‘An Unseasonable Chill Has Settled Over Housing Market’
The News Democrat reports from Illinois. “Local home sales numbers are down throughout most of the metro-east, and for the first time in many years, prices are starting to fall. Chad Doyle, president of the Belleville Area Association of Realtors, said that adjustable rate mortgages, or ARMs, are hitting their 3 percent caps. He said consumers have been affected by subprime lending and adjustable rates.”
“‘The loan officer doesn’t ask you if you go to the grocery store, if you go to the movies or do any activities,’ Doyle said.”
“‘The bubble has burst,’ said economist Peter Morici. ‘Interest-only mortgages were a time bomb,’ Morici said. ‘They were the first to go off when the housing market slowed because lots of people were betting on perpetual appreciation. The people were betting the market would keep going up because they weren’t paying off any of the debt. Some of these folks are faced with the prospect of their home values declining.’”
The Chicago Tribune. “For farmers eager to sell land for development, the phones have fallen silent. An unseasonable chill has settled over the housing market, and farmers and middlemen who were waiting for deals that would yield bundles of money have been left holding the bag, said real estate consultant Steve Hovany.”
“‘There have been some cries of agony as buyers renege on agreements,’ he said. ‘National builders have sold off some land as a way to make their bottom lines look better.’”
“Farmer David Bengtson says the market for those seeking to sell their land ‘appears to be just about dead. Everyone has pulled in the reins. It was so crazy for several years that a downturn had to happen.’”
“Not far south of Joliet, realty agent William Arbaugh said a multimillion-dollar deal to sell 400 acres of farmland fell apart earlier this month. ‘The buyers didn’t show up for the closing,’ said Arbaugh.”
The Indystar from Indiana. “Federal, state and local authorities received warnings, some dating back two years, about the Fishers man at the heart of a mortgage fraud lawsuit involving the foreclosure of scores of Indianapolis-area homes.”
“Yet the operation continued, according to court documents and observers. Now several Hoosiers say they, too, got roped into the alleged scheme and insist that 400 homes is just the tip of the iceberg.”
“One of Robert Penn’s neighbors, Ed White, suspected Penn of mortgage fraud in his own subdivision. So, as a real estate agent, former mortgage broker and member of the homeowners association, he said he did some digging and reported Penn to the FBI and Argent Mortgage back in 2004. From the FBI, he said he got nothing.”
“Larry Cowell, a partner in Kensington Carriage Homes in Westfield, said Penn bought 39 of the development company’s 90 units. But only six now have tenants in them. While Cowell thought Penn’s purchases would help Kensington sell all its units faster, now the empty houses are a hindrance to further sales.”
The Missourian. “Take Scott Boulevard south to Thornbrook, or Nifong Boulevard west to Mill Creek Manor, or take a short drive to any of the new subdivisions surrounding Columbia, and you’ll see empty houses.”
“It’s not that new homes aren’t selling. But 2005 brought a significant increase in newly built homes in Columbia, and there are just not enough prospective buyers to match the number of vacant houses. ‘In general, every new subdivision probably has more new homes on the market than needs be,’ said Brent Jones, a Columbia real estate agent.”
“Developers haven’t sold off all the houses built during 2005, a year of record production. The city issued 1,239 permit applications for single-family residential construction in 2005, up from 743 in 2002.”
”The number of new homes started last year was significantly higher than in previous years,’ Columbia real estate agent Rob Wolverton said. ‘The growth in sales didn’t keep up with the growth in production.’”
“While buyers in an overbuilt community enjoy lots of options and reduced prices, sellers face tight competition to win buyers. Each month, with another interest payment, the builder loses more money. And in a market where supply outweighs demand, the builder can’t pass that expense along to the buyer by raising the list price of the house.”
“The result, Boone County real estate professionals say, is that the situation could squeeze builders out of the business. ‘I think we’re having a correction,’ said Brent Gardner, a real estate agent. ‘I don’t think you’re going to see any experienced builders take it on the chin. It’s going to be the people who thought, ‘Hey, let’s make a lot of money.’”
“While some builders worry about an already saturated market, Andy McVey continues to build. He has five houses under construction, and says he plans to start at least two more before the end of the year. ‘I’m starting another house down the street,’ he said. ‘I wasn’t going to start that until I had this one under contract. But I … have a feeling this house is going to move.’” ”
McVey has had trouble moving some of his houses in medium price ranges. He said he has lowered the list price of several of his houses from $204,000 to $199,000, hoping they will sell before the end of the year.”
“‘I do well the first part of the year, run to the end of summer,’ he said. ‘Then you’ve got a decision to make: Do I give a better deal and just try to sell it? I hate to lower prices,’ McVey said. ‘It’s not fair to the people who bought the houses at the original list price. But I saw a couple of builders go in and lower prices. There’s a point where I have no choice.’”
“C&C Construction scaled back its production to cut its losses in anticipation of a potential slowdown. Kas Carlson, co-owner of the company, said he could go the rest of the year without breaking ground on a new house. ‘Unless something changes, we’re not going to gear up for next spring,’ he said. ‘If (the market) doesn’t turn around, when the end of the summer comes, we’re going to be sitting on all these houses.’”
“Carlson has co-owned C&C for nearly 28 years. He said he hasn’t seen a new-homes market this bad since the early 1980s. Carlson said one indicator of the glut in the market is the fact that work has slowed down for his subcontractors. ‘They’re usually booked up two to three months in advance,’ he said. ‘They’re just out there beating the bushes for work. For my framer, it’s just day-to-day now.’”
