Drop Rattles “Fundamental Assumption” In Phoenix
The Arizona Republic reports on the September numbers. “The Valley’s resale housing market continued to slow in September as the market struggled to find a bottom. The number of houses sold fell and, for the first time in a decade, the median price was down from the same time last year, according to ASU.”
“The price drop rattles one of the fundamental assumptions of Phoenix housing: Buy a home and it will probably be worth more next year. It’s another reason for skittish buyers to stay on the sidelines. ‘The problem gets to be what is the incentive to move into the market?’ said Jay Butler, head of the real estate center.”
“It’s also bad news for people who bought at the peak of the market who are finding their houses no longer are worth what they paid. ‘If you bought last year and you don’t need to sell, bite the bullet and wait for the appreciation,’ said (realtor) Diane Watson in the northeast Valley.”
“Scottsdale residents Kyle and Jaci Olsen are seeing that phenomenon firsthand. They bought two investment homes in Scottsdale last year, and one has been on the market for 10 months. They paid $415,000 for it and dropped in $40,000 to $50,000 in renovations. Now, it’s now listed for $435,000 after coming to market at $499,000.”
“‘It’s a nightmare,’ Kyle Olsen said. ‘It’s priced really well. We’ve had a lot of lookers but no one is coming to the plate.’”
“The couple will list the other house this weekend. They spent $45,000 to completely remodel it, something they hope sets it apart. They bought the house for $430,000 and will try to sell it for $529,000. They originally hoped to get $599,000. ‘That’s how much the market has come down,’ Kyle Olsen said.”
“Broker Jim Sexton..said there are plenty of condos for sale and sellers are offering incentives. Sexton said it’s pointless for sellers to obsess over last year’s prices. They’re not going to get them. ‘Comparing to last year, you’re setting yourself up to find a six-story building to jump from,’ he said. “You can’t be too greedy.’”
“Ahwatukee Foothills experienced a $20,000 drop in its median home price from August to September, according to the Arizona Real Estate Center. Ahwatukee experienced a $15,000 drop from a year ago.”
“Like much of the Valley, Ahwatukee Foothills had a ‘good percentage of investor homes,’ noted Jay Butler. Butler said he doesn’t expect the Valley’s housing market to improve soon. ‘We probably aren’t going to see much changes coming,’ he said. ‘People don’t really want to look for a home during the holiday season.’”
“As the prices continue to decline, some families may be in danger of owing more on their homes than the homes are worth, Butler said. ‘Its really a question of how much debt did they get into their home,’ Butler said. ‘It’ll be sort of an ongoing case thing to look at in the next several months.’”
“In September, the median price in Gilbert was $318,500. That’s down from $325,000 in September 2005. The number of resale homes sold also dropped, from 565 in September 2005 to 265 last month.”
“Paul Hanus is selling his Gilbert house in preparation to move out of state. Hanus said the response in the three weeks the house has been on the market has been slow, as he expected. ‘We’ve had people look, but there’s been no offers,’ he said.”
“Hanus said he hasn’t lowered his asking price but is considering it. ‘I just think there’s a lot of uncertainty, and it’s causing people not to buy,’ he said.”
“Chandler’s numbers were also down year over year, falling below $300,000. In September, the median price of a resale house was $292,500, compared with $295,000 in September 2005.The median price in August was $308,000, according to the real estate center.”
“The number of resale homes sold in Chandler also dropped, from 715 in September 2005 to 315 last month.”
“Only half the number of homes sold last month as the same month a year earlier, according to ASU. ‘A lot of it is the buyers aren’t out there,’ said Butler. ‘The days of the big (price) increases are gone, at least for a while, so the buyer is very cautious about what they’re going to do.’”
“The slowdown has caught some sellers short, forcing price reductions that still don’t attract buyers.”
“‘It’s so depressing and frustrating because I probably am like 20,000 other people out there,’ said Craig Bohall, who cut the price on his family’s Mesa home and offered other incentives like a trip to Hawaii but still hasn’t had a buyer step up. ‘You have a beautiful home, there’s nothing wrong with it, but there just aren’t any buyers.’”
‘Scottsdale’s senior population is the latest group to feel the effects of a condominium craze that is petering out but has left its mark on affordable housing. Although the condo market has slowed in the city, Scottsdale is still feeling the aftermath from the 2005 conversion of 18 complexes.’
‘During the condo craze that began in 2004, about 40 percent of Scottsdale apartment buildings or more than 50 complexes were converted to condominiums, according to real estate agent Pete TeKampe of Marcus and Millichap. But the frenzy is over, and eventually many of those units will be back on the rental market, he said.’
‘The market overreacted, over-anticipated and overestimated the demand by the home consumer,’ TeKampe said. ‘It’s not a bursting of the housing bubble, it’s just reverting to a more normalized market.’
The term “re-partments” comes to mind here. As in, condo conversions that are reverting to apartments.
You have a beautiful home, there’s nothing wrong with it
Except the price…
But its different here!
you know what they say about ASSume…..
PHX is not significantly different than other bubblicious areas…
I feel really sorry for people who bought a home in Phoenix in the last few years!!
“Recent homebuyers freaking-out in Phoenix as prices plunge!”
“Phoenix home values plunging fast! On pace for 20% decline by January!!”
“September’s median sales price of $256,900 represents a 2.32% decline year-over-year. This number lies between the July 2005 median price of $255,000 and the August 2005 price of $258,700, essentially wiping out 14 months of appreciation (not adjusted for inflation). If this trend continues at the current rate, price depreciation would be at 20% YOY by January 2007.”
Full article and chart available at
http://www.realestatedecline.com
Just don’t give away!
He clearly needs to add a koi pond.
With upside down statues of St Joseph for the fish to swim through!
I was just testing the market. I don’t really have to sell. I can wait it out!
San Mateo B!
LOL! Absolutely! That’s why it’s not selling, no koi pond! Oh and add a little Japanese style foot bridge too. That always gets someone to “step up to the plate!”
It’s funny you bring that up b/c as far as I understand sales at Lowe’s?Home Depot haven’t yet fallen off a cliff. Must be all the FB/Specuvestors last minute curb appeal gyrations keeping them afloat (for the time being anyway). This is the New American Way. Borrow out the ying-yang to do remodeling for someone else to pay for and just live off the fat of the MEW!
