‘They Don’t Want To Buy Prematurely’
The Connection reports from Virginia. “Stephen Good, a financial planner, just bought a three-level townhouse in Fairfax last month. The end-unit, which includes a garage, sold for $460,000 in April of 2005. Good paid $430,000. After studying the market and working with his Realtor, Good felt comfortable buying.”
“‘I felt I could get what I want, not that I would necessarily get a deal,’ said Good. ‘I don’t think I bought at the top [of the market], but I don’t think I bought at the bottom either.’”
“The assessment wasn’t far off from what George Mason University economist Stephen Fuller told a crowd of about 500 real estate professionals at the Northern Virginia Association of Realtor’s 10th annual Economic Summit. ‘Buyers are out there,’ said Fuller. ‘They want to buy. They don’t want to buy prematurely.’”
The News and Advance. “A controversial town home development in the New London community did not get the rezoning approval it needed Tuesday to move forward. Huddleston Supervisor Roger Cheek said he did not support the development because of the problems of congested roads and schools.”
“‘We have enough use by rights to drown us in housing,’ Cheek said. ‘I think we need to start listening to our taxpayers.’”
The Washington Post. “It’s taking longer and longer to sell homes in the Washington area, and even longer in the outer suburbs, a new survey reports. Real estate experts say homes are languishing because some sellers do not set realistic prices and some buyers are waiting on the sidelines for prices to drop.”
“The report also shows the average median price, the level at which half sold for more and half for less, rose in September, compared with a year earlier. The sharpest price drops were in Loudoun, which was down 9.3 percent to $440,000, Fauquier, down 9 percent to $365,000 and Fairfax, down 8.3 percent to $445,000, the survey shows.”
“John McClain, a George Mason University economist, said these housing prices suggest the market is ’still strong for neighborhoods that don’t involve a lengthy commute, given today’s rising gasoline prices and traffic congestion,’ an MRIS news release said.”
The Daily Times from Maryland. “Rows of new houses sit for sale in neat, upscale new subdivisions, but a glut of new projects like them and a slowing real estate market in Worcester County has left them looking a little lonely.”
“A change in the market in 2005 that national housing industry experts are now calling a full downswing is affecting Worcester County equally despite the fact it’s the only oceanside community in Maryland.”
“It’s going to start affecting jobs, experts predict. ‘There are currently 1,300 members of the (Coastal) Association (of Realtors),’ said Realtor and County Commissioner Bud Church. ‘A few years ago that was 700 and it doubled because of the market. But we’re going to see a thinning out of agents.’”
“And Church, who has sold houses for 30 years, said the downswing could last a while. ‘I don’t see the market changing until next spring or summer,’ he said. That’s bad news for a market that has seen listings steadily increase for more than a year already. In February 2005, there were 396 houses listed with Realtors in Worcester County, but in August 2006 there were 765, a 93 percent increase.”
“Condos on the market have grown at an equal rate with 1,870 being on the market in the county in February 2005 and 3,541 in August 2006, an 89 percent increase. ‘We’re a little saturated right now, but I think we’ll catch up,’ said new Coastal Association of Realtors President Kevin White. White said he felt inventory was up because of the combination of so many new projects, but said the inventory wasn’t ‘completely out of whack.’”
“The problem is that saturation of the market with new homes isn’t about to stop. Glenn Riddle has only built about 100 of 600 planned homes. Summerfield developer Mark Odachowski plans to build its first 300 homes in Snow Hill in the next 15 to 21 months while the entire development is planned to be 2,000 homes.”
“If the downswing goes beyond the next year, an ADC Builder’s Inc.-proposed 1,000-home development in Showell, developer Troy Purnell’s proposed 150-home Purnell Crossing development in Berlin and a Highland Development Corp.-proposed 127-home division on Stockton Road near Pocomoke City could all see slow returns on their substantial investments.”
“‘I would not want to be sitting on a big project right now,’ Church said. ‘One of the things we’re seeing with major projects and developments is a lot are dropping their prices $100,000, $150,000, even $200,000 (per house).’”
