‘Every Place That Was Hot Is Cold Now’
It’s Friday desk clearing time. “There numbers aren’t pretty, 20.7 percent of housing speculators in the Baltimore region reportedly lost money in the second quarter of 2006. ‘Speculators are taking a bath,’ said David Martz, a Realtor in Baltimore. ‘Rehabbed [houses] and new construction are hitting the market, and there is a glut of that inventory.’”
From Virginia. “‘You don’t want to get too greedy. When you get high appreciation like we have had and like other markets, you will fall off the cliff and it will hurt,’ said Wes Atiyeh, who is president of the Richmond Association of Realtors. ‘There’s more inventory than we’ve had in a long time,’ Atiyeh said.”
The Chicago Tribune. “There is no denying that the slowdown is taking a toll. Chicago-area sales in August were down nearly 21 percent from last year, while condo sales were off 11 percent. During the lull the inventory of homes for sale has grown about 40 percent from last August.”
“‘Too many sellers got greedy,” (realtor) James Merrion said in Elgin. ‘Prices have to come down.’”
“Not so, said Tommy Gentile, who has been trying to sell his five-bedroom home in west suburban Montgomery for about six months. He has reduced the price by $20,000, to about $380,000. ‘That price is pretty close to rock-bottom, as far as money we’ve put into it,’ he said of the house, bought two years ago. ‘We have to get our money back because we’ve bought another house, and we’re remodeling that one. We have two mortgages.’”
From Michigan. “Statistics show that the housing market has cooled across the United States. But that news doesn’t shake Lisa Damron, president of the Battle Creek Area Association of Realtors.”
“‘We do not accept the philosophy that the market is down,’ Damron said. ‘The more sellers keep a negative perception, the worse our outlook will be.’”
The Denver Post. “‘The national media would have people believe that the housing market is getting creamed, and that’s really not the case,’ said economist Jeff Thredgold. ‘Yes, there is a housing bubble on both coasts, but it is an issue somewhat exclusive to both coasts.’”
From Texas. “New subdivisions are popping up all over town in Austin. ‘There are just the right amount of homes on the market, so we are not like the rest of the country,’ Realtor Amy McDonald said. ‘I get sticker shock on both sides. I get people who can’t believe how inexpensive housing is. They come from big cities,’ McDonald said.”
“While many buyers are living their dreams of home ownership in Austin many have had those dreams shattered. ‘[There's] one foreclosure for every 142 households,’ Sally Borie of Consumer Credit Counseling Service said. Austin is now fifth in the nation for home foreclosures during the second quarter of this year. People move into homes that seem affordable at the time but they end up breaking the bank.”
The Arizona Republic. “New-home permits have been falling for months as builders try to sell their inventory of new homes. Valley housing analyst RL Brown said the housing market in the West had the steepest decline because it had been the most robust region. ‘Every place that was hot is cold now,’ he said.”
The Mail Tribune in Oregon. “Short-term real estate investors looking for a quick profit may now find themselves stranded in the slowing market. And that has contributed to a big increase in the number of homes for sale locally. Jackson County’s inventory of homes for sale crested at more than 2,000 in August. In the year 2000, it was typical countywide for no more than 900 homes to be on the market.”
“‘I think one reason for the increase of inventory is those investors trying to sell,’ says Bob Forest of Bob Forrest Loans. ‘The supply of new houses has competition from investors (trying to sell their properties), so there are excess lots and houses.’”
“One investment adviser says he’s not surprised by the burst of activity. ‘Most everybody is late to the dance,’ says financial planner Al Densmore. ‘They chase stock when the market is high and then they hear real estate is hot and get trapped. They’re sort of lemmings following the crowd.’”
From California. “‘There’s so many houses for sale on my street that I felt I needed to do something to get mine noticed,’ said Jean Simon, a of Corona, Calif. Since Doug found a new job on the East Coast, they want to sell fast so they can move.”
“After four months of trying to sell the house with no solid offers, the couple put the house up for auction on eBay. Simon says the $400,000 reserve price is a tad below the house’s fair market value.”
“‘We built up a lot of equity since we bought it, so it’s not like we’re losing money,’ she said. ‘But we’re motivated sellers who don’t have the time to find renters, and who don’t want to be saddled with property taxes and a mortgage for a house we no longer live in.’”
Another amazing week! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
This week takes the cupcake for being one of the best so far.
Think this’ll effect rents in San Diego?
http://www.signonsandiego.com/news/northcounty/20060929-1644-bn29escon.html
-affect
Cheap brandy.
Wasn’t this being tried in San Bernadino as well. Don’t remember how that worked out. Folks are keeping the A.C.L.U. busy these days.
Escondido is a fairly small city. I am guessing they will be branded racists and this will fail. Worse, illegals will just move further into wooded areas. The hills all over San Diego Canyons are a shanty town of canvas and tarps. Doubt it will effect rents at all.
Although Escondido is small compared to a large city, it is still fairly significant in size and has a very large Latino population (not sure how many are legal/illegal). This will be interesting.
What I would also like to see is strict enforcement of codes restricting the number of people living in a dwelling unit. This is also keeping prices of rents and for sale inventory exceptionally high since 20 people can easily afford $2,500 in a run-down 3/2 SFH. Most single families really struggle to pay the rental prices here in So Cal.
Smells like racism to me.
Areas of the City of Irvine in OC California, had parking regulations in place to the effect you were not allowed to park on the street at night and had to park your cars in your garage at night, presumably in an effort to make multi-family dwelling as difficult as possible. I agree code enforcement is the correct approach, rather than singling out any particular group. Also, I have seen many cases where extended families purchase a good size home and move in 20 to 30 people, effectively trashing a nice neighborhood, and this is what the Irvine parking regs seemed to target.
