‘Some Properties Sold For More Than They Were Worth’
The Rockford Register Star reports from Illinois. “Home sales plunged in September compared with the same month in 2005, the third straight month of declining sales in Boone, Ogle and Winnebago counties. September’s falloff was the largest in terms of percentages in more than five years, according to preliminary statistics from the Rockford Area Association of Realtors.”
“Real estate agents sold 615 houses in the Rock River Valley in September, down 12.9 percent from the 706 sold last September. The decline occurred even as the number of houses available continued to set records. At the end of September, the current listings rose to 2,852, 16 percent more than were on the market at the end of September 2005.”
“‘I’ve been watching as the inventory (of available homes) has climbed and climbed,’ said (broker) Jon Krause of Rockford. ‘There has been so much new construction and that’s pushed up supply while there’s a limited number of buyers. That’s giving the buyer a little bit of an advantage.’”
“Indeed, the average sale price was down as well. The September average sale price was $141,990, down 2.7 percent from last year. The average price has declined year-over-year four of the past five months.”
“The numbers were weak across the board. Existing- home sales were down 12.7 percent, while sales of new homes fell 13.4 percent. Sales of homes in the Rockford School District fell nearly 20 percent from last September.”
“‘The air came out of the balloon, finally,’ said Jim Barbagallo, president of the local Realtors association. ‘It’s a little bit of a return to normalcy.’”
The St Louis Post Dispatch. “Zella Harrington and her husband, Melvyn, love their West End home but wish they would have sold it two years ago. That’s when nearby homes similar to their three-story, six-bedroom house were selling for $400,000 to $500,000. But sales have since slowed.”
“The Harringtons have had their home on the market for five months without a bite, despite a couple of price reductions. It’s listed at $365,000. ‘I think it’s worth more than that, but of course I’m biased,’ Zella Harrington said.” “Economists and real estate people say home sales locally and nationwide are starting to slow, forcing sellers to lower their profit expectations and patiently wait for the right buyer.”
“‘Expectations are catching up to reality,’ said Rik Hafer, an economist at Southern Illinois University Edwardsville. ‘Housing prices are going to retreat a little bit, but even if they retreat a little bit, they’re still going to be appreciably higher than they were five years ago.’”
“‘You hear a lot about prices falling. I don’t really see prices falling, but I don’t think sellers can be as aggressive on asking prices,’ said Mike Travaglini, branch manager at Coldwell Banker’s office in south St. Louis County.”
“Most people won’t be caught in a crunch, but some will, and home foreclosures could rise as a result, said Richard DeKaser, chief economist at National City Corp. in Cleveland. ‘People were buying homes that might have been a stretch, but they started to factor in the belief that housing prices would not only sustain but increase,’ DeKaser said.”
“Gail Farwell, the Harringtons’ real estate agent, said the heightened interest in home buying a couple of years ago created a market where some properties sold for more than they were worth. ‘I think the market is really just adjusting,’ Farwell said.”
“Three years ago, Farwell helped a client buy a home in a bidding war in which he had to offer more than the asking price. Now the client is trying to sell the home, she said, and he is having a tough time making his money back.”
‘Housing costs too much, and people are not making enough,’ said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. Even in Missouri, where the real estate market has been relatively stable, household incomes have not kept pace with the rising housing costs, said Retsinas.’
‘And it is no longer true that a job holds the promise of a decent living, he said. ‘That social contract is broken today,’ he said. ‘The labor market and the housing market are disconnected.’
Since 2003 house price went up 100% and wage went up 6%.
Now house price is forecasted to decline around 8-15% next year and peolpe are screaming bloody murder. go figure. too insane for me to understand.
Maybe if people got paid in houses and plasma tv sets they would care. You would have to take away the easy credit funny money, too.
Ben:
Restinas sure has changed his tune from just a couple of months ago.
It seems as if the pounding he received here and elsewhere had sunk in for their bubble apologist report of almost 6 months ago.
In my mind your blog deserves the credit for that.
Good job!
June 2006
“Climbing interest rates and cooling speculative demand is putting pressure on the housing boom, but as long as jobs continue to be created and builders curb production, the sector will experience a soft landing, according to Harvard’s Joint Center for Housing Studies.