“‘What happened nationally and in our market, prices have gone up so dramatically that people got sticker shock,’ Church said. ‘(The market) is like a skydiver jumping out of a plane and falling, and you’re waiting to see when they’re going to open the chute. I don’t think we’re going to hit the ground, but I don’t think we’re going to see the market change into next spring or summer.’”
After studying the market and working with his Realtor, Good felt comfortable buying.”
Another one bites the dust, thanks to advice from a Realty Clown. I wonder what they “studied”. Probably the usual propoganda and market research from NAR “economists”. I’m quite sure they didn’t hit this blog.
Yo Crave,
Suzanne researched this!
It’s really sad. Anyone with a take-out pizza, a cold six-pack and a Friday night to spare could sit at home and read enough credible information online to conclude that buying now still gets you in at the top and the only direction left to go is down. And when they’re done, they’ll have spent $16 for the most valuable lesson on market conditions money can buy. And have fun doing it, to boot. I guess some people just can’t get into it and self-destruction is the path of least resistance.
Wow, what’s really sad is you just described my typical Friday night!
Hell, in Manhattan $14 bucks gets me the six pack.
Bandits like this are like the guy in the book “The Shipping News” who sells the clueless guy a boat that is not seaworthy. Clueless felt comfortable too until it capsized. Why don’t these vermin salvage some ill-gotten gains and what little self-respect they have left and go into some other more useful line of work, like selling Viagra.
and a finacial planner too.
Not only has he just joined the flock of debt slave sheeple, but ruined his career as well.
he just bought a house, he didn’t kill anybody. it’s very likely it was 3-4 times his income, too.
I know a couple who appear to have taken their real estate advice from an agent. Right now, they’re carrying two mortgages — one on the house they live in and are trying to sell, and they other on the house they’ve bought and are renting out. (I suspect they’re underwater on the rental.) They’re not happy campers these days.
“Huddleston Supervisor Roger Cheek said he did not support the development because of the problems of congested roads and schools.”
“‘We have enough use by rights to drown us in housing,’ Cheek said. ‘I think we need to start listening to our taxpayers.’”
Everyone got that? He admits that they haven’t been listening to taxpayers. What’s with this? He should resign right? Just one more piece of the puzzle; municipalites foregoing their responsibilites.
‘I don’t think I bought at the top [of the market], but I don’t think I bought at the bottom either.’
The Empire State Building is 102 stories. The 95th floor isn’t the top but I sure wouldn’t try jumping out of it. What’s scary is someone else is paying him for professional, financial advice.
he’s probably got a lot of money though. if he’s been in the business throught the stock boom years, he’s probably got a lot saved up. he must make 6 figures, so he might only be at 3-4 times income, not including a downpayment.
sure the house will lose value, but not everyone who buys is a sucker. not everyone who buys will lose their house.
he’s probably got a lot of money though. if he’s been in the business throught the stock boom years, he’s probably got a lot saved up. he must make 6 figures, so he might only be at 3-4 times income, not including a downpayment.
So we’re back to the “rich people like losing money” theory? Doubtful.
sure the house will lose value, but not everyone who buys is a sucker. not everyone who buys will lose their house.
Actually, grossly overpaying for an asset sure to lose significant value in the near future is a reasonable definition of a sucker. Again, I don’t see how being rich = wanting to lose money. The few rich people I know (albeit not a statistically valid sample) don’t seem to fit this profile. Of course, if they wanted to lose money, they would probably not stay rich for very long.
sure, nobody wants to lose money, even the rich. just because you buy a home at the top doesn’t mean you’ll lose it. that’s my point.
Good point. But I always presumed the wealthy elite will always capitalize on a market trend, hence paying less than the typical buyer. I believe the wealthy stayed wealthy by this method.
Yes you may not lose your house but in the long run you will definitely lose money even with the so called “tame inflation” that we have.
Quick math problem for the smarties out there: You have purchased a home at the top for 700,000. The price then drops to $600,000 and does not recover to the $700,000 mark for 10 years. Calculate how much money was lost over that 10 year period using a 3% inflation rate.
3% inflation? Oh! You mean CORE inflation and substitution where you will buy chicken if beef gets too expensive? Don’t you mean 7% or so?!
