October 5, 2006

‘Prices Are Coming Down And That’s Good News’: NAR

The Journal News reports from New York. “Fresh data from a statewide group of Realtors shows that prices for houses in Putnam County slid by double digits in August. The median price of a single-family home in Putnam fell 13.7 percent to $402,500 from $466,300 compared to August 2005, the data from the New York State Association of Realtors revealed yesterday.”

“Prices in Rockland fell 8.4 percent in August to $490,000 from $535,000 a year ago. Putnam recording the largest percentage drop. In August, the county recorded 81 sales, down from 142 in August 2005, a 43 percent drop. In Westchester, 652 homes were sold, 22.6 percent fewer than the 842 that sold a year ago.”

From Delaware Online. “The softening of the nation’s housing market is unlike any downturn seen in the past 50 years, one of nation’s top housing economists told a group of Delaware real estate agents and mortgage loan officers Wednesday. In previous falloffs, the weakening was caused by underlying economic fundamentals, said David A. Lereah, chief economist of the National Association of Realtors.”

“The downturn is caused by falling confidence among buyers who are fearful of paying too much. ‘Buyers are just not buying,’ Lereah said. ‘We need to have a correction. Prices need to come down,’ Lereah said.”

“While the nation’s housing industry has not seen annual negative price appreciation since the Great Depression in the 1930s, some individual markets could see declines of 10 percent to 20 percent. Particularly vulnerable are resort markets on the nation’s East and West coasts, he said. ‘Prices are finally coming down and that’s good news,’ he said.”

The Wall Street Journal. “The proliferation of headlines about a weakening housing market is encouraging some potential buyers to hold off until prices look like they’re near a bottom.”

“Nillani McClain has been looking at condominiums and townhouses in New Jersey with her husband. But given the recent slowdown news, the McClains are leaning toward waiting until next spring, and then looking in Manhattan, a market they had originally thought they couldn’t afford.”

“‘We are taking into consideration the option of finding something in the city and not having to move out to Jersey if prices drop considerably,’ Ms. McClain says.”

“For sellers, the real-estate news adds to their headaches. Laurie Siegel, a retired nurse in West Orange, N.J., is trying to sell a three-bedroom house so that she can buy a condo. The house was listed six weeks ago at $449,900, and Ms. Siegel hasn’t had any serious offers.”

“‘If I don’t get enough for the house, how am I going to buy the condo?’ Ms. Siegel asks. So far, she has refused to lower the price of the house. ‘I think it’s all a gamble,’ she says.”

The Asbury Park Press. “East Brunswick builder Kara Homes Inc., one of the biggest home builders in Monmouth and Ocean counties, anticipates filing for Chapter 11 bankruptcy, a company official said in a letter given to laid-off employees earlier this week.”

Home News Tribune. “Kara Homes (is) one of the state’s largest private home builders of condominiums and active-adult communities. The company terminated some personnel on Tuesday because it is ‘trying to restructure’ the payroll, said Patrick W. Turner, the general counsel for Kara.”




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101 Comments »

Comment by Ben Jones
2006-10-05 11:04:19

Sept. 10, 2006:

‘Now that the long anticipated correction in the real estate market has occurred, both home builders and buyers are discovering opportunities created by the market shift. Zudi Karagjozi, president of Kara Homes, reported that the recent market slowdown has inspired valuable new incentives for home buyers while giving builders the chance to become more efficient.

“At Kara Homes, we’ve just completed the two most profitable quarters in the history of our company,” Karagjozi said. “We’ve taken advantage of this temporary lull to reevaluate our business plan, streamline our operation and prepare for the market recovery which some experts are predicting will begin either later this year or in the first part of 2007.’

Comment by Mo Money
2006-10-05 11:18:02

Who are the experts ? Physic Freinds Network ?

 
Comment by Sohonyc
2006-10-05 11:23:59

Its incredible how people can’t conceive of a market downturn lasting longer than a few months. I’m still amazed to hear people talk about our “economic recovery” as if the downturn after 9/11 was a long one!

And now we’ve had a nanosecond of real-estate price decreases, and Karagjozi is talking about a recovery which “will begin either alter this year or in the first part of 2007″ ???

The more alarming question is: is *anyone* prepared for a decade of price decreases and economic stagnation? Apparently not.

2006-10-05 11:40:23

I can’t get over how it’s now “a much anticipated correction”….when we all know and have logged in the archives hundreds of claims that there would be NO correction by the very same “experts” who now claim to anticipated it all along. And why should we believe their recovery predictions?