The center’s “State of the Nation’s Housing” report, released on Tuesday, predicted that even though home-price growth will fall to more moderate levels in many areas, sharp drops in prices are unlikely. The absence of severe overbuilding or big job losses in major metropolitan areas is an important factor in the stability, the report said.”
“While homeowners with annually adjusting mortgage rates are facing interest increases this year, including those with expiring teaser discounts, only about one in 10 homeowners face higher mortgage payments this year” Nicolas P. Retsinas, director of Harvard’s Joint Center for Housing Studies, said in a news release.
posted “‘And it is no longer true that a job holds the promise of a decent living, he said. ‘That social contract is broken today,’ he said. ‘The labor market and the housing market are disconnected.’ ”
Over 80 years ago even that cheapie Henry Ford understood the above. He raised all wages to the 10 or 20 dollar week, I forget now. Anyway his workers became consumers of his product…. not a dumb guy.
I think one of the things people need to take into consideration is that builders aren’t building affordable homes. The average Joe didn’t have granite and stainless steal counter tops. They didn’t have a 60′ hi-def TV, a room for every kid, a 40K SUV + another car (or two), and a yearly family vacation.
I think values are disconnected from wages, but I also thing that the American worker seems to think they are entitled to the life of a millionaire
True. Ever look at the houses built in the 20’s and 30’s? mostly smallish but built with quaility materials and workmanship. I hate to think what you would have to pay someone to construct built-in wood bookshelves and the like today…’course very few people actually read enough these days to need bookshelves but I digress. Yes the houses they make today aren’t affordable but they are by and large particle board-n-stucco crap.
Many of the the homes you mention are known as ‘Craftsman’ homes. They were marketed by Sears and Roebuck as a packaged kit, hence the name Craftsman. These kits contained everything necessary for the handyman to construct his own home, and were generally built with great care and attention to detail. They came in 3 sizes - 850, 1000, and 1200 sg.ft - and given their modular form, were adaptable to many regions.
A common mistake in reasoning. You won’t see shoddily constructed houses from the 20s and 30s these days because they’ve already fallen down or been razed for redevelopment long ago. You can still have a quality brick (or some other construction) home custom built nowadays, it just costs even more than the tinder stick McMansions.
Maybe true. I’m no expert but there seem to be a lot of intact 20’s and 30’s ‘hoods. If the mistake were in my reasoning I think you would see a lote more infill mixed in these places neighborhoods. My experince is Seattle, Denver, SF Bay. Maybe things are different elsewhere. Georgia Pacific sure as hell did’t make particle board back then.
Agreed.
It is clearly true that it is becoming harder and harder to live the “American dream”. However the “American Dream” has exploded to obscene proportions.
I know that a lot of us are pissed at the hedonistic adjustment made by the Fed (including me). But at the same time, people ARE expecting a lot more out of life.
Example: iPod.
Not too long ago, a walkman was perfectly acceptable for most folk. It cost around $30 or $40 for one of these things in the mid 1990’s. I bought mine for $22 in 1996.
Suddenly, we “need” an MP3 player, and it HAS to be an iPod. Cost: $200 to $400.
Back to housing:
We’ve replaced the average 1200 sq ft home with around 1900 or so (my numbers are off I know, but the gist is right).
the home can’t simply have hardwood floors in the LR, carpet in the Bedrooms, and Linoleum in kitchen/bath. It has to have Brazilian cherry hardwood everywhere except for Travertine tile in the Kitchen/Bath.
No Formica countertop, has to be Granite.
The builders and consumers only want high end. It’s high end we got. Problem is: people can’t afford high end.
The thing I find ironic: with all the high end stuff we use, we find a way to do it in a character-less sort of bland McMansion way… robbing even these fine materials of any oomph.
I’ll take my 1909 home with 16 inch baseboards over those anyday, even despite the way the home has settled, the fact that nothing is “standard” (door openings, windows etc) .
Well, here in San Diego, even the small older homes are not affordable, and indeed are priced substantially higher for wnat you get than the bigger nicer places. So small does not seem to matter. At some point there appears to be a high minimum charge for the first square foot and then a fairly linear increase beyond that.
