“Buyers Wait To Take Advantage Of Price Declines”
Some housing bubble news from Wall Street and Washington. “U.S. new-home prices will fall this year for the first time since the 1991 recession as a glut of properties for sale forces builders to offer discounts, the National Association of Realtors said.”
“The inventory of new and existing homes for sale has swelled to record levels as the five-year U.S. housing boom comes to an end. Buyers are have a ‘wait and see attitude’ because they want to take advantage of price declines, economist David Berson said in the forecast.”
“Eighty percent of Americans believe it is difficult for most first-time buyers to afford a home, according to an AP-AOL Real Estate poll. Many people, 59 percent, believe the situation is worse now than five years ago.”
“House hunters can benefit by showing patience, some analysts said. Suresh Sreeramenen says he sees some some homes for sale in his Lake St. Louis, Mo., neighborhood sitting on the market longer than they have in the past and suggested that will shift more bargaining power to would-be buyers and away from sellers.”
“‘If I was in the market now to buy, I would be happy,’ he says. ‘But if I were trying to sell, I would be worried.’”
From Forbes. “George Wimpey PLC has blamed a spate of speculation in housing deposits for exacerbating the housing market slowdown in its US operations.”
“The company told investors that its Morrison Homes division in the US was seeing a 10 pct dip in net pricing ahead of full year results, and its US order book was 28 pct below last year by volume and 35 pct by value.”
“Wimpey’s financial director, Andrew Carr-Locke said that the increase in houses coming back onto the market had pushed up housing supply, increasing the downturn. ‘Speculators are flipping the product back on the market,’ he said. ‘I think the market underestimated the scale to which that was going on.’”
“KB Home said that it’s delaying release of its third quarter earnings results because it needs more time to complete an ongoing accounting investigation. Also, the Los Angeles based homebuilder estimated a 32% plunge in net income as the housing market weakens.”
“KB Home warned that its delay in filing the Form 10-Q could make it default on credit agreements. It expects to receive extensions to its deadlines soon, though.”
The companies filing. “As of October 10, 2006, we had $600.0 million of outstanding borrowings under our $1.5 Billion Credit Facility and $487.0 million of outstanding letters of credit, leaving us with $413.0 million of available capacity.”
“We currently anticipate that our 2006 fourth quarter will be consistent with our historical experience and, in conjunction with a planned reduction in investment in land inventory in the fourth quarter relative to the prior periods of the year, we believe..that we will have sufficient resources to meet our current business needs.”
“San Francisco Federal Reserve Bank President Janet Yellen told California Independent Bankers yesterday that a cut in California home prices is almost inevitable. ‘A significant buildup of home inventory implies that permits and starts may continue to fall and the market may not recover for several years,’ she said.”
From Dow Jones Newswires. “As the housing market slows, evidence continues to build that borrowers with less than perfect credit are struggling more this year than one or two years ago.”
“In September, Novastar Financial, a subprime lender that packages loans as bonds and sells them, released its most recent mortgage bond performance report. A bond issued in April, known as 2006-01, had 7,173 loans remaining and had 91 loans in foreclosure and 29 already real-estate owned.”
“By comparison, last year, a bond called 2005-2, issued in May of 2005 had as of October 2005 11,498 loans remaining and just 23 loans in foreclosure with 1 loan real estate owned.”
“The report ‘provided evidence that recently originated subprime loans are performing much worse’ than loans originated in earlier years, said Kevin Jackson, senior mortgage strategist with RBC Capital Markets in Chicago.”
From Yahoo. “Mortgage lenders make no bones about it: They are tougher on second-home loan applications than on primary-home loans. That said, however, the current environment for second-home lending is about as lenient as it has been in years.”
“Don’t count on your bank to take all of a home’s estimated rental income into consideration. Even for a property with a long rental history, most lenders will only consider 75% to 80% of it. Some even take 75% after netting out your costs.”
“If you don’t need the rental income to meet the mortgage industry’s ratios, you may not want to mention to your lender that you’re thinking of renting. We’re not suggesting that you lie on your mortgage application. That’s a federal offense. But if you happen to change your mind, well, that’s another story.”
“‘A lot of people go in under the guise of buying vacation property for personal use only to turn around and rent it out,’ says Keith Gumbinger, of mortgage researcher HSH Associates. “I have never heard of people getting caught.’”