The Missourian article has a lot of interesting detail from a local housing market perspective.
From the Missourian article;
- “I always stay positive when the Parade of Homes comes along,” McVey said. “It’s a good opportunity to show off what we’ve got.
“Of course, once Thanksgiving hits, we’ll be dead until Christmas, but I don’t lose sleep over that.”
While some builders worry about an already saturated market, McVey continues to build. He has five houses under construction, and says he plans to start at least two more before the end of the year.
Spring is typically his best time of year for sales, he said, and he wants to be ready.
— McVey is one COOL CUSTOMER!
Great that you posted an article from my hometown. I recognize
a couple of the quoters. You had an article on this blog before from the Columbia Daily Tribune spotlighting Cas Carlson’s wife Rhonda. I moved to Tampa from there in the Spring of 2001 and so I have been thinking the people here are crazy, but really it is everywhere, isn’t it?
I just oriented a contract worker at my job who came from from Columbia(native Missourian, not native Columbian), and who by coincedence had my old job there. She said she has a house there and is hoping to be able to sell it for more money in the future, I know exactly where it is and even before reading the article I am thinking to myself, “No way”. We got a letter from our old boss today saying that she misses us and wants us to come back. The pay is just too low there. I have been trying to get this gal to stay here permanently, as it is nice having a fellow Missourian to work with–hard workers. I am afraid that she will be tied to that house for a while. The big draw for me to move back would be the school system which is excellent due to the University and two colleges. Columbia has the highest per capita with bachelors degrees in the country.
Even though I am going to the beach tommorow, I am now very homesick. Like Dorothy said, “There’s no place like home”.
“Carlson has co-owned C&C for nearly 28 years. He said he hasn’t seen a new-homes market this bad since the early 1980s. Carlson said one indicator of the glut in the market is the fact that work has slowed down for his subcontractors. ‘They’re usually booked up two to three months in advance,’ he said. ‘They’re just out there beating the bushes for work. For my framer, it’s just day-to-day now.’”
_______________________________________________
And so the first innning has begun…
Once the employment picture turns bleak for members of the REIC this will turn ugly fast. The framer becomes the framer in Anytown, USA. He no longer goes to buy the big screen or the new Ford Pickup. The Ford dealer cuts back on his personal lifestyle and his employees feel the pinch, and so on….
Based on sales figures and company reports, the Ford dealer and his employees have had to cut back some time ago.
Josh
- “While some builders worry about an already saturated market, Andy McVey continues to build. He has five houses under construction, and says he plans to start at least two more before the end of the year.
He said ‘DAD BURN IT’ .. ‘I’m starting another house down the street,’ he said. ‘I wasn’t going to start that until I had this one under contract. But I … have a feeling this house is going to move.’”
- Hey Andy . . .I grew up in Indiana on a farm. I am in SoCal now and it breaks my heart to tell you that you are toast.
“He said he hasn’t seen a new-homes market this bad since the early 1980s”.
That quote brings back memories. My ex father-in-law was a sub contractor for all the builders in Columbia during that time period, when these guys were just starting out. Back then residential construction was so different. The builders were all very hands on, most of them started out as laborers and did everything to learn the business, just like these guys. They also built the houses one at a time and would maybe have one or at most 2 spec homes. And the spec homes were built to be ready in the spring/summer.
When you had a home built you got to choose everything about the construction and design, not just a couple of upgrade packages or carpeting colors, the buyers were very involved(sometimes that was a big headache). They didn’t and don’t have the big home building companies there that you see here in Florida, like the Transeasterns, the Morrisons, etc., who just slap up houses by the hundreds in a short time.
After the early 1980’s there was a housing boom in Columbia that never slowed down significantly in any of the other downturns experienced elsewhere. It will be interesting to see if they can weather this one too. I am rooting for the hometown team.
I remember the winters being very cold in the early 1980’s.
One more reminesence, I remember that back then if the bank would give you the money for one spec. home you knew you had made it to the big time.
I guess summer is over - the chill is setting in!
“It’s not that new homes aren’t selling. But 2005 brought a significant increase in newly built homes in Columbia, and there are just not enough prospective buyers to match the number of vacant houses…”
__________________________________________
So much for the - we are not building enough houses to keep up with immigration, baby boomers, foreigners, etc..
They should have said we are not building enough homes to keep up with the MASSIVE speculation that is occurring!
‘I don’t think you’re going to see any experienced builders take it on the chin. It’s going to be the people who thought, ‘Hey, let’s make a lot of money.’”
_____________________________________________
Are these not the same people!?!?!??
And tie that comment to …‘I’m starting another house down the street,’ he said. ‘I wasn’t going to start that until I had this one under contract. But I … have a feeling this house is going to move.’”… and the unwritten #1 rule of builders is simple. Build till you can’t build no more. The company’s all geared up, the sub’s are ready to go, and the bank’s still handing out construction loans. Time is their enemy: a long, slow winter of sales, and a very depressing spring will end the game for them.
From Austin:
New home starts stay hot
Central Texas builders keep up the pace, even as other parts of the country slow down.
AMERICAN STATESMAN STAFF
Monday, October 02, 2006
Central Texas continues to buck the national trend in real estate.
The latest evidence: Area homebuilders started 4,266 homes in the third quarter, up almost 8 percent from a year ago, and closed on a record 4,518 sales, according to Residential Strategies Inc., a Dallas-based firm that tracks new home markets in several Texas cities.
“While Austin builders are concerned about the housing slowdown reported in other parts of the country, the fact is that — for now — Austin is still a healthy market,” said Mark Sprague, a partner in the firm’s Austin office.