“I agree code enforcement is the correct approach, rather than singling out any particular group. Also, I have seen many cases where extended families purchase a good size home and move in 20 to 30 people, effectively trashing a nice neighborhood, and this is what the Irvine parking regs seemed to target.”
Whether a city/burb strictly enforces it’s zoning ordinances dependes on how “PC” they’ve gone. In Santa Ana, they are very lenient toward allowing multiple families to reside in SFh’s. The City of LA and many LA county burgs do not enforce their zoning ordinances as regards having multiple families to reside in an R-1 zone. This is a boom for owners of older SFH’s in older LA areas who can rent out to large extended immigrant families who can afford to pay $2000+ a month in rents thru 4-6 familiy members having jobs, even if they are all min wage workers. Code enforcement is a joke in the deterorating older LA innor areas!
I’d really like to hear anecdotal evidence from folks about the Bay Area. So far I’ve not seen any price drops personally. The inventory has moved from non-existent to a few months worth. Homes are still being snapped up in the $1-1-5M range. The people buying have 6 figure incomes, but that’s par for the course around here despite what the demographics say. The median income reflects people who rent and never plan to own. The folks on the high side of the median have high average incomes. I can’t discern any other reason why things don’t seem to be cooling here yet.
The reason you don’t see price drops is because most brokers are lowering the “list price” by a couple hundred grand to say the property sold for “above list”. EVERY area of the Bay Area is down. Look at condos, in SF units in the same building are not selling for $100K less than the Spring and the developers are throwing in a big screen TV and a year of HOA payments…
“‘We do not accept the philosophy that the market is down,’ Damron said. ‘The more sellers keep a negative perception, the worse our outlook will be.’”
Think positive. Think positive. Don’t look around. Close your eyes. Think positive.
Comedy.
- “Not so, said Tommy Gentile, who has been trying to sell his five-bedroom home in west suburban Montgomery for about six months. He has reduced the price by $20,000, to about $380,000.
****‘That price is pretty close to rock-bottom, as far as money we’ve put into it,’ he said of the house, bought two years ago.
****‘We have to get our money back because ..blah blah.
Hey Tommy - YOU ARE GOING DOWN!
Nobody cares what YOU and your bottom line are. Idiot.
Yep. Tommy is going to get a lesson on sunk costs and the laws of supply and demand.
“That price is pretty close to rock-bottom, as far as money we’ve put into it…We have to get our money back because we’ve bought another house, and we’re remodeling that one. We have two mortgages.”
Well, then, why don’t you just shove the POS under your pillow and wait for the tooth fairy? I smell another well marinated flipper heading towards the warmer regions of the BBQ.
BHAHAHAHAHAHAH !
Crash and Burn !
I wouldn’t expect anything different from a grown man who goes by the name of “Tommy.”
I resemble that.
Oh wait, I stopped using “Tommy” when I was five.
Never mind.
Yeah, this is a typical home owner/seller. They think people are going to care what they paid and will up thier offer to bail the poor guy out. A home is worth exactly what someone will pay you for it, period. Not what you need to break even, not what you list it for and not what it was last year-get real people.
> They think people are going to care what they paid
Yes, I do, if it was 1999 - I offer the same price plus inflation.
> They think people are going to care what they paid and will up thier offer to bail the poor guy out
An informed house buyer should certainly know this information, as well what mortgages were filed. If the offer is below the expected mortgage balance, the seller is probably not going to take the offer. So, just wait for the foreclosure, the bank will take whatever it can get quickly…
The market down is a “philosophy”?
Holy crap this is going to be painful for some people.
“close your eyes and think of England”
My mother told me that the day I got married
She was kidding.
I think.
“I refuse to think this ship is sinkinglublublubblub…”
Sounds like something she learned in charm school while she was working on her pageant rhetoric. Keep up appearances at all costs. Try to fool them as long as you can and stall while you sell everything off. Then let the chips fall where they may, after you’ve cleared your plate…
AZ-_BPr-
I do think this is a lot closer to what is really going on ….. the keeping up appearances that the housing value paradigm is valid …..
When I talk to people at work about the housing in our area (and many think I’m the new Yoda since I sold at the peak ….yeah, right, what a wizard), they tend to get a “shut the hell up” look on their face, but then know at the same time they are telling Yoda to shut the hell up ….. which leads to that sad clenched teeth, wide fake smile “I’m still ok aren’t I” pathetic wishful look of acceptance. I think I correctly advise they are ok, but the imagined appreciation displayed by our “fake smile, crap! Buy my house” sellers is likely to evaporate.
No one I know is a flipper, but I can tell it is widely accepted now, that talking about the market change is in vogue, even here in bumpkin land, Chico, CA.
Of course. If you want to see how it’s done you need to watch Kenny Lay’s pep rallys with the sucker Enron employees drinking the koolaide even after the whole charade was unravelling in front of their eyes. Quite skillful that Kenny-boy.
What these con artists have going for them, and they know it, is most of those listening really really WANT TO BELIEVE. That’s the key. You know all the FBs not only want to believe, they HAVE TO. At this point, it’s all that lies between their present uneasiness and certain unsolvency…
Of course. If you want to see how it’s done you need to watch Kenny Lay’s pep rallys with the sucker Enron employees drinking the koolaide even after the whole charade was unravelling in front of their eyes. Quite skillful that Kenny-boy.
I agree AZBP,
Unfortunately I see that play out again and again throughout our culture. I dare say (with great fear and sadness) that it has become our American way.
I’m starting to think the affordability index and the credit bubble concept will never be known to the common man. The blame will be like a sticky note on the back of some poor unsuspecting slob that was just a minor player.