 
Comment by pinch-a-penny
2006-10-05 11:49:33

What economic recovery? Unless you were in some way associated with the mortgage/REIC, you probably saw your income wane. Also, it has been more difficult to find good paying jobs, specially in Mass.
I have not seen any economic recovery since 2001, just a wild “appreciation” in some segments of the RE market. Every other industry is gasping for air. High tech has not had a single innovative idea since 2001. (don’t even dare mention google!). Manufacturing is dead, Automotive is imploding, Insurance got taken out back last year with rita and Katrina and shot, Banks and investment banking have been leveraging to the hilt in order to get some measurable rate of return (Amaranth), so where is this economic recovery that is being talked about? No wage increases, and pressure downwards, no innovation, and an economy reliant on personal consumption, and not exports are very bad combinations. It is a matter of time when this selling houses to each other for wildly impossible amounts is going to end badly.
We never left the recession of 2001, just masked it with lipstick, and we are hoping that no one notices that it is the same slaughtered pig!

Comment by jim
2006-10-05 11:56:58

Cheer up Pinch!
Banks are rolling out a new innovative product for ‘07. Indentured servitude for “high debt worth” individuals.

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Comment by DinOR
2006-10-05 12:02:11

“high debt worth” individuals LOL!

jim, I’m giving you 90 seconds to patent that or IT IS GONE!

Sounds like your receptionist has a “cold”. She referred to me as a high DEBT worth client!

No, actually…… Lindsay feels just fine?

 
Comment by IL_NC_IN_CA
2006-10-05 13:54:42

Um, you can’t “patent” a phrase.

 
Comment by Steadykat
2006-10-05 13:59:38

Um, he was making a joke.

 
Comment by AE Newman
2006-10-05 14:55:10

posted “Um, he was making a joke.”

And I am joke thief of the first order!

 
 
Comment by DinOR
2006-10-05 11:57:53

“don’t even dare mention google!”

pinch, I’ve been harping on this for as long as I can remember. Everyone was too busy loading up their pick-up at Home Depot on their way home Friday to notice about the only good thing happening in their life WAS their home appreciation! Had they bothered to look up from installing fake hardwood flooring they might have noticed.

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Comment by Inspired
2006-10-05 20:37:40

The entire economy has been a mirage! {of Debt}
I don’t recall the numbers exactly but I beleive it takes over $12 dollars of debt for $1 dollar of GDP!
The Government has Jerry rigged every number they report, to make us believe the economy is OK! Hoping that sooner or later, despite BAD policy,the economy will magically catch on & will start to show signs of real life!
Let’s see:
In Northern Nevada The 2nd largest County in the state Washoe is reporting negative sales tax receipts.. butGDP is up
Rails keep spinning they are taking market share from trucking yet car loads {units} are up 1.4% YOY. GDP is up more
Trucking is downgraded (but all go up) as they await for the “Delayed shipping rush” (ie Christmas goods)..Wall street remains convinced it’s only a delay now we are in OCTOBER!
WalMart largest retailer on the Globe reports, September same store sales up 1.3%..not 1.8%.was that units or inflation adjusted?
Walmart for the year is around 2.5% GDP up more!
US Auto makers shipping Volume down 9.9% YOY -stocks are up despite their less profitable mix weaker than 2001. But our GDP is not impacted? Totyota is doing about 4%
Then there is real estate sales down 30 - 50% from last year and respective industries appliances, furniture, etc. down also! But GDP is UP!
Gasoline is just 30 cents less than last year, JIT{just in time} to spend on China’s trinkets for Christmas! Gas down 75 cents all for 2 weeks vs all year long.. Yet we spent more GDP is up!
Personal savings goes negative for 7 quartes in a row..lower on a pecentage basis than the 1930-32 period, known as the depression…But GDP is up!
All entities {corporate, govenrment, & private}, owe more as a percent of annual income BUT GDP IS UP!
How can all this be a growing economy?
Well Pinch, when the economist came in with annual housing down August 42,000 units per monthly average below the July number. our government servants reported it as 50,000 units better than July, while revising July down 91,000/ per monthly average. GDP is therefore turning UP!
Summer electricity production/usage from the Mid atlantic to New England is down approx. 20% ..but GDP is UP!
Despite mass lay offs in one industry { chips, software, housing, autos, parts, mortgage financings, no one ever applies for unemployment as another weekly new unemployment remains stable between 310-320 thousand.
Of Course their mehtods are all monkey business and the press is part of the government, banker KABAL!
The answer is how we come to the statistic…all data trimmed to minimize inflation!, increase growth….if they don’t get the number they want to report….they rejigger the methodology,{ post the change in a footnote on page 305} and /or revise the prior “old” numbers so the headline number looks and feels good!

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Comment by giantaxe
2006-10-05 12:02:15

It seems they’re not even prepared for a downturn of a single year’s duration. Lots of pain ahead for people with these time-horizons, imo.

 
 
Comment by OC Jack
2006-10-05 11:50:32

Kara Homes goes from the announcing the “two most profitable quarters in the history of our company” to Chapter 11 bankruptcy … in less than 30 days!!!!