You want to know why Home Depot & Lowes are holding up? McMansions with kids. Has anyone else on this board actually experienced what it takes to keep a 4000+ sq.ft. house up if it has kids living in it? There is always something broken, has a hole in it, doesn’t work, got stained, etc… The main thing all of that extra room does, provide more space that needs maintained and for something to happen to it. You visit Home Depot a lot.
I don’t understand your statement. I thought houses were magic ATM machines that regularly spawned greenbacks. What you’re describing sounds suspiciously like a durable good –and one that depreciates and also requires regular maintenance to keep in useable condition.
Now I’m really confused. I thought house = retirement account and debt = wealth? What’s going on here? This must be some kind of “new math” or something.
All of the houses that have been built at record pace the last few years by anyone who could possibly get a general contractors license are the best ever built. Norm and Tom personally oversaw each project and the best union craftsmen in the world labored diligently to make those houses the finest ever built. They just take care of themselves. Nothing leaks, they can withstand any storm mother nature dishes out, insects run in terror, the wiring is perfect and makes sense to even novice home owners, everything is perfectly up to code, the foundations never settle, the paint never fades, the walls are square and plumb, the plumbing works and is located in easily accesible places for when your two year old flushes batman down the toilet, etc.. And lastly when they hand you the keys the general contractor is available 24/7 to answer your questions and to promptly correct any problems.
A word of advice - if you own one of these big houses, they do have benifits, learn to do drywall and buy a professional spakling machine and learn how to use it. It will pay for itself dozens of times over.
Someone hand me my trout . . .
- ‘If you bought last year and you don’t need to sell, bite the bullet and wait for the appreciation,’ said (realtor) Diane Watson in the northeast Valley.”
The assumption is that APPRECIATION is just around the corner.
I hope they don’t break their teeth on that bullet waiting 10 years or so just to break even.
What she meant to say was “by waiting your basically putting a barrel in your mouth”
The complete text of what she meant to say: “Your home being on the market is distracting buyers from my flip. Get your home off the market, let me sell my ‘investments’ and then you should put a gun barrel in your mouth as you are pond scum and are not as deserving as we realtors. Buyers, please use me as your agent so I can feed my alligators.”
Neil
Perfectly said, Neil.
We’ve got dumbass realty-dropouts down here saying the same thing to the media. And every time they say it, you know they’re not just brokers, they’re also owners. With their greedy hand stuck in the trap. I’d lie out loud (and often!) too if I was in the same situation.
Greed is good - for laughs!
Paradise Lost,
ROTFL
Isn’t it so true. Realtors are like the monkeys with a fist stuck in a “nut trap.” They stick their hand in a jar, but with a handfull of nuts, they cannot get their hand back out. Rather than letting go of their prize, they are stuck.
Oh, this is going to get interesting.
Neil
If I want to go to work high, I will think of becoming a realtwhore.
Surely, their value add only consists of unlocking the door and pointing out middle america accoutrements like granite and whirlpool tubs. Puhleeze. 85+% (I am being nice) are deadbeat losers.
Pass the bud
“Surely, their value add only consists of unlocking the door and pointing out middle america accoutrements like granite and whirlpool tubs. Puhleeze. 85+% (I am being nice) are deadbeat losers.”
Speaking as an RR (recovering realtor), I think you’re being a bit conservative. Although, naturally, I was one of the 15%ers . . . .]
Here’s a thought: I remember back in the early part of the balloon days when the older/more established agents would sniff and say, “I don’t work with buyers–I refer them.” Wonder how many are still saying that. The ones that are left.
I’ll bet the office brokers are changing their tune, too. Instead of doting on their “pet” agents–the ones with multiple listings–they’re probably haranguing these same agents to get off their self-satisfied asses and beat the bushes for buyers. Ah, Kismet!
I wonder if Diane Watson understands the difference between appreciation and inflation. The DOW still hasn’t broken even after 6 years if you take inflation into account.
BINGO! I’m so glad someone gets it. I’m so tired of hearing “the DOW broke all time highs” It’s about 20% off what it would take to break it in todays dollars, but who cares it’s all about feel.
However, the Dow doesn’t include reinvestment of dividends, so it slightly understates the total return. Including dividends gets you a little closer, but still not quite even. But it’s very close.
Bruce,
Correct me if I’m wrong but doesn’t the DOW have an issue with its components being changed on occassion. I would say whatever benefit dividends supply in terms of getting the DOW’s return to an all-time high on real terms is offset by the periodic elimination of its weaker components. If this sampling biases was eliminated I would hazard a guess that the picture that the DOW is showing would be significantly different.
Just another example of manipulation. Look what’s going on in my left hand (DOW at “All Time High”) while paying no attention to what I’m doing with my right hand (reducing purchasing power through inflation which is underreported (sp?)).
Dividends? What are these dividends that you speak of?
-American Investor who came of age in the mid/late 1990s
Forget break even on the dow…look at 6 years of QQQQ, the Nasdaq that used to be QQQ….Not even close to its 5000 high in 2000. Thats where are the new growth companies reside. Only CNBC carefuuly avoids the trend line of the QQQQ going back 6 years. That is called SPIN, mr Crammer
“It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” — Upton Sinclair
‘If you bought last year and you don’t need to sell, bite the bullet and wait for the appreciation,’ said (realtor) Diane Watson in the northeast Valley.”
hehehe…
Should have added
Your hair may turn a different color; the clothes in closet go out of fashion; and you might put on 20 pounds over the next DECADE!
But that’s ok…appreciation is RIGHT around the corner!
“Fundamental Assumption”
Everyone knows what happens when you assume. You make an “ass” of “u” and “me”
If I’m a seller, do I publicly advertise that I’m hoping to fleece someone into giving me a profit during a declining market? Apprently so:
“The couple will list the other house this weekend. They spent $45,000 to completely remodel it, something they hope sets it apart. They bought the house for $430,000 and will try to sell it for $529,000. They originally hoped to get $599,000. ‘That’s how much the market has come down,’ Kyle Olsen said.”
No kidding! Who lent this pair of clowns $1M?????
Tell me how much it SELLS for (not asking price) and I’LL TELL YOU how much the market has come down!
That’s exactly what I was going to say.