No kidding. It’s true that houses today are on average about 50% larger than 50 years ago. However, a lot of perma-bulls (and before someone says anything, I know House Inspector Clouseau is not one of them) are using this stat to justify today’s prices. The technique is similar to the Fed’s self-serving “quality improvements/Hedonics” pablum. However, when you compare SAME HOUSE prices then vs. now on a wage/inflation adjusted basis (see Shiller graph), prices are STILL about double what they were then.
Yes, I’ve noticed that about SoCal and also to some extent Florida. The smaller and older houses tend to be not very nice or well constructed, probably due to not having to worry about heating, snow, etc. Yet, if anything, the prices of older housing mirrors the price of new housing even more closely than it does in places like small-town Va., where quality of older housing is generally fairly high and the houses are often quite distinctive. Notwithstanding the admittedly shoddy construction on some of the very newest stuff, I think older housing in rapidly-growing Sunbelt cities may be some of the most overpriced stuff around. Ground zero for this phenomenon would be some place like North Park, San Diego.
The entitlement society, that’s what we’ve become. Gotta have the latest, fastest, clearest, grooviest stuff credit can buy. On that note, how many of you will run out and buy Vista when XP does all you need it to? Feeling a little defensive about now? This consumption need permeates are society. It is a drug. Ask yourself right now if you’d be fine with what you have right now in your possession for the next couple of years without buying a thing. Of course you would. But I bet many of you are having withdrawl symptoms just thinking about it.
” On that note, how many of you will run out and buy Vista when XP does all you need it to?”
Hell, I just moved to XP after running ‘98 for years. Didn’t want to but was forced to when Norton wouldn’t run on 98 any more. Not a matter of desire but planned obsolescence by MSFT. Same thing with Vista. I’ll run XP until they force me into some new POS OS. Vista won’t be usable and reliable for at least 2 years anyway.
get a mac. if you care about a quality OS
I’m stickin’ with my XP. It works. So why spend money on something that may not?
windows 98. still holding firm against xp. but will fold eventually as only xp runs my 2 chips pc!
Uhhh…what’s Vista?
Heck, I’m still on win2k. And I think you are carrying it a bit far. I think most people would go nuts if they couldn’t buy anything. No shoes, no clothes, no books (real killer for me), no vacations (you are buying an experience), no expenses for hobbies (things that you earn money to do)… Would I be able to live? sure. Would i be fine? Nope, and I don’t think you would either, but that’s just a quess.
Actually, I’m using Vista RC1 at the moment, along with IE7. It’s basically XP with a facelift, though with lots of new multimedia toys built in. I see no pressing reason for anyone who’s just a business/casual user to move to it. IE7 is worth the upgrade if only for the tabbed browsing feature (you can download it free at Microsoft’s site).
I will certainly upgrade my media center version to Vista, but beyond that XP and 2000 Server serve my needs at this time. If it proves to be quite a bit more stable than XP I will be more interested though. The only question left… Which credit card shall I use
We thought about all that, figured SOMEONE could afford it, but not us. We have a patch of land sporting an old doublewide (it was funky, believe me). We looked at log homes, timber-frame… and put a three-section manufactured home on it. We decided we didn’t want to be 90 before the house was paid off (we’re mid-40’s). We’re not ALL yuppies out there!
This is the whole reason we have a negative savings rate!! No one want to work and save for the American Dream they believe they can put it on their C.C. and everything will work out. They deserve to have nice things!! Why because the neighbors have nice things and we must keep up our social standing (outwardly) I agree the homes of early 1900’s have so much more character then the McMansions today. They go cheap on window casings and baseboard in order to put granite countertops in. IMHO the high end will drop further then the low end due to this push for big, expensive homes. The book The not so big house” does a decent job showing how big is not necessarily better. I have found if one buys that big nice house, all of a sudden their perfectly good furniture no longer good enough and they have to consume more to fill it. Its a vicious cycle that people are caught in. The only way out for many is to cash in the ‘equity’ of their home. I think we will see a shift in consumer behavior after this bubble finishes bursting or maybe I give the consumer too much credit!! Wait that is how we got into this mess “by giving the consumer too much credit”
The irritating thing about the “Not So Big House” books is that she’s still talking about 1600-2000 square foot homes….those are still BIG by any international standard! Try living in 700 square feet with two kids - student family housing for example - it can be done, and well. And the community that goes with it, in my mind, outweighs any inconvenience of living cozy.