LOL! No for the sake of the problem we are going to “assume” that the gubment figures are correct.
I’m not a “smartie”, so I’m not going to attempt to calculate the dollar amount of Mr. Financial Planner’s purported loss.
However, when it comes to purchasing a home, there are intangibles that someone with a cushion can afford to indulge. For instance, Mr. Good’s new acquisiton may be a ten-minute commute to his job, or has some other added value that is known only to him. Additionally, if he is a financial planner and really is good at it, he will recoup whatever he may lose on his residence, by realizing gains on his investments in other asset classes.
If you’re an FB that is upside-down on your mortgage, it won’t matter if your job is a 10 minute walk from your house, or your child can bike to the best private school in the country , or if your ego is massaged by knowing you live in the zip code your sister-in-law covets. You pretty much have to cut your losses and go back to dealing with concrete realities.
You pretty much have to cut your losses and go back to dealing with concrete realities.
And this brings us back full circle to MazNJ’s original comment:
The Empire State Building is 102 stories. The 95th floor isn’t the top but I sure wouldn’t try jumping out of it.
How’s hitting the sidewalk after a 95-story fall for “concrete reality”?
HARM,
Remember my comment? Floors 94 thru 2; no problems.
241K give or take.
Ok nobodys want to answer so I’ll lay out my scenario:
The buyer will lose about 26,000 on that 100,000 because of inflation alone.
The effect of inflation on the mortgage of let’s say 6% will cause the net interest paid on that extra 100,000 to be 24,000.
If we look at lost opportunity cost of $100,000 that could have been invested in a 5% return fund (then backing out inflation of 3%) would be about 22,000. (Yeah I know it’s borrowed money but just go with it)
Total loss on just inflation and extra interest:
46,000
4600/year
383/mo
Assuming full deduction of interest on taxes so it’s just the inflation eating him (Dare to dream eh?):
26,000
2600/year
216/month
With the opportunity cost factored in and full amounts above:
72000
7200/mo
600/mo
7% inflation is ugly if it is compounding as it about doubles prices in 10 years time. It seems pretty obvious in this regard why financial advisors say 10% return per year is conservative.
Please add corrections where I may be wrong.
The article says he’s 28. Probably started 6 years ago tops, so he missed the boom. $430,000 at age 28, I’d assume he probably got some creative financing as well.
You also need to factor inflation eroding the value of the mortgage not just the value of his principal. If M.B.A. is correct and inflation is really running at 7% or so, we are all stupid for not taking out as fat a mortgage as we can at 6% (effective rate of 4.5% after taxes). Also with 7% inflation rents would be insane in 10 years.
All I know is that 150k a year buys me a cup of coffee. It is complete BS that we have seen low inflation. And the fact that they no longer count ENERGY (which impacts almost everything) and FOOD in this equation, is INSANE! (just like Crazy Eddie).
If you think you are doing OK (gee 80, 90 etc. should be good, right?), but get the feeling that you are barely keeping up, ever wonder why? True, we have conspicious consumption, however, not all of us are buying Porsches. The reason you feel that at the end of the month that you should have more is because salaries do not go far anymore. I would rather have 50k in 1975 than 150k now. It bought a hell of a lot more…..
Wages are not rising by 7% - Remember we are now a “global” economy so you are competing with offshore labor. With regards to rising wages, I am finding that once I hit OT, I am taxed at around 56% on hours above my standard 40, so there appears to be a level at which it is diminishing returns, and clearly income tax brackets have not adjusted up with the actual purchasing value of incomes.
I do know health coverage for my whole family was $380 in 2000 and is now $850 with three times the copay and in 2000 my electric bill was $70 and now averages $350. Gas was a lot less too, so yes we are being squeezed from all sides and frankly a $400K mortgage will not make things any better! And no, all we have is a Camry so no snazzy auto’s either.
-
Don’t assume anyone has “a lot saved up” or has a high income. Unfortunately, most people are living paycheck to paycheck - and in debt. (not me). this includes many “financial planners”.
Don’t assume that everyone who calls themselves a financial planner is either. Most are just glorified salespeople trained by their brokerage to sell the highest commissioned crap possible.