Carrie, I’m afraid this is the oldest game in the book, only now we have laws to try and control it - marginally effective in the securities business but absent in RE. Kenny-boy is headed to prison.
DL, LAY, GWatts… can claim, against all sound logic that prices will continue to climb 20%/yr forever. In RE they don’t even need to qualify their self-interest-serving “opinions” with legal double-talk. It’s still the wild west in the RE business and the only rules that apply are caveat emptor.
Worse, these animals are hoping to offload their “mistake” onto some other poor unsuspecting soul. As far as outlook, keep hoping and praying, but realize prices are going down.
Greed got them into this mess and their continuing greed (of some) will worsen it. Some won’t believe “this is happening to ME” because they (wrongly) thought it was THEIR “genius” that got them to take the ludicrous risks in the first place. Those that have enough humility will get out, wounded, but not dead by taking “what they deserve” for making a bad decision. Everyone makes bad decisions. Face it, learn from it and take your medicine.
But I truly believe “what goes around, comes around”, seen it too many times when seeming greedy dopes “do well” (for a time) and then get wiped out when the game of musical chairs they’ve been playing, ends. The really greedy will never get the last chair. Why? Because they don’t recognize that they’ve always been in a game, one as old as time.
‘We have to get our money back because we’ve bought another house, and we’re remodeling that one. We have two mortgages.’”
Such a sense of entitlement!
“‘We do not accept the philosophy that the market is down,’ Damron said. ‘The more sellers keep a negative perception, the worse our outlook will be.’”
If you wish hard enough, your problems will go away! WHEE!
‘We have to get our money back because we’ve bought another house, and we’re remodeling that one. We have two mortgages.’”
This attitude is exactly why this bubble will be a slow painful grind down for the next few years.
I talked with a builder friend today who is sitting on a spec house that he has reduced to breakeven. He can agree with all the facts I present right up until he has to admit to himself that there may not be a buyer for his property.
Let’s see, should I pay more for House A because Tommy G. “has to get his money back,” or should I pay less for House B (identical to House A) because they are not letting their financial errors control their home price as Tommy is?
I think I’ll buy House B, and then Tommy will be my neighbor, and I will park an old fridge on my porch, drink beer, burp loudly, and wear an old nightgown and fuzzy slippers when buyers come over for Tommy’s endless open houses.
I actually see this speeding up. The other guy with two morgages is prime example why prices will speed up toward year end. No one is buying his home.
I hear you T but I think alot of people are going to go down with the ship after using any wealth or credit they have to keep it aloat.
It took the Titanic several hours to sink.
Come to think about it, that’s my favorite part of the movie — watching those little people fall and hit the water, or the propeller.
I always thought that scene where “the steerage” fight each other in the frigid water for anything that’ll float while the wealthy watch in horror from a comfortable distance was compelling.
I think both Thomas and waaahoo are right. The only difference is how long Tommy G. (and that ilk) can keep paying 2 mortgages. If they have endless credit it will be very slow. If the credit cards are maxed out and the HELOC ATM is empty, it will be fast.
There certainly are no shortages of chumps willing to get quoted in these stories.
Yeah the first step in their long education process is going to reading their own quotes until they understand how clueless they sound.
“‘We do not accept the philosophy that the market is down,’ Damron said. ‘The more sellers keep a negative perception, the worse our outlook will be.’”
Just click your heels once, twice, and then three times and say there is no place like an up market and that will fix the housing crash that is coming down on top of all of us. Oh by the way go back to school and get a degree that actually benefits economy. Fat, lazy, and selling real estate is no way to go through life.
Or perhaps the house will fall on her and she’ll have to give the magical ruby housing slippers to a bubble sitter.
We have to get our money back because we’ve bought another house, and we’re remodeling that one. We have two mortgages.’”
OK all you renters out there, not to mention homeless people, not to mention the hard workers who have put their lives on hold, those who have not raised families because someone else needed 10 spec homes and left you in the dust….
LET’S ALL help this poor guy. If everyone here would just chip in $5.00 to a special fund that we can set up in some bank we can donate the proceeds to help this poor mentally improvished individual pay off one of the mortgages and maybe, if everyone is generous, both mortgages. Enough of this bashing of the get rich quick crowd, lets forget and forgive and raise money for them so they can get back in the game…
WHAT DO YOU ALL SAY?
OK, everybody ready? On your mark,
SCREEEEW THAT!
(Cheerleaders jump up and down, shake pom-poms and all that)
Pee Wee Herman (in high voice): “I say we let him go!”
Bikers in Bar (in unison): “Noooooooo!!!!”
Ahhh geee that’s so nice and warm and fuzzy ….
Nah ah pal! Ain’t happening!
Instead, let’s pool our money and buy ad space in a few major papers and simply invite distressed sellers to this blog where they can get a different perspective that may just help them get out of this thing with their arse intact rather than making a bad problem worse by trying to hold on. What’s it cost? OR how do we get Ben interviewed by the NYTimes, LATimes, WashPost, Miami Herald, Chicago Trib, etc.? That is free exposure. Get the word out that there is a place to come and hear the truth as we see it. They may not like it, but someone has to tell them.
Thanks for making my work days tolerable!
Auction off houses on ebay is no cure for the re ills. unless it’s a darn good deal, the house will get zero bit. putting the house on auction with reserve is just another way of chasing the down market. how stupid can people get. price right and sell. dooooohhhh. haha.
I blame ebay for having a have “reserve” auction as an option when they already have a minimum bid set by the seller. It’s the stupidest thing on ebay, period. And there are many stupid things about ebay.
and who would buy a HOUSE off ebay? has anyone ever actually done this? crazy. sure, i’ll just paypal 400k right over to your account! in fact, the whole home auction thing just makes me wonder, who buys a house at an auction (other than the foreclosure experts) — all these stories about home auctions being the new hot thing - any data on homes selling this way? i just don’t see it as a good idea. more of a desperate act, i guess.