Americans are too fat and happy. What happened? Maybe we need a good Depression….
Of course, I rent, and I have no debt…
Middle-class Germans consider 120 sq m (about 1300 sq ft) to be great for a family of four. The walls are so thick that you don’t miss air conditioning unless it gets unusually hot.
“…people need to take into consideration is that builders aren’t building affordable homes.”
This is a glaring problem within the industry. And it begins with the prices these spec builders are paying for land. They apparently have the mentality of pay anything and pass it on to the end user. Well, the average consumer is not going to be able to pay over $100k just for the piece of dirt their house will end up on. Some of these guys need to get a clue. It’s like they don’t even consider the market before they build. The middle to high end is way, way, way overbuilt. They shared the same mentality of the flippers in that they thought anything will sell and at any price. Even in little nowhere towns along Interstate 5 here in Washington, I have seen improved city lots selling for $75k. That is way too much. When you consider the average family in these areas could afford a home in the $125k range max (given median income), the detatchment is obvious. These builders need to start considering affordability. They got too greedy and lost touch with reality.
“I think values are disconnected from wages, but I also thing that the American worker seems to think they are entitled to the life of a millionaire.”
This is true, but this is also the basis of our entire consumer economy. The whole consumer-industry model is based on getting people addicted to more stuff they don’t really need. If people really focused on what they needed and cut out all the extra crap, they would buy a lot less and work a lot less. Corporate profits would go down the tubes.
Watch “Fight Club”. Tyler has a great speach about this “trap” of the American Public; about how we just keep buying more sh!@ that we do not need.
Probably OT, but just reminded me of the movie. And I totally agree; but try telling your wife/GF that nobody cares if she has a 300 dollar handbag. Or 200 dollar shoes. Its so stupid, nobody even notices anymore because everyone has this crap.
Well, I’m a woman and I don’t get the whole “handbags and shoes” thing either. I did spend more than a hundred dollars once - but that was for a pair of hiking boots. Purses - no way. Don’t get it at all…
Idiot consumers=idiot corporations. If suddenly consumers decided to sharpen their wits and save, I think it would be the best thing in the world for corporate america. They’d have to actually make good products instead of hyped-up junk.
It’d be painful in the short run, but would ultimately save our economy, our sanity and our spirit in the long run. The arguments for keeping this junkie nation going are getting thinner and thinner…
Unfortunately, I see it going more the other way. I think people are beginning to act more and more like corporations, acting with a very limited sense of responsibility and with short-sighted rather than enlightened self-interest. We spend a lot of time on this board bemoaning the fact that people want to get money for nothing in real estate, but isn’t this essentially just maximizing profit and externalizing costs?
‘The labor market and the housing market are disconnected.’
No worries. They’re about to be reconnected.
“Gail Farwell, the Harringtons’ real estate agent, said the heightened interest in home buying a couple of years ago created a market where some properties sold for more than they were worth. ‘I think the market is really just adjusting,’ Farwell said.”
Latest spin, and this gal isn’t the first I’ve heard this from, is prices aren’t dropping, it’s just that houses were overpriced last year. Huh?
Yeah, I’ve even heard a few agents say that last year was a “false market” and that now we’re at normal… with the obligatory normal appreciation rate of 7% from here on out! Yay!
funny thing, I don’t recall anybody except us calling last year a “false market”. I recall them saying prices were justified by funny-mentals.
“‘I’ve been watching as the inventory (of available homes) has climbed and climbed,’ said (broker) Jon Krause of Rockford. ‘There has been so much new construction and that’s pushed up supply while there’s a limited number of buyers. That’s giving the buyer a little bit of an advantage.’”
Ahh, the beauty of supply and demand…
And just remember there won’t be a large correction in prices as long as the economy is good and builders don’t overbuild.