‘Seven U.S. real estate brokerage firms unfairly blocked some home sellers from their listing service, the Federal Trade Commission said Thursday. That action limited consumers’ ability ‘to obtain low-cost real estate brokerage services,’ the FTC said in a statement.’
The NaplesBOR better think twice about their auction blocking tactic b/c the FTC might sue ‘em.
“San Francisco Federal Reserve Bank President Janet Yellen told California Independent Bankers yesterday that a cut in California home prices is almost inevitable. ‘A significant buildup of home inventory implies that permits and starts may continue to fall and the market may not recover for several years,’ she said.”
contrast this with what greenspan said about the RE market bottoming out already. Alzheimer sure sets in fast once you retire. or is it dementia? haha.
From a public realations perspective, I think the most recent volley of *positive* housing market remarks speaks more loudly about the level of fear these folks have about the impending fallout than what they actually say. In other words, the fact that they are addressing the subject tells me they know the market is crashing and they are trying to set a floor.
“San Francisco Federal Reserve Bank President Janet Yellen told California Independent Bankers yesterday that a cut in California home prices is almost inevitable.”
Nothing is more inevitable than something which has already occurred.
Good one, sounds like a Ben Stein saying.
Nice to see a member of the Fed with a realistic perspective. “Several years” sounds like a fair and noncommittal estimate. Definitely more than 2 years but easily stretching to 4 or 5.
“Several” = time to bottom. Recovery in 10+ years.
hope W and DOJ busts up the MLS
net rules
I am not a MLS apologist (I hate the system) but since the Realtor ™ owned and maintained the MLS they can choose to limit who get access. Would you like to go back to the old days of having each office maintaining their own listings? As far as the internet, sure you can list your house with ziprealty and such but the majority of there listings comes from the MLS which is made up of induvidual real estate agents listings. If you want to have a free listing service ala craiglist then the quality of the data is not as clean. Believe it or not but some realtor associations do levied quite a bit of fines for infraction on the MLS.
The net will not bring enough people to your listing. That is why the MLS was created in the first place. To get more agent to look at your properties. Just be careful what you wished for as far as making the MLS public domain. The Realtor may decide to keep it all internal. No more public searches.
Last rant. You can do all the transaction yourself but be aware that anything you forget to disclose, it will come back to haunt you. At least with a realtor he/she has to make sure that you disclosed every bit of your house because he/she is liable for the disclosure also.
Mike
Internet Explorer was owned and maintained by Microsoft. Yet the DOJ told it how to run its business. If a private organization (Realtors or whoever) acts in the restraint of trade, the feds can go in and force stuff on them. Sorry, but that’s the way it works.
I think you got the IE analogy wrong. DOJ has no problem with IE. It has a problem with the fact that Micro$oft bundled the IE into windows thus rendering windows useless if you take out IE. MLS is different in that it is a database agreed upon by most realtor associations to parcipate in. They can limit who can access the DB if they are not participant. The MLS was not originally created for the public. It was a way for multiple real estate office to use the data to help their clients find home and list home.
Anti-competitive behaviour is illegal in all of it’s forms. The price of getting too big in business.
Moreover: go ahead I *dare* you to take it private. How long would it be until google or whoever had a web-searchable alternative. As a seller, who would you rather list with? An MLS using 1973 technology or someone using web 2.0?
As a seller, who would you rather list with? An MLS using 1973 technology or someone using web 2.0?
Whichever one helps get the house sold faster and for a better price.
Google, Amazon and/or eBay could take over in a heartbeat. Any one of them would provide a highly liquid and transparent marketplace that would serve the best interest of buyers and sellers instead of realtors®. Any one of them would provide a superior product at a fraction of the cost.
Full service realtors® would become optional and the do-it-yourselfers would have the open same access to the market as realtors® do today. People would get to pick and chose what they want services they wanted from a realtor (i.e. help with paperwork, show my house when I’m not home etc.,) withour being blacklisted by the 6%’ers.
Whichever one uses more AJAX, of course. That would rule out MLS.
Actually if you all remembered the cars.com and cardirect.com. It was supposed to take out the middleman (car dealers). Guessed what, everyone still go to the dealers and haggle with the salesman. As for the services provided by Realtors. Sure I think the 6 percent is outrageous. I think now a day if you can get listings for 5 percent total both ways. You are pretty lucky. Most listing agent get about 1~1.5% now. The other 2.5~3% is used to lure the selling agents with their clients.