Wow.

Comment by P'cola Popper
2006-10-05 12:20:39

Holy shiite!

 
Comment by CincyDad
2006-10-05 12:34:46

I saw that and assumed I misread it. Record profits to BK in 3 weeks. Makes you wonder if those were the only 2 profitable quarters for the company?

 
 
Comment by jim
2006-10-05 11:51:06

“At Kara Homes, we’ve just completed the two most profitable quarters in the history of our company,” Karagjozi said.

And now they’re filing for BK. $hit happens in a hurry doesn’t it Mr. K.

Comment by Pete
2006-10-05 12:24:35

And now the real question: how much is Mr. Karagjozi’s bonus going to be? I’m sure he will somehow be rewarded for his “performance” with some of the company’s few remaining dollars.

Comment by Premature Curmudgeon
2006-10-05 13:01:12

He probably got his bonus by selling stock between those profitable quarters and the bottom falling out.

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Comment by easthawaii
2006-10-05 11:10:12

Imho, the “market recovery” is going to be a lot later than 2007, years later.

Comment by Sobay
2006-10-05 12:08:08

- ‘Buyers are just not buying,’ David Lereah said. ‘We need to have a correction. Prices need to come down,’ Lereah said.”

- First there was the ‘Horse Whisperer’
- Second there was the ‘Dog Whisperer’

- And now we have the ‘House Whisperer’

Dave is an absolute master of the ‘Spin Zone’ … to him everyday is filled with ’sunshine’

Comment by AE Newman
2006-10-05 14:58:12

Sobay “- ‘Buyers are just not buying,’ David Lereah”

But liars are still lying.

 
 
 
Comment by Catherine
2006-10-05 11:10:23

“‘If I don’t get enough for the house, how am I going to buy the condo?’ Ms. Siegel asks. So far, she has refused to lower the price of the house. ‘I think it’s all a gamble,’ she says.”

So, Ms Siegel…who do you think we blink first?

Comment by Catherine
2006-10-05 11:11:05

“we” = “will”…sorry

Comment by NoVa Sideliner
2006-10-05 11:30:04

“I think it’s all a gamble”. That’s the line I hear from goofy friends of mine who lose money hand over fist on the stock market. It’s what someone says when he doesn’t even know the name of the company behind the ticket symbol, much less the P&L statement. (Yes, I have friends like that.) Likewise, here it’s someone who has no idea what the RE market is like, so in a way she’s right: For *her* it’s all a gamble. (A bad gamble this year, baby doll.)

As for selling the house to buy a condo… No! How about ditch the house for what you can get, and RENT a condo? You’ll have your pick of nearly-new units! And if you like one a whole lot, then just buy from the FB (or his bank) in a few years. Selling a house to buy a condo now is like the proverbial “frying pan into the fire”.

Comment by NoVa Sideliner
2006-10-05 11:31:16

My turn for typo: ticket (symbol) –> ticker

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Comment by bairen
2006-10-05 13:30:44

When you gamble the “house” always wins in the long run.

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Comment by IL_NC_IN_CA
2006-10-05 13:57:47

:)

 
 
 
 
Comment by WT Economist
2006-10-05 11:14:51

Downsizing is a good idea, but only if the condo is cheaper than the house. If it isn’t, something is wrong. You’re occupying less square footage on less acreage. The goal is to spend less money and live with less effort, not to have more granite countertops.

Comment by DinOR
2006-10-05 12:11:41

WT Economist,

God love you Sir! In a normal world young couples rent, buy fixer/starter, intermediate home, dream home, grow old together and then downsize. All the way up, you’re everybody’s new best friend. And why not? Bigger fees, bigger commissions, more home furnishings, appliances, cars etc.

My wife and I were thinking about downsizing even before our kids were grown. (Hell, they’re not around 98 % of the time anyway). Then the tech bust, then 9/11. I said enough.

Sadly the REIC doesn’t make much off of you by selling you a modest home to downsize to. This is why we now have 2,985 sq. ft. homes on 3,800 sq. ft lots! That’s “downsizing”?

Thanks, we’ll rent while you big wigs sort this out.

 
Comment by OCDan
2006-10-05 12:43:09

WT how right you are. Obviously, the goal is to get housing to spend the least amount of money on housing, of course in a good area. Even better is have an account with enough in it so that it pays enough interest to cover the property taxes and insurance and, if really fortunate, maintenance. Why spend every last penny trying to live in a place?

 
 
 
Comment by flatffplan
2006-10-05 11:10:31

prices didn’t rise anywhere in 06
what BS
go apples to apples

 
Comment by Anthony
2006-10-05 11:10:38

“For sellers, the real-estate news adds to their headaches. Laurie Siegel, a retired nurse in West Orange, N.J., is trying to sell a three-bedroom house so that she can buy a condo. The house was listed six weeks ago at $449,900, and Ms. Siegel hasn’t had any serious offers.”

