Post Local Housing Market Observations Here!
What do you see in your housing market this weekend? Here’s one from Louisiana. “‘Homeowners are looking across the street and saying, ‘Well if they got that much for their house, I’m going to sell mine too,’ said real estate agent Larry Haik in Slidell. ‘But what they don’t realize is that there are so many houses on the market that it’s turning into a buyers’ market…. Housing prices are coming down, but the average Joe doesn’t know about it.’”
“‘”It’s getting scary,’ he said about the real estate market in Slidell. ‘There’s a nationwide slump in home sales, but it’s worse here.’”
From Canada. “In Ontario, Quebec and Atlantic Canada, more reasonable sales volumes and moderate price appreciation suggests the market is gradually working its way back to more normal historical levels. ‘Gone is the sellers’ market that we have lived in for some years,’ said Phil Soper, CEO of Royal LePage Real Estate Services.”
“Rapid appreciation in Calgary’s housing market is scaring away some buyers, says a report. ‘We are now beginning to see a shift in the purchasing pace. We are seeing that buyers have become reluctant to get involved in the frenzy that has typified the city’s market up until now,’ said broker Ted Zaharko.”
“Zaharko said many buyers, and some sellers, are no longer willing to take part in the chaos of Calgary’s housing market.”
“Canadian economists are postulating that we’re in a housing boom with much time to go on. But some fear it’s becoming a bubble. In a conversation the other night, a single mother of teenagers told me she’s considering investing her entire pension fund, probably the most money she’ll ever see in her lifetime, in property.”
“She’s bought into the current mantra that buying residential property realizes greater returns with no risk attached because everyone says there’s no end to this boom.”
The Royal Gazette. “A leading realtor yesterday said she had not seen so many homes available on the Bermuda housing market in ten years as there are now. Susan Thompson has noted a ‘glut’ of condos available which has even persuaded some developers to drop their prices. It was not that people could not afford available properties, Ms Thompson said, rather it was a case of people waiting for a downward move in the market.”
“‘The inventory is the highest I have seen in ten years and a good two-thirds of what is available is in the condominium sector,’ Ms Thompson said. ‘There is a large glut of condos at this time and we have seen developers put their condos on the market at one price and a few months later, drop that price.”
The Times Herald from California. “During the current Bay Area real estate market slowdown, any edge a Realtor can find, could mean the difference between success and struggle, said Paul Winders. Winders said he was there looking at ‘what new technology I could use to differentiate myself from the others’ in this less-than-perfect real estate market.”
“The current slow market is expected to last at least a couple of years, Winders said. ‘There will be a lot of foreclosures and short sales,’ he said.”
“A short sale is when the seller owes more on his home than the home is worth and the lender agrees to accept a payoff amount of less than what’s owed on the home. In an increasingly competitive buyers’ market like Solano County, anything that helps attract a dwindling client pool is welcome, Winders said.”
Here is the most recent New Jersey market report, released late Friday afternoon by the Otteau Group, a local appraisal firm:
The residential market rebounded slightly in August as buyers took advantage of softening prices and declining mortgage rates. August contract-sales activity ran 6% higher than July, suggesting the overall market deterioration is beginning to slow. Also noteworthy is that the Unsold Inventory of homes on the market increased by only 1% in August, as compared to a 47% increase over the 1st 6 months of 2006.
Also contributing to the August sales performance are declining mortgage rates and unemployment rates as the Economy continues to create new jobs. According to Freddie Mac’s Primary Mortgage Market Survey® (PMMS®), the 30-year fixed-rate mortgage (FRM) averaged 6.31 percent for the week ending September 28, 2006, down from last week when it averaged 6.40 percent. Rates have declined for 8 of the last 9 weeks and are at their lowest since March 2, 2006, when they averaged 6.24 percent. Last year at this time, the 30-year FRM averaged 5.91 percent.
A closer look at Unsold Inventory indicates an overall supply of 8.5 months, down slightly from 9 months in July. One year ago, Unsold Inventory reflected a 4 month supply. When analyzed by home price, the market continues to show the greatest strength below $600,000 with a 7.5 month supply as compared to 23.6 months above $2.5 million (see table above).
Next months report will be a key indicator of future trends as September marks the one-year anniversary of the current market cycle when home sales began to decline and Unsold Inventory started rising. The results of that analysis will be released at our Fall Market Workshop Series which begins in October.
Graphs and data available here:
August Otteau Report
Caveat Emptor!
jb (aka grim)
Spec builder I know is signing a contract for 410K on house he originally planned on selling for 550K.
in santa rosa,centennial home has a radio blitz ,no payments for a year,no closing costs and easy qualifying on their tapestry development in nw santa rosa.
From So CAL - I heard a KNX1070 radio ad on Friday. It was hawking ‘Condo Hotels’ In FLORDIA! They declared, “Get the APPRECIATION that YOU DESERVE! SPECIAL PRICING ONLY $99,000.00
WTF!!
Yes, they have been running the condotel ads for a couple of weeks, just not at the saturation level of the re-fi ads. However, the KNX morning money show has turned bearish on housing, and they are running Jim Cramer in the afternoon. My guess is that the majority of the loose money is getting sucked back into stocks, and the recent action on Wall Street seems to bear that out.
“the majority of the loose money is getting sucked back into stocks”
The stock market takes a *lot* of money to stay propped up, there likely isn’t enough “loose money” just hanging around after tech and RE fleecings. I think this last sucker rally in stocks will be the finale. It’s like they have every last sucker out there upside down and shaking their pockets down. Insiders are likely getting out now and the press is at it trying to lure in the final round of fools.
After *perhaps* DOW 12k, housing festers, stock market tanks, severe recession/stagflation, USD falls. Position yourself! The timing of all this will be tricky and the only thing which is really left to wonder about.
i don’t see how you get “inflation” unless there’s a devaluation of the u.s. dollar. so far, japan is the only good case study of what happens during a real estate bubble deflation and their currency didn’t tank.
just look at the CRB index and you can see commodities tanking. i think deflation makes far more sense at this point, not inflation.