The bottom line stupid assumption here: that the 430K they paid was a real price, not somebody else’s wishing price.
sometimes i have to click on the link just to be sure ben isn’t making this stuff up.
i’m talking about the scott valley fb’s. good night betsy
I click on the links to see if there’s a pic of the idiots and their “homes.” This pair, I’m betting is a 30 something couple with an income of maybe 100K max totally leveraged on this “investment.” Probably 2-3 kids, who are going to be royally screwed because of mommy and daddy’s greed. He’s a mid level cubicle dweller somewhere or Costco store manager, she’s a realtor or teacher.
How’s that for stereotypes.
Hey Tex,
Enough with the angry boomer avenger persona! I haven’t heard from Shaunta in a couple days, and it doesn’t suit you. Yes, they are fools and sound young.
But I can’t stop from thinking about “Bill from Phoenix”’s comment yesterday about boomers investing in real estate whole hog, cranking up valuations into la la land, when there will not be near as many x-ers to buy them five years from now. I always pictured the boomers as smarter and richer than me, but how did so few connect the dots….Stupidity has no age requirement.
In the spirit of disclosure, I was born in 1964, so I am an equal opportunity pontificator.
Let her rant about gen xers, it’s not as nauseating as her immigrant hate.
That’s a pretty funny statement considering that I am the only American in my family, and it was only by accident that I was born here.
But thanks for playing.
I doubt txchick has any “immigrant hate”, but you, on the other hand, have some issues with someone smarter than you.
Costco store managers make decent salaries (well over $100K) and are pretty astute to the economy. Now, if you made him a Wal-Mart manager, I might buy it.
I was waiting for a quote from the weekend “guru” school they attended where they paid $7000 to teach them how they couldn’t lose buying, fixing and selling. Only 70,000 people showed up in Las Angeles at the last Learning Annex Trump special, and they were selling out $7,000 courses like it was
free cocaine. And the look on the buyers faces reminded me of that euphoric high. Detox from this bubble is going to be painful
‘If you bought last year and you don’t need to sell, bite the bullet and wait for the appreciation,’
Hope you can wait 20 years
“‘It’s a nightmare,’ Kyle Olsen said. ‘It’s priced really well. We’ve had a lot of lookers but no one is coming to the plate.’”
Obviously, if it was priced “really well” it would have sold by now. And what did she mean by “coming up to the plate” is she saying “will someone buy my house, your all suppose to be in a bidding war!!!!”.
Lastly, Phoenix is one of the most (if not #1) of the crappiest cities in America.
“Lastly, Phoenix is one of the most (if not #1) of the crappiest cities in America.”
No doubt. My firm sent me there for 3 days to determine if I wanted to take a 3 year project. After 48hrs, there was no question in my mind that the place was the hemmroid on the azzhole of the earth…… and all the people are dingleberries.
No thanks.
Could you elaborate? I saw some photos from a retired couple that had a winter home there and heard their description, and it seemed nice (in the winter).
Peter, there are plenty of beautiful homes in Phoenix. The problem is the six straight months of 100+ degree temps. The city is also very homogenized. One could be on a street corner in Mesa, and think they were in Gilbert, Chandler, or Tempe. It is one giant valley of stucco subdivisions, and strip malls. It is devoid of arts and culture. If you like to be a slave to the indoors, maybe it’s for you.
The Heard Museum is great. There is some culture, just not a lot.
Phoenix Art Museum, Herberger Theatre, Arizona Theatre Company, Scottsdale Center for the Arts and Museum of Modern Art, Mesa Arts Center, Phoenix Symphony (also Mesa, Chandler, Tempe symphonies though they’re not nearly in the same league), Arizona Opera, various events at ASU, Gammage Auditorium, etc. It’s not New York or LA, but there’s plenty here.
Not enough culture - the entire area is infested with white trash, druggies, and old people. Anyone with brains gets the out of that hell hole as soon as possible.
[assuming a gun to my head] I’d pick L.A. over PhX. PhX is a hotter version of L.A. without the ocean.
I lived in Phoenix (Chandler actually) for five years. Glad as I can be that I got out. Here are some more things for the list: dust storms, terrible air pollution, fire ants, every indigenous plant has 1 inch thorns or is poisonous.
I grew up in Phoenix and would never move back. The only reason Phoenix got so big is because housing was cheap and there have always been lots of low-skill jobs available. So basically it’s now full of people who couldn’t afford to live anywhere else…I call it a lowest common denominator society. And half of them are real estate “investors”, realtors, or both. Scary.
Not my first choice, but I have to say, the people I meet from the Phoenix area seem to like it fine. The weather is mild in the winter and the low humidity is good for some ailments. Lots of golf courses, etc.
And there must be something to Scottsdale, considering how much people pay to own there.
A bigger problem for the state is that the prices soared everywhere! Little places like Williams and Winslow had Californians crawling all over them and now the locals resist letting go of those prices. But they are slowly giving in. Last night I heard about a local house that had the asking price reduced $100k, from around $540k to $440k. Needless to say, all eyes are on that to see if it sparks a sale. Still too high, but progress.
Who in northern AZ has $440k to pay for a house? I wasn’t aware that your jobs paid that well.
Shoot, I remember in 1993 and 1994 looking to buy a house in Sedona and thinking the prices were ridiculous even then. Flagstaff too. I don’t know if those places will ever come into line with the local economy. They’re more like an Aspen or Santa Fe. Second home areas for wealthy from out of state.
I live in Phoenix and enjoy it. Some people enjoy hot weather.
It is a retiree haven. That is a huge chunk of the economy. Over time, hopefully other parts of the economy will develop.
But there is absolutely no reason for expensive real estate here. None!!!!
Phoenix, and close behind it Tucson, are pyramid schemes.
Over 30% of the Phoenix economy is construction. Phoenix therefore spends a third of its time building itself.
If this continues forever, everyone in the world will eventually live in Phoenix. If it stops or slows, what happens to the construction industry?
Um, well, it already is slowing, as the bubble deflates. Isn’t Pheonix probably already in its own local recession?
The other way to look at Phoenix and the rest of AZ is that is was and still is a good entreprenurial environment. If you want to start a business of your own, AZ is one of the better places around - low entry costs, no unions, good upward mobility, etc. But the problem will soon be seen that most of those small businesses (including mine to an extent) are either in or supported by construction and homebuilding.