Just a thought: Do nurses in NJ make $100K a year like they do in California, or is that just because in CA there is so much fleecing going on with respect to unions in these public-service type professions (i.e., CDF, police, PG&E)?

Comment by Mo Money
2006-10-05 11:16:28

Been in a Hospital lately ? Kaiser looks like they outsourced all the nurses to the Phillipines to save money. My freind told the nurse he thought he had woken up in Manila after the operation.

 
Comment by Andy
2006-10-05 12:00:32

I’ve been seeing these prices for years and they still shock me everytime I read them. I can’t believe a friggin house, that a nurse lives in, is $449k. Houses should be like $100k. Maybe $150k for a pretty nice one for upper middle class. $250k should buy you an old-school mansion.

Comment by NjGal
2006-10-05 12:03:37

Nurses actually do pretty well here on the East Coast, especially if they’ve been doing it a while. According to a doc in my family, they are in short supply.

 
Comment by Bill
2006-10-05 12:33:10

Note that the nurse is retiring. Could be that she bought her house > 20 years ago when the price was under 100 K.

 
 
Comment by MacAttack
2006-10-05 12:04:36

She’s a RETIRED nurse. She may have bought the house THIRTY YEARS AGO.
Unions… the folks who brought you the WEEKEND.

Comment by Anthony
2006-10-05 12:44:31

I normally don’t get weekends off.

 
 
Comment by dcrenter
2006-10-05 14:20:59

“Just a thought: Do nurses in NJ make $100K a year like they do in California, or is that just because in CA there is so much fleecing going on with respect to unions in these public-service type professions (i.e., CDF, police, PG&E)?”

What exactly is your point? Are you saying public servants don’t deserve to make enough money to live in areas where they “serve”? This is a problem not often discussed. Here in Arlington, VA - teachers, cops, fireman, nurses, etc are now the working poor. I sometimes think wouldn’t it be funny if we all up and moved away and let the elitists fend for themselves.

 
Comment by Barelyescaped
2006-10-05 18:20:27

I was a union nurse for 6 years before leaving Kaiser.
I made 75k on my best year, and believe me, I busted my tail
to earn it. Working 12 hour shifts and overtime finally took their toll. Burnout set in and I quit. I’d rather have hot pokers through my eyeballs than EVER work another night shift. The money is not all it’s cracked up to be.

 
 
Comment by jjinla
2006-10-05 11:14:31

“So far, she has refused to lower the price of the house. ”

This game of chicken is hysterical. Sellers in my area are refusing to lower prices, sometimes carrying two mortgages that each eat 50% more of their gross.

I, and many others, are renting for less than 10% of my NET.

Any bets at who is going to blink first??

Comment by Mo Money
2006-10-05 11:22:42

My brother in law said this weekend if a seller won’t listen to him and lower the price he stops marketing it since it’s a waste of time and his money. He says he knows he’ll get fired and oddly enough the house will list with another agent at a lower price. But he doesn’t care since he picks up a lot of other listings the same way and gets them to lower the price so it will finally sell. Says he’s on track for best year ever right now.

Comment by Sobay
2006-10-05 12:13:40

That’s great … he gets the listing on the ‘Flip Flop’.

 
Comment by jag
2006-10-05 12:47:32

I thought about this same thing. Interesting to hear its working.
I would bet smart agents would do this; Politely give the seller their REAL estimate of a crossing price. Listen to the seller justify their higher price. Agree to disagree and leave.
If the agent is right, it won’t sell. Maybe many won’t come back to him out of pride but people who really want to SELL may see him as more “knowledgeble” and “trustworthy” and come back to him and come back MOTIVATED to listen (and sell).
I’m actually not surprised your in law is doing well with this counterintuitive strategy. He really has nothing to lose and something (motivated sellers) to gain.
Gee, sounds exactly like the ONLY clientele a broker would want in the first place.

 
 
Comment by giantaxe
2006-10-05 11:45:54

The sister of a friend is in the two mortgage situation. They’ve just moved from upstate New York to Kentucky. When I suggested that they were taking a risk buying without selling, the answer was that they didn’t have an option. What about renting for a while for goodness sake? I’m convinced that New York house will end up in foreclosure when they tire of paying two mortgages on relatively limited income.

Comment by HARM
2006-10-05 12:48:56

What about renting for a while for goodness sake?

You’re kidding right? The REIC & MSM have done a bang-up job over the last decade convincing practically *everyone* out there that renter = loser. Renters now have a social status somewhere between lepers and crack addicts (even when renting a detached SFR in a good neighborhood). When I tell friends and neighbors we rent the place we’re living in now (a detached SFR in a good neighborhood), the look I get is either “you poor thing!” or “get the f*ck away from me, loser!”