“What’s scary is someone else is paying him for professional, financial advice.” My quess is probably not. It’s “free” advice because the client never has to write a check. Who cares about the 5.5% commission? Not like the client will miss it anyway. Or maybe he sells annuities - a lot more than 5.5%.
Real planner who work with real numbers and not the sales data generated by an insurance company are telling people the dangers of this market. Anyone with any TRUE financial education understands the very basic concept of great reward is gained through great risk. If you have a 20% return in a year you can have a 20% decline in a year. And you should only buy with this in mind. Doesn’t mean that all markets mean don’t buy now - but it does mean approach the overheated markets with a great deal of caution and only with traditional standards in mind.
And a wind will blow them to the northeast and they will get skewered on the Chrysler Building. Boy, would that hurt!
wow, let me send him my $ so he can charge 1% forever for advice like this !
-
This is why I invest directly with Vanguard at razor-thin costs. I don’t need to pay some fool a sales load every year to put me into bad stocks and bad mutual funds with high expense ratios to finance dumb decisions like this.
Eh. It’s so hard to know where anything is at any given time. Granted many of us think the Bubble is going to keep bursting for the next 12 months, but if everyone is thinking this…maybe that’s the time everything changes (kind of like the Time cover demonstrating the “top.”)
I do know, rentals (especially at apartment complexes) are harder to come by when my wife and I were looking, there were very few vacancies. Now will the housing rental market open up? It appears that it is, so maybe rents will stay stable there. Always hard to know for sure. None of us do have a crystal ball. I do know, a lot of people who want to buy, but don’t want to buy now, they want to hold out for 6 mths to a year, it’s probably the same with sellers too. The markets in holding, sellers are panicing and generally, if you’re the one who panics you’re the one who gets taken for.
Simple, supply follows demand. Expect to see condos for sale turning into rentals. I know of one example where someone rented out their condo instead of selling it after unsucessfully trying to sell for the last 7 months.
Story from the Shorelines section of the Jacksonville Times-Union today (print only):
“Even after spending $5 million changing the 204 units at the Mayport Trace Apartments into the Island Club condos. . . co-owner Hal Horton said Friday every unit has been ‘taken off the market.’”
Horton blamed a lagging housing market for the sluggish sales of the condo units. . . . “Apartments are very strong now because a lot of them have been converted to condos so vacancy rates are low. . . So it’s favorable to own an apartment now.”
The article, however, goes on to talk about not only the excess supply of condos and townhomes, but also mentions several apartment units in which rental rates have fallen, not risen - showing that at least in the mid-range rental markets that the condos and townhomes compete directly with more typical rental units for clients, putting downward pressure on prices. It seems to be only the low-end rental market which is getting squeezed by condo conversion [my analysis].
Another anecdote: I ride by a small 3/2 house in an admittedly desirable location near the beach most days. It has a tacky hand-lettered sign that’s hardly legible: $675K. Yesterday, it had some stuff added: it is now for sale or rent, and the rent is $1350/mo. Really makes you want to buy it for its investment value, doesn’t it, at a cool 500X monthly?
and they’ll put it back on the market the moment they think prices have “stabilized”, no?
In Austin, land is so expensive that it does not make financial sense to build affordable rentals. It’s better to build upscale condos. Therefore, there is a bit of shortage of apartments. Right now, we have a 95% occupancy rate and rents are rising.
Joel,
I think you’re on the wrong web site if you’re trying to drum up support amongst sellers not to panic …. No posters I read here are changing position until the housing market shows itself as corrected…..not in 6 months ….. not in a year ….
It’s not a time-line, it’s about money and investing. So, never a better time to panic !!
“….if you’re the one who panics you’re the one who gets taken for”.
That was the giveaway ….. reducing the price is “getting taken for….”
I’m not trying to do anything, other than note that lately it seems like the only bad thing is doing what everyone else is doing, if that’s buying in 2005, that was a bad idea, maybe (MAYBE) that’s selling in 2006.
What is corrected? People want to use rents to prices which is fine, but just as prices can come down, rents can come up. And it sounds like there’s a lot of places (especially apartments and complexes) with low vacancies that are raising rents.