Charles Keating sure thought so! (ducks)
“low entry costs, no unions” Hey, with no unions, you get low salaries. So you open a business real cheap and then you have to sell your products to minimum wage workers. Seriously, what can a Wal-Mart employee aford to buy from anyone besides Wal-Mart
Arizona Slim,
The state did a survey and determined that a wage of $60/hour is needed to afford the median priced home. Almost no one makes that kind of money up here. Yes, there are wealthy retirees, but not enough to sustain prices.
Slim weighing in from Tucson, where the housing is also overpriced relative to local incomes: I don’t know of too many Arizona-based employees who make that kind of money.
I was in Phoenix last month. I enjoyed it. I like the desert scenery. Hate the climate though. And commuting long distances in it sounds like a tour in Iraq. Probably a nice enough place once, but it has definitely “jumped the shark”, as they say. This bubble and the stucco crap is spawned have ruined the town.
Hey! I didn’t hear that…lalalalalalala…I just moved to Phoenix.
Capt. Credit,
I just about spit my drink all over my computer, laughing at your post. You know, I lived in that furnace for 8.5 years and I can agree. If you don’t own a pool, this is what you can do outdoors from May-October:
1. NOTHING
If you do own a pool, you can:
1. Sit in the pool.
Even in frost-barren places like Minnesota in the worst time in the winter you can do outdoor activities. There is ABSOLUTELY nothing to outdoors in Phoenix during the summer time, except overheat your core body temperature. I will say this: my wife loved it for one single reason: low humidity made it easy to keep her hair styled.
My favorite Phoenix phrases:
“Hey kids, why don’t you head outside and go play in the rocks!”
“Yea, you can’t miss our house - it’s the pink stucco one with the tile roof.”
“Did you hear they’re opening a new Chilli’s down the street?!”
I’m glad you liked it.
I should offer my apologies to any phoenixites I offended. Nevertheless, living there is out of the question for me.
Florida, you are spot-on. I had a dog when I lived in Chandler during the summer the only time I could walk him was in the early morning, before the sun came up. During the day or even at night the pavement was too fricking hot for his little paws. Even at midnight the ground is still radiating heat that soaked in during the day and the temperature is still 98 or so.
But the same low humidity that allows fabulous hairstyles ages the women beyond belief - a state of pruned, lined faces. The women who spend anytime outdoors look like old leather bags.
Oh, come on, The golf courses are wide open in the summer…I play as long as the temps stay below 105…Pass that water bottle.
What about Detroit, New Orleans, Houston, Youngstown, Bakersfield, Montgomery, Birmingham, Columbia, El Paso…??? Phoenix by far is not the crappiest city
Fresno, Merced, Gila Bend, Buffalo, Flint, …
Tonapah, Winnemucca, Butte, Amarillo, Gallup, …
A small aircraft just hit a bldg at 72nd St and York Ave in Manhattan…
That’s the same wording that NPR used in its first report on the 9/11 attacks.
Fed making hawkish statements too.
You’re not kidding. I don’t want to OVERstate the importance of what’s going on in the bond market. But in the past week or so, long bond futures are down more than 2 points (high to low). My research shows that last Friday (jobs report day) was actually the worst single-day percentage decline in 10-year T-note futures in more than 14 months.
This isn’t a huge change in trend … yet. But it bears watching. Also, as you mentioned, the Fed is practically shouting from the rooftops that there will NOT be an imminent rate cut.
More thoughts here on the latest move, the pre-conditions for it (several posts back) and Greenpspan’s latest “off the reservation” ideas about where the housing bubble came from:
http://interestrateroundup.blogspot.com/
Ya just wonder if they can hold it up long enuf to get the bonuses nailed down.
LRCX just put up big numbers so it’s time for a short squeeze in chips. Let’s see, usually it’s the chips then the optical networkers, then the tank.
Not that the following stats matter a bit in view of deaths and suffering- but in keeping with the theme of the blog-here is info on the building that was hit.
The Belaire, a 50-story red brick luxury condominium building with two-bedroom units priced at more than $1 million, was built in 1988, according to the cityreality.com Web site. The residential tower was modeled after 30 Rockefeller Plaza for a development team headed by William Zeckendorf Jr.
I saw that but thought I’d leave that hanging curve for someone else. In keeping with the baseball theme, you knocked it out of the park.
Bush is on his way to his Florida classroom.
Sorry.
Appears to be nothing. Hopefully. I am going to NY next week - I hope they clean this mess up.
2 killed on the sidewalk below.
Wonder what their horoscope said.
Apparently a NY Yankee was on the plane. Don’t know who.
Corey lidle. Ex-Phillie guy.
Really? A-Rod? Maybe he was flying - although I doubt it, he couldn’t hit the side of a barn if he tried!
my favorite quote that I don’t think Ben included from the AZ Republic link was,
“There are way too many listings, way too many homes for buyers to see,” said Bridgette Gavagan of West USA’s Arrowhead office in Peoria. “It makes it hard for buyers to make a decision.”
WHAAAAT? let’s see,…(husband to wife as they peruse the Sunday for sale ads) “Gee honey,…this is so frustrating! So many houses to choose from! why can’t the government limit the number of houses that we can choose from!!! There oughta be a law!”
whatever.
So many listings! So little time!
Actually the buyers are finally realizing they have plenty of time. Many of the sellers with multiple mortgages are running out of time.
Perhaps they would prefer to move to a third world country where options are much more limited.
“There are way too many listings, way too many homes for buyers to see,” said Bridgette Gavagan of West USA’s Arrowhead office in Peoria. “It makes it hard for buyers to make a decision.”
Bridgette couldn’t be more wrong. It’s actually too easy for buyers to makes decisions lately; everything’s drastically overpriced and prices are falling, so the decision is “wait for lower prices”. It’s the biggest no-brainer in the history of mankind
“‘It’s a nightmare,’ Kyle Olsen said. ‘It’s priced really well. We’ve had a lot of lookers but no one is coming to the plate.’”
“The couple will list the other house this weekend. They spent $45,000 to completely remodel it, something they hope sets it apart. They bought the house for $430,000 and will try to sell it for $529,000. They originally hoped to get $599,000. ‘That’s how much the market has come down,’ Kyle Olsen said.”
Such a sense of entitlement. Entreprenuers in this ‘ownership society’ are the new Democrats.
Even if they were to get what they’re asking for the second place and the current asking price for the first place, net net I think they lose money on the entire “venture.”