Comment by grubner
2006-10-05 15:40:26

Cheer up Harm, as a fellow renter in a pretty upscale NJ neighborhood we get that BS all the time. Our kids just started attending an expensive private school and one of the snotty neighborhood wives (whose kids go to the public school) said to my wife, “I don’t how you renters have managed to scrounge up the money to pay for that school when you can’t even afford to buy a house.” As my wife said to me, “you can lead the horsy ladies to water but you can’t make em think” The builder who built but couldn’t sell our current rental house asked us why we weren’t buying. He knows how much we pay in rent, he knows what he couldn’t sell the house for, he knows how much he pays the bank every month and still doesn’t get it. Our motto around the house is “we’re renting our way to prosperity”.

PS Nothing against Pub school as I am a product of Pub Schools.

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Comment by spike66
2006-10-05 16:29:35

Bravo Grubner, bravo.

 
 
 
 
Comment by BanteringBear
2006-10-05 11:58:32

“This game of chicken is hysterical. Sellers in my area are refusing to lower prices, sometimes carrying two mortgages that each eat 50% more of their gross.”

I think this is the case in most areas. I believe a lot of it has to do with the fact that a large number of flippers are stuck. Reducing means giving up the dream and most likely bringing money to the table. They will most likely go broke rather than reduce the price. So, in turn, these bagholders are just clogging this market up bigtime. There are also a huge number of dreamers hanging huge price tags on their homes hoping for that greater fool to make them rich. Here in Washington, there is so much garbage for sale, it is truly incredible. The bottom end is just loaded with $200k trailers and crap. These people, should they ever be able to sell (not likely), would see more cash than they ever have in their lifetime. It is gonna take some time to work through this hideous glut. I look at listings in WA, Northern CA, and Northern NV almost daily and it can be quite annoying as it appears to be the “Great Real Estate Stalemate.”

Comment by turnoutthelights
2006-10-05 12:25:10

nice post. My sentiment exactly. ‘Who blinks first’ isn’t really an option to the blind.

 
Comment by jjinla
2006-10-05 14:41:00

“I believe a lot of it has to do with the fact that a large number of flippers are stuck.”

In my area at least, I have to disagree. It’s greed, pure and simple. The majority of sellers in my area have been here for years.

But then again, lord knows how many HELOC’s they took out based on assumption of future gains.

 
 
 
Comment by FoxV
2006-10-05 11:23:55

“While the nation’s housing industry has not seen annual negative price appreciation since the Great Depression in the 1930s”

Second article this week that makes a reference to the great depression.

If it Walks like a duck, swims like a duck, and quacks like a duck it must be…

A Dove!
A glorious beautiful Dove soaring forever higher into the sky

Comment by Robert Coté
2006-10-05 11:41:44

Passenger Pidgeon.

Comment by HARM
2006-10-05 12:53:10

:lol: Maybe the Ivory-billed Woodpecker –it’s not completely extinct yet, just on the brink.

Comment by Robert Coté
2006-10-05 14:10:04

Ahhhh, a fellow NPR Audio Log listener. No, We exotic specimens are “rare and special” not bordering on extinction.

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Comment by Recovering Homeowner
2006-10-05 16:04:24

“annual negative price appreciation”

boy, there is some twisted English at work there. How about annual depreciation?

 
 
Comment by CincyDad
2006-10-05 11:45:31

“‘We need to have a correction. Prices need to come down,’ Lereah said.”

I guess the NAR was right all along when they said to buy now or be priced out forever. Looks like everyone is now priced out of the housing market

Comment by Gekko
2006-10-05 11:53:04

-
Boy, Liareah really has done a 180, no?

 
Comment by santacruzsux
2006-10-05 11:55:04

LOL! Isn’t language great!

 
Comment by Gekko
2006-10-05 12:05:50

“We’ll reach the point Europe reached 20 years ago, where families pay 45% of their income on housing and married couples have to live with their parents for years before they can afford houses,” he says. “Prices will keep going up in double digits for years.” - Bob Toll

Comment by manhattanite
2006-10-05 12:15:34

hehe — it’s like quoting realtwhore scripture, chapter and verse! i’ll never forget that nytimes mag article from summer ‘05.

 
Comment by wmbz
2006-10-05 12:25:10

Oh I remember that one! What an A-hole, of course he and his brother unloaded big chucks of the company stocks while he was spouting that crap.

 
Comment by diogenes
2006-10-05 12:27:49

That was wishful thinking, wasn’t it?
About the same time he’s selling tens of millions of dollars in company stock to “diversify” his holdings.

 
Comment by mrktMaven FL
2006-10-05 12:46:29

If kids are forced to stay longer with their parents, would’nt that lower aggregate housing industry demand over time and would’nt that be bad news for HBs? If you listen really hard, sometimes you can actually smell the BS?