I currently have every stock position with stops set to ensure I get out before this the stock market ‘baby’ is carried out with the ‘Real Estate’ bathwater. The stock market is quick to react and the Dow is taking 6 years to get back to the highs it once had. If the Dow took 6 years, maybe it will take 10 plus years for the RE to rehit the highs of 05-06 (depending on local market)
Salespeople look for suckers all across the country. In the Miami Herald there are adds for land in WYOMING, condos in ASPEN, etc. (not to mention the usual adds for land in the Carolina’s and Tennessee). Only a moron speculator GF in Florida would buy property sight unseen in Wyoming. Greed drives these people’s actions, not any brain power…and there must be plenty of them for the sellers in Wyoming to justify placing quarter page adds in the Miami Herald. It is a source of constant amusement for me!!!
I’m seeing land bought in Wyoming with no water, no legal access, and rattlesnakes. The wind is relentless-to the point of suicide. Oil and gas companies own the mineral rights and can drill oil or CBM wells anywhere they want on your land. You want some land? Give me a call. I can fix you up with 35 acres.
But they’re not making any more Wyoming land! Buy now before it gets totally built-out!
97,000 square miles. The population of the biggest city is roughly the size of a major league football stadium.
when i hunt in wyoming hotel rooms are 29 dollars.i wouldnt want to get stuck there in the winter.
I think condo hotels might be in for a particularly bad crash. First, they were priced absurdly. Second, because the buyers of the condos insulated developers from risk on the hotel side, they built way too many of them under any circumstances. The thing is going to stink from both sides. If it remains a condo hotel, they can’t be saved by the rental market.
A lot of condotels in Florida are just rehabbed old motels on the beach. The “craze” seemed to pop up on the radar about a year ago. While there may have been some built for that purpose, I’m not aware of any here.
Check out the inventory picture for Calgary
http://photos1.blogger.com/blogger/4027/164/1600/inventories%20sep%2025.jpg
This link doesn’t work.
It worked for me.
Doesn’t work for me either.
Nor did it work for me…
Change the “%20″ to whitespaces
Thanks Max. I access Rob’s page from his blog, but this graphic is a great stand-alone. For those not in the know, smart-money made some plays and gains from May 05 to Dec 05. Easy flippers from Dec 05 to Apr 06. MSM panics buyers into bidding wars from Apr 06 to Jul 06. Jul 06 to present - FTBs stop bidding and step away from market. GFs and “Move-Ups” are the ones going to be hurting from here on in, as inventory builds up and prices “stabilize” to 5% down.
click “refresh” after you get to the message page.
The Priciest Places to Buy a House
Kind of interesting…from Yahoo Finance.
http://tinyurl.com/l3rk8
This article chose to play the “everybody wants to live here” card. Card-counters take note.
Yup, Santa Monica is now number two most insane market in the country according to this survey of 4/2 SFHs, at an average sale price of $1,766,666. Looks like I’ll be sitting this one out for some time to come.
I’m still kicking myself for not playing an SFH or two in the last runup. With perfect timing, I could have tripled my money in about six years. Apartment buildings didn’t do nearly that well.
Be careful with CNN housing best places to live, most expensive, most affordable lists,ect. They actually put down Compton on the list of the 100 most desirable cities to preside in.
Compton? Bwaahahahahahahaha!
Back to Santa Monica for a sec, there were 113 open houses listed in the LATimes RE section for SM today. I counted as many as 10 signs at one intersection on Montana Avenue, so I’m guessing that many more were not listed.
Santa Monica Condos for Everyone!!
A little ways south of Santa Monica, along Redwood ave south of washington Blvd in Mar Vista(close to marina Del REy), there are three massive apt/condo projects going up. I think that the RE Developers looked into their crystal ball and foresaw a need for more apts and condos in the westside LA area as more and more FB’s and exurban expatrites flee back to the coastal areas.
They ‘ain’t makin’ any more land on the westside so why not go vertical.
Here’s an ad from a local paper here in N AZ.
‘ATTENTION BARGAIN HUNTERS Price reduced $20,000 for one week only. Oak Creek Valley. 3 BR 2 full bath. You must see this one! $315,000.’
Darn it! I will be busy THAT week! I wonder if they might still have the next week?
Probably gonna have to go like $175k on that POS as buyers are at this point, on the endangered species list.
Oh I have to go to that sale, 20K off for one week only. Oh I hope I do not get distracted by the other 1000 homes for sale on the way there.
I don’t know how you feel about this upcoming cycle for housing, but I wanted your opinion on the following.
Are you familiar with the principles of Triple Waterfall Crashes?
If so, what is the likelihood that we experience a Triple Waterfall Crash for the Residential Housing Market in U.S.??? There are a couple reasons I believe this is a possibility.
1) The Boom lasted very long and built-up to a classic “Blow-Off” top where people were waiitng in line, camping out overnight, lotteries, etc… (I’m sure u get the idea).
2) Since the Boom lasted so long, people will view the first downwaves as “buying opportunities”. In other words, they (people who can afford it) will be anxious to jump in, double up, still excited since all they can remember is their own euphoric experience (not having been burned yet).
3. Like most of us here agree, the builders will keep building until many of them are bankrupt or magins are so thin that a wave of consolidation will occur (late in the housing bear market cycle). This will only leave 2 to 3 homebuilders in the U.S. left after the consolidation (marking the bottom) of the cycle.
4. The vicious competition and the fact that a very large percentage of the U.S. economic growth is housing and housing related will ensure that supply to demand ratio is out of wack for a LOT LONGER than most people think!
5. The end result being that we experience a Triple Waterfall Crash, with increasing inventories, almost endless supply and falling prices for quite some time (first in nominal, later in real prices).
6. By quite some time I feel that maybe two decades or longer (20 years) is possible. Now of course, some of this will be a drop in Nominal Prices early on and later on in the cycle will translate mostly in a drop in REAL Prices.
7. Ultimately what this means it that Housing and Housing related investments could be some of the worst performing assets over the next 20 years!!!
How is that for a possibility???