On an annual basis, builders started 16,973 homes, on track with the pace seen this year.
The median price rose 8.5 percent, to $196,933, as builders shift their emphasis to higher-priced homes, in part because of an influx of relocation buyers from more expensive markets. For example, Sprague said, starts of homes costing more than $300,000 have risen 64 percent in the past year.
Austin’s real estate market has been riding on healthy job growth and moderating mortgage interest rates.
Sprague said he thinks the market will remain strong through 2007, unless job growth weakens.
All of the builders on the east coast and CA will go to Austin to build (a mini version of that happened in 1983 when the oil bust killed Dallas and Houston and they all went to Austin). This means Austin will peak and pop in 2008 +/-, badly, like before.
I don’t give Austin until 2008, but you have the right idea. Builders will dump resources into Austin, ensuring a large oversupply… everywhere!
By mid 2007, the housing market will be in a true Bear market.
Neil
How in the world can you buy a house in a market like Texas where, in a heart beat, a hundred more homes like yours can be thrown up virtually next door?
And with a record of busts in that state as well?
I guess the same is true of FL real estate though too.
How in the world can you buy a house in a market like Texas where, in a heart beat, a hundred more homes like yours can be thrown up virtually next door?
This should be a non-issue if you buy the house to live in as a consumption item, versus buying it as an investment with unrealistic expectations of financial gain.
You buy in old Austin in areas such as Enfield, Pemberton Heights, Tarrytown or Brykerwoods as examples. Supply is constrained and prices fall the least and rise the most in busts and booms.
I know a couple looking to invest in Texas. They argue that with prices in the 125k to 150k range their 3rd and 4th rental properties might actually be cash positive. The 1st is cash negative and when the 2nd is finally rented it will also be cash negative.
Their RE agent tells them that they should not tell each and everyone about the gains to be had in Texas; its a secret. He adds only his best clients are invited to take part in the Texas venture.
They are very proud of their RE investing prowess; consequently, I foolishly quiet my bearish sentiments in their company. Its the only way to make it through an evening dinner with these admirable nincompoops. So, yeah, expect prices to increase in TX; these wild-eye RE investors are feverishly packing and headed your way.
bull sheet….this market is in worse shape than the bust in the 80’s…..out of control inventory…falling wages…and taxes out of sight….anyone “investing” here will lose their shirt….did I mention the negative am mortgages?
Their RE Agent is probably selling them his own investment properties to clear out his inventory from the sounds of it.
“An unseasonable chill has settled over the housing market.”
I think we have our Chapter Title for the Section covering Oct ‘06.
I’ve lived lots of places and this phrase sent a chill up my spine. On Cape Cod (bubbleprime) the same quiet came just before a Nor’easter. In the Berkshires it meant buy milk and bread for a week. Panhandle, pull your boat if you could. California, check the generator.
Personally, I say bring it on:
[x] Bucket O’ Equity
[x] Box O’ Reasonable
[x] Guns N’ Whiskey (motorcycle & electricity these days)
Seriously, I’ve never seen “holding our breath” like this.
Seriously, I’ve never seen “holding our breath” like this.
A lot of builders, flippers, and FBs must be turning blue as their net worth turns red.
The impression Iget is one of we adults having a cocktail party with the little ones first unable to sleep, then peering from the stairs then brazenly coming close but then when told the reality of the situation throwing a tantrum. Whenever you read Casey or the others just envision a child dancing in the corner, eyes closed,hands over ears, singing “nah!, nah!, nah! I can’t hear YOUUUUU!”
I am surprised by the amount of “staying power” right now. Asking prices are still astronomical. I wonder when the levee is going to break…
I think that there is some money, ie credit cards , that peopel are living on right now to suspend the inevitable. (Do you hear that sound Mr Anderson? It is the sound of inevitability.)
The RE market is unlike the stock market in that the prices are not reflected minute by minute . But rather month by month, since payments are due monthly. I think once panic is sensed by the FB’s then you will have mass sell offs in a step wise fashion downwards with dead cat bounces along the way.
posted “I wonder when the levee is going to break… ”
That little 27 page report of new silly Rules and Regs. the FED let go after the close on friday was it. That silly notion that people should be able to repay lent monies hit the real funny bone! I bet that the bosses at Countrywide still think that one is a hoot! I bet they are gald they don’t sell homes!
Funny, funny when some shmoe what to re- fi and had to abide by the new funnies from the FED and are told they could not even make on thier old loan! He Ha! He Ha! …. So what’s a guy to do? I say just sell at the top of the old 05′ prices!
I think “soft landing Leslie who now likes it hard” is enjoying the “staying Power” of the RE market!!
No jokes about turning blue. In the process of downsizing my rented house (saving $1500/mo against The Day in late 2008 when I pick up my OC house for 33% off), I managed to fall off a shelf in the garage and clothesline myself on the open rear gate of my minivan. For about ten seconds, I thought I’d fractured my windpipe and was frantically looking around for someone I could pass out in front of so they’d call someone with a reasonable chance of getting me an emergency tracheotomy.
Fortunately, I think I just bruised it, and am very pleased to be not dead. But then I took my first shower in the new place this morning and in trying to adjust the shower head ($#%#! California low-flow fixtures!) I managed to knock loose the cover, which promptly flew off and hit me in the eye.
I swear, I think some local realtwhore to whom I explained unpleasant truths at an open house must have put a voodoo curse on me.