 
Comment by BanteringBear
2006-10-05 12:57:56

Bob Toll. Just another greedy capitalist padding his bottom line through fear and intimidation of the “little people.” Bob Toll, prevaricator extraordinaire, philanthropist in absentia.

 
Comment by Reuven
2006-10-05 13:04:02

This cracks me up! Can’t anyone do math. Take the 27% gains that some areas saw in 2005.

At this rate, you can turn 200,000 into 1 BILLION dollars in 35 years.

Does anyone think that “double digit gains” are sustainable more than 1-2 years in a row, at best? Simply impossible without money becoming worthless.

Anything that promises consistent double-digit gains can’t possibly be sustainable.

2006-10-05 13:27:21

Unless you’re Warren Buffet.

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Comment by Army No. Va.
2006-10-05 12:12:47

NYC area - the outer counties get hit harder first….Putnam and Rockland… over Westchester. Exactly the pattern I’d expect. Of course, Westchester median is probably rising due to high end sales in places like Rye which will be the last to go. But they all will go. Lesser areas in Westchester - Yonkers, Port Chester come to mind - I’d bet are already negative.

When they bottom out and begin a modest recovery, Rye (and similar, e.g. Old Greenwich, CT) will be the leading indicator of recovery up there.

Comment by Suds
2006-10-05 12:53:06

Why were homes in Rockland and Putnam ever over 500K to begin with? I thought the median in Nassau was around 500K, which is typically more than those areas. Wow - this bubble was huge!

Comment by Huck Finn
2006-10-05 16:00:51

My neck o’ the woods.
Westchester is a gorgeous county.
300 year old river towns like sleepy hollow etc etc , beautiful old homes and tree lined streets etc etc. Really , much of the place is right out of a movie (nixing White plains , Yonkers etc some others. ) Now Rockland is another story. Some very nice little towns on the other side the river , like Nyack Piermont - very historic area - revolutionary was etc , some beautiful old Vics. But a lot of the county is ass-ugly 1950’s-70’s bilevels and raised ranches. Miles of ‘em. Don’t get me wrong , still a very nice area for families etc. Just lots o’ ugly houses is all. 500k will get you squat in Westchester. A condo maybe. Unless something is really wrong. Rockland and half a mill gets you a 4 , 2 1/2 RR , or smaller colonial on maybe 1/2 acre or so. Most colonials are above that range in nice areas, although not as high as last year , and selling nowhere near as fast. Anyway , both counties are pretty much built out - not a lot of subdivision s left to be built around here. Nassau #’s can be misleading, stark differences between neiborhoods out there, besides - people who were born on LI never leave. Nobody from off LI ever moves there. Some real nice areas (GC and all) but to people who don’t live there (city,jersey,rock,westch.), it’s really kind of depressing. As in , Ughhh , I have to go out to LI for a wedding, that sucks.
Prices in Rockland never went up as much as other areas. maybe they doubled over the last 5 years. Still ridiculous , but nowhere near as bad as some bubble towns. As perspective , my father , NYPD (tons of them in rockland) moved up from the Bronx (even more of them) in ‘67. He made about $8ooo /year back then. Paid 34 for the house (now prob. go for about 500k maybe). So paid about 4 times his income. Mom didn’t work. So nowadays , if you say a local police office married to a local teacher , they should about be making 150k - so 4 times = 600k. Still , I think plenty of room to coerrect round these parts as well.

Comment by Huck Finn
2006-10-05 18:08:15

Just as a note. When I say that prices in Rockland have doubled over the last 5 years , that represents an approximate 15% annual appreciation during that period. This means that the last 5 years have seen roughly double the rate of appreciation that my Father saw during the time he owned there. $34,000->$500,000 over 40 years being about 7% average annualized return. Doesn’t sound like that much of a big difference, but someone in this thread or a different one today was mentioning the comlete insustainability of double digit rates of return. So just to illustrate -Had my father expected to see 15% returns over the whole period( which is what a lot of these people seem to think they should see , year in and year out into infinity) the house would have a value now , not of about $500k , but in excess of $9 Million.

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Comment by WT Economist
2006-10-05 12:15:16

(I’ve been seeing these prices for years and they still shock me everytime I read them. I can’t believe a friggin house, that a nurse lives in, is $449k. Houses should be like $100k. Maybe $150k for a pretty nice one for upper middle class. $250k should buy you an old-school mansion.)

How about this — a block of rowhouses occupied by nurses, teachers, cops, firemen, and small shop owners since it was built in 1915. Peak price in 2005 — $1 million for a house 17 feet wide, 1,500 square feet plus basement, no off street parking. I like the neighborhood, but yikes!

The same house sold for $300,000 in 1987 — and $210,000 in 1994. NYC has gotten better. I’d say $600K might be reasonable, but I can’t stretch it any higher than that.

