months inventory have only begun to rise as the glut of homes will be exacerbated by continued overbuilding, disposition of land, and the selloff of homes by flippers. And, as discussed previously, the consumer enters the current downturn in a weak position. Consumers are highly leveraged after the overconsumption binge of the last decade and after massive cashouts of home equity.
Consider the dramatic sale of D.R. Horton (DHI) homes in the Daytona Beach market in Florida. Please note the message at the bottom of this advertisement: “Realtors Warmly Welcomed!” That’s never a good sign.
These discounts include up to $90,000 a unit or as much as 30% (plus a free washer/dryer and refrigerator). This is not unusual: Most homebuilders have offered large price discounts and/or large incentives (vacations, car leases, reduced mortgage rates, etc.) for several months.
For a moment, let’s suppose that you were a flipper in the Daytona Beach D.R. Horton community who owned and speculated on a few homes without the intention of moving in. You just took a 30% haircut on your inventory, not to mention carrying costs of a mortgage, real estate taxes and expenses to keep up the property (landscaping, utilities, etc.).
And when the unit is finally sold, you have to pay a real estate agent a 6% commission. That speculator likely put up less than 20% up front (probably far less), and is now out, by my calculation about 50%. But making the situation worse is this: Who wants to buy a used home when you can get a new one like one in the advertisement above?
The ramifications of an extended housing downturn are broad — far broader than many realize. For example, the apartment REITS, a sector I am short, argue that there has been no new construction, so supply/demand favors an escalation in rents. But just wait until speculators, unable to sell their condominiums and homes, resort to renting the units.
Or consider the implications for building materials companies like Eagle Materials (EXP) , which warned on Tuesday. What about the sale of pickup trucks, which are often used on the construction trade? What does an extended downturn portend for carpet, gypsum, lumber and appliance manufacturers? Or for subprime and some prime lenders? And what do you suppose happens to the plethora of real estate agents and mortgage brokers? (Do they become daytraders again?)
You get the point: The housing decline is just beginning to be felt. The fixed-income market recognizes this. But for now, equity market participants don’t. Common sense has taken a sabbatical.
Don’t believe the housing soft-landing advocates, and do recognize the broad economic impact that a protracted downturn will have on our economy.
The worst is yet to come.
——————————————————————————–
At time of publication, Kass and/or his funds had no positons in stocks mentioned.
Doug Kass is general partner for two investment partnerships, Seabreeze Partners L.P. and Seabreeze Partners Short L.P. Until 1996, he was senior portfolio manager at Omega Advisors, a $4 billion investment partnership. Before that he was executive senior vice president and director of institutional equities of First Albany Corporation and JW Charles/CSG. He also was a General Partner of Glickenhaus & Co., and held various positions with Putnam Management and Kidder, Peabody
Good post Txchick ……
This is beyond preposterous. In April 2005 they thought housing would continue onward and upward? Bull.
I am not a housing expert of any kind but when I started reading about the problems at FNMA (late 2004), I knew the game was over. I told my wife then that we would refinance (which we did) to get the lowest possible mortgage rate (w/o taking $$$s out) and watch the melt-down begin. And thats exactly how it has played out.
“This is beyond preposterous. In April 2005 they thought housing would continue onward and upward? Bull.”
I don’t think that they “thought” housing would continue upward. “Hoped” is the most generous word I can come up with, “dreamed” is a more likely word, and “desperately prayed” is more likely on target.
BUT they definitely WROTE and CLAIMED that housing would continue to escalate. I have been racking my brain for any novel legal claims that could be used against the NAR (I am not a litigator and have no intention of ever pursuing any claims, nor am I a homeowner, so I have no personal loss) and I will post them as they occur.
I know that many on this blog are fundamentally opposed to utilizing the civil legal process against the real estate industry on principle (which I do not share) but it’s worthy of a topic. I don’t think its just for lawyers either. The lay person, intelligent and knowledgeable about this housing bubble, has an excellent chance of identifying the possible criminal/civil exposure of NAR as well as other market participants.
IMHO it would be the inducement of panic buying by lies like “real estate never goes down “, we are running out of land”, etc .
Regarding the mortgage industry it would be putting people on loans they didn’t qualify for which would insure a default even if the persons income remained the same .Also mortgage companies not offering people better loans and putting people on pre-payment penalty in bad faith when they had same loan available without pre-payment penalty .
Oh , I could go on all day .
danke/thanks
If we are in a correction, this thing has a long way to go, because the numbers still don’t work on any income property I can find. Nor SFR’s, for that matter.
Why do you think there will be a significant correction in income properties(which I consider 3+units) based on a housing correction in SFH’s? The income property market is driven primarily by rents, interest rates, and vacancies.