Glad we don’t have anything like that happening this time
Yeah, the builders are so much smarter than the last time around…they really learned their lesson from the last bust
Sure they did! Well, the CEOs and company bigwigs did, anyways. They all cashed out/exercises their stock options in 2005, just at the peak. Of course, they will be able to repurchase this stock at rock bottom prices in 2008/2009. Your typical retail stockholder will not be so “lucky” of course.
According to the NAR, this guy is still in a seller’s market. His Sept. 05 month’s of inventory was like 3.5 months and his Sept. 06 MOI is 4.6. What does that mean for the housing industry in places pushing 9-10 months?
rockford ? it’s a pit
WOW msnbc says double digit = crash
so I guess N VA has “crashed”
Three years ago, Farwell helped a client buy a home in a bidding war in which he had to offer more than the asking price. Now the client is trying to sell the home, she said, and he is having a tough time making his money back.”
Will he get his money back, or won’t he? The $64,000 question. Shall we have a poll about this FB? I vote that he will get kicked in the shorts! Any other predictions?
Illinois and Missouri getting hit, very interesting. Here are some more notes from flyover land (these from Montana):
Motel to Condos in Missoula
Number of Montana Realtors doubles since 2000
Sales are just starting to drop here, no newspaper reports yet. But it’s coming!
‘And it is no longer true that a job holds the promise of a decent living, he said. ‘That social contract is broken today,’ he said. ‘The labor market and the housing market are disconnected.’
Man, that really hits the nail on the head.
Where did we as Americans get the crazy notion that all you had to do is get landed up at a safe job and sit it out until you retire? We used to be a nation of inventors and entrepeneurs, now all we do is complain and buy on credit because we can’t compete against cheap overseas labor. Well guess what folks, the going wage in China is not 10% of what it is here and you are being set against that standard. Welcome to the real world NEO!
“Where did we as Americans get the crazy notion that all you had to do is get landed up at a safe job and sit it out until you retire?”
From unions?
we got the idea from our parents and grandparents! Shame on them! None of mine were in unions.
The young guys that are at my work have a sence of entitlement and when they fail they do not seem to take it ‘onboard’ and readjust their thinking. I am only 10 years older but see a generational gap in them. They are quick to blame others rather then admit fault. Some never get it and they leave disenchanted that the world was not handed to them while others see the light and understand you get what you work for!! Americas ‘work ethic’ has greatly decgraded IMHO. I think we have beome so accustomed to ‘good times’ that the lessons of the Great depression have been lost. The majority of the population has no savings so they will be the first to perish should we fall upon hard times. Why save for a rainy day when you can just throw that umbrella on your Credit Card!!!
I don’t think people ever had this expectation. I do think that people used to have the expectation that if you did your job well, you would not be fired just so accountants could cut $10 million from the budget while giving your underperforming CEO a $20 million bonus. The latter expectation is clearly no longer true.
The other expectation that is no longer true is that a better service or better product will win in the marketplace. Clever and pervasive manipulation of perception (sometimes called deception) will win over a better product these days.
We should not be surprised that there are fewer inventors and entrepreneurs these days. What inventor or entrepreneur can afford a legal battle against a behemoth corporation over copyright or patent infringements? These days, we bestow corporate status even on ventures with very little risk and allow corporations to patent even obvious ideas.
After WW2, there was a social contract for blue and white collar workers–you worked hard and did your job well and you were rewarded with decent raises and a chance for advancement. The CEO and the rest of the management team worked hard and did their jobs and collected salaries that were about 10 or 12 times the highest salary of non-management.
Check out the action today–CEOs who demonstrate lousy business skills parachute out with tens of millions; CEOs of public companies like Toll talk up the stock while cashing out themselves, giving misleading info on business conditions. Stock buybacks burn company cash to give insiders a chance to cash out at a good price. Companies extract tax benefits from towns desperate for new jobs, then like MBNA in Camden Maine, blow town when it’s convenient, leaving locals strapped for costs of extra schools, roads and infrastructure. Blame workers if you like,but the upper echelons of corporate culture have embraced a slash and burn mentality, fueled by greed and a sense of oligarchic entitlement.