Nor do I think many posters here are going to change positions anytime soon, but it’s always hard to tell what the “herd” is going to do until the “herd” does it.
Joel, the herd is going to get slaughtered. I’m sure of that. Once we see the carcasses en masse then we know it’s time to buy again. They haven’t even reached the killing floor yet. They are still en route.
“Granted many of us think the Bubble is going to keep bursting for the next 12 months, but if everyone is thinking this…maybe that’s the time everything changes (kind of like the Time cover demonstrating the “top.”)”
Everyone is thinking this? I don’t know what the thinking is where you are but around me the VAST majority of people think this is a temporary lull and that there will not be drastic declines. There is just “no way” a home in San Diego can go down 40%. Doesn’t matter that it can go up 44% in one year, it just can’t go down that much. I am a very lone voice and only know one person who deliberately sold their home to wait out the bubble. So while the majority here on the blog are true bears, the “real world” still doesn’t really see a problem although they are starting to admit that maybe it can go down “a bit.”
Are you finding the average person is predicting a large drop? Or just the people here?
SanDiegoBear, you must live here in Manhattan. The mere thought that their precious real estate might drop is “just silly”. I am all alone crying in the wilderness. I am Winston Smith. So, no, the herd isn’t thinking that.
“John McClain, a George Mason University economist, said these housing prices suggest the market is “still strong for neighborhoods that don’t involve a lengthy commute, given today’s rising gasoline prices and traffic congestion,” an MRIS news release said.”
sounds like people know the game is up and have stopped buying in the middle of nowhere.
(In the past 28 years, the value of the average home in Northern Virginia rose 7.2 percent each year, according to Fuller. Thus, he said, the typical home will double its value every 10 years. “That’s the story I tell people,” said Fuller.)
the only thing that matters is where you buy in the cycle. they don’t tell you that your home price may be flat for 10 years. where is the fun in that?
That’s an interesting comment by Fuller… Is it followed by any volatility stat? Any housing market that has an avg increase of 7% will be accompanied by correspondingly high volatility. This market is probably the riskiest right now because it has so far to go downward. He’s obviously not telling the full story here.
Fuller is including the unsustainable price gains from the last five bubble years in his measurement of long-term price appreciation.
If you back out the last five years, which are by his own definition abnormal, the average appreciation is under 5%. Further, these figures are unadjusted for inflation. Remember that the early 80’s were highly inflationary, so much of the gains he refers to weren’t real gains. Adjusted for inflation and excluding the unsustainable gains from the last five years, homes in the DC area have appreciated about 1.3% per year for since 1975.
Being an economist and such, Fuller knows his figures are misleading. But he also knows that his bread is buttered by the housing industry (they sponsor him) and that he had better come up with some good facts and figures realtors can use to convince people to buy. It’s shameful!
Someone I know in a decent part of DC just sold their small house at top dollar - $1.7 million - in 3 days. The realtor had made a big deal about how nobody wanted to buy in the outer burbs anymore but the desirable parts of DC near the Metro were still real hot. I voiced a lot of scepticism about that, but I guess I was proven wrong. At least for now, the bust seems to be highly localized in DC.
Maybe it depends on what you mean by close in. Alexandria is close in and there have been price declines there reported in the media. Closer to home for me is Maryland (Four Corners area). I’m seeing realtor’s flyers which spell out % declines for many neighborhoods in Montgomery country (and implying that now is a good time to buy … during this “lull” in appreciation). Nothing spectacular on the downside (so far) … 2% to 5% down YoY being typical but with increases for a few neighborhoods. Perhaps what you are talking about is “high end” real estate like Georgetown? Some people will buy that regardless. What neighborhood do you refer to?
I think they call the neighborhood Cleveland Park. It’s a nice woodsy area in the heart of the city, with decent-size historic houses on large lots.
Right near the National Cathedral and St. Albans.
Stephen Good, a financial planner, just bought a three-level townhouse in Fairfax last month. The end-unit, which includes a garage, sold for $460,000 in April of 2005. Good paid $430,000. After studying the market and working with his Realtor, Good felt comfortable buying.”
Oh, WOW-a 7% price clip!