No jokes about turning blue. In the process of downsizing to a cheaper rental (saving $1,500/mo. against the Glorious First of September 2008), I fell off a shelf in the garage and managed to clothesline myself on the open rear gate of our minivan. For about ten seconds, I thought I’d fractured my windpipe and was frantically looking around for someone to pass out in front of so I’d have a reasonable chance of getting an emergency tracheotomy.
Fortunately, I think I just bruised it, and am pleased to be not dead. But then this morning, trying out the shower in the new place for the first time, I was trying to adjust the shower head ($#$%#! communist California low-flow fixtures!) and a piece flew off and hit me in the eye.
I strongly suspect the nice realtor lady to whom I offered some free (if unwelcome) economic analysis at the last open house I visited has put a voodoo curse on me.
sorry for double post — first one didn’t show up
Thomas: you have just invented a new argument for buying. Buy now and avoid the voodoo curse . . . .
heh.
[x] Guns N’ Whiskey (motorcycle & electricity these day
Yup-Amazin’ what an old HD Shovelhead and the juice to run a microwave, coffeemaker, stereo, and heat the hot water for a shower can get ya thru.
GS1100ES, perimeter alarms and well pump.
Seriously, this is just giving light voice to extremeism but in the opposite direction. California may have problem when their PG&E and SCE and DWPs get short squeezed and the buyers revolt but there’s no chance of actual physical discomfort. Understand many of California’s counties have sustainable economies the envy of most nations. The bubble gum all over our face should not be mistaken for having our face blown off.
GS1100ES, perimeter alarms and well pump.
Good man! Where’s the Benelli 12ga auto?
Those with Swiss sniper rifles and the equally unlikely double ought under n’ overs and such don’t talk about them.
Missouri and Indiana. Well now, that should clear up the confusion about which coast is in worse shape.
These are the first indications of a national bubble being acknowledged outside of the the core bubbleheads. Understand, only a year ago these same pages would poo-poo any idea of national homogeneity.
Actually, Indiana’s woes have nothing to do with the credit addiction of the two coasts. The state legislature changed the property tax laws a couple of years ago. Instead of basing it on the price the home was purchased for, property tax is now calculated on the market value of the home. A huge number of landlord suddenly went from being cashflow positive to negative and put their properties on the market. For quite a while now, it’s been possible to drive around the state and see For Sale signs all over the place.
What is a better description of the below quote from this article…?
1. Delusional
2. Clinicly Insane
You make the call!
“While some builders worry about an already saturated market, Andy McVey continues to build. He has five houses under construction, and says he plans to start at least two more before the end of the year. ‘I’m starting another house down the street,’ he said. ‘I wasn’t going to start that until I had this one under contract. But I … have a feeling this house is going to move.’” ”
McVey has had trouble moving some of his houses in medium price ranges. He said he has lowered the list price of several of his houses from $204,000 to $199,000, hoping they will sell before the end of the year.”
BOTH!! I hope he get his a$$ handed to him. The lesson he learns will be passed down for generations in the Hatfields, er… McCoys, er… McVey family!
Nope, won’t learn no lesson here. ‘I have a feeling’ he’s gonna blame it on the market, or the stubborn buyers, or the Fed, or the media, or bitter jealous renters (BJR).
P.S. I have a feeling that the 5k reduction’s gonna do the trick.
Don’t be so quick to judge the property. Have you seen the size of the garages!
When people are in denial they tend to do the same thing they’ve been doing b/c it is emotionally comforting; hence, the anwer to your question is denial.
Isn’t the definition of instanity “repeating the same action but expecting a different result?”
Neil
To tell the truth, I feel sorry of Mr McVey. the building biz at his size is a fun business to be into, take a piece of raw land, put your sweat and smarts into it, and at the end, have a product you can be proud of customers moving into.
the guy seems to be “Hands on” which is a good sign. I would guess this guy does not build a POS.
On the bad side, the building biz is like a drug, when you stop the after affects hit you like a brick.
posted “What is a better description of the below quote from this article…?”
Yet but you forgot he had a feeling.
I actually grew up in this area and had always kind of prided myself in my “mid-western sensibility”? Early on it looked like only the coasts and trendy, hip places would get crushed. I mean after all, homes in the Chicagoland area have usually been affordable when compared to the coasts right? Pffft. Yeah right. This absolutely shoots holes in the theory that there is no national RE market!
I suppose deep down we’re as greedy as any other part of the country but it really gives me pause to reflect on just how all this happened? Anyone that’s ever flown into O’Hare more than once laughs when towns and suburbs begin to appear beneath the clouds. You see the rookies gather up their belongings like we’ll be on the ground any minute. Dude, chill. It’s gonna be awhile.
There are actually strategic “bends” built into the roads so people don’t fall asleep at the wheel. But I guess they’re running out of buildable land too!
DinOR,
I’m a mid-westerner as well, and I also initially saw the bubble as a coastal problem. Then I visited my folks last summer and was very surprised to hear people in my home town go on and on about real estate, sounding pretty much like people on the CA coast. Prices are much lower there than here, of course, but the excitement/anxiety about housing seemed eerily familiar. Sad, as I really enjoyed growing up in a “home” rather than an “investment”.
SLO_Renter
I haven’t actually visited there for some time so I appreciate your on site intel! The town I grew up in actually has very few if any listings UNDER 300K! What a farce. Much of what makes the area livable is it’s affordability! Or should I say, was? I Zillowed the home I grew up in the western suburbs and it’s actually over half a mil! My dad would have got a kick out of that (especially knowing everything that’s wrong with it!) Then of course we have no national real estate market.