“What inventor or entrepreneur can afford a legal battle against a behemoth corporation over copyright or patent infringements?”
It’s called a contingency fee arrangement. Go check out how much Medtronic had to pay an individual for patent infringement. It’s more than 9 figures.
I was thinking of corporations sueing an individual or small private firm for potential infringement on the corporation’s intellectual property rights. Large corporations have huge patent portfolios containing many fairly obvious ideas. They could easily tie up an indidual in a lengthy legal dispute even if the claim has no merit. Since there is no money for the individual to win, I think it would be difficult to arrange a contingency fee.
Ahhhh Now you have me going
Patents these days are a joke. There was a time and an old saying that if you built a better mouse trap the world would beat a path to your door. Not any more, because if a mousetrap were to be patented today, the patent would read “a device, mechanism or other unspecified means by which mice are captured, killed or otherwise removed, disposed of or mitigated”. In otherwords the Idea of trapping mice would be patented, not a specific design. BT (British Telephone) for example has a patent on hyperlinked text, TIVO has patented the Idea of recording TV on a hard disk for time delay, Unisys holds and enforces the RLL patent used in Gif’s and extorts money from many corporations, and it goes on. Patents seem to abound on basic ideas. Thank god no one patented round things, or we might have to drive on odd shaped wheels.
Where did we as Americans get the crazy notion that all you had to do is get landed up at a safe job and sit it out until you retire?
This –although an aberration when viewed in a broader historical context– was actually the rule from the post-War period (1946) until the 1990s. Anyone who has Boomer or Silent Gen parents can tell you that. In the 1960s-70s-80s, you could literally show up for work drunk/stoned/late on a repeated basis and not get fired. This is the era of the three-martini lunch, after all.
The sad reality is, many people from those generations still have the “safe/guaranteed good jobs, good times” entitlement mentality, even though that era is long gone and never to return. Most Gen-X/Yers (despite some notable Paris Hilton-type exceptions) tend to take a more realistic view of the labor market.
It’s not just union workers or others who want to “sit it out until retirement” who can’t afford a decent house. Here in LA, I know lawyers and doctors from top universities who can barely get into a little stucco shack in the Valley. These are not lazy people. They work hard, have a ton of education, and up until the last few years, didn’t have a problem buying a house. This is not just about lazy people with a sense of entitlement, something really has changed, and in my opinion, it’s that all of this loose financing has put prices in the stratosphere, to the point where only the stupidest or most judgment proof people are willing to get into the market.
Completely agree, except I would replace “in my opinion” with “per well established fact”.
Probably the same place that the Germans and just about everyone else in the First World did. Get a decent job, do it to a satisfactory level, then retire around age 65. In return, decent housing for family, opportunities for children according to ability, comfortable retirement.
When Germans get those things, they’re cool. When they don’t, they are NOT (e.g., the 1930’s, bits of former East Germany today that elected extreme right-wing state parliament members)
(note: “right-wing” means something different here than it does the States, to some extent. “Conservatives” describes one of the two larger parties, and they’ve got a decent grip on reality and accept that Germany might have some brown people. German “right-wingers,” on the other hand, miss the good old late ’30s.)
Re: Rockford Register article
- Pumilia said the market in September also may have been hurt by high gas prices.
“That does have an effect,” Pumilia said. “Especially when it comes to having to drive to look at houses in the smaller towns around Rockford.”
Pumilia said as gas prices dropped, activity increased. Gas prices in the Rock River Valley peaked in August at nearly $3.20 a gallon. Monday, prices were about $2.27 at most area stations.
IF ONE DOLLAR PER GALLON of gas is going to affect your budget that much …you have NO BUSINESS buying a house. My God, you need to project some reserves in you monthly budget.
The idea of savings is lost on the “how much a month?” crowd.
This is the same brain-dead logic used by the NY Times, et al, every time they write “Crime is down, even though the prison population has grown.”
‘The air came out of the balloon, finally,’ said Jim Barbagallo, president of the local Realtors association. ‘It’s a little bit of a return to normalcy.’
I’m very sure that he’s glad that his agents are now having to work hard and fight over the declining number of commissions.