If you are Ebay,Amazon,whatever…would you like to take on the liability of facilitating and possibly be held liable for doing real estate? It would be akin to employing real estate agents to do the paperwork, pay them a salary but have them be liable for disclosures down the road. If that is the case, no way will any real estate agent take that on. They get a good commission because there are risks down the road that may come back and haunt them.
Still, I’d like to see a vibrant alternative sales channel than the closed MLS. Moreover, with increasing builder bks, I’d rather spend the RE commission on a lawyer to protect my interests.
sorry dude. realtors commisions are going to go down
ala travel agetns, stock brokers
any broker gets squeezed by the net.
I think this involved the Foxtons people here in Monmouth County. They were willing to provide access to the MLS for 1% instead of 3% and it got ugly. If it’s something else and someone can clue me in, I’d appreciate it.
>“Mortgage lenders make no bones about it: They are tougher on >second-home loan applications than on primary-home loans. That said, >however, the current environment for second-home lending is about as >lenient as it has been in years.”
>“If you don’t need the rental income to meet the mortgage industry’s >ratios, you may not want to mention to your lender that you’re >thinking of renting. We’re not suggesting that you lie on your mortgage >application. That’s a federal offense. But if you happen to change your >mind, well, that’s another story.”
Most “investors” that I have talked to in CA have applied for their “investment” mortgages as their “primary residence”. The banks do not verify this at all.
Its amazing how many have four or more primary residences…
From Dow Jones Newswires. “As the housing market slows, evidence continues to build that borrowers with less than perfect credit are struggling more this year than one or two years ago.”
In unrelated news, the other third of borrowers were worried about their flips being underwater.
Neil
Steven,
What’s worse is that the lender not only turns a blind eye to someone claiming that they are commuting 6 hours each way but the also become the borrowers accomplice in defrauding the government! Through the establishment of this deceptive paper trail all the flipper need do is have the cable or garbage bill in their name and they’ll have established the precedent to declare this as their “primary residence” for tax purposes as well! Remember ANY 2 of the last 5 years is all that’s required. If the gub’ment was as aware of this I wonder if the relationship the lenders enjoy would be as “chummy”?
I wonder what would happen if you took:
1. All of the “primary” residences as disclosed on a mortgage applications in CA and cross referenced with:
2. All people claiming primary residence in the State of CA for tax purposes.
I don’t think I’m going out on a limb to say that the number of addresses for #1 is significantly larger than #2.
Sounds like your plan should be sent to Steve Westley CA’s comptroller, he did a similar exercise for business taxes.
PS I would love for the state of CA to specifically look for these kinds of mortgages borrowed by “out of state” residents, and stick the buyer with an income tax bill. (you know, where the buyer claims the CA residence is a primary residence to get the loan, but claims primary residence in another state to avoid CA income tax)
And the IRS should collect income tax on the amount specified as “stated income” if it’s greater than what they said on th 1040!
Brilliant!
You folks are beyond nuts. Government created this atmosphere (FDIC bailouts, central bank collusion, regulations written by industry, etc) and you want MORE government? Unbelievable!
Let the mortgage market go free market with zero regulation AND zero help and a free market non-inflationary hard-money currency and you’ll see progress.
*shakes head*
I wasn’t 100% serious…
The government shouldn’t be inflating house prices by subsidizing mortgages. You’re exactly right.
I wasn’t 100% serious…
The government shouldn’t be inflating house prices by subsidizing mortgages. You’re exactly right.
I was eating at a restaraunt in OC about 15 years ago (when credit was tough to get) and these two mortgage brokers were talking about an applicant who had clearly forged their tax returns. The one guy was like , we just sent it to the IRS to figure out. Back then this would most likley have drawn some serious attention to this shmuk. These days it seems normal.
“…we believe..that we will have sufficient resources to meet our current business needs.”
Wow, if you have to make a statement like this, you know you’re screwed.
KB & Lennar Homes are still going strong in So Cal. They continue to pull the trigger on tracts in the High Desert, Inland Empire, Lancaster and Palmdale.
Some would say that these were planned for several years. So what…how long do you continue to drive on a flat tire. Other builders have pulled over to the side of the road and pulled the plug on there projects. Not KB or Lennar.