Yeah, but it happened on Bushes watch. After 6 years, something has got to stick with the dumbest president the US has ever had
And you’re a genious
Kyle,
I’ll play ball and ‘come to the plate’ after you drop that price by 50%!
“‘It’s a nightmare,’ Kyle Olsen said. ‘It’s priced really well. We’ve had a lot of lookers but no one is coming to the plate.’”
Spelling Correction: “It’s priced reall well.” should read:
“It’s priced for 2011.”
I know I should probably feel sorry for people like Kyle Olsen and his wife and the thousands of fb’s who appear to be on the lower deck of the USS Property Boom (now known as the USS Property Bust as it sinks) but, frankly, I don’t. I’m not going to laugh cynically but I am going to sigh and shake my head, the same way I shake my head when I see a motorcyclist speed past me on the freeway doing 95 mph, weaving in and out of traffic. The proverbial accident waiting to happen. I added up the Kyle’s figures and included realtorwhores commissions. The Olsen’s are in trouble if they have to drop prices further. Actually, if they’ve been paying two mortgages they are already in trouble.
Why do I not feel sorry for the Olsen’s? Because (A) They are stoopid. (B) They are greedy. Stoopid because they tried to jump in on a fast moving train just before it started to slow down and greedy because they figured they could just sit back and wait for a buyer after simply doing to fixing up then clearing $100,000 onto the original price. They appear to be the poster children for the dumb money.
Like most people who get caught in boom’s and busts, the Olsen’s failed to realize the smart money moved in early and the dumb money jumped in late, just as the WELL ADVISED smart money bailed. The Olsen’s will have a lot of company in 2007/8/9.
I think the next question is, what is going to be the next hyped Ponzi Scheme to arrive on the scene which will fleece the next generation of suckers? I read an interesting article over the weekend where the writer stated that the US economy (thanks to Greenspan) is surviving on fast cycles of booms and busts. Considering, in the past, the cycles between booms and busts have been decades, the current boom and bust cycles look pretty ominious. We went, basically, from a stock market bust, to a property market boom and bust within a couple of years.
As for the current property market? It appears there are 2 possible scenarios. (A) A slow decline, with the odd dead cat bounce, especially in some popular and coastal areas over two or three years with price drops of between 10% to 50% depening on the3 property market rules. Location, location, location or (B) After a limited drop, reasonably stagnant prices, with the odd dead cat bounce again, for 10 to 15 years. A crash being out of the question, of course. Too many smart and WELL advised people, including foreign investors looking to park their crooked money, holding cash who will grab property with both hands when the blood starts to flow in the streets.
So, the property boom is over. Long live the XXXX boom…………but what will it be? Fill in the XXXX’s of your choice.
Is it possible, just possible that no one returns to the party? That we are looking at years of rot and loss, declining values and depressing consumer spending. Those ’smart and well advised…holding cash’ aren’t just another version of ‘boomers with money’, where the good times are beyond the next hill but always out of sight. I wonder.
It does make you wonder. There’s always a new scam being spun up to fleece the next generation. After stocks and real estate what’s left? Oil futures? Gold? Tulips? Seriously.
Too many smart and WELL advised people, including foreign investors looking to park their crooked money,
aka-the mortgage sleazebags who clipped the bazillion of FB’ers.
How about art?
Too many smart and WELL advised people…
Booms & busts happen among the masses and not the select few. Not nearly enough truly wealthy people out there, and they didn’t get there catching falling knives.
That said, these people will likely make a lot more money front-running the trends.
I wonder how many Boomers have lost their retirement in the housing bust? Buying investment homes to make up for the losses in the 1999 stock market bust.
“‘It’s a nightmare,’ Kyle Olsen said. ‘It’s priced really well. We’ve had a lot of lookers but no one is coming to the plate.’”
The nightmare will be when they are unable to sell and can no longer afford two house payments, and they are underwater on the houses. Assuming they can afford the payments now.
i live in N Scottsdale surrounded by million + houses (I am renting of course). My neighbor was going around last night putting envelopes in everybody’s mailboxes. I asked her what it was and she said she was “promoting herself”. She just changed careers to a realtor ™. I almost burst out laughing, but contained myself. yikes, what a ditz……. clueless.
Um, excuse me, but isn’t your newly minted Realtor neighbor supposed to stamp and mail those envelopes first?
Why should she? Or is it forbidden to put your letter into another mailbox?
The post office is going to let her know if it’s legal or not. If they are going in the mailbox, she is committing a crime. That is a great way to start her new multi-billion dollar career. I hope she can afford the bail. Then again, I hope she can’t.
Yeah, it’s illegal. Rarely enforced, but the USPS did go after some Boy Scouts a decade or more ago; they got a restraining order against them.
“It’s also bad news for people who bought at the peak of the market who are finding their houses no longer are worth what they paid. ‘If you bought last year and you don’t need to sell, bite the bullet and wait for the appreciation,’ said (realtor) Diane Watson in the northeast Valley.”
What if your financing package only pencilled out if homes went up by 20%+ each year? A key question is just how many investors and subprime borrowers will not be able to wait for appreciation because they cannot afford to do so…
“A key question is just how many investors and subprime borrowers will not be able to wait for appreciation because they cannot afford to do so…”
Far more than this market can bear. Bite the bullet and hang on just isn’t even close to manageable for todays FB’s. Add to it the upcoming economic fallout from this summer and fall slowdown and there’s just no way these folks hang on. Most are dead in the water and don’t even know it yet.
Dead flipper flopping! (Dead man walking).
A DFF…new bust lingo. You heard it here first!
LMAO!!!!!!!!
It’s simple people. There are “NO” buyers because no one can honestly afford these over priced homes all across america. Plain and simple!!
OT, from the Wall Street Journal:
“Relocating to Cheaper Housing May Not Help Low-Wage Families
“Moving to an area with lower housing costs often doesn’t pay off for low-income Americans, according to a study to be released today by the Center for Housing Policy, a nonprofit research group based in Washington.
“The study, which looks at families with low to moderate incomes in 28 metropolitan areas, found that transportation costs in places with cheaper housing are often so high that they wipe out the savings from lower rent or mortgage payments. Such places tend to be farther from employers or short on public transportation, which makes commuting costlier.