There were plenty of sight-unseen ebay RE stories 2004-2005.
Hey Li,
When you think about it if you buy something at auction you are guaranteed to overpay for it. When the gavel bangs you have paid more the item than anybody else was willing to pay.
Who are you going to sell it to?
It’s called the Winner’s Curse. Check out the link for Wikpedia’s full explanation.
http://tinyurl.com/hehfg
much like buyer’s remorse?
WaitingInOC — thanks for that post. I found the description very useful in that it will guarantee I keep my enthusiasm in check in any bidding exercise. Have done so, so far, but this exxplains why, in a reaffirming way.
lol — glad I didn’t misspell with “exxxplains.”
Actually, you can have a “Dutch Auction” and avoid the “winners curse”.
All the bidders put in the highest price they are willing to pay. The bids are simultaneously unsealed. The highest bidder (of course) wins but they don’t pay their bid, the pay the NEXT LOWEST BID. Could be a penny less, could be a million less.
The point of the auction is to attract as many “real” buyers as you can and then encourage them to bid as high as possible. Think about it; you really like something or you think something is worthwhile at X price. The thing in the back of your mind is “Geez, I don’t want to pay a dime more than I have to for this, I like it at X or less but I don’t want to ‘be a sucker’ ”.
Dutch auction solves this. Unfortunately, it is a strategy that is better served with something fairly distinctive. Might be a number of people who want a particular car, type of house or whatever. Don’t think it will work well with mundane objects or property unless you can somehow attract many, many bidders somehow.
It’s not even buying the house, it’s just “expressing serious interest”
from ebay:
By participating, you are not entering into a contract to purchase this property. You are, however, expressing serious interest in the property and in pursuing contract discussions.
To place a bid of US $15,000.00 or more, you’ll need to provide a valid credit card or complete the ID Verify process ($5)
“‘We built up a lot of equity since we bought it, so it’s not like we’re losing money,’ she said. ‘But we’re motivated sellers who don’t have the time to find renters, and who don’t want to be saddled with property taxes and a mortgage for a house we no longer live in.’”
Great attitude! We’ll see a *lot* more of this soon as inventory stays high and those who have owned > 3 years (non-flippers) find a reason to move.
Although, that $400k reserve might be too high…
Neil
attitude? it gets better. this is whats on the auction:
PLEASE NOTE: This house is not yet listed on MLS or Realtor dot com. When this auction is over, if it has not been sold, it will be listed with a realtor and put on MLS and all the popular homeseeking websites, with a increase in selling price to cover realtor commissions of $20K+. If you are interested in purchasing this home, please bid or contact us soon.
http://tinyurl.com/nuucg
Like it matters to a buyer what the seller has to pay a realtor.
LMAO
Exactly. As a buyer, the selling price is just that. If it won’t sell at $400k, why would it sell at $420k? Wait a second, $420k*(100%-6%)=394.8k.
It looks like they’ll be following the market down. What FOOLS!
Neil
Ps, I take back my comment on attitude.
Not to mention that eBay selling fees bottom out at 1.5%, so the cost of selling this house (if it were to sell) is more than $6K in eBay fees. So using their twisted logic, they should subtract their “saved” eBay selling fees from the new listing price, right?
And if they still own some drkoop.com, I’ll be happy to consider buying that at their cost basis (plus a fair normal market return) if they’ll just bake me a few cupcakes!
fyi…it is over priced for the area. I’m in corona this week end, I might swing by there and take a peak at her cupcakes.. er i mean house.
I live in Corona and I know for a fact this house is over priced by at least 150K. Oh yeah, the location where the house sits is crap!
Crap? Is it a former dairy farm?
Yawn. Call me when the asking price reaches $225K.
‘But we’re motivated sellers who don’t have the time to find renters’
But they have plenty of time to make a pretty listing on Ebay and sell ribbons!
How is that people convince themselves that if they tell an interesting enough “story” someone will emerge as a buyer (at their “stupid” price)?
Do they really think they are that “charming”? Clever? Do they stop for even a moment and think from a BUYER’S perspective? Maybe there are still some dopes buying properties mid-avalanche, maybe some can be “charmed” with a candle, cupcakes, a home’s “story” or a “clever” auction on ebay. Maybe. Maybe there’s one…..in a thousand.
Doesn’t any new homeowner out there know the difference between appreciation and equity?
My new bumpersticker:
Tommy Gentile and Jean Simon. Two reasons for betters schools.
Betters? Me needs more edukation to.
Stick ’round hear, you sho nuff be fixin to get an edumacation.
hehehe
Hey … I gots a edddukaton in public skool rit her in Kalifonia. U lookin at me?
‘That price is pretty close to rock-bottom, as far as money we’ve put into it,’ he said of the house, bought two years ago. ‘We have to get our money back because we’ve bought another house, and we’re remodeling that one. We have two mortgages.’
You may think you’re at rock bottom but remember that the tides are still low…. With 2 mortgages, the water currently at your ankles will devour you.
Hmm, I like the tide analogy but I think they’re neck deep and nekkid, and the tide is going out.
I think they’re neck deep and nekkid
Kirk - you gotta be a Southerner - everybody from south of the Mason-Dixon knows that “nay-kid” is what you are when you step in the shower, but the rest of the time you’re just plain “nekkid.”
I thought ever-body knew that.
Nay, I’m a brit that moved to San Diego as a wee lass. People in New York tell me I sound like a surfer. “Neck deep and Nekkid” just had a nice ring to it in my brain.
But… Ron Paul is my hero, I hope that makes me a little Texan.