DinOR
That is really something. This is likely true of my parents’ town as well, as their (very small) 3BR 1 1/2 BA ranch is currently appraised at 300K. It is on a charming, tree-lined street, they keep it in good repair, it is near a good high school, and has a lovely yard. Still, it is small even for a ’starter home’ by today’s standards, and my parents are probably correct in thinking that most young families would want something larger. Even 300K seems quite a bit to me, though,for a young couple plus 1-2 babies.
I was born in Berwyn, IL, lived in Cicero and went to HS in Wheaton. Wheaton (perhaps b/c of Billy Graham) always struck me as more than just a little snooty but my dad figured we would get in less trouble there? Pffft. From what I’m told the whole area has hellish commutes into and out of the city (reverse commuting seems to have caught on there). I just can’t imagine paying any kind of a premium to live there? Unless of course you’re into shoveling snow 5 months out of the year!
DinOR:
I grew up in Iowa City, and I always say that if you are going to be stuck in a small town in the midwest, Iowa City is where you want to be: good job base (the university), good medical care (ditto), and as much culture as you’ll get in the state of Iowa (there are a couple of Indian restaurants in the downtown, a good Korean place, some theater, etc.). That said, the prices there have really disconnected with reality, and, like the rest of the country, the town seems to be counting on wealthy retirees to purchase expensive downtown condos ($1 million for the penthouses, although cheaper units will be available). Unfortunately, downtown Iowa City is in a bit of a decline, what with lack of parking, drunken students getting into barfights, and the building of big box stores out of town. I love my hometown, but if I had the $$$, I’d buy my $1 mil retirement condo someplace with good health care but less snow and ice.
I lived in Iowa City for 30 years–I just left last year for job reasons, but I’ll eventually move back, at least as a part-year resident. It amazed me over the past several years how much building was going on. It was before I was really keyed into the bubble, but I always wondered exactly WHO was going to buy all of these houses? Especially the ones they built between Dubuque St. and the Coralville exit on I-80–perfect location for those who don’t mind the occasional semi crashing through their living room wall. I spoke to a friend there just this weekend (going back for a visit in a couple of weeks), and he said NOTHING is selling (his house is paid for, so he’s not particularly worried about its value). I sold my place there in May of 05, at just the right time (and even had a mini bidding war going over it, complete with letters from buyers explaining why I should accept their bid–letters that I did NOT solicit, by the way, since I wouldn’t dream of playing that game).
Don’t feel bad… The town I grew up in has no listings under $600K. That’s why I don’t live there any more. Priced out.
MacAttack,
That’s Ashland, OR? (as I recall?)
DinOR,
I’m very familiar with the Wheaton market. It has gone crazy, though not as bad as California and the like. Lots of teardowns and flippers.
The leader in the Mass. race for governor is Patrick Duval who was on the board of directors for Ameriquest Mortgage.
You should see pics of his 10,0000SF summer home in the Berkshires.
Americans get the government they deserve.
You mean Deval Patrick?
….and there are just not enough prospective buyers to match the number of vacant houses…
OK, now I get it!
Local california Bay area observation:
Jan 04-jan06 4 flippers briefly oun Granny’s very old house in an expensive area
Feb 06 builder buys and tears down
Apr 06 big crew pour foundation in a couple of days
May 06 big crew shows up and frames hugh house in several days
jun06-Aug 06 nothing happens
sep 06 builder has fired everyone and is doing the rest by him self
Doug_home,
LOL! Isn’t that the way it always is? “Damn it, if you want anything done right……..” I suspect that with the whole sense of “urgency” now out of the picture he has the rest of his life to complete it. Funny.
Oh, Good Lord…
“You can’t go anywhere without hearing people talk about “the real estate bubble.” Such talk drives me to distraction, and I’ll tell you why. It’s because there is no real estate bubble. Bubbles are for bathtubs.
Despite a thousand articles in Sunday newspaper real estate sections, the bubble is a myth. The real estate markets in many areas are going through a normal correction cycle. I’m going to tell you how to recognize the signs of a correction in your market, how you can avoid getting sucked into “bubble trouble” and how you can even benefit from the current environment.”
http://promo.realestate.yahoo.com/
LMAO..more about the author of this insightful piece…
Kendra Todd is the first and only woman to win Donald Trump’s smash hit NBC show, “The Apprentice” on NBC. Additionally, she is Broker of Florida-based MyHouseRE.com, host of the popular HGTV Show “My House Is Worth What?” and a regular real estate contributor on Fox News Live. Her first book “Risk and Grow Rich: How to Make Millions in Real Estate” has been an instant success.
Tucson, AZ
Orlando, FL
Lot’s o’ luck to those purchasing now in Kendra’s recommended cities. From what I hear, the market in Wilmington, NC has cooled down very suddenly, and Tuscon and Boise sure don’t seem like great targets at the moment. Glad Kendra’s book has been an “instant success”. Hope she does not emulate her mentor (the Donald) in an early bankruptcy. And if so, I hope she has a wealthy family to help her dig her way out.
Asheville, NC
Santa Fe, NM
Boise, ID
Tucson sure isn’t a great target. I’ve seen houses in desirable neighborhoods with for sale signs for over a year. I can think of three examples right off the bat.
As for the other neighborhoods, well, the houses aren’t exactly flying off the market.
fine, don’t call it a bubble, call it a down turn. And I can tell you, I have lived in one of those down turns… From 1978 to 1980 I built and sold about 50 homes and was going fine, 80 hit and you could not give a home away.
The “me” before that happened, would have gone “all in” with my money.
The “me” after that period was a different person.