KB must be heading for BK any day now based on the gloomy guidance if Kara which went BK less than one month after posting up the best quarter in the history of the company is any indication.
Live fast and die young.
I have a contact in KB… They’re pulling back so fast its scaring their executives. But… big companies have a huge amount of momentum. Let’s just say my contact’s division is screwed and they know it. Its too late to turn the ship; so you might as well start the party and pound down the good champain next to the life boats. They know its time to abandon ship.
Neil
So very very very amazing.
It was just 2 years ago I think I remember a lot of housing executives talking about how, they understood that their business was boom and bust and that they had learned from mistakes in the past (1990s) and knew to keep their resources much more mangaged for down times.
Is someone telling me, that was just a sham? Inconceivable.
And yet KB stock was up almost 4% today, and most of the other homebuilder stocks have been on a tear lately. Does somebody know something we don’t, or are stock investors as stupid as the flippers?
stock investors as stupid as the flippers? Stupider! They got Jim Crammer to be their pied piper!
I cannot believe Crammer is listened to…
I still remember him cheering on NASDAQ at 4,000…
Also, do note the builders are buying stock like no tomorrow. They’re creating the perception of artificial demand.
Lightsaber
Neil, do you mean the HB companies are buying back their own stock? With the money they would’ve been spending to build houses? That would explain some of this anti-gravity motion.
I wonder how many times they said this in the mirror before repeating it in the public…
Yeah, current can mean ‘3-12 months near term’ or it can mean ‘market conditions stay the same’. You know they are reaching for the Tums and Rolaids.
Not to defend K.B., but that is boiler-plate financial statement language included by pretty much every public company in their 10-k/10-Q’s (in the liquidity and capital resources section of the filing). Every company says that. Now whether its true….
LA Times Headlines from 10/12 alone .. are these all in the print edition, too?
Tepid Home Market Still Cooling
More Cooling of Housing in San Diego
Lending Slumps at Countrywide
Realtors Predict ‘06 Drop in U.S. New-Home Prices
despite that
Poll Results on Real Estate Attitudes
* Overpriced, 46 percent
* Underpriced, 5
* About right, 45 percent
* Not sure, 4 percent
During the next (two years), do you think housing prices in your area will go up, go down, or stay about the same?
* Go up, 49 percent
* Go down, 18 percent
* Stay about the same, 32 percent
* Not sure, 1 percent
Call me crazy, but if 46% believe that housing is overpriced and 5% think it is underpriced, how the heck do 49% think that housing will increase? Am I missing some common sense thinking here or is this just more wishful thinking from the sheeple?
it means that people think the prices will get more overpriced - that is what has gone down for the past couple of years, after all
take that poll in 4-6 months and the attitudes will shift massively
I think this is part of the “buy now or be priced out forever” crowd who obviously accepted the statement whithout actually think about what “priced out forever” means
There was no common sense during the boom, so don’t expect there to be any during the bust
the 45% who think it is about right plus the 4% who aren’t sure think it will go up. Whaddya spec from Joe 6 pak?
How about this:
It’s fairly easy to say, “Yes, housing is overpriced.” But there’s a big disconnect when you jump over to saying “House prices are going to fall here. In my city. On my block.” The second statement logically follows from the first, but it can be psychologically very hard to say, especially if you are a homeowner!
I am a homeowner (paid off the mortgage several years ago!)
The “imagined value” of my house is going to fall by 20-30%…or more!
I think it’s a good thing. Housing is overpriced and bubbled.
(And I think that, outside of the folk here, very few Americans feel this way!)
Who cares what the Lemmings think? They are the same group that’s been gobbling down the vitamin C enriched NAR Kool-aid boastfully chanting ‘RE always goes up’ as they leapt faithfully off the finacial cliff with those POArm parachutes on their backs. ‘Reeeeeeeaaalllwaaaa…SPLAT!’
Simple - people are expecting a decrease in the *rate of change* of overpricedness. You could substitute stock market in 2000 and get the same results.
Right, this is what Harvard (Kennedy School) guy N Retsinas predicted (”predicted?!?!?”) in a Cleveland op-ed piece on September 22. Was 9/22/06 so long ago that he didn’t already know prices were falling? Or is he a shill
46% overpriced=renters
45% about right=homeowners
49% go up=people who don’t understand the situation and the delusional (this includes Realtors(TM))
18% go down=us
Thank you. Forgot to take into account who they polled. That obviously has everything to do with it.