I’ve noticed that all the realtors are using the same lines. Same as the bubble went up, same now that it’s going down. Perhaps they have neural implants that allow them to act as a collective.
Yeah, those neural implants are called NAR newsletters.
Somewhat off topic.
I have posted here before on and off. I just wanted to share with you all the the “greater fools” I am seeing. I just happen to be a minority person from the Republic of Panama originally, have had my legal citizenship for some time now.
I have noticed here in Boston that the amount of “real estate professionals” heavily pushing minorities to buy and others they wrongly consider to be ignorant of the current RE downturn. Whether it is HUD,Fannie Mae or the local lending instition. These entities make a heck of an effort to look like the cross section of the population they want to rob blind. I am thankful I researched housing and spoke with my Veteran’s Administration advisor about housing.
And believe me there won’t be a housing bail out at all no matter what your skin color is. Why do you think the BK laws changed at the perfect time? If anything minorities will be screwed more than normal because a significant percentage start out in this “game” with less of financial cushion anyway. Just thought I would throw in my two cents. Feel free to comment.
I listen to spanish talk radio about a half hour a day, just to keep up my spanish skills, and every other commercial is to pull money out of your house, either to “get out of debt” or to “spend on your family”. The spanish talk radios are all over the RE market, I can’t tell whether these are infomercials or real talk radio shows, but they go into minute detail about IO loans, loans where you don’t have to make any payments for the first X amount of months, etc. It’s going to be really sad when construction slows and a lot of mexicans lose their jobs at the same time as their property values are going down and their loans are resetting.
I think some of my neighbors have taken those Spanish language “spend on your family” commercials to heart. And it’s gonna get ugly real soon.
As for my family? A lot of frugal Scottish blood there. With the “What? Spend money?” attitude that goes along with it.
No doubt about it hectore3. In my area of the Midwest in our medium sized city there has been a big push for inner city revitalization especially since 2001. Ya know, poorer people, minoritys, go in and buy trashed houses in high crime sections of town and fix ‘em up with government grants. There are many charitable organizations that are saying they are doing people a favor by gifting the downpayment moneys to make the loans affordable. The only catch is they have to live in them for a few years before they can sell, to uhh stabilize the neighborhoods. Begining in 2003 these areas had the highest concentration of for sale signs in a six county area. Now, I see alot of for rent signs and ads in the paper, some are dreamers asking up to $725 per mo. where the average salary is minimum wage, $5.15 per hr. The local response is to up the minimum wage.
Hi Hectore — My dad was Panamanian (he passed away years ago). In 1999 I almost bought the house he grew up in in old Panama City…it was a wreck though with squatters living in it so I passed. My cousins live in Panama City (new parts). My grandparents lived on Via Argentina — their house is now used as an office. Supposedly Panama is one of the hot retirement places now…esp. Boquete.
http://articles.moneycentral.msn.com/RetirementandWills/RetireInStyle/PanamaIsParadiseForRetirees.aspx
I’m wondering if the housing bubble has hit there too…and if so, if it is now also popping.
Ozarkian - Sorry to see MSN has picked up on the Panama angle, but I think Panama City is probably one of the best places to park money in real estate right now. I’ve spent a bit of time in Latin America and pay some attention to what is going on there. Panama is cheaper and less-discovered than Costa Rica, but actually a bit more cosmopolitan, without the problems and danger of Colombia, which also has some nice, interesting, inexpensive places, like Medellin and Cartagena. Many Americans are familiar with Mexico, which is convenient, but which also has draconian regulations about foreign ownership of assets. I think Panama may be one of the top places to buy for the next 3-5 years. I’m thinking about checking it out more closely in Dec. or Jan. Any thoughts welcomed.
When I went there last in 1999 there were already US retirees moving there…esp. in Boquete. I wish I had bought then. I think prices are a lot higher now. The country is fantastically beautiful and the people are really friendly. I have many Panamanian second cousins and some are doing well and some not so well.
There are lots of very, very poor people too not just in the cities but out in the country, especially the original Indians.