I dunn got C’s att Yail, wich is faylin graydz fer th’ Ivee Leeg.
Now I’mm th’ PREZIDUNT!
GO TEEM AMERUKA!
Rock bottom is when you appear at your first HAT (homeowners annonymous in trouble) meeting and say “My Name is Flipper, and I am a homeowner in trouble”
Now that’s rock bottom
That Tommy Gentile most definitely does not have a yiddische kopf.
!!משוגע גוים
Anyway, I need to turn off my computer and get ready for Shabbat Shuva!
Have an easy fast, Reuven!
OK — what’s a kopf?
Head.
“Not so, said Tommy Gentile, who has been trying to sell his five-bedroom home in west suburban Montgomery for about six months. He has reduced the price by $20,000, to about $380,000. ‘That price is pretty close to rock-bottom, as far as money we’ve put into it,’ he said of the house, bought two years ago. ‘We have to get our money back…
Does this guy really believe what he’s saying?!? What is it about real estate that makes people think that the law of supply and demand are suddenly inoperative?!? Do you think that anyone would ever say something like, “well, I’m holding out for $150/share for my AOL stock, since that’s about the amount of money I put into them”?
Unbelievable!!
Like they say, nobody likes to take a loss. But by not cutting your losses you will take a bigger loss in the long run.
Loss, what loss? They’ll simply pull it off the market and rent for the next 17 years till the market comes back. Sure they might be $2000 in the hole per month, but it’s a long-term investment now.
Tommy G is another nitwit. Maybe someone should point out to him that at least he didn’t “throw away his money on rent”. It’s much better to throw it away on double mtg payments on 2 depreciating houses.
I want my Enron money back too. Waaaaaaaaa!
“What is it about real estate”? Its probably because it is so personal. It represents a huge part of people’s lives. Homes our shaped by our visions, not society’s. Don’t all of us think that our personal taste is as good (if not better) than anyone else? If we thought otherwise, we’d probably change it.
No, the problem is for the Tommy Gentile’s is they somehow become CONVENCED they are right. It probably has to do with other parts of their lives where their “superiority” to others is somehow “confirmed” or at validated. Tommy’s going to get it….I’ll bet a lot of people Tommy knows won’t be too upset.
I would just like to say Thank you Ben for having a forum for me to Vent… I am reposting this link cause I want everyone who has not seen it to view it. I am sorry to those who have seen it in the past..That couple got screwed but they we not completely innocent. http://cbs5.com/video/?id=16607@kpix.dayport.com
M/40
I just watched that video.
I think that they may have got cause and effect backwards. They say that the banks started offering these loans because people’s salaries weren’t keeping up with house prices.
I think that house prices went up BECAUSE of these loans. If nobody could afford them, then prices wouldn’t have gone up.
No person who actually makes or has the money would get a stated-income loan. Why? because the interest rate is HIGHER for a stated income loan.
There are only three possibilities:
1. The person has no way of paying
2. The person has under-the-table income (while I don’t approve of tax cheats, i don’t think everyone a person does business with should have to play policeman for the IRS, so this case is marginally “OK”)
3. This person has relatives that will pay the mortgage (who would rather not be cosigners.)
Each scenario isn’t really optimal for the lender. But #1 only serves to distort the market, inflate house prices, and cause a big boom later on. #2 and #3 have less impact on the community.
#4. Tax returns show a loss (not neccessarily cheating but legit write offs)
I think what happened, was that some lenders began to push these and approve higher amounts. These loans enabled potential buyers to outbid the legit loan crowd and so in order to compete… Yes a vicious cycle .
In economics there’s something called Gresham’s Law. Here’s the definition: http://en.wikipedia.org/wiki/Gresham’s_Law
According the Gresham’s Law, bad money crowds out good money since people are more likely to pass around (spend) the bad money.
How does this apply to the housing market? I see that people willing to take out toxic loans gain a temporary advantage over those who use more traditional loans. Their toxic borrowers in effect have as their advantage their willingness to take on crazy levels of debt. Over time, the bad borrowers crowd out the good ones, since it is impossible to buy in some markets with a traditional loan. The tragedy is that those who are prudent and conservative are punished by being excluded from the housing market. Until the crash comes… he he he
And, after watching that women who makes 2700/month with a husband on disability cry her eyes out that she can’t pay the 3500/month mortgage….I looked at the ad on the bottom of the page:
CA Mortgage Rates Near 39-Yr Lows
$510K loan for $1,639/mo. Think you pay too much? See new payment!
http://www.LowerMyBills.com
I am SO TIRED of seeing “LowerMyBills” ads!
They’re on MSNBC. They’re on Wunderground.com. They’re on Yahoo. They’re just about every freaking where on the net! ArrRrrRRggGGggghhhh
“‘That price is pretty close to rock-bottom, as far as money we’ve put into it,’ he said of the house, bought two years ago. ‘We have to get our money back because we’ve bought another house, and we’re remodeling that one. We have two mortgages.’”
The funny thing is the mindset that because you are trying to sell something for what you put into it that means it is priced right…..might it be that YOU PAID TOO MUCH FOR IT IN THE FIRST PLACE??? No, couldn’t be…….it’s a house….they only go up!!
I can imagine Realtors in the future google his name and declining to help. Why bother with a stubborn seller, you’ve got your own paycheck to worry about.
Hey txchick…if you’re out there, a realtor in SF emailed me a listing you might want to see. If you want, I’ll email you the link.
catherineiw@yahoo.com
Will do.
“One investment adviser says he’s not surprised by the burst of activity. ‘Most everybody is late to the dance,’ says financial planner Al Densmore. ‘They chase stock when the market is high and then they hear real estate is hot and get trapped. They’re sort of lemmings following the crowd.’”