Thanks.
I don’t think it will last more than 20 years. There is too much leverage in the housing system. When leverage unwinds, it is usually violent, because liquidity quickly dries up. That leaves the possiblity of getting out very difficult save for only a lucky few.
Liquidity will be injected if needed. I don’t think liquidity is an issue. The FED (”Helicoper Ben”) stated that they will make sure it (Deflation) doesn’t happen here again. This is why I think that in the earlier stages (first couple of years) we experience actual price drops (nominal price reductions), then in the later years (up to 20 years) we experience Real Price Losses (by real price losses, I mean adjusted for inflation). Remember that in this country we take many things being “cheap” for granted. We expect that goods at Walmart will remain cheap, food, clothing, etc.. But these are only cheap now due to the strength in our currency. In poorer country, people pay a larger percentage of the income on things we here take for granted as being “cheap”, but they won’t always remain that way. I believe this change will unfold in the U.S. as we (mostly the middle class) experience a slow, but steady decline in living standards. Remember that now we are basically being subsidized by foreigners through their savings. We don’t need to save here anymore (at least not for the time being) since foreigners are doing it for us. At some point this lovely relationship is going to “hit a brick wall” (literally taken from former NY Fed President William McDonough).
Not sure about a “triple waterfall”, but I’ve considered the possibility of false bottoms, discount buying etc. What I’ve found is this type of thing is usually uncommon with housing for two major reasons 1) the economic impact of housing downturns tends to put a damper on any enthusiasm or ability to engage in discount buying 2) lender retrenchment tends to occur as soon as home prices start falling, once again making discount buying much more difficult. Remember, unlike most markets that just involve buyers and sellers, the housing market also requires lenders to function. And lenders tend to flee at the first sign of trouble and show little interest in funding discount purchases.
You’re already seeing these factors occur in this downturn. And historically you just don’t have a lot of rebounds, dead-cat-bounces, or false bottoms with housing. I don’t think they’re impossible - but I think to see them you’d have to have a very rapid period of price drops before and substantial damage to lenders or the economy.
I believe that the recent “Blow Off” in the Housing Bubble is synonymous with the unfolding top taking place now in the “Credit Bubble”. I think that the “Housing Bubble” is actually a direct result of the ongoing “Credit Bubble” that I believe is in the terminal stages of popping here in the U.S., but not necessarily in the rest of the world. The “Credit Bubble” appears to be alive and well at the moment according to Doug Noland, but I’m watching this one closely.
Are you at least enjoying the schadenfreude in Hampton Roads, f.r.? I sure am. The Va Beach housing conditions can be best described as HAHAHAHAHAHAHA!!!!
A few observations:
1. A vicious game of leapfrog.
In some of the flipper-infested recent developments, sellers are vying to offer the lowest price, resulting in a new low price every few days. I’ve seen a couple developments where, e.g., once the $300k level is breached on the downside, about half a dozen sellers have managed to take the price down 5% in 45 days.
2. Toured one new development that had reduced prices compared with last year. The sales agent told me that while they were doing ok, the other developments by this same developer weren’t just slow, they were DEAD — as in, no customers all weekend.
3. Toured another house where the prospective buyers backed out during the walk-through just prior to closing!
4. One semicustom Mcmansion development apparently is having serious financial trouble — several dozen buyers backed out of sales, now the houses are just sitting. So they threw a well-advertized, big-buffet “Open House” for the whole development a couple of weekends ago. They got just 16 customers.
Don’t know who, but somebody here posted comments last winter saying the fun would start on August 15, and boy were they ever right!
“Are you familiar with the principles of Triple Waterfall Crashes?”
No, what are the principles? A Google search found multiple references claiming that various events were “triple waterfall crashes,” but none explaining what they meant by that. Is this some kind of technical analysis pattern? If so, then it’s about as useful as tea leaf reading, iridology, or palm patterns, and there’s no genuine causal/explanatory principle behind it.
Don Coxe explains the principles in his book - “The New Reality of Wall Street: An Investor’s Survival Guide to Triple Waterfalls and Other Stock Market Perils”. Coxe describes the spectacular rise and fall of technology and telecom stocks as a “Triple Waterfall,” a technical analyst’s term for a classic boom-and-bust event. In events like these, vast amounts of wealth change hands from investors to those who profit from the bubble, in this case the upper management of dot-coms and the like who cashed in big at the top by selling stock and exercising stock options. According to Coxe, “Triple Waterfalls aren’t mere bubbles, they are financial pandemics that take not months, not years, but decades to run their course.” His analyses place investors in the 10- to 12-year “final long-term collapse phase,” a treacherous climate most today have never experienced, so few have a clue as how to survive, much less profit in these times.
This in a nutshell this is the basics behind it, but when you extract the various components of the event leading up to the crash I believe many if not all the elements are present and apply to this “Housing Bubble”, not just here in the U.S. but Globally around the World.
posted “Don Coxe explains the principles in his book’
I bet Don has holes in his shoes and head too!
- ‘But what they don’t realize is that there are so many houses on the market that it’s turning into a buyers’ market….
- Housing prices are coming down, but the average Joe doesn’t know about it.’
About this time next year we will hear no more talk like;
‘the average Joe doesn’t know about it.’
Does anyone live in the Atlanta area? I see inventory climbing about 1,500 home’s per month and now over 60,000 total (ziprealty). My question is what are prices doing in the area?
I’ve been following the outer areas and prices are pretty sticky — predictably so. That is exactly why the inventory is rising. The great majority of sellers are holding their prices and their properties are not flushing out of the system in the “normal” amount of time, thus the new listings increase the total inventory fairly dramatically. No different than elsewhere.
Since there is nothing I can think of that will cause buyers to accept these prices, the prices will have to come down. That most likely will occur when, one by one, toxic loan payment re-sets force out the weakest players. Once there are enough sales at lower-enough prices to screw the comps for a neighborhood, other sellers in the ‘hood likely will panic and we’ll be off to the races.