Even the ivory tower economic shills are callin’ for 10/20% declines.
hehehe…and this guy calls himself a “financial planner”?
Moving from the specific to the general is dicey. Mr. Good may have paid cash; the home may have been 3 blocks from work next to a park frequented by young, nubile females - hell, in his world this could be a very good deal. Like the one-liners from real estate dimwits, how do you know what’s true?
turnout, I said pretty much the same thing (simultaneous posts?) scroll up a bit.
You just said it in a little more, um, manly way.
Yeah. Kinda let the old gender thing slip. By the way, yours is the better post. Complete.
well, the nubile young ladies could be the added value I was talking about!
same point, different ways to express
Okay, that’s it. I am tired about all this speculation about potential buyers. I want some sort of methodology (or survey) to determine how many people are actually looking so that we can compare it to actual inventory. I am tired of these talking heads spouting off without a lick of data.
Agreed, If you read the entire article w/ GMU economist, Mr. Fuller, You’ll see where the east coast has found their version of Gary Watts….Of course, if I was speaking to 500 realtors, I would be a bit hesitant telling them about their future as toll both operators and k-mart greeters.
‘Fuller’s forecast was far from bleak, including continued rising home prices for this year, somewhere between 3 and 7 percent’
Fuller is living on planet realtor shill. With prices already down in No. Va.,this year, does he really believe that they will somehow pick up in the slow Fall months? Last year, prices went down almost 10% Oct-December.
He was predicted gains of 6 to 12% just six months ago.
Nva is already off 10-12% YTD
so fullosht thinks it’s going up 17% in the 4th quarter ?
Normally here is the housing market:
~50% of households own a home
~25% of households individuals could buy a home but currently rent
~25% of hoseholds are too close to the poverty line to have access to credit (or there is another reason, like a felony, that keeps them from credit).
25% of households own a 2nd home (or more).
Today:
~70% of households “own” their home
~26% of households are too poor or otherwise are locked out of the credit market.
40% of households own a 2nd+ home.
Gee… that leaves 5% of the market on the sideline (I rounded up). Normally, downturns are reversed as for every 2 home owners there is someone on the sidelines able to buy in.
Today There are 14 homeowners per potential buyer.
There are 3 second homes owned by someone who really isn’t wealthy enough to own multiple homes per potential buyer.
Are there buyers out there? Sure! I’m one of them.
But normal downturns are stopped because 33% of the potential home buyers haven’t bought and can be lured in by a bargain/change of life.
Today? That is 1/15th of the potential home buyers. Less than 7% of the market… Ohhh… that will slow things down. NOT! Not when there are 3 “second homes” waiting to be sold to each qualified buyer. Think about that a second… It implies quite a bit of population shift…
Wait people. It will take a little time, but by the end of 2Q 2007 the depreciation will be rolling.
Oh, I’m chaning my prediction. Peak depreciation rate will be 3Q 2007.
Neil
Could you link to the source of these numbers? I would like to use them in discussions/arguements I am having.
Thanks.
Okay, yeah, that’s more like it. Though I second Roy… Links?
I’m skeptical about the stat you provide about only 50% of households owning homes during a normal market. Today’s 70% is certainly high by historical standards, but 50% seems rather low.
Historical homeownership rate is 64%. Last year it topped at nearly 70%, but has slid back to 69%. AG himself has stated that he considered that 5% of added homeowners — all of whom wouldn’t likely have qualified for a 80% fixed — “at risk”.
You are correct, I went off memory and the 50% is off:
http://www.census.gov/hhes/www/housing/hvs/historic/histt14.html
The 26% “uncredit worthy” was from a UCLA presentation by the Anderson school, I have no link.
That error would change my conclusions… oops!
But do click on the links to the housing historical data and have a look at rental and home vacancy rates…
Mea culpa for my error on the 50%, oops!