Poor Joe and Jane Sixpack just don’t get it. They buy an investment when it hot and most of the time overvalued. Then when things fall apart, they sell at the bottom and take a loss. Buy when when an investment market is cold and in due time it will be hot. After a few losses, hopefully some of them learn how to invest.
Hard to believe two major bubbles in less than a decade - the tech boom and the RE boom. The big players got rich in both and Joe and Jane Sixpack took and will get a beating in both.
“Hard to believe two major bubbles in less than a decade - the tech boom and the RE boom. The big players got rich in both and Joe and Jane Sixpack took and will get a beating in both.”
A buddy of mine made big bux in the Dot.com boom of 2000. He sold his options and made a bag load. So stupid him went out and purchased a big house in nice part of town. Sad to say he accepted another offer for a job. To his shock he sold at at loss ~ around $400K. Big money means you can loose much more and really cry over it.
I don’t believe that there have really been two bubbles, just one bubble that crept into different places. The same attitude fed both bubbles.
I agree with you. The tech recession of 2001 - 2003 wasn’t enough to kill the “I deserve to be wealthy” attitude.
It has been a rip-roaring week! Moreover, it’s been really edge of the seat gripping watching the sea-sawing affect on price between supply and demand.
Initially, demand was so heavy and supply light that price flew off the saddle. Now, the market is at a gunslinging stalemate, buyers and sellers are carefully eying each other while supply mounts.
And as supply mounts, demand is wasting away; as a result, price hangs precariously in the balance, edging towards the precipice, inching closer and closer to the abyss. It’s obvious, supply is gaining weight. It is only a matter of time before supply crushes price.
Reminds me of the Robert Mitchum character in “Night of the Hunter” who had “LOVE” and “HATE” tattoed on his knuckles, and he psychotically tells everyone the tale of the struggle between love and hate by clasping his hands together. David Lereah could tattoo “PRICE” and “INVENTORY” on his knuckles and do the same routine (any truth to the rumor he has 9 digits on one hand?)
Nope, he has three hands! That leaves room for an exclaimation point.
What I would give for a one handed economist!
I’d have thought David would have “LIES” and “TRUF” instead.
[Denver Post] “‘The national media would have people believe that the housing market is getting creamed, and that’s really not the case,’ said economist Jeff Thredgold. ‘Yes, there is a housing bubble on both coasts, but it is an issue somewhat exclusive to both coasts.’”
I live in Tucson. Can somebody please tell me how I get to the beach?
Sure. Apparently you’ll need to go through Phoenix, Colorado, Las Vegas, Reno, Salt Lake City, Boise, and a few other coastal bubble cities, but it should be right there. Can’t you feel the cool ocean breeze?
The beach in Tucson? That’s easy! Just head down to any of our normally dry washes during a rainstorm. Then watch the SUVs try to beach themselves after they drive into water they can’t get out of.
Yes, we do put barricades up to prevent such behavior. But it happens anyway. And that’s why Arizona has a Stupid Motorist Law to get people to pay for the cost of their swiftwater rescue.
LMAO when I lived there I never quite understood why people did that every year during monsoon. Never failed
Just head down to any of our normally dry washes during a rainstorm.
Did you hear the one about the Arizonian who travelled far, to see the Mississippi River? He returned home disappointed, telling everyone that he never did get to see the river, ‘cos it was covered by water.
Taks Ajo (86) east all the way to Why, turn left onto 85, cross border into Mexico, drive another 60 miles and hey look you’re at the beach, and in under 4 hours! LOL.
“Take Ajo west”
lol, typos.
That’s what I was going to say. It’s really not that far! Only a little longer than driving from Dallas to the beach.
I go to that dumpy little town once a month. The water’s salty and warm. Nice….
It’s astounding how many condos there are, and, how expensive they are. Something tells me they’re going to get a lot less expensive real soon.
I live in Tucson. Can somebody please tell me how I get to the beach?It’s in Yuma. Oh, wait, that’s _after_ California sinks into the Pacific from an earthquake.
Free air conditioning, ’50s-style — the sign-twirlers will cool you off.
I don’t know who this staff writer for the Denver Post is trying to please but I am here in Denver and this is a blatant lie! There is an area called Highlands Ranch. An employee of my husband took a job in another city…over a year ago and can’t give his home away…prices down over 30% and nothing. We are looking in the Boulder County are (About 20 min from Denver) and I viewed a property yesterday that is down over 50% from a year ago and the landowner has sold his water rights leaving the property virtually worthless. The beach is right here in Denver! We continue to rent!
Agreed. This man has blinders on. Adams county is a bloodbath. I rent in Stapleton (tons of REIC kool aid drinkers), and prices are heading down, albeit slower than I would like to see. New homes keep sprouting. Jon Laing, a builder, recently courted my wife and I by offering a 40 year mortgage, maintaining their prices would never drop (they don’t have to, they build with quality ;). No thanks. I can’t wait to hear back from them in November, and then a again in March, July . . . Perhaps I can keep stringing them along through ‘08? ‘09?
Okay Jeff, just the “coasts” are affected. So, how much of the nation’s population lives along “the coasts”?
50%? 70%
And Jeff, how much of the countries wealth resides along the coasts?
70%
See the “national” problem now Jeff?
“‘The national media would have people believe that the housing market is getting creamed, and that’s really not the case,’ said economist Jeff Thredgold. ‘Yes, there is a housing bubble on both coasts, but it is an issue somewhat exclusive to both coasts.’”
Really? So why does Colorado lead the nation in foreclosures? Jeff, you need to learn that this bubble was based on vast amounts of credit, and that infected just about every town in America, including those in Colorado. Just because Colorado didn’t have as much as run up in prices doesn’t mean that it wasn’t a bubble area - it was, and it will suffer just like all of the rest of the bubble areas.