I live in town in a 1920s area 2 miles from Mid-Town and 4 miles South of the Buckhead big buildings. The market is slow…just like it was last year at this time with about 10% more inventory. A lot sold through July. Not much since, but a few have (same as 2005). Prices are flat Y-T-Y. Nice recent redos priced right (around $200-225 per sf) sell. Fixers sell if discounted to $150 / sf or so. The rest sit.
Should add that a few will fetch $250 / sf if really well done. Above ground basements that are dry are a +. Over $1 million takes time to sell. A 1980s (tore old house down) stucco house in the 2500 sf range just went for about $600K. People like the older houses better, particularly the 1920s and 30s well remodelled. These are quite rare below $600K-700K and even then are scarce.
The outer areas are toast…there is way too much being built and the traffic is horrific…people are beginning to realize it’s better to have a 2000-3000 sf place in town over a 4000 sf place out there. The only thing holding up demand out there are pockets of tech employment and the good schools. Perhaps the desire to have a big new house cheap still helps. There are only 3 school districts worth considering in Fulton Co proper. Two just north of Buckhead and Morningside schools.
These 3 areas will hold up better than others along with a few other in town enclaves (Ansley comes to mind…as does Brookwood).
Been shopping townhomes in Sandy Springs, Dunwoody. One developer cut prices 5% across the board on a new development in Sandy Springs. Sales are quoted as very slow. We’ve been looking for a few months and note that there are very few new sales at various developments. We were also told by a realtor that about 33% of folks, who buy new in developments, fail to close. Not sure about that one.
Note that the Metro Mortgage Broker bill boards around Atlanta indicate 92,000 homes for sale.
Note also, that Atlanta led the nation in ARM mortgages in 2001 (32%). I beleive that a LOT of people will be in foreclosure next year. Many of my friends have ARMS and are starting to sweat.
In town condo resales are toxic. Many, many people are underwater. And developers continue to build!
All that aside, Altanta seems to still be drawing people. The cost of living is reasonable and the quality of life, outside of the impact of grid-lock traffic, is quite good. In Atlanta, it is best advised to design your life for optimizing your communting conditions.
I’m getting married in March ‘07, so I am a major bubble sitter at this point. I lived in two lofts in Midtown before moving to Dunwoody and renting. I sold both at break-even after expenses and feel extremely lucky.
I think Atlanta will real estate will continue to soften due to (1) rampant overdevelopment, (2) the loss of jobs from recent business decisions (Ford, GM, Bell South, Georgia Pacific, etc…), and (3) the abundance of ARMs and the like.
I agree that prices will be coming down in Atlanta due to one of the highest levels of ARMs in the country. It’s a credit bubble in Atlanta. Houses intown have come down a bit depending on the area and style. Some areas are prone to foreclosure due to fraud and flipping. Oh, and one of the Fortune 50 companies in Atlanta(not mentioned here) will be having mass layoffs soon.
Here in the SF Bay Area, there’s 671 listings on Craigslist marked “Reduced”.
Here is an update on Maricopa County (Arizona, the county that includes Phoenix) notices of trustee sales. Looks like there’s still a long way to go…
Somebody else thinks it’s over. A bit sad what the final results can be.
http://www.latimes.com/news/opinion/sunday/la-oe-daum30sep30,0,717651.column?coll=la-util-opinion-sunday
Nicely written article. Thanks for the link.
Great Article!
Thanks for that. I see a lot of denial about the crash in LA and SF. It’s more obvious in exurbia and suburbia, but it’s in the cities too and the effects are just as devastating for real people as for superficial yuppies who got in way over their heads.
Vegas inventory jumped by 250 in two days! New month, new listings? Now over 24,400 per ziprealty; an increase of 50% since December.
I found this beauty in lovely Hartford, Ct ugh! Buckley High School next door to it, is ladened with bullet holes!
http://www.realtor.com/FindHome/HomeListing.asp?snum=66&locallnk=yes&frm=bymap&mnbed=0&mnbath=0&mnprice=0&mxprice=99999999&js=off&pgnum=7&fid=so&stype=&mnsqft=&mls=xmls&areaid=882&poe=realtor&ct=Hartford&st=CT&sbint=&vtsort=&sorttype=&typ=2&x=27&y=14&sid=07577A844208C&snumxlid=1058758278&lnksrc=00003
Over at the San Diego Trib site, the Hard Rock Condotel development is running a lot of display ads for the “encore release” of condos.
They claim to have sold out the first 300 units in 9 hours. I am curious how many “suites” are in teh second wave, and whether these represent new units, or resales.
Another interesting point here is the legal disclaimer that sales reps are not allowed to talk to potential owners about renting out their units and what the rates would be. This is reserved for rental management employees only.
http://www.hardrockcondos.com/
Here in NE Florida demand is slowing but prices are still inching up YOY. It takes about 6-9 months for locals to respond to national RE trends. This article describes market perceptions: http://tinyurl.com/pauom
Everyone quoted in that article is a real estate agent. The whole article is a RE tout, with an occasional nod to reality, such as:
“The market absorption rate is the number of months until the current inventory of homes all are sold,” Marshall said. “The market absorption rate for August 2005 was three to four months. In August 2006 the rate was 8.85 months. In general five to six months is normal.”
Concurrent with this article Dr Horton is running a $45,000 discount in one of its popular NE FL neighborhoods. Here is the link: http://tinyurl.com/ncdhe
Scroll to the middle of the page; the offer is displayed in the right edge. It includes, “Sales Price Reduction, Washer/Dryer and Refrigerator, Installed Custom Mini-Blinds, Distinctive Floor Options, Homeowners Association Fees, and Interest Rate Buydowns.” In addition, Dr Horton pays all closing costs.
Holy-Moly! My bad; I jumped the gun. The sale is regional; different neighborhoods have different discount levels from $10,000 to $40,000. This is going to blow away last years comps. Here is the link: http://tinyurl.com/qjlxd
Click on any of the monopoly type homes and scroll right.
It’s early in this downturn, but I expect that seller desperation will rise as the days grow shorter. Having experienced it first hand, I know the depths that desperation can reach.