These people building, buying and selling, a lot of them were not in the building, or even home ownership period in there lives 26 years ago.
This is going to change a lot of people, and if my experience is worth something, would bet you will not see a real estate drive up until 20 years from now.
When people lose this amount of money it is a sting that stays a long time in their minds. It is a hard lessen that takes a generation to repeat. Once bitten, twice shy!!! We will see home prices that an investor can be cash flow positive in a few years (2-6 depending of several variables). The housing industry will stay connected to realities for another 10-15 years then the lessons of old will be forgotten and a new generation of homebuyers will come in and repeat the bidding up process for whatever the “flavor of the day” becomes. It may be low interest rates, we are running out of land or a low unemployment period but it will happen again- IMHO!!
Suzanne says Kendra does us all a great disservice. First of all, she evidently seems to think real estate investing can be properly explained in the pages of a book. We all know you need an agent who understands the needs of her clients and the market.
I like how all the bubble poo-pooers point to the dot.com meltdown as the “obvious” bubble when back in the 90’s the entire MSM was telling us how the Internet had changed the rules, Infospace was going to 1000 and so on. I think Greenspan was right, but in a different context. “Bubbles are only obvious to the ‘experts’ and MSNBC shills after they have popped”
Are you sure Kendra didn’t also guest star in “The Stepford Wives” as one of the drones? She’s been reading too many Gary Watt’s “motivational flyers”.
Kendra is kinda cute though.
What does she care about RE? She is making millions off all the idiots buying the crap she is spewing in the books.
Much like Donald, she is rich because of who she is; not because of what she knows/is, can do, etc. Donald is rich; because he is Donald Trump. Its a wonderful job if you can get it; and I fully credit him with developing an amazing model. But it has little/nothing to do with RE anymore. He is selling himself, not a product. More like an idea that everything he touches turns to gold.
I hope I get that job someday. I keep applying to be “midas”, but nobody will take me up on the offer.
Seems like selling self as “product” is the way to go these day.
Sigh. All of this makes me feel so middle-aged and grumpy.
If you really want to feel middle aged, just watch the news. Kissinger is advising the president, Woodward is digging up dirt, congressmen are trolling for pages—it’s like one gigantic 70s and 80s flashback. Next thing you know George Bush will reveal that he has lust in his heart…
She’s done a good number on herself. Look at what she was in college:
http://www.clas.ufl.edu/jur/200006/profiles/todd.html
It’s kind of sad actually, she went from volunteering in pediatric oncology to being a real estate ho. Maybe that pediatric oncology gig was just to look good on her “Apprentice” application.
The Donald hardly came into this world with nothing…… seems I read in one of his books his Dad owned 12,000 rental property’s in NYC.
Yeah. There are rumors that the family bailed out the Donald the first time he went broke. He sure does his best to present himself as a self-made man, though.
Boy do I miss the time when Trump was considered a person to NOT look up too. Good old Spy magazine used to call him a “short fingered vulgarian”. Those were the days….
Its a wonderful job if you can get it; and I fully credit him with developing an amazing model
________________________________________________________
His Model = Grow up rich. File Bk. Get more money from wealthy family and start over…
For the record, in spite of himself, The Donald is rich because his father was rich. He is a self-promoting buffoon, and I’ll bet he’d be a car or insurance salesman if he was not born rich.
ahh. see I was beaten to my point. Twice. Sorry.
“It’s not that new homes aren’t selling. But 2005 brought a significant increase in newly built homes in Columbia, and there are just not enough prospective buyers to match the number of vacant houses. ‘In general, every new subdivision probably has more new homes on the market than needs be,’ said Brent Jones, a Columbia real estate agent.”
Even sadder, these areas will become slums! The houses will be boarded up, or rented out to section-8 freeloaders.
I came across this in Yahoo. Hope it not a repost.
There is no bubble per Kendra Todd. There is corrections, per her:
“….The most important thing you can do in this real estate environment is avoid panic selling. Real estate is not like the stock market. It’s like a drive through the Rocky Mountains. You will have rises and dips. Hold tight and wait it out……. Over the long term, the value in real estate will stabilize and you’ll profit.
Now is not the time to sell. But it is a great time to buy.”
Kendra Todd is not feeling the Chill yet, she being a boker of FLORIDA based MyHouseRE.com.
If the name does not ring a bell, she was winner in Donald Trumps “The Apprentice” TV Show.
Well, it appears she is complementing NAR on many fronts, she is also an author of the book “Risk and Grow Rich”. (Oops! sounds too familiar to the well known “think and grow rich” book.
She could think a bit harder in her quest to be rich. The name just does not have any Positive Energy, feng Shui .
RISK? what is that doing with real estate? )
Now David Lierah getting some much needed help. Or is she something he need to worry about…
She actullay conceded that the correction can be upto 24 months. That real estate is cyclical. As a TV show host may be she has better skill at trying to connect with the audiences.
Question: Please look at the link bellow. promo.realestate…is this a paid promotion of realestate or Kendra Todd?
http://promo.realestate.yahoo.com/
She lists “hot markets”… folks, are those markets hot? She says they’re hot because they remain “affordable.” I say she’s fos.
Santa Fe, NM does not qualify as affordable.
Ha! The photographer cut off the top of her head, ala “Kill Bill”. Talk about a haircut!
Good catch.
Oh man, just like real estate correction. I see she already has a 20% hair cut she is not aware of.
that broad is tripping. i read it closely and didn’t see one single argument to back her position. she’s just parroting the realtors.
Just like the NAR ,Kendra says nothing to justify her positive spin on the near future for real estate .