Yeah, that guy is a total fool, YO JEFF:
Milwaukee Median household income was $37,808 - down from $38,303 in 2004. While home median prices are up 55% since 2000 in Milwaukee. It’s over 5X median income now here in Brewland. Amazing. Do we count since we’re on the “coast” of Lake Michigan? geez
Indeed. The Great Lakes and the Mississippi River are navigable waterways under Federal jurisdiction and patrolled by the United States Coast Guard. So, yeah, y’all are counted in the “coastal” bubble.
Jeff is actually based in Utah. He constantly talks about how Utah is immune to the national housing trends. He loves to tout how immigration will keep Utah house prices up.
He is associated with a large regional bank (Utah, Arizona, Colorado, Idaho, Nevada holdings) based in Salt Lake City (Zions). May have something to do with his happy attitude.
Of course if you look closely at immigration, most of the folks are undocumented — so sure, they will be snapping up all of those $400k houses being built around here with their low-end wages.
He neglects to mention any impact of ARM’s, Option Arms and I/Os that are very prevalent around here.
jb
No-Doc loand for No-Doc buyers.
Makes perfect sense to me.
Aha! The Bob Woodward of Ben’s blog. Anything else to dish, JB?
Used to “work” with people at Zions….not surprised that an intellect like “Jeff” finds comfort and respect there. Nice people, don’t get me wrong but lets just say decisions were not their forte.
News from the trenches:
Spoke to a guy who does sales for one of the big home builders in Ventura CA. County. Asked how new home sales were going? He said “thing have slowed down some, but they will stay even then go up.” I usually keep my mouth shut, but this time I spoke up:
Really, I hear thing are going down! His reply: Not in Ventura County, everyone want to live here! Sales are still up in Ventura County.
I challenged him some more: I said I see numbers going down: His reply: “Well we must be looking at different numbers!”
He is an old nice guy so I said, yea I guess we are. I walked away in awe, people in the business have not clue.
Realtor friend in San Fernando Valley has just started escrow on two condos this week. I am still amazed that people are still buying. Most of these new buyers are buying after the price has been discounted/reduced. There are a lot of GFKCs out there (Greater Fool Knife Catchers) out there.
Most are not new fools, but old fools buying while prices are still “cheap” but somehow still thinking their old place is still appreciating. We are out of new fools. Nothing left but some middle-of-the-ponzi old fools who want to line up for the ass-whomping at the ass-end of the pyramid as well.
-Lisa Damron, president of the Battle Creek Area Association of Realtors says . . .
“‘We do not accept the philosophy that the market is down,’ Damron said. ‘The more sellers keep a negative perception, the worse our outlook will be.’
Keep it up Lisa - just don’t write any checks on your ‘perception.’
You don’t have to accept it Lisa, but it is what it is, and wishing won’t change it. But if you actually want to make any commissions, you’re going to have adjust the reality that the market is down, and it is going to continue going down for some time. A smaller commission is better than no commission.
Talking about “philosophy”!!!
a quote from Plato…”The worst of all deceptions is self-deception”
This woman reminds me of Annette Benning as a housewife/realtor in the movie “American Beauty”.
Makes me recall the scene where she’s a vacant house saying the mantra, “today, I’m going to sell this house!” over and over…then ends up screaming in agony at the end of her “open house.”
Classic.
DOC
“That price is pretty close to rock-bottom, as far as money we’ve put into it,’ he said of the house, bought two years ago. ‘We have to get our money back…” IT DOESN”T MATTER WHAT YOU PAID FOR/PUT INTO IT! The Buyer DOES NOT care, and WILL NOT pay for your mistake! REDUCE THE PRICE!
“We have to get our money back because …”
We’re in beta-testing now, but I am about to offer, free to any of Ben’s bloggers, a software utility that will scan virtually any set of online real estate ads and eliminate any ad with the above phrase in it. But wait! There’s more! it has the option of auto-responding with the appropriate put-down of your choice (no curse-words, just punchy, painful English).
“Because.” Is there some giant tribe of squirrel-lovers out there who think I care WHY they want more for their house than they will get? As Robert so aptly coined it a few months back, these people have set a “wishing” price for their home. I’d at least have a little sympathy for an add so phrased, such as “we’d like to get,” though at that they are wasting precious characters of screen text.
“‘We do not accept the philosophy that the market is down,’ Damron said. ‘The more sellers keep a negative perception, the worse our outlook will be.’”
yup. i’ll remember that the next time i break my arm.
“it’s not really broken, it’s fine”
So you don’t even have to have a null hypothesis in a statistics argument these days? At least try to admit the housing bubble may be true and use facts and arguments to refute it. C’mon know, that’s as easy as a lazy man’s scientific method can be! Are these folks so lazy that they can choose just to disbelieve the information that is laid out before them?
So if I drink drano and believe that it won’t hurt me I’ll be fine right?
“‘We do not accept the philosophy that the market is down,’ Damron said. ‘The more sellers keep a negative perception, the worse our outlook will be.’”
Neither do ostriches. Enjoy trying to breath with your head buried in the sand.
“After four months of trying to sell the house with no solid offers, the couple put the house up for auction on eBay. Simon says the $400,000 reserve price is a tad below the house’s fair market value.”
According to what fraudulent appraisal? If the home does not sell within a week or so, then will that mean that the reserve price is a tad above the house’s fair market value?
Robert Cote is one of our most clever coiners des mots; wonder if he can come up with a good one for “reserve price?” “Wishing price” is not good enough, RC — requires no effort and you’ve already used it for the listing price.
I would think that the reserve price would be the “whining price”, since it would the price where the hopeful seller starts to whine about how much money they “need” in order to sell.