In 1981 when mortgage rates were over 16% we tried to sell our first home, a NYC co-op. No buyers in sight. We were being sucked dry month after month with mortgage and assessment fees on an empty property. After 8 months, (seemed like 8 years) we finally got our first and only offer — at 20% off the already reduced listing price. The buyer had the balls to ask for a new refrigerator as well. She didn’t know that we would have happily agreed to put a new refrigerator in every room to close the deal. We lost all of our downpayment and had to bring a pot of cash to the closing, but the bleeding stopped. It took years for us to recover financially, but we were young and had time to rebuild. The experience taught us many valuable lessons about real estate - including never underestimate the desperation of the seller.
We’re living (renting now, sold in April) in an affluent Chicago suburb, and watching the market closely. The general populace seem to have no clue that anything is different about this year compared to last. But for someone like me who enjoys watching the markets daily, things have definitely changed. Price reductions and relistings are extremely common, and closings have tumbled. A handful of builders are now trying to find renters for their empty $1M+ newly constructed homes, but many others have held tight to their listing price for over 18 months. I do not sense seller desperation yet, nor even realtor or builder desperation. Everyone simply seems a bit baffled by the lack of buyers.
I don’t think there will be any urgency to get back in anytime soon. I think their is enough supply and current over building going on to last us for the next 10 years. I know countless people who became “landlord” wantabees and bought many houses with the idea of having someone else pay off their mortgage over time (even though they are cash flow negative now). I also know of many people who still want to do this and take advantage of the coming downturn by “loading up” even more. Look at all the Baby Boomers with not one, but two, three, four or more homes that still need to be serviced, maintained and financed. It’s a joke. In the meantime, they have almost zero savings or liquid, easily accessible assets. Bubble Trap, Wealth Extraction like none I’ve ever witnessed before. Some say they will just pass the property down to their kids, but the cost of servicing and maintaining these homes is growing by the year while their respective values shrink and shrivel.
Yeah, that would be a nice gift to give the newlyweds. Here you go Johnny and Sarah take my 2nd home with the IO ARM that’s about to reset in 18 mos.
Moreover, these landlord RE moguls wannabe don’t have a clue. They are leveraging up on IO ARMs w/neg cash flow; needless to say, they are not building equity; as a result, no one is paying off their mortgage; it’s a fantasy; they are in state of mania detachment; detached from reason, financial, and market reality; they are simply beyond reach.
I don’t know anyone who has had a good experience renting out houses. Being a landlord sucks! People move in, they pay for the first few months then they stop. When they leave, the place is trashed. There is a reason people are renting - they were the bottom of the barrel who couldn’t get a mortgage loan during the past 5 years. People who think they are “just going to rent it out instead” are in for a rude shock…
Like some of the other folks on this blog, I am a current renter, sitting on the sidelines for this whole thing to play out. My landlord should be having a good experience with us. I pay the rent on time every month and do all minor repairs on the home myself. I do all the landscaping/pool maintenance and the neighbors love us because the house actually is kept up better than when the owner lived in it (just before us). I was worried that the owner would try to raise the rent after my first year lease was up a few months ago…but she didn’t. I assue because she values us as renters.
However, I do agree with your comments in general…but there are exceptions.
Please leave out generalizations like “There is a reason people are renting - they were the bottom of the barrel who couldn’t get a mortgage loan during the past 5 years.” - why should I want to compete with people who want to commit financial suicide in order to buy a house?
I generally agree with the idea that people who think they are just going to rent something out and generate some cash flow are underestimating the problems.
I’m also renting in Fla. and it was quite a shock and very humiliating to have to “prove” my ability to pay to my landlord. But now after five months of paying rent and keeping up the property, planting a garden, going out almost every morning on my bike, and even finding a decent part-time job he really values me. But I can tell by the crap he put me through (paying a fee to have him investigate me - give me a break) as well as the experiences I have had trying to find renters in the past, that the whole landlord-rental thing is just one big hassle. I would never again buy a property for the purpose of trying to rent it, and I will probably end up buying (something modest) again before the bottom because I just really enjoy having a house and piece of property to work on.
BTW, in investing in housing in general, I like to thing in terms of hip, post-hip, and pre-hip. I think Miami/Miami Beach and south Florida in general is on a downcycle of hip, but that Jax is an up-and-comer. All relative of course; the housing market and economy in general are in for a big jolt.
Bottom line on housing, though, told to me by an old-timer in the mountains: if you ain’t got good neighbors you ain’t got sh$t. Now that’s something you can take to the bank.
Las Vegas builders are “blowing them out”!!! KB Homes has listed in the MLS a 2300 sq ft 2 story house in one of the best zip codes in Vegas for $329,000 on a 4700 sq ft lot. The MLS shows 5 sales in 5 days.
I see a couple of resale listings where the owner paid $368,000 a few months ago. Instant loss for Flipper. When these pendings, get into the MLS as Solds, the median price and comps for all of Vegas will be ear shattering. KB’s year end Nov 30…and they have many other projects in Vegas to clear out before their year end.
5 suckers caught falling knives this week. That doesn’t seem like much of a discount. IMO we are way too early in this downturn to buy. Never be a motivated buyer. Those houses will be 40k cheaper in six months.
Good point! Remember, however, no matter how hard we try some people will not listen; they will buy way too early in the downturn. You’ve got to let them do what they wanna do. The upshot, however, is their impact on the price demand equation, 5 fewer buyers lessens the weight of demand and further weakens HBs pricing power.
I think a lot of the homebuilders are going to dump inventory in Q4, try to get it off the books ASAP. The shocking new median house prices should come out shortly after the Nov election.
Just an observation from running errands all afternoon in Bakersfield, CA.
Lots & Lots of yard sales today. More than usual,although Monday being payday , might have something to do with it. Many folks got paid early on Friday. Also noticed a dozen or so Pick Ups loaded with furniture and household goods. Seems like it was a good weekend to move.
I did not see many Open House signs,but the number of For Sale signs looks to be going up.
Last, I drove by some really tacky and cheap apartments that I lived in during the early 1990’s. They are now being sold as Townhomes!! W.T.Hey?