“The study found that housing and transportation costs combined eat up an average of 57% of annual income for “working” families, which the study defines as those with incomes of $20,000 to $50,000 a year. The combined costs ranged from 54% of income in Pittsburgh to 63% in San Francisco; in 25 of the 28 metro areas, the combined total was within three percentage points of the 57% average.
“The findings contradict the common notion that many people would be better off financially if they moved from areas with high housing costs, such as California, to states like Texas or Georgia, where housing is much cheaper.
“The median house price in San Diego, at $613,000, is four times that of Dallas. But the study found that working families in San Diego spend 59% of their income on housing and transportation, only slightly more than the 57% they spend in Dallas. Families in Dallas spent just 26% of their income on housing, compared with 31% in San Diego, but the Dallas families spent more on transport.
“The study also found that moving to an inexpensive outer suburb, but continuing to work near a city center, often backfires. Typically, a move that adds more than about 12 miles to a one-way commute will result in a rise in transport costs that outweighs the savings on housing, the researchers found.
“The data on housing and transport costs for working families come from the 2000 U.S. Census. Since then, both housing and transport costs have jumped, but Barbara J. Lipman, research director at the Center for Housing Policy, said the results are still valid. Housing and transport costs have grown by roughly similar amounts.
“The center is an arm of the National Housing Conference, a nonprofit group that favors more spending on affordable-housing programs for low- and moderate-income people. The conference is funded by groups including the MacArthur Foundation and mortgage-finance companies Fannie Mae and Freddie Mac.”
I have a very hard time believing that. Gas in Texas is almost $1 cheaper than California and car tags only costing $70/yr in Texas vs. a % of the value of your car in California. What about the extra cost of that California emissions package for your car?
60% of the drivers don’t have insurance either, so that is another cost savings of living in Texas.
Until an uninsured driver hits you
The study also found that moving to an inexpensive outer suburb, but continuing to work near a city center, often backfires. Typically, a move that adds more than about 12 miles to a one-way commute will result in a rise in transport costs that outweighs the savings on housing, the researchers found.
Doesn’t that finding basically exemplify a market equilibrium? Shouldn’t we be surprised if a large market inefficiency between commute and housing actually existed, rather than surprised that people are more or less equally screwed?
But the study found that working families in San Diego spend 59% of their income on housing and transportation, only slightly more than the 57% they spend in Dallas
That’s because the great majority of homeowners in SD bought before the prices became ridiculously high. But that’s irrelevant to someone looking to buy now.
If you’re going to study the merits of moving to save housing costs, you have to look at current prices, not average out the prices that all people have paid. You can’t buy at 2001 prices (yet).
Oh thank you Jesus! Someone finally gets it! Thank you for posting that.
–snip–
“The findings contradict the common notion that many people would be better off financially if they moved from areas with high housing costs, such as California, to states like Texas or Georgia, where housing is much cheaper.
“The median house price in San Diego, at $613,000, is four times that of Dallas. But the study found that working families in San Diego spend 59% of their income on housing and transportation, only slightly more than the 57% they spend in Dallas. Families in Dallas spent just 26% of their income on housing, compared with 31% in San Diego, but the Dallas families spent more on transport.
“The study also found that moving to an inexpensive outer suburb, but continuing to work near a city center, often backfires. Typically, a move that adds more than about 12 miles to a one-way commute will result in a rise in transport costs that outweighs the savings on housing, the researchers found.
OT, also from the WSJ:
“Bidding War May Be Moving to Rental Front; Applicants Begin to Employ One-Upmanship Approach As Apartments Gain Appeal
“BIDDING WARS, once waged by prospective home buyers in a red-hot housing market, may be moving to a new front: rental apartments.
“As rising interest rates and flattening home values have made renting more attractive, renters are beginning to resort to the same one-upmanship tactics to secure a choice apartment.
“In Washington, D.C., the owner of the Ellington, a 190-unit rental building on U Street, has a 12-person waiting list, and nearly a half dozen renters are paying rent two to three months before their move-in dates. San Francisco renters are showing up early to open houses and racing to fill out applications before other applicants. In Manhattan, some renters are offering landlords more money than asking rents, while others are paying the equivalent of the entire year’s rent upfront in cash.
“In August, Adrian and Amanda Liang agreed to pay $5,300 a month for a two-bedroom apartment on Manhattan’s Upper West Side — $100 more than the asking rent and $1,000 more than they intended to spend. “I just wanted to get this done as soon as possible,” says 31-year-old Mr. Liang, who moved to New York from San Francisco with his wife after selling his software-services company. “I was sick of looking at places.” The couple had spent a month looking at nearly two dozen Manhattan apartments and had lost two apartments to other tenants because when they showed up at open houses, the landlords said they already had plenty of qualified applicants.
“Justin Lindblad, a broker with New York-based Citi Habitats Inc. who represented the Liangs, says another client secured a $2,300-a-month, two-bedroom apartment on the Upper West Side only after offering to pay $13,800 in rent upfront and a $13,800 security deposit. “You’re not in a situation anymore when you can wait around a week and think about an apartment,” says Mr. Lindblad. “You take it on the spot on that day, or you move on.”
“Rental landlords, who used to fret as prime would-be tenants jumped into the housing market instead, suddenly are in the driver’s seat. Nationally, rent for a 1,000-square-foot apartment has jumped 3.7% to $1,389 a month from $1,339 a year ago, according to data collected by Boston-based research firm Property & Portfolio Research Inc. Rent increases haven’t been this high since the fall of 2001, when rents jumped by 4.1%.
“A big reason for the rising rents — and the emerging bidding wars — is a smaller stock of apartments, caused partly by developers who built condominiums instead or converted existing apartments into condos to take advantage of the once-hot housing market. Rental vacancy rates dropped to 5.3% in the second quarter of 2006 from 6.2% in the second quarter of 2005. The vacancy rate could shrink to 5% by year end, according to Encino, Calif.-based real-estate investment brokerage Marcus & Millichap.
“In Manhattan’s pricey Tribeca neighborhood, where Citi Habitats says vacancies are a miniscule 0.55%, finding an apartment has been much tougher than Kerry Stichweh anticipated. After looking at 10 different apartments to buy in downtown Manhattan, Ms. Stichweh, a 34-year-old choreographer and interior designer, and her boyfriend, a 50-year-old hedge-fund executive, abandoned their purchasing plans for the more affordable rental market.