The fact that she says real estate is cyclical is not a fact that supports a up market in a short time . If anything the cycle supports a long bear market .
These people have never had a correction after a credit bubble like this one before so if anything their advice of “buy now ” is just self-serving .
To me these TV people have nothing in common with the masses of people who really buy houses .
Meanwhile, on the West Coast, the fun continues… from the Foreclosures forum:
We are in the eviction stage of the foreclosure process and we are interested in buying a home in foreclosure in California in San Mateo County. Preferably in Pacifica, Daly City, or South San Francisco. Three bedrooms, 1.5 bath, at least 1,300 sq ft living space, backyard. Prefer but not required ocean view. We are in no rush since we already have a place to stay while we find a home, but we are ready to move on and start over again. I have read the discussions about how to find a short sale and I am following advice, but in the meanwhile know of any short sales that meet the criteria? What can I expect? How long can it take to find a win win deal?
Foreclosures in SLO county just took a jump upwards per listings on foreclosure.com. Had been running 4-5, and now 12 are listed. There must be some reason for a sudden jump up. Have property taxes just come due?
MacAttack:
Guess I didn’t read your posting carefully at first. The poster, who is being foreclosed upon, is seeking to buy another house (and hoping to get one cheap by buying a foreclosure?) Wow. This really blows my mind.
Good Lord. Still getting evicted/foreclosed and they already trying to buy another place??? I take it they’ll be doing a 100% option arm. I guess renting while rebuilding your credit is out of the question.
It’s easier to get a home loan than to come up with two months rent and a deposit plus references. So far, no takers for liar leases.
Good point, Suzanne!
Sad but probably true!!! It is easier to get a liar loan then rent an apartment or house, WOW that explains how reality got so far out of hand!! Excellent point, even if I find it disturbing!!!
I find this fascinating. I have perfect credit (at least I don’t owe anybody anything, and never dodged a payment), but my last three years rental history is in the toilet.
I took a job from my next to last landlord, then went out on my own in his line of business - AND I turned down many offers from his customer for their business. I wanted to start my own, not steal his, but that did not stop him from phacking w/ my cars. No ref. there. Next, I rented from a junior amateur investor who managed to combine ignorance, conceit, inconsideration, and bungling into a nice round package. We knocked heads, and she’s in short sale now (foreclosure to follow). She actually has quit claimed the house to someone else to avoid law suits, and refuses to give me a mailing address. This is an FFFFFFn’ nightmare for me ’cause I run my business from my house. Anyway, no ref. from her either.
This is how the bubble will affect all of us. Pain ladled upon us from the overflow of those responsible. I hope I can pick up a piece or two when it ends
Paul
Tucson is toast, nothing is selling and the prices are WAY too high, I’m seeing a lot of ‘Reduced’ and ‘New Price’ signs popping up lately.
Another Tucsonan here: I can think of three examples of “For Sale and/or For Rent” houses within less than half a mile.
“It’s beginning to affect more well-to-do families. While they may have a $300,000 to $500,000 home, some still live paycheck-to-paycheck because of their lifestyle.”
Here
“We’re starting to see a lot in the $400,000, $500,000, $600,000 range,” said Deputy Duane Jirik. “It’s unbelievable.”
Here
These are not people who bought some 500k crapbox in L.A. or S.D. because it was the cheapest thing they could find, no, these are people living the high life, hoping for neverending appreciation on houses they never could afford in the first place. Now they are geting foreclosed. No sympathy for these, only contempt.
I am a small Mom & Pop developer building around 10 to 20 units per year. Finished a 17 unit townhome project in 2nd quarter of 05. In that project the first phase units in 2003 went for $180,000 and the last units in phase 3 went for $340,000 in early 2005. After attending a housing forecast confernence in Washington DC I elected not to build. I have been sitting at home for over 1 year now. Not wanting to build at high construction cost (material & labor) with housing prices falling. Hoping to see material(lumber,concrete,steel,drywall,etc.) start to fall heavily in 07. Labor should also drop nicely in 07 as work becomes hard to find. If that happens I will start construction in 4th quarter of 07 and hope to build for $80 to $90/sq.ft instead of $120/sq.ft that it cost me on my last project. Therefore I can price low and still keep my margins in 2008 & 2009. Further I will build units for sale at $200,000 or less in Tampa. I think buyers are there at that price even in a weak housing market. I see further downward movement in 07 and 08 before it levels off.
Any feedback? Other builders out there agree with the above plan.
Nice to see your post. We do not see builders posting here that often. You are a bubblesitter like most us here.
Build ‘em smaller, stronger, more durable, and more highly insulated. People get more yard for the money and pay less taxes and insurance. I believe quality sells. Take pictures at various stages of construction to document the quality.
I build with solid block construction - using stick framing only on second floors and for interior walls. Units that share a wall are always blocked all the way to the roof. Never had a problem with noise traveling from one unit to another. I do not take pictures but I have had homeowners that did! Thanks for the feedback.
Post this at the top of a new story. I am sure you will get tons of feedback. We are always looking for opinions from insiders.
Only those with OBD (obsessive blog disorder) go back and review the old posts. LOL
Like me. What happened to my post on the subject?
LOL
Hey Tampa Developer,
Kudos for stepping to the sidelines when you did. As another builder I can understand the balls / foritude it took to do so when all looked so rosy. I’m in the same boat and I’m just going back and doing all the jobs I promised friends but couldn’t do because of the gravy train coming through town these past few years.
Doing a small addition for a friend and I am struggling to get it up to $80 per sq ft.