These places were duimps then, in an area that was plagued with a high crime rate. I cannot see how anyone local would BUY one of these dumps.
Had to be out-of-town money. I hope they knew what they were doing.
Equestrian estates are selling slowly right along with the tract houses here in the Virginia Piedmont. I thought they’d hold their “value” better but it seems they are not. One of them I was watching was sold at break-even with purchase price in 2001.
The initial prices on these were pie-in-the-sky, though.
MLS #FQ5151902
Lot Size: 86.5 Acres
Year Built: 1998
Listing Date: 02/08/05
On Market: 599 days
Price Reduced: 04/04/06 — $2,300,000 to $1,999,000
Price Reduced: 09/17/06 — $1,999,000 to $1,695,000
—————————————————————
MLS #: FQ5380770
Lot Size: 150.0 Acres
Year Built: 1904
Listing Date: 09/10/05
On Market: 385 days
Price Reduced: 08/28/06 — $6,250,000 to $4,750,000
—————————————————————
MLS #: FQ5478698
Lot Size: 381.0 Acres
Year Built: 1889
Listing Date: 12/15/05
On Market: 289 days
Price Reduced: 12/30/05 — $18,900,000 to $17,900,000
Price Reduced: 09/27/06 — $17,900,000 to $11,999,915
and this tract home for good measure,
“Great House will not last” the listing says (except it’s been on the market since it’s conception).
MLS #: FQ5327396
Year Built: 2005
Listing Date: 07/27/05
On Market: 430 days
Type: SFR
Price Reduced: 12/14/05 — $589,900 to $569,900
Price Reduced: 09/23/06 — $549,900 to $529,900
Those multi-million dollar estates that used to get sold through the U. Va. Alumni News - the dirty little secret is that they’ve turned into flipper properties, too. Who with $4 million to spend is really interested in *living* in a big brick mansion (as nice as some of them are) out in the red-clay backcountry where the only thing the country is good for is growing grass and raising horses? But most of these central Virginia owners who recently bought at inflated prices truly are wealthy and won’t get forced out - it’ll just go down as a bad investment decision.
Venice and SM still expensive as all get out.
Yup. No relief here, except that the desperate brokers have stopped pestering me to trade out and buy their half-empty office pigs and dying retail corners. Retail is churning like crazy, glad I don’t need to fund improvements right now.
SFHs, Condos, and duplexes are still orbiting Pluto. I guess they didn’t hear the news that Pluto is no longer a planet. We’re frozen up tighter than a _____________ (you fill in the blank).
How about Uranus?
There were alot of garage sales here in Reno today. More than usual for this time of year. I went to one where they had so much of their belongings for sale, one would wonder what they were sitting on inside the house. It was obvious that they were desperate to raise some money.
BTW, coinsidently, alot of homeowners that bought within the last 6 years are late paying property taxes. I just wonder what is going to happen to that number next month when the next installment is due.
I got this spam in my in-box today from KB homes. They were just sending this to all subscribers of the Sacramento Bee. It looks like we are a long way from the day when people would be waiting in line for the privilege of bidding on homes in new developments.
http://kbhproduction.com/images/September_2006/51403.jpg
“As low as $599 a month for the first year.” On a real-life 30-year fixed with good credit, that would get you a $95K loan.
Looks to me like they just want to move these units from one set of books to another. “Listen, baby, this is cheaper than rent. If the cost goes up, we’ll just walk!”
While the market is slowing down and it seems that prices are going down, there are still GF buying in Irvine, CA. In my old neighborhood of West Irvine, there were two sales for a floorplan, one that met the record comp and the second one set one $20K higher. Both houses sold for $10-30K less than the initial listing however. Three was an identical floorplan that was $30-50K less that hasn’t sold yet.
I have friends that listed their homes in Irvine during the summer and cancelled after getting only one lowball offer. Other friends have passed along similar stories.
I’ve been touring the new home developments here, Portola Springs, Woodbury and the Villages of Columbus. Unlike the bubble years when it was rare to find a development that wasn’t 100% sold out, today’s developments are not sold out and many floorplans are available. In a few developments, every plan was available while only one development, an entry level townhome, was sold out.
At San Carlos in Portola Springs, William Lyon Homes did not include a price sheet. I didn’t notice because I was looking at the sheet that listed loan terms and payments instead. It was the first time I’ve seen this. The only loan listed was a 6.375% 5/1 ARM IO for 80% to 100% loan value and a 9.75% Prime + 1.5% HELOC for the balance (If you go for a piggy back, I think a fixed second is a better deal). With a 1.9% tax rate (0.9% Mello-Roos which is generally not tax deductible) and $264 HOA, monthly payments range from $2,889 to $3,620 for the $450K purchase price, and range from $4,056 to $5,112 for the $650K purchase price. The smallest plan is a 1040 sq. ft. 1BR 1.5BA and 1 Garage condo which is probably in the $450K range. The going rent for a 1000 sq ft. 2BR 2BA and 1 Garage apartment from the Irvine Company monopoly is about $2,000. As many posters have stated, it is cheaper to rent than to buy.
At Serra at Portola Springs, the agent immediately told me there was a $75K options incentive package that was not reflected in the $1.5M average price. The first phase release was this Saturday, and I bet their interest list looks pretty short. The builder incentive game has finally arrived in Irvine.
North County San Diego:
More of the same (rentals moving *very* quickly for much higher rates — FBs trying to cover their payments, and getting it????).
Home for sale are sitting, sitting, sitting. Some reduced, but most sellers still delusional with their $20K off $800K house (they think $20K is a lot to them, but $800K shouldn’t be a lot to buyers — idiots).
Anecdotally, a couple we know where the wife is a local Realtor asked if we still lived in the same place (a rental). When we said we did, they said, “Oh, so you’re doing the smart thing and waiting.” This realtor used to harass us to no end since we sold in 2004 — trying to drum up business, even though we said we wouldn’t be interested in buying for YEARS. We actually had to stop associating with them (husbands used to be best friends) because of the relentless, “when are you going to buy? I printed up some more listings for you,” every time we got together.