“But after touring nearly three dozen apartments, they couldn’t find anything they liked within their $5,000 monthly rent budget. So next month, they are moving into a fifth-floor, two-bedroom Tribeca apartment that rents for $6,500 a month and initially won’t have a working elevator. Still, the couple figures that is a better deal than buying a similar unit — which would cost more than $1.5 million with monthly payments of about $10,500 including taxes and maintenance fees, according to their broker, Craig Filipacchi of Brown Harris Stevens.
“The boom in demand for rental apartments follows several brutal years for landlords. From 2002 to 2005, 438,000 renters from age 20 to 34 nationwide took advantage of low interest rates and became first- time homeowners, says Hessam Nadji, managing director of Marcus & Millichap’s research services. Landlords offered free rent for a time and paid brokers to find them tenants.
“To be sure, the good times for rental landlords may not last. With the rapidly cooling home-buying market, many condo developers are expected to switch units back to apartments. “The rents aren’t going to continue growing like they have,” says Manhattan developer Douglas Durst, whose second residential apartment building, which has 600 units, has filled up in the past 18 months. While rents have risen roughly 10% from the year before, he is cautious about developing more rental projects.
“But for now, it is a landlord’s market. In the second quarter, AvalonBay Communities Inc., of Alexandria, Va., which owns 45,000 apartments nationally and is concentrated in the Northeast, raised its asking rents by 4.7% from the year before and cut concessions by 67% for incentives such as free rent for a month or more and gifts including vacations, microwaves and televisions.
“San Francisco renters are increasingly anxious, says Abigail Glynn, a broker with San Francisco-based firm Davis Realty Co. “A lot of them run into the apartment and come running out to hand you the [rental application] papers,” she says.
“Rob Hielscher, a 31-year-old commercial-real-estate broker, recently moved back to San Francisco from Chicago with his girlfriend, Lisa Lombardi, a 29-year-old occupational therapist. After two trips to the Bay Area and visits to 12 apartments, they moved into a two-bedroom apartment with a private backyard in the Potrero Hill area. To Mr. Hielscher, the $2,300 monthly rent was a better deal than buying a similar unit — which would cost nearly $900,000, or about $3,800 a month after a mortgage payment, tax savings and homeowners’ fees, according to Potrero Hill real-estate broker Greg Angilly.
“I don’t plan to be a renter for the rest of my life,” Mr. Hielscher says. But “even if the house appreciated, I wouldn’t have the money to go to [Lake] Tahoe or take trips because I would be putting all of my money into a mortgage.”
Wait ’til the re-partments (failed condo conversions) start flooding the rental markets. The bidding wars will become the stuff of history.
Yeah-this is total fookin’ hype.
There’s so many FOR RENT signs around here it’s incredible.
Lot’s of older homes which you know some sibling own’s due to the death of their Greatest Gen parents and would rather have the rental income, than a cap gain on a sale.
Anybody have any information on the real estate market in Anthem, AZ? It seems this correction started in Anthem sooner than the rest of the Valley and I know this from personal experience.
Oh yeah, there’s a lot of good people out there that are going to be hurt by this correction. Some of you smart a$$e$ should know that not all of them are greedy SOB’s, just people that didn’t really know what they were doing or the condition of the market. In my case I moved to CA hoping for a better life and thinking that my house would sell right away, but I did not buy something over here. Now I’ll probably have to move back. At least I get to move back to Phoenix. Check out this website to see how bad we have it in Phoenix. http://www.activeadultdelwebb.com/homefinder/Community.aspx?ID=100023
And another thing, Phoenix is a hell of a lot better than about 1,000 places in the midwest and the east. In Phoenix you can go golfing, play tennis, go hiking, ride your bike, and use your pool 365 days a year.
Phoenix is a sh#t hole. Does anyone do anything outside whatsoever in Phoenix from May through September?
May - Average high temperature: 93
June - Average high temperature: 103
July - Average high temperature: 105
August - Average high temperature: 103
September - Average high temperature: 99
at least in northeast/midwest, you can dress to keep warm. In fact, there is a whole recreational culture built around cold-weather sports, skiing, skating, etc.
In Arizona, i guess, the equivalent is air-conditioned malls. Very nice.
“Does anyone do anything outside whatsoever in Phoenix from May through September”
I do. When I lived in Scottsdale on the edge of the greenbelt I would ride my bike at 5am in the morning for an hour. It’s a 20 mile greenbelt. I had a nice bright lamp, so I could get my mountainbike up to bursts of 21 mph and not worry about not seeing objects (or people) in the way. I love Phoenix. Sorry about you. I also love Los Angeles. I just don’t like people being negative on west coast cities, or any city, for that matter. I lived in many places (including the cold northeast) and Phoenix ranks high with me as a nice place to live. I love the sunshine and cannot get enough! At 11:30 AM after a quick meal at Pei Wei or Chipotle in the 109 degree heat this summer I would get a hot coffee at Starbucks and bring it back to work. No problem with me! The 5th largest city in the United States, Maricopa County population grew by 600,000 people in the last 5 years. That number is no typo. And you are probably calling us a bunch of dumbasses. Have fun shoveling snow this winter!
I agree with you Bill. I lived in PA, TX, MI, CA(Northern and Southern) and NV. I have been in the Ahwatukee/Foothills area of Phoenix for 16 years and its a great place to live.
I live in Ahwatukee right now (Ray Road west of I-10). And for mountain biking, I would do it all year when I was in Scottsdale. Three times a week. People don’t realize it can be very chilly in the winter at 5:00 a.m.! And in the summer after an overnight storm some of the bike path near Roosevelt or McKellips would be flooded with a stream from one of the ponds overflowing. All goes into the Salt River. I’m always amazed about the hateful generalizations outsiders (such as bubbleboi) make about this place without ever living here!
Strictly speaking you can golf in AZ year round and they have great deals during the summer. I used to golf in 110 heat during the week for like $12. They would have these cute towel girls who would drive around in golf carts and pass out frozen towels to the golfers. You can hike during the day too. Just bring about two gallons of water per person.
Calm down Lip, there are probably ten thousand people that have read this post since I put it up, so don’t go generalizing. If you want to get mad, look at who lead these innocent folk you describe down the path. It wasn’t any of us.