Neil
We can scratch out the speculators (including most of the second home buyers) and a good part of the first time buyers who are priced out. I agree that the number really looking to buy, either as moving up locally or moving into the area, is probably
Why do they say there are buyers out there. I am so sick of hearing that crap, it is as if they feel that there should be a buyer for each home sitting on the market. There does not have to be any buyers, I do not see any buyers, I have not talked to any buyers, there are no buyers you lame ass realtors, that is why nobody is buying. If you had buyers they would buy , that is how it works. Six months ago we talked about how home ownership is at 70% in this country, that means they expect to draw buyers from the other 30%. I think the other 30% live in poverty and do not have the means to buy a home. There are no buyers, there will not be any more buyers, the situiation is screwed you greedy bastards.
> home ownership is at 70% in this country, that means they expect to draw buyers from the other 30%. I think the other 30% live in poverty and do not have the means to buy a home.
There are many who simply won’t overstretch themselves to buy a house and rather rent. Some of them are here on the blog. I don’t know their percentage of the population though.
The statement about drawing buyers “from the other 30%” is not exactly true. Most of the people who I know that have bought in the past 5 years were already homeowners and simply bought newer/larger homes due to a growing family. I just talked to friends last Sunday that have an offer in on a bigger house, contingent upon them being able to sell their existing house. I think one major factor in the slowdown will be the inability of existing homeowners to sell their current homes at the price that they want/need to get in order to purchase their next house.
Your right the 30% is off base, just trying to make a point, but where you say
“major factor in the slowdown will be the inability of existing homeowners to sell their current homes at the price that they want/need to get in order to purchase their next house.”
That is where the down and out come in. Between all the speculative buying dramatically slowing down and people who cannot afford homes the people you mention will never be able to sell their home at a price they need to enter a larger house. Housing dominoes are in free fall now and the end is going to big FB mouse trap.
The end result is still no BUYERS!!!! Although, realtors say their out there, somewhere, lurking, and sneaking around, they see them here and there they say. BUYERS SHOULD BE CLASSIFIED AS AN ENDANGERED SPECIES.
What portion of that 70% are living in “house poverty”? That is the percentage that is “in” but really needs to get “out”. That is an important figure. Even if ownership is historically at 64%, I would guess that currently it should be at 50% or a little higher. That means we are in a drastically “overbought” market.
Anybody that has ever been cleaned out in the stock market knows what happens to overbought markets with rotten fundamentals. It’s not a small correction. It’s a bust. It’s October 1987. It’s 1929.
There are still people holding their noses and buying crap shacks in SoCal. I know them. No one gets the house they want, they’re tired of waiting. SoCal will swim in its own vomit soon enough, but it is the credit bubble that must burst, not the housing bubble.
- “It’s going to start affecting jobs, experts predict.’
I just got off the phone with a contractor that owes us only $1950.00 and it is 180 days overdue. He said that he has been under-bid on several of his last bids and that he is having to ‘make payments’ to all of the sub contractors. His area is the Palos Verdes Peninsula in So Cal.
This story is starting to hit hard on ALL of the construction subs. Many will take work to simply make payroll. I will often offer work to a sub and say this is the price….are you in or are you out? No one has said no.
Now they say if people do not buy homes it will wreck the economy. Think of it a whole economy supported by real estate. I SAY WRECK IT.
“‘What happened nationally and in our market, prices have gone up so dramatically that people got sticker shock,’ Church said. ‘(The market) is like a skydiver jumping out of a plane and falling, and you’re waiting to see when they’re going to open the chute. I don’t think we’re going to hit the ground, but I don’t think we’re going to see the market change into next spring or summer.’”
(The market) is like a skydiver jumping out of a plane and falling, and discovering on the way down that he forgot to pack his chute.
I’m just glad their analogy illustrates the risk involved in the current market.
…given today’s rising gasoline prices
Eh High? That’s a little bit dated now. Then again, I still hear people in the office whine about high gasoline prices even as I just tanked up at $2.19/gallon.
Off Topic: More chicanery and subterfuge from our beloved Government
http://www.msnbc.msn.com/id/15220076/
Congress just upped the debt limit by something around 900 billion in March 06. 30% of that money created via debt is 270 million. So they created a bunch and then taxed it. Imagine that. Sheer genius….as long as you never have to pay it back (without inflating that away as well).
John McClain is a phony.