Still lots of Kool-aid drinking going on it seems.
Here is the translation..
Go up = Looking to sell in the next two years and includes realtors, lenders and flipper FB’s .. 49%
Go down = Looking to buy. 18%
Stay the same = Long term owners staying in current home. 32%
Yep, you nailed it. Let’s see, 49%(supply) vs. 18%(demand). Who do you think wins that stand off?
The guys on the supply end would be saying: “Duhhh, the winners are going to be us because prices always go up and they arent making any more land.”
We here at this blog know the right answer comes from basic economics.
Great evidence there that now is not the time to buy — now is the time to catch a falling knife.
Renting. I’ve recently (last day or two) noticed an interesting variation on rentals. Brand new, or at least quite new, 4 and 5 bedroom homes offering to rent out single bedrooms @ 400 to $500 a pop. Checking the addresses puts them in new developments, basically residential neighborhoods. An attempt to generate the PITI overhang in a dead market. My 22 yo son is in one of these with 3 friends, and I shudder at the amount of neglectful and/or willful destruction 20 somethings due to property. Beer, mud and ground in potato chips - got cement flooring and a center drain?
And wouldn’t it just be great to be a buyer moving in next door to that situation? There’s a real selling point–drunken parties outside your bedroom window 24/7.
You talkin’ smack about Huntington Beach?
I find that a stern “move-along” generally shuts em up in downtown Huntington Beach.
Actually the cops are pretty good at shutting down parties usually within 30 minutes of my call.
Now that Summer is over beach town residents can have their town back until Memorial Day or so next year.
Talon, you’re describing a house in the next block to a tee. It’s in central Tucson near the University of Arizona. New construction, completed earlier this year.
To the west is one of those mini-dorms, which are built to hold 8-10 students. They’re rented out by the room, and to say that they attract problem tenants is an understatement. UA area neighborhood associations HATE them.
Needless to say, the brand new house is empty and for sale/for rent. (Do you suspect there may be an FS owning this property?) And trust me, the beer bottles that are strewn all over the yard (and the yard in front of the mini-dorm) are not helping with sales.
turnoutthelights,
Boy have I seen a rash of that lately. My youngest daughter looked at me like I live in a cave! Dad! All the kids in Bend, OR are doing it! Seriously? Yeah (geez these old guys are dumb!) Of course! Well certainly you mean places that are already or should be trashed right? Nope. Brand townhomes/condos and even SFH’s! Seriously? You….. uh, haven’t been to any of these parties have you?
I think this housing bubble will cause (and has been causing) an interesting shift in communities. Take the “planned” communities, where middle class “investors” bought out properties like they were going out of style. Now they have to rent them to less than desirable folks, turning a previously good neighborhood into a poorer one.
On the flipside, consider a neighborhood that may have been noisy and party-happy, a place where 20 something typically rented, but then moved out to the burbs once they were ready to settle down. Well, thanks to easy money and the pressure to buy over the past six years, many bought. But now they’re stuck. What happens? They stay put. They raise families there, and over the next couple decades, that noisy party town where all the college kids used to live, turns into a middle aged “suburb”.
That’s my ardent hope, at least (seeing as I live in one of those noisy, party places, but would like to stay here to raise a family)!!
I’ve been saying this for some time. I don’t think the trend will be limited to empty houses either.
If you are a childless couple who bought a 4 bedroom house, what do you think you’re going to do when the ARM adjusts? Hand the keys to the bank, or scrap and claw to keep the home, including renting out the extra rooms to local Junior College students? My money is on renting out to students.
People have been focused entirely on watching the dwelling units per person (or job) number–I think if you redefine a “dwelling unit” to be a bedroom, I think you’ll see there is more supply of living space out there than people think . . .
- ‘Speculators are flipping the product back on the market,’ he said. ‘I think the market underestimated the scale to which that was going on.’”
SURPRISE!
Even worse from KB…”Historically, we have generated greater cash flows from our business operations in our fiscal fourth quarter relative to other quarters because we make a proportionately greater number of unit deliveries in that period.”
So they expect sales to go up in their fourth quarter? Are they nuts?!
At least KB’s stock price is likely to go up; not so sure about sales…
I’m listening to Kudlow. He’s bullish on the homebuilders.
I hope he saves some of that doobie for me…..
What’s the guy gonna say? “We’re going to default on our debt and go through a restructuring. Best you investors can hope for is that some private equity fund buys us out and boosts the stock a little.”
The photo is priceless:
Evidence That Brooklyn’s Still Brooklyn, Yo
“Worried about the safe, sterile, homogeneous influence of Prospect Heights creeping into your Crown Heights experience? Worry less. A Jeep Wrangler was stripped and left sitting on cinder blocks beneath the Franklin Avenue Shuttle on St. Marks Avenue yesterday, a reminder that the 16-story glass tower planned a few doors down at 540 St. Marks Ave. may be a very difficult sell.”
Gives a whole new meaning to, “It’s different here.”
Reminds me of a friend’s “downtown condo”, bought in the mid-$500s, and directly across the street from the city detox center. What could be better than waking up each morning and watching the drunks (now sober, of course) file out onto your block?
‘The economy continued to grow in the early fall despite a ‘widespread cooling’ in the once-hot housing market, the Federal Reserve reported Thursday. The report found there was a distinct slowdown in housing with the majority of the Fed’s 12 regions reporting lower asking prices for homes, a softening in sales and rising inventories of unsold homes.’
if it doesn’t spread to the rest of thge economy”
what economy- MIC ?
the economy we sent to China!
“The inventory of new and existing homes for sale has swelled to record levels as the five-year U.S. housing boom comes to an end.”
The bubble started in 1998, right around the time of the LTCM bailout. By my son’s fourth grade arithmetic, 2006-1998 = 8, not 5.
“By my son’s fourth grade arithmetic, 2006-1998 = 8, not 5.”
you assume too much
that would actually be negative 8 (-8).
Actually, that might be 9.
“House hunters can benefit by showing patience, some analysts said.”
What multiple of SD median income do you want to save? Suppose you were looking at a house valued at $650K by last year’s mania pricing. 10% off would save the median SD household 1-year’s worth of labor; 20% off would save them 2-year’s worth; and that is before factoring in taxes (the number of year’s savings goes up if taxes are reflected in the calculation).
So in 6 months sellers will have added 2-3 years to their retirement date? Sweet! Sarcasm on: It’s been such an absolute pleasure watching people sit on their asses, working half-ass and bragging about their equity gains over the last couple of years.
I’ve had a service-oriented business for the last few years and it’s unbelievable how many homeowners/flippers were doing absolutely nothing on a daily basis. I read somewhere that only 15% of our population was working at any given time. It’s shocking, but I believe it.
Why is that shocking? If you define work as employment, then in a standard 40 hour work week a person only works 24% of the time. Shave some percentage points off the average for the retired, the underage, the idle rich and the unemployed and having, on average, 15% of the population engaged in “work” at any given moment doesn’t seem that shocking.
“Eighty percent of Americans believe it is difficult for most first-time buyers to afford a home, according to an AP-AOL Real Estate poll.”
Apparently 20% of our population works for the real estate industrial complex.
HOUSE HATERs” new show on HIVtv for 07
Seller’s haven’t begun to feel real “PAIN” yet !
By the end of the Second Quarter of 2007, you will hear the shrieking of the financial dying Crispy Critter HomeSlaves in MASS !
mikey,
Sounds like a drive-in movie horror film title! (I like it).
According to forbes.com, “The company told investors this morning that its Morrison Homes division in the US was seeing a 10 pct dip in net pricing ahead of full year results, and its US order book was 28 pct below last year by volume and 35 pct by value.”
If orders are down 28 % and revenue is down 35 % and net income is down 10%, why don’t I see the price cuts in my market? Is anyone OT seeing Morisson Homes price cuts in their local market? I see their $1 promotion but no price cuts.
Some housing bubble news from Wall Street and Washington. “U.S. new-home prices will fall this year for the first time since the 1991 recession as a glut of properties for sale forces builders to offer discounts, the National Association of Realtors said.”
Was this the same NAR that was telling us all long home prices have never ever had an annual decline nationally, never never ever never not even once? And now they’re saying we forgot, it happened in the 90s?
The NAR is still predicting a small YOY increase in the price of existing home and a very slight decrease in the price of new homes. Any bets on whether they will need to revise their