I do not do small jobs - I find it a pain dealing with homeowners. Prefer new construction. Passing my time studying the market, more time with my kids - dropping and picking them up from school which I never did before and getting more exercise time in. I made good money on earlier projects so I can sit but looking forward to starting late 07. I enjoy developing and miss the smell of lumber ,drywall and other construction materials!! Sounds weird but is true.
I am not a builder but my father was - who taught me the lessons of the early 70’s. A lot of builders went bankrupt during this time because, in his own words, they didn’t look ahead but only behind and they built up too many employees and not enough subcontractors (made them less agile in a rapidly changing market). He said he ’survived’ the down turn by understanding the economic environment and that one should stay educated on macro-economic forces since these forces are greater then any one man. What I found interesting is you attended a homebuilding seminar in EARLY 2005 that caused you to change course. It appears the writing was on the wall at this point. Was the information being presented this way or was it your insight into the information that allowed you to read between the lines? I have no real expertise in building (I did work construction growing up but chose a different profession) but I do agree with your plan. You have to control your costs. The cost to build and the cost to carry the project until you sell. A house takes about half a year (give or take depending on size etc) to build so monitoring for declining Inventory will be a key indicator as to when you should start your next project, since this will determine your carrying costs but I am sure you already know this. respectfully, Shakes-Take
At the NAHB conference in Washington DC in early 05 some speakers were positive and some were negative. The negative speakers were more convincing in their agruements. So I elected not to build and wait and see. If the market did not cool I would have missed out on more money but I made good money on my earlier projects. So it did not matter if I missed out. Greed and controlling it allows money to made over time. Greed is a businessman’s worse enemy.
Personally, I think what is comeing on the horizon is uncharted…. In 1980-81 when the tap of sales was turned off, any Joe Blow off the street could point to the problem, 12-16% mortgage rates at that time!!!!
But the flip of that is you could say to yourself, when interest rates get to this much[ lower], I will build that spec.
I see NO trigger that any government program, any lower of interest rate,[ unless 30 fixed goes to 3% ] will do make the downslide any easer.
I agree we are in uncharted territory as the cause for the housing bubble but the effect should remain relatively the same as bubbles in the past (large downward correction back to reality). I think the cause (credit bubble) has no other precidence other then the roaring 20’s and the stock market. If the fed lowers interest rates and turns on the money spigot I don’t think it will do any good and if anything it will do more harm in other areas. It is a precarious time with interest rates, National deficit, housing prices, credit bubble, and trade deficit. IMHO The US has created a house of cards with shortsided goals that have pushed off the pain to a later date. We are quickly approaching that ‘later date’ unless we can balance all of our issues. It will take a steady hand to add that next card or else we can see a large section of our house crumble. If we see 3% 30 year fixed then all our debt the foreigners hold will get cashed in and the dollar will tumble. This will cause even greater pain so I don’t really see this as a good option.
In Florida 07 and 08 we will see more distress properties as mortgage loans go into default. Property tax and home insurance will need to be reset at reasonable rates. The resetting will be done by lower home values since both property tax and home insurance are determined by the home price. This correction will take a few years to go through the system. Since Florida has new people coming(net inflow) by 2010 everything will settle and then home prices will start rising again because new units coming online will be minimal in 2008,2009 and 2010. Therefore clearing out inventory.
Is that a 1,000 people a day?
I think the 1000 people a day has already been debunked.
However, I think that his take is reasonable, if we add one thing.
Before 2010, prices take a 50-60% drop from the peak values.
Then I have no problem with this statement. If prices dropped 50% tommorow I think the trend would start upward (slowly) the day after. The fundamentals say a 50-60% drop. I expect a bit more because of the mentality shift (why buy a home, its just a money losing proposition; renting is the way to go). But, as soon as the prices get back in line with fundamentals I expect it to start climbing again.
Too bad that can’t happen locally, because of the scope of this bubble, the whole country needs the haircut at the same time. So, I think 2010 is a bit optimistic, but not “wrong”. I think 11-12 is where we are going to hit the bottom though.
Honstely, I don’t care. The second that rent = cost of ownership and median income can afford median home price (using a real loan) I am going to buy. I love where I live, and I don’t care if I overpay a bit, or have a few years of neg appreciation, because I know that those fundamental factors underly RE prices.
Initial property tax rates in Florida are determined by a house’s selling price, but the tax office can up the alleged “value” to anything it wants. Moreover, if a house sells for less than the last buyer paid, the official value does NOT reset at the lower price. I’ve spoken to the tax collector’s office about this. If you buy a house for less than than the owner paid, an appraiser is sent out and decides if the house is worth more than you paid. If he or she so decides, you’re screwed.
If real estate prices drop by 50% or more here in Tampa, don’t expect this to be reflected in the “fair market values” concocted by the tax collector’s office. The county of Hillsborough and City of Tampa have already spent all the ill-gotten real estate tax gains for the past five years, and will never willingly let go. Last week the city generously reduced the annual property taxes on a 200k house from $6,000.00 to 5,975.00.00, in keeping with the public’s desire for tax relief. Ha Ha Ha. A $25.00 savings, and the newspapers reported it as a major event.
Lower student enrollments is proof positive that net outflow of population is the norm of the day. That coupled with the U-Hall index( costs twice as much to rent one to move out than to move in, because of demand) and you see a clear picture of population out flow of the working middle class.
The mindset of everyone wants to live here is dead. This is the new paradigm shift that the Florida market is facing. Nobody wants to live here because it costs too much. It will take a generation to change it back the way it was.