I am concerned that interest rates could skyrocket in the long term, thus putting pressure on cap rates and cash on cash returns, but in the short term I think interest rates may hold or go lower. I don’t see rents going down, in fact I see rents going up as renting becomes more desirable and potential buyers hold off trying to time the market. Increases in lending standards should offset any decrease in values making it a wash for renters trying to buy. And as far as vacancies go, that is based on supply and population demographics… all comes down to location. I for one, don’t expect my 4 family to drop much in value as there is always a need for housing for the middle/working class. Of course, I’m not an expert and I could be wrong so if anything I said/think is off-base, let me know.
If you think it could possibly will ‘work itself out’ in a matter of months you are NOT an expert.
I’ve been in the RE business since 1997. So, I have to laugh at the media, even certain members of this board, when they talk about this major correction that’s underway. Prices are still way, way, way above where they were in 2000-2001, which in my view is where they should be.
Being in the business since 1997 tells me that you haven’t been through a downturn before, but HAVE had an opportunity to drink Kool-Aid - and see it come true.
Come back to this board a year from now and tell me if your opinion has changed.
“Prices are still way, way, way above where they were in 2000-2001, which in my view is where they should be.”
Do people make more money now then they did in 2000-2001, I think on average the answer is no. Is there a shortage of housing, I think in most places the answer is also no. So what is pushing prices higher if people have no more money and there is no shortage of housing?
Too bad you weren’t around in 1989 “lainvestorgirl”.
Real estate sank even as interest rates declined from about 9% to 6% by 1993. Hmmm, how was it possible for “investors” NOT to get into the market back then? Do you imagine mortgage interest rates similarly declining from 5.75% to 2.75%?
You do realize, that for rates to fall that much further you basically have to have a depression? And in “Depressions”, even though rates decline, fewer people have jobs, incomes decline and the “demand” for home ownership falls next to zero.
And quess what? Back in 1989 you actually had to DOCUMENT your income and make a 20% downpayment! What a novel idea! I even have a feeling it will make a comeback.
So, you see record inventory, stagnant personal incomes, the affordability index at a record mal-extreme, record low interest rates (still) as factors that “support” current prices (much less provide room for any notable appreciation)?
Have you taken economics yet? Did they leave out the part about prices being set by “supply” and “demand”? Did your professor of logic explain how, when people can’t afford something even NOW, they’d be willing (much less able) to buy it in the future absent a decline in price, decline in cost (lower interest rates) or an increase in income?
Did you take psychology? You probably certainly understand the concept of “euphoria” where, because people are so enthralled they lose their normal skepticism. They don’t look hard at prices and risks, in other words. Well believe it or not, there is an opposing human emotion to euphoria called “depression”. That is when people get so discouraged, look so hard at the downside of every proposition, that they can hardly be stirred to take any risk.
Right now you are probably entering the first merely “sober” period in your entire career within your marketplace. I pray people won’t go further than becoming “sober” because the next emotional stage down is a bit too ugly to contemplate.
Best of luck with your business and investments.
Well your “view” that prices are where “they should be” is just about to get swamped by reality.
Pray tell, how does a ratio of probably 2 or 3 sellers for every buyer result in prices staying “where they should be”?
And assuming prices ARE “where they should be” how can they be sustained “where they should be” absent a rise in incomes, a drop in interest rates or an increase in “speculation”?
What you probably don’t understand is that just about 10 years before you got into the real estate business there was a mere “bust”.
Demographics back then were great, rates were headed down, incomes headed up…yet the real estate market tanked for at least five years. Oh, and back then you had a demand constraint called “qualifying for a loan” that, at least until recently, has become a quaint notion.
Is there anyone left who wanted to own a home (or two or three) in the last few years who hasn’t been able to buy due to lower rates, lower qualification needs and the certainty that what they were buying was going to appreciate?
And now? Will as many people qualify? Will rates drop further? Dramatically? Will incomes grow as rapidly as they did in the 90s? Will people now, automatically, assume price appreciation?
If you can tell me how demand will grow in a market where it was proved as recently as the mild 90s experience that real estate does conform to economic and investment reality, I will gladly send you a check for $100 to your favorite charity.
Give me the reasons, the logic and I will gladly cough up the dough.
Not sure why you guys were all over LAinvestor girl. My interpretation was that she thought prices should be at the 2000-2001 levels which I’ve heard lots of our favorite posters here also say.
My interpretation was that she was saying the correction hadn’t even begun yet.
That was how I understood her too.
Some of you are missing her point. She said that she thinks prices SHOULD drop back at 2000 levels, and that they have a long way to go to get to that level..
“Prices are still way, way, way above where they were in 2000-2001, which in my view is where they should be.”
I could be wrong, but I think lainvestorgirl is saying she thinks prices should be at 2000-2001 levels… based on her previous posts and my understanding of her last post.
I see your/her points. Sorry if I misinterpretated her statement.