Thought the change in their psychology was interesting.
I wonder what their next career will be, now that they can no longer earn money selling real estate.
A realtor friend in Irvine told me yesterday that there are 38,000 active realtors in south Orange County. As I recall there are more than 500K licensed RE agents in CA…
not for long
Active, as in pay their dues. How many are actually working part or full time?
After years of listening to the realtors in sunny Corpus Christi proclaim that “yes, there are bubbles in the rest of the country but that won’t happen here!” well, it’s happening here as I knew it would:
http://www.caller.com/ccct/business/article/0,2537,CCCT_873_5034956,00.html
The reality of the market here is that the expensive homes were purchased by retirees from up north and people who took out those insane no-down/no-doc loans. Average income in Corpus is $38K. It speaks for itself.
Just returned from Phoenix. There are developments going in west of town off of I-10. The Tartesso Development is a solid 35 miles from downtown phx. 4 miles off of I-10. And in the middle of freaking nowhere.
Someone convinced about 6 or 8 national HB’s to build a new community out there. According to the city of Buckeye website, it’s slated for almost 10,000 homes in this one area.
Last time I did a drivethru about 5 months ago, lotta homes nearing completion, models open, sales offices open, 1st park built out. Someone posted here shortly after that the developers had whacked $100k off of asking prices (to start in mid $250’s).
Yesterday–5pm. kinda like walking thru a graveyard. Many homes done or almost done (couple of hundred, easily). Saw maybe a dozen scattered about that were actually occupied. Parks empty. A couple of contractor pickups around, minor amount of late work. Schools not even started construction. No stores, no commercial development. Nearest gas station is probably 10 miles away. Grocery store? no idea.
Passed a couple of other vehicles driving around looking (like me). Eerie…
One of the builders’ signs now show starting prices begin at 190k.
http://www.tartesso.com
And the press story about the Road to Nowhere actually going somewhere now:
http://www.stardustco.com/tartesso/press-20050316.htm
Here is the post (I saved it)
2006-07-02 15:16:08
Some updates from the Phoenix Mkt.
My wife and I just returned from the far West Valley. We visited several communities and I have to share what is happening with KB’s Santarra community in Buckeye. First, back to Feb. 2006. We just sold our home and decided to look at this KB community. They had a 4 bed/3bath 2600+ sqft spec home listed $365,000. This was way out of our price range and thought we would never return. After reading this blog and seeing the mkt trends we decided to return. What the heck, we’re on vacation anyway. As of today, same model different spec., however, this one is loaded. Oak cabinets, granite counter tops, upgraded carpet, 18″ tile. 7500+sqft lot, the whole nine yards. It is a part of the 48 hour sale they are running from July 2-July 4th. It is listed on current spec. sheet at $249,000! That is nearly a 32% price reduction. We also found a 2200sqft home in the same community at $210,000! Five months ago we saw a similar floorplan in this same community selling for nearly $290,000.
After talking with the agent, who was obvioulsy hot, tired and miserable, he stated that this sale has been going on for well over a month and every weekend the prices have been “severly” reduced. They have well over 15 more specs to sell but he felt the prices wouldn’t drop much more.
After hearing that interest rates are at 7% now we seriously considered purchasing today. We forced ourselves to walk back to our truck and think it through. We want our house so bad we can taste it. Is it time to buy?
If you can figure out what the bottom price may be and are close, then make a low ball offer.. you never know what desperation may get you.
NO! I-10 out there is two lanes each way. 35 miles to downtown Phx. These will be virtual giveaways (think tax liens) before this is over. Phx has a VERY long history of bubbles, and worse, RE fraud and scams. A million years ago when I grew up there, they were prosecuting some of the shysters for peddling empty desert…..
Of course, that area is around Paradise Valley and covered w/houses! They were just a bit ahead of their time. LOL.
35 miles out of Phoenix! Offer $50K….this type of property will be worthless within 10-20 years.
Take another 10% off, for your offer. And don’t look eager. They still have room to negotiate. If they think it’s a quick easy sale they’ll probaly go for it, the builders need to move inventory.
thanks AZGolfer– my error. I thought it was for the Tartesso, but it was for the Santerra development. Worst part, Santerra is generally closer to I-10, and closer in on I-10 (by about 4 or 5 miles. If it’s sucking this much wind now, Tartesso will very shortly end up as one of those ghost-town developments–half finished construction, open framing, tumbleweeds blowing thru. Just dust in the wind.
“If you ain’t got good neighbors you ain’t got shi$t.”
There’s a new development in Lake Elsinore, CA where building seems to have stalled, possibly due to a lack of funds. If you drive past it at night and look up at the houses on the hill, you’ll notice that there are lights on. Apparently, the developers are using lights on automatic timers to try and fool people into thinking it is an ongoing concern!
Where exactly? My relatives used to live in Widomar and Menifee, which are right close by.
Yes, Lake Elsinore, Menifee, Murrietta, working class Temecula. All ground zero for the coming implosion. Home of the $400-$600 home built of sticks (err 2X4’s), chicken wire and stucco.
Last i went out to lake Elsinore in late 2005 they were still grading for a large housing tract up in the higher elevation parts west of the lake. That part of LE has been springing up new tracts in successive Phases. The completed sections actually looked ok, with their newly constructed large 2-story stuccoed McMansions sited in curvy streets and cul-de’sacs with nearby spanking brand new parks and schools, as a freshly minted suburban tract would be.
Problem is that the entire SW Riverside county has gone on a New SFH tract building binge, and the oversupply of new homes is greater in SW riverside that in any other SCal county. Not at all surprized if some projects have stalled. See this happening in new condo/apt projects all over LA county.
From bubble ground zero (SD), the For Sale signs which were posted a couple of weeks back within walking distance of our abode seem to be disappearing. We know a family who rents a home across the street which was put up for sale a couple of months ago at an astronomically-overvalued wishing price; I noticed the For Sale sign vanished a couple of days ago, and asked my wife to investigatge. She learned that the owner has taken the home off the market and renewed our friends’ lease for another year.