 
Comment by OB_Tom
2006-10-05 12:16:57

Has anyone got access to this WSJ article?
Bernanke Warns of Housing Correction
Bernanke suggested that the sinking housing market could damp growth. Stocks and bonds rallied on the remarks, which were seen as more evidence that the next Fed move will be to cut rates.

Comment by lainvestorgirl
2006-10-05 12:37:34

So that’s why the stock market is rallying? Investors see housing tanking and they’re betting on a cut by Bernanke to save all the FB’s?

 
Comment by Bill
2006-10-05 12:38:24

Yes–Bernake’s comments fueled yesterday’s buying spree on Wall Street. Just about everything was up and lenders and builders were very strong.

Comment by OB_Tom
2006-10-05 12:47:07

There is definitely a risk that Bernanke is going to sacrifice the US$ to get the FBs with ARMs into a fixed 5.5% mortgage. It’s going to be interesting to see who blinks first, Bernanke or Bank of China. In 3-5 years China might not need the US market anymore, but now they might just take the losses and keep buying our depriciating IOUs.

Comment by nnvmtgbrkr
2006-10-05 12:57:33

He better hurry up, then. Pretty soon the necessary equity needed to qualify for a fixed mortgage will be gone. We call these folks the Unrefinancables. Anyone who bought in the last year with minimal or no down are currently holding that title. What’s more is that most of these folks can’t afford their I/O ARM at 5%, how are they going qualify PI/TI on a 30yr fixed at 5.5% (throw in mortgage insurance while your at it if they don’t have 20% equity cushion)?

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Comment by OB_Tom
2006-10-05 13:27:21

I believe there’s a fairly large number of FBs that would have to make serious sacrifices, but they would be able to stay in their house for years, maybe even until inflation bails them out. The new bankruptcy laws are a great motivator.
My worry is that the worst case scenario becomes more and more likely: the dollar tanks, the rate cuts don’t save the economy, and the bubble continues with a long lasting sucker rally.

 
 
Comment by lainvestorgirl
2006-10-05 13:16:47

So are metals rallying? I’m working today and haven’t had time to look.

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Comment by OB_Tom
2006-10-05 13:34:06

Gold is flat today @ $570 after the plunge the last few days.
Maybe the plunge protection team is dropping dollars out of helicopters, promising to sell gold (they don’t have) cheaply next year. There’s no limit to what you can do if you only pay for the ink and paper when you make dollars. Wait a sec., they don’t even have to print them, who pays cash these days?

 
 
Comment by lainvestorgirl
2006-10-05 13:20:00

Wait a minute, I just thought some more about what you’re saying: you mean the Fed might dilute the currency, i.e., the savings, of responsible people like us, to save the asses of house flippers and others who are stuck in irresponsible investments? So not only are we priced out of real estate, we also have to subsidize these people? I want out of this currency. Now.

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Comment by OB_Tom
2006-10-05 13:43:32

It’s a fine balance. We want China to lend us money so we can buy their cheap crap. They invest most of it in the US, and even a slight drop in the US$ is OK for China, because the alternative is very, very scary. I don’t want to think about what 150 million unemployed Chinese would do for fun. It’s not just the stuff you buy in Wallmart that comes from China. Many of the sub-components in “American Made” products are made in China as well.
Looks to me like the Fed’s strategy is to drop the US$ so slowly that it just reaches the permissible pain level, but doesn’t exceed it.
And YES, if you have money in the bank at 5% and real inflation is 8% and rising, then you might be financing the possible bailout of overextended home-”owners”.

 
Comment by BanteringBear
2006-10-05 13:48:21

I don’t think they would be stupid enough to do that.

 
Comment by technovelist
2006-10-05 19:51:40

Yes, they would. Remember, Bernanke wrote his dissertation on the Great Depression. His theory was that it could have been avoided if they had printed money fast enough. Of course, this is a crackpot theory, but he’s in a position to try it out. If he does, we may go the way of the Weimar Republic.

 
 
 
Comment by mrktMaven FL
2006-10-05 12:53:34

Except FL luxury builder WCI, down 5% yeseterday. Borrowing heavily to buy back stocks to meet the street’s lofty EPS expectation.

 
 
Comment by jag
2006-10-05 13:03:28

This “logic”, that the Fed cutting rates will stem a recession fascinates me. If we do go into recession, profits, for virtually every business, will decline. The fact that interest rates might decline somewhat isn’t going to change the fact that people are out of room to borrow, that housing supply is grossly excessive and that demand for all kinds of products relating to housing will decline.
In this kind of enviroment, what exactly will lowering rates do? Japan went to zero in their debacle and nothing happened for years in their economy. Now I don’t think we are anywhere near as bad as Japan was but why does anyone imagine the post bubble impact that Japan realized is somehow going to magically be avoided here by doing exactly what the Japanese did?
Dropping rates will help, sure but how is that going to support housing prices (much less new housing production)? There’s too much out there already, at unaffordable prices.
This “Fed will make it right” simplistic thinking is shocking to me.
If someone can explain how lower rates will stave off the house price decline, I’m all ears. I’d love to be invested in the market.