I know, I just had to vent because living in CA and having a home in AZ I know a lot of those investors and I don’t appreciate some of the folks taking joy at their demise. A lot of people are gonna loose everything in this correction. They should have known better, but they didn’t.
So how’s everything up in Flagstaff. Are the real estate prices holding better up there?
Flagstaff is cracking as we type. But don’t expect the local paper to report it. Sedona is even weaker, to the surprise of many.
>>Sedona is even weaker, to the surprise of many.
Not a surprise to us on this fantastic blog….we are the few, the proud, the independent thinkers!
Lip, your mistake is labeling those who are waiting in the woods, like a hunter waiting to pull the trigger, on an upcoming opportunity beyond belief. It’s not the joy of the kill (the FBs’ demise) but the thrill of being right which drives a lot of us housing bears. Personally, I’m looking forward to going to the LA County courthouse to pick up someone else’s mistake for 60% off peak (2000 pricing). Nothing personal…just the thrill of being right.
frcp_23_b_3,
Sorry, I took my 12 oz chill pill. Actually I’m with you there at the LA County Courthouse, I want to buy something right in CA too. But I might have to wait longer than most.
How long are you going to wait? I’m thinking middle or late 2008?
TROLL ALERT!!!
Some of you smart a$$e$ should know that not all of them are greedy SOB’s, just people that didn’t really know what they were doing or the condition of the market.
Guess what-If you, DON”T KNOW WHAT YOUR ARE DOING then WTF are you doin’ buying a half million dollar house?
This ain’t rocket science.
it ain’t - however, you would think it was from the quantities of FBs out there that didn’t know any better
“didn’t really know what they were doing or the condition of the market”…I don’t buy this for a minute. If you’re adult enough to step up to the table to sign a mortgage for a 500k house,based on your 50k salary, with visions of huge YOY appreciation dancing in your head, then guess what, you’re adult enough to suffer the consequences if your delusion doesn’t pan out. No one needed to understand “the market”. they just needed to be honest enough to realize what they could and could not afford. So they blew past honesty to magical thinking and now hope that singing a sad song will get them a mulligan. Fat chance. You gambled and lost. Suck it up.
Sorry, LIP, but gotta respectfully disagree. Born in/grew up in Phx. Drank my way thru ASU…(hey, #3 party school in the country at that time–Playboy survey). Done the 115 degree days. The waiting to let your car cool enough to get into. Bad enough then, but now? Nothing like seeing used up meth-heads at every freeway ramp, on & off (love them teeth!). The flood of illegals in the lot @ HD & Lowes. Ticky-tacky houses, MILES & MILES of them, with friggin postage stamp lots, covered in rock.
When I moved to LA in mid 80’s I couldn’t believe the new developments here where you could walk from roof to roof….now, Phx is the same.
And as far as the Anthem community is concerned, it may be nice, may have some decent facilities. Great. I’m in OC (Irvine). Pools, parks, schools that don’t need chain link & armed guards. Lotsa bland, but some good stuff goin for it, AND I can go for a walk at 6pm in July and it feels nice.
Yea, I know, I’m living in Anaheim Hills, I like to go deep sea fishing, surf fishing, etc. I can understand why CA people think AZ sucks, but it ain’t that bad. I guess I have to think that way because it looks like I’m going back.
ASU grad when Reggie played ball there. I remember driving Bell Rd to get to the 60 freeway to drive to LA. There were signs selling 10 acres lots for $100 an acre. I kid you not. Nobody thought they could get water out there. 100 degree temperature in the summer gave me a heat stroke and I got rushed to the hospital.
Living in Santa Monica ever since.
“Some of you smart a$$e$ should know that not all of them are greedy SOB’s, just people that didn’t really know what they were doing or the condition of the market.”
Boo-f#cking-hoo. It was their job to know what they were doing and know the condition of the market. They were making the biggest investment they’d ever made, not ordering a sub sandwich. They are victims only of their own stupidity. Go back to Phoenix and melt.
finally, the Y-O-Y numbers reflect reality. i think prices will continue to fall as the median salary here does not support the median home price. oh, and if you don’t like phoenix, fine, but don’t piss all over it. every city has pros and cons. i have traveled to 49 of the 50 states, and most every city, and this is where i live. and love it, too. and forbes agrees, since they rank phoenix in the top 10 places in the US to live.
After buying last year … ‘“The couple will list the other house this weekend. They spent $45,000 to completely remodel it, something they hope sets it apart. They bought the house for $430,000 and will try to sell it for $529,000. They originally hoped to get $599,000. ‘That’s how much the market has come down,’ Kyle Olsen said.’”
Buying at the market’s peak and now trying for a significant profit over that? How’s that for failure to acknowledge reality… Hubris - they will get burned badly aiming to make money in the falling market and it’s hard to feel bad for them…
Yeah, I am not digging the Phoenix Bashing either. I lived in Phoenix for years. I live in NYC now and am surprised by how many aspects of Phx I miss.
Phx, outer Phx, and outer outer Phx (or as I call it, Arizona) are simply ridiculously overbuilt and ludicrously overpriced. Everybody just got too excited, and just didn’t get it that a future light rail system that goes, like a few miles, in uh.. a straight line, from Phoenix to Tempe, is not gonna make the City the next LA or SF. Whatever. Ooops. But Phoenix still has its corporate charms, conveniences, and a little desert-ey beauty.
Besides, Phoenix is in Arizona, and Ben is in Arizona, and without him we wouldn’t have this blog to play on, or get to feel the guilty thrill of being right and prepared as the rest of the world slowly awakens from their tulip-ey dream state to realize that they are screwed.
Donate what you can afford to this blog- its easy and on the upper right.
[For all FBs--countrywide]
PRAYER TO SAINT JUDE (Patron Saint of Lost Causes/The Saint of Last Resort)
O most holy apostle, St. Jude, faithful servant and friend of Jesus — People honor and invoke you universally, as the patron of hopeless cases, of things almost despaired of. Pray for me, for I am so helpless and alone. Please help to bring me visible and speedy assistance. Come to my assistance in this great need that I may receive the consolation and help of heaven in all my necessities, tribulations, and sufferings, particularly (state your request) and that I may praise God with you always. I promise, O blessed St. Jude, to be ever mindful of this great favor, to always honor you as my special and powerful patron, and to gratefully encourage devotion to you by publishing this request. Amen.
[RInse & repeat]