The upshot: I doubt this is a unique situation, as we also rent an investor-owned SFR. My best guess is that the mass of desperate SD investors-turned-landlords are going to lead lives of quiet desperation for the foreseeable future as they wait to see whether DL’s forecast of a shallow period of price decline will end in 2007 with renewed home price inflation. Unless this time is different, we have at least four years of declining prices ahead, and many investors whose gambling venture involved trading current negative cash flow for expected future capital gains will eventually find themselves selling into a fire sale.
Just heard this radio ad: “Move into a Morrison Home anywhere in the state of FL for just one dollar. Yes! For less than the price of a cup of coffee you can own a beautiful Morrison Home”.
http://moveinforonedollar.com/
Another one — move the stuff from one set of books to another. Reminds me of the car leases 5-6 years ago — shove that loss somewhere else.
I’ve been tracking 11 Eastside homes for over 100 days now. 1 has sold, 2 were pulled off the market, unsold. Last week, all of a sudden 3 additional homes were listed as “inactive.” Given that these homes are $700k-$800k, I for a second believed we had found 3 GFs.
However, turns out it’s a classic delist relist scheme. One even had the balls to increase the price (From $755k to $759k). These houses went for $500k in 2004; for $350k in 2002. It’s over people - now I have to muster the patience to watch the foreclosure seeds grow.
This morning on Ocean Avenue in Long Beach (CA), I saw not one but TWO sign flippers on opposite sides of the street, holding signs for two of the numerous new downtown high-rise condo developments.
On my way home from work, along Ocean and 2nd St. in LB/Belmont Shore, I couldn’t believe the number of for sale and open house signs in the center medians. Looks like a fair number of houses for sale in Naples, too.
I knew it was coming, but it’s still a bit of a shock. A pleasant one, though.
I’ve been a long-time blog reader, and have occassionally posted on the Bozeman, MT real estate scene (crashing hard).
However, I’ll be moving to Pullman, WA in a couple of months and am debating whether or not to buy. Relative to Bozeman, Pullman seems very affordable. We can probably get a nice 4bd/2ba in a nice neighborhood for $250-300k. With $150k for a down payment (we’ve been renting and saving like crazy), it wouldn’t be at all difficult to make the payments on a 15 year fixed. Rent for a similar home would be $1200-1400/mo from what I can tell… a bit less than total ownership assuming a 30yr fixed with 20% down, but not by much. Inventory is at 63 homes (SF, condos & townhomes) for a town of ~26k.
Relative to Bozeman, this looks like a reasonable place to buy.
However, home prices have gone up considerably in the last 5 years, probably 50% from what I can tell. And current listings have been on the market for quite a while.
Given that we plan to live in Pullman for a long time (25 years +), should we just bite the bullet, perhaps overpay a bit and get into a home? Or rent and wait? Ironically my wife really wanted to buy in Bozeman, but now that she realize I was right about the market collapsing (Bozeman RE is really in the tank), she is afraid to buy in Pullman.
Since housing is an expense and not an investment, and you’re going to stay long-term, it seems to me it doesn’t matter where in the cycle you buy. We’re renting now and waiting until we can purchase something we like at the price we want to pay; we’re not concerned with the direction of the market.
I think it depends on whether or not you’re retired or working, whether you’ve lived there before (and are very familiar with the area), what your future income prospects are, etc.
If you still need to work, I’d suggest renting because you should always find out if reality meets your expectations. Since prices rose in the past 5 years, see what incomes have done. If incomes didn’t rise, and people are stretching their monthly income to cover PITI payments or if they are using toxic loans, better to rent, IMHO.
Perhaps give yourself time to really get settled in the area and know *for sure* exactly which neighborhood you’d like to live in (even down to the particular house/floorplan). With renting, you can’t lose right now.
I already have a job in Pullman (faculty) and pretty much know what I’ll be making for the next 20+ years. Not much uncertainty there.
As for neighborhoods, it is a small town and there isn’t a lot to chose from. Four hills with one devoted to student housing.
If we find something good, we might jump with a low-ball offer, but no sense of urgency.
Sacramento, CA
I work in a building with four mortgage offices. Last week I was interrogated by 5 employees of the various companies to find out what my job (claims adjusting) involves, how difficult it is to get into, does my company have any openings, etc. Considering this works out to one a day, I’d say that’s pretty impressive. The rats, they are jumping ship.
Additionally, when asked how things are going, all of them say slow, but one of the ones from a major player says what business there is left is all B & C paper, and most of that is refis from ARMs into fixed mortgages. There is not a lot of money being pulled out and almost no purchases. The A paper has evaporated.
Bonita Springs, FL
Grandma, being canny, is getting rid of the snow bird condo. Unfortunately, she didn’t get rid of it last year (the plan at that point was to hold onto it and keep using it, but with Pops going into a home, she doesn’t want to leave him behind). It’s priced very low for the area, but no bites yet. On the plus side, she can afford to reduce it to 1997 prices if that’s what it takes, as that’s when she bought it.
Ft. Wayne, IN
Dad sold his rental unit. Didn’t get what he was hoping for, but he’s happy to no longer be a landlord. I believe the original list was $80K, but it sold for $74K with Dad paying the closing costs, so probably $69K after it’s all said and done. As he’d owned since the mid-1980s, he’s still getting out fine, but he’s also kicking himself for not selling last year.
And that’s all the updates I can give.
Hi everybody!
I’ve got the September numbers and charts up for dollar volume in the south bay/LAX area of So Cal.
Real Estate $$ Transacted through September 2006 for Beach Cities
Enjoy.
Looks like you may soon have to change your Y-axis in that last chart to incorporate a -40%.
I went to Albertson’s grocery near my house to pick up some carpet cleaning suds. While standing in line at the checkout I mentioned to the checker that I was cleaning the carpet at my rented house. He told me it was a buyers market and I should buy a house instead of throwing away money renting. Thanks store clerk. I appreciate your advice.
Isn’t that the prophesied event that signals the bubble pop?