Here are John McClain’s predictions from this January - 10 months ago all of us could see the writing on the wall and rising inventories, and he could not.
http://www.cra-gmu.org/06%20conference/Housing.pdf starting on page 28.
Arwen - Do me a favor? When talking about these bozos in the future, please include the link to CRA-GMU’s “Client Link,” that shows where their money comes from. Here it is:
http://www.cra-gmu.org/capabilities.htm
Oh, and notice the web address is “.org” and not “.edu” That is also a clue.
OT. Someone’s making some money on Nevada land deals:
http://www.breitbart.com/news/2006/10/11/D8KMJ8I00.html
Hehehehehe
Sorry if this was posted already.
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Slower Economic Growth Predicted by Freddie Mac
U.S. housing sales are declining at a greater-than-expected pace that will shave 1 percentage point off economic growth in the second half of 2006, Freddie Mac said in a forecast Tuesday.
http://tinyurl.com/hsmyr
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KB Home May Restate Earnings
The builder says it improperly accounted for stock option grants in previous years
http://tinyurl.com/fzwjb
What an incredibly strange choice of words “Prematurely” is…
If “premature” refers to this coming sh*t-storm of a real-estate crash — which hasn’t yet, um… “matured”. Then yes, in that case buyers want to wait for, um, “full maturity”.
I guess what he really means is, “Buyers don’t want to buy in the first few moments of a long and historically unprecedented real-estate crash”.
… but I guess saying that might make the Realtors(tm) a little upset.
Sales volume is DOWN 30% in areas like Fairfax and Arlington. The market is NOT strong. That’s a complete lie. Imagine if your business had sales down 30% from the year below.
http://www.nvar.com/market/pressrelease/prnvsep06.html
Then there are some really funny ones, like Rappahannock County. (I know, where’s that?) I know people who commute from there to D.C. There are 78 homes on the market there. Guess how many sold in September? Four.
One sold for over five million. So the “average” sale price in Rappahannock County has gone up 374.96 %.
And in Fauquier County, there are 136 homes on the market priced between 500-600K. How many of those sold in September? Five. I’m holding up one hand. One, two, three, four, five.
http://www.mris.com/reports/stats/
Towards the bottom of the article Thornberg comments on the residential r/e mkt
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L.A. County’s Office Market Gets Tighter
http://tinyurl.com/f4km2
OT: KB is probably in trouble. I did OK with a couple of short positions in KBH earlier this year.
However, I think I made a mistake shorting CFC (Countrywide Financial). I thought that the lenders would be the next victims of the housing bust but then I began to understand deriviatives and more specifically Credit Default Swaps (CDS). Would anyone happen to know where I might look to find out if these lenders (CFC, WaMu) have protected themselves with CDSs?
Thanks
This is the reason that most crashes have a “double dip”.
There are always a few suckers who think they’ve hit the bottom after a slight drop…
“The assessment wasn’t far off from what George Mason University economist Stephen Fuller told a crowd of about 500 real estate professionals at the Northern Virginia Association of Realtor’s 10th annual Economic Summit. ‘Buyers are out there,’ said Fuller. ‘They want to buy. They don’t want to buy prematurely.’”
This is consistent with what Steve told the same crowd at last year’s annual Economic Summit, pointing out that things are different here:
“”In a nutshell, you couldn’t be in a better market,” according to Dr. Stephen Fuller, Director for the Center for Regional Analysis and School of Public Policy at George Mason University. “If you’re worried about some bubble, or slow down, or something that’s evil, just put yourself in any other market,” he said. “They envy us.”"
http://realtytimes.com/rtcpages/20051125_squealers.htm
Just one example for Loudoun but I sold my TH in Loudoun for 350,000 in 10/05. Similar unit of my friend finally sold for 289,500 in 9/06. That’s 20%. It’s a real shitty neighborhood but I don’t think that’s uncommon out in Loudoun from my back of the envelope tracking.
A point made above is worth emphasizing. When you add up the people who own and don’t need to sell, those who don’t own and are waiting for the drop, minus the speculators, that leaves a very small buyer pool. Let’s not forget the new lending guidelines which restricts the buyer pool further.
Buyers are out there…..I don’t think so. Not until it makes sense financially for people to buy.