How about “chasing price”? (As in the price they chase at each step to the bottom.)
If he KNEW the “fair market value” he wouldn’t be auctioning it would he?
He’d price it “at the market” and it would sell. Period.
‘Speculators are taking a bath,’ said David Martz, a Realtor in Baltimore. ‘Rehabbed [houses] and new construction are hitting the market, and there is a glut of that inventory.’
And so the great real estate karma cycle is completing another turn of the wheel.
To let pricing stop at what can be sold is a great attainment. Those who cannot do it will be destroyed on the lathe of heaven.
Apologies to Chuang Tse.
“Not so, said Tommy Gentile, who has been trying to sell his five-bedroom home in west suburban Montgomery for about six months. He has reduced the price by $20,000, to about $380,000. ‘That price is pretty close to rock-bottom, as far as money we’ve put into it,’ he said of the house, bought two years ago. ‘We have to get our money back because we’ve bought another house, and we’re remodeling that one. We have two mortgages.’”
and a “Heckeva job you’re doing Tommyboy”
2 mortgages…Dah ?????
“When you get high appreciation . “‘You don’t want to get too greedy. When you get high appreciation like we have had and like other markets, you will fall off the cliff and it will hurt,”
little FB fall down, go boom…
battle creek and denver- it’s the black night from Monty Python again !
THEY’RE DOING IT AGAIN!
Some kind of anarchists or something are going around Portland, Oregon at night slapping these things on all the For Sale signs they can find so that it looks like all the houses in the neighborhood are reduced.
Great work, Michael. We won’t tell.
More people should do the same, only with 50% off decals.
Ahh… the ol’ New Price trick. Yeah, I stopped by one of the houses that had “new price” that was actually the previous price. I thought it would be fun to pull all the flyers out, and put them back in, upside-down.
I took a yellow “Real Estate Investor seeks apprentice 10k” sign out of the ground yesterday. This weekend I’m going to modify it to replace the word apprentice with “bagholder” and replace it in the exact spot I took it.
To shed some FACTS on the “Dallas Report” in this post…..
The realtor said, “”There are just the right amount of homes on the market, so we are not like the rest of the country,” Keller Williams Realtor Amy McDonald said.”
If that’s the case, perhaps she can explain why I’ve received two emails from builders who have offered a straight discount off the listing price. One for $25k and the other for $20k. One listed for a tad over $354k and the other was listed at $369k. I can’t answer the logic of the difference in discounts; just share the facts.
Is the market falling off the table? Hardly
But, if you have the “right amount” of inventory, why do I get such emails and updates with “price changes”?
I am seriously following the Austin market so I talk with realtors a couple of times a week and get daily MLS updates.
I was making a clever analogy between marketing and the sexual expectations of the buyers using street level language and my post just wouldn’t show up. See, when people buy a house, or anything else, the ultimate expectation is that it will get them some sex. Toothpaste, cars, vacations, homes, whatever. It all boils down to how much sex and how soon will I get it.
It doesn’t always work so well. I had a 4 bedroom house, and an SUV. I was single, living alone. I was dating a beautiful blonde, but she got scared off when her friend pointed out that I have the perfect environment to raise a family immediately.
I later found this out and laughed. I told her that I had no intension of ever having offspring. That turned her off even more.
Next time, try dating an intelligent, honest, trustworthy, so-so looking brunette.
I had to call my husband over for that one, George. He laughed and walked away as the reality is we had much more time for that type of fun when there wasn’t grass to mow, flowers to plant, gutters to clean, leaves to rake. When the kids are gone I think we’re gonna sell the house and live on a boat…now that would be more likely to include some expectations.
George C. …..I think this blog has never talked about the sexual expectation regarding real estate . I might be a interesting subject but than again ,knowing this group ,we would be cracking jokes the rest of the night .
For dear old Tommy boy and his 2 mortgages. I think I exhibited my unsympathetic rant yesterday regarding the folks in Minneapolis. I say ditto for Tommy (see yesterday’s blog). A lot more unsympathic bloggers. SWEET.
Hey Tommy. See you in BK court!
$380K for an average house in Salt Lake? It is immune to a bubble, based on some clown from Zion’s bank. I grew up in SLC. It is a beautiful place. But I can’t see the houses there staying at that level, and it is definitely immune, unless of the California floppers are moving there and will agree to buy and sell each other all of the overpriced POSs and the Zion’s bank guy will provide endless financing! ha ha ha
Housing WIzard - would make this a fun place to hang for the night.
The only think I can think of is this …Women like houses so if they get what they want than males get what they want .
As John McLaughlin used to say . . . .
Wrong!
My husband lived in his cousin’s home with 3 other guys when we met. His cousin and he had taken good care of it. Yet once engaged , his cousin’s fiance didn’t want to live there. They sold it and bought a condo. It was probably a smart move since they were both workaholics and the condo was closer to her work.
Having grabbed a pretty high rung on the ladder at Sun Microsystems…she could have probably paid cash for a home herself if that’s what was important to her. I found your “women like houses” comment to be a pretty broad stroke. May I suggest you might have been referring to the women you chose to spend time with.
Another point to consider: one of our partying friends on the Cape had his wife move into the home he had lived in for over 10 years. His antics were legendary. We always felt sorry for the ghosts she had to live with.
I made the comment to get a conversation going. No offense .
I was just interested to see if any posters felt that George C’s comment had any merit .
I can get sex and a $500,000 mortgage for “only” $1000 a month?
Where do I sign?
Well sortof. Unfortunately, once the mortgage adjusts one or two times you actually stop having sex altogether. It’s hard to maintain an erec, errrr relationship, when deep stress, mounting bills, lack of sleep, and general hatred for the house interfere with your physical, errrr psychological relationship.