Comment by jannifl
2006-10-05 14:51:45

Jag,
I agree totally. People have borrowed so much that they are overextended with the principal payments on all the things that they have bought. Even if the interest rates went to zero, these people could not pay the principal. They were counting on a windfall of profit with no regards to how much they would have to pay back. And here in FL, the increases in insurance and taxes would more than make up for any gains realized by a cut to zero percent interest.

Comment by jannifl
2006-10-05 15:53:20

Here is an example. Lets say you bought a house for $150,000 in 1999, 30yr fixed, 6.31%. Your monthly payment would be 929.44 and over the 30 years the house costs you $334,598.40.
Today with the bubble appreciation you bought the same house for $450,000.00, 30 yr fixed, 0% interest. Over the 30 years you pay $450,000.00, with a monthly payment of $1,447.38.
Who cares about interest rates???
The topic of interest rates has been just a red herring all along. People read that they were down, then got caught in an exotic mortgage and just figured the payment was so cheap, because they read a headline saying interest rates were down.
PRICE is what matters!!!

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Comment by tj & the bear
2006-10-05 22:18:23

Right on, jag. Anybody spouting that nonsense hasn’t put much thought into it.

 
 
 
Comment by Russ Winter
2006-10-05 12:17:59

Is it just me, or is David Learah, about the most two sided talker on the planet? He is all over the map here, trying to reassure folks it’s all OK on one hand, but you better cut prices on the other? What is it Dave? His pronouncements are so peculiar that maybe the press is just having fun with him at this stage?

Comment by dwr
2006-10-05 14:02:10

“What is it Dave?”

It’s a good time to buy, and a good time to sell, just like always.

 
 
Comment by SunsetBeachGuy
2006-10-05 12:18:12

Is it just me or is the blog less fun when we aren’t lambasting Baghdad Bob’s like LAY and DL or Nicholas Restinas.

I kinda miss those days.

The only fun posts that I am seeing are the ones like John Doe’s over at So Cal RE Crash blog comparing quotes from different time periods.

If I could put in a request let’s see more of those.

Maybe Crispy could track down that Realtor in FL that made the new economic paradigm quote and get a current quote.

Comment by crispy&cole
2006-10-05 12:36:12

LOL. I will email him and see what kind of reponse I get.

 
Comment by OB_Tom
2006-10-05 12:39:30

I you haven’t read her column before, here’s Bagdad-Bertha for your entertainment:

http://realtytimes.com/rtmcrcond/California~San_Diego~lisablanchard

Unfortunately, even she is backpedaling now, it used to be “10 reasons why the “Housing Bubble” is bogus. Now it’s only 6!
I wish I had saved her old column from about 3 weeks ago.

 
 
Comment by Insider
2006-10-05 12:40:17

As the Hindenburg is in flames a minute prior to crashing….

Shoulder to shoulder watching the destruction, the Contrarion says to the Bull: “it’s going down,” to which the Bull retorts, “but, it’s still flying.”

Sometimes it’s ebarrassing to be in the business and listen to my colleagues. It’s as if the real estate scene is straight from Monty Python, “eh, not a big problem, just a minor flesh wound…”

 
Comment by auger-inn
2006-10-05 12:45:32

‘Prices are finally coming down and that’s good news,’ he said.”

Well if you think this piddling price decline is good news wait till 07′. You’ll be positively ecstatic!

Comment by dwr
2006-10-05 14:03:31

it will be “impressive”

 
 
Comment by mrktMaven FL
2006-10-05 12:47:40

So, Kara bites the dust. Who is next? WCI?

 
Comment by ChillintheOC
2006-10-05 14:02:09

“The downturn is caused by falling confidence among buyers who are fearful of paying too much. ‘Buyers are just not buying,’ Lereah said. ‘We need to have a correction. Prices need to come down,’ Lereah said.”
—————————————————————————–
WOW, this from a guy who last year claimed there was no housing bubble and even wrote a book touting how to get rich during the big “boom”!

I’ve got to believe that the NAR knows how hard this ship is going down and wants to get on-record with their CYA messages.

Comment by dwr
2006-10-05 14:06:38

or else nothing is selling and they need to say whatever it takes to make sales happen so that they can feed their own option ARMs. Panic buyers into buying, then when that no longer works, panic sellers into cutting prices to induce sales. Remember the #1 rule of realtwhores, it’s all about me and my commi$$ion.

 
 
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