My Aunt (also Panamanian but is moving here to the Ozarks next week, she has been living in Houston) and I may go back next year and visit our relatives and check things out. She doesn’t want to live there anymore even though she has lots of relatives and her money would go farther. [She married an American and became an American citizen years ago.]
I have friends who sold in Silicon Valley last year (like me) and moved to Mexico but they paid $500K for a house!
Thanks for response - I was going to check out Panama City + the Bocas del Toro area - was in Panama once many, many years ago and liked what I saw then, so I figure worth another look. As for Mexico, I go there consistently for a little side business I have (was there last week), but would never buy property there unless I wanted to speculate on the peso. Aside - when Mexico privatizes Pemex and allows Americans to earn money there the way we are expected to allow them to earn it here, I’ll take them seriously as a country.
read the community banking law passed by the clintonistas’
whitey’s buyin
Here’s a cheap place to live in SoCal.
http://tinyurl.com/ewsto
Pathetic, but at least it’s cheap. It should be, if it’s like that. But, you can find plenty of slums in LA and OC counties, and then spend $500,000 to get your foot in the door there, yet it’s no better than what you read of this place in the LA Times.
Such is the bubble. Crap should cost little to nothing, but it doesn’t, not in LA and OC
Anecdotal evidence of rents possibly softening.
My lease is up at the end of this month. My friend is a property manager and showed me a house he is renting out. At first I said no because the rent was the same as I’m paying now. He just called and said the owner reduced the rent 150 per month. The average heating and cooling costs are 50 dollars less a month b/c the house has new windows and I don’t have to pay for trash removal at 35 a month. When I plot half of that savings out at an average appreciation rate of 6% that’s almost 40k in 20 years. I know a lot of things change over that period of time and I’m not going to live there that long but I find that projecting numbers out like that is motivating me to be a better saver
I’m not seeing big rent cuts in the NoVa area but I am seeing houses taking longer to rent.
Just talking to you guys on this blog has got me plotting long term savings, etc. People tend to brush off little savings like that, but when you actually plot it out, it can make a difference.
Novasold
It is the little saving that create big savings over the long term. I bought a “Save a Buck”(my own term) espreeso machine a few years back when I went to get my wife her Starbucks Vanilla Latte. I ran the numbers and after 100 “save a bucks” the machine had more then paid for itself not to mention the gas and time it takes to drive there. We have definately got our money’s worth on it. My dad taught me if you don’t want to be stuck living paycheck to pay check you have to save each and every month. After several years I never missed that money but I do know what I will do with it in the future since I still have it!!!!
Yep
Excellent to see a Saint Louis report on the blog.
Local Housing Observation-> I have a friend who is trying to sell a house. Put it on the market in January 2006 with an agent. Didn’t sell. Got rid of the agent and tried FSBO. Didn’t work. Now listed with a different agent. He has a put on a new roof. New carpet upstairs, and painted the exterior. He bought it in 2002 for $141K and listed it originall for $169K. No sale as of today.
It interesting to see how the national market is affecting us locally. His house is rather modest and slightly old. Probably can’t sell because their is an abundance of the new.
The national market affected the STL market in the early 1990s as well, when I lived there. It was interesting to see the first generation of west St. Louis county McMansions get snatched up in droves by California refugees back then.
“Some Properties Sold For More Than They Were Worth”
Wow, what a surprise. Right up there with this headline:
“Drinking Paint Thinner Proven To Be Bad For You”…
People’s ability to barely understand the screaming obvious truth is truly amazing.
“‘You hear a lot about prices falling. I don’t really see prices falling, but I don’t think sellers can be as aggressive on asking prices,’ said Mike Travaglini, branch manager at Coldwell Banker’s office in south St. Louis County.”
THE SKY IS FALLING! THE SKY IS FALLING!
When St. Louis homes are selling at California prices, you know a crash is in the pipeline.
I grew up in STL and yes, there appears to be a bubble there. When I decided to leave the OC I had similar offers from two firms, one in St. Louis and one in Columbus, OH. Houses in the 400-600k range in nice areas definitely appeared to be 100-150 higher in St. Louis, e.g. 400k in Columbus = 550k in STL. I’ve come to like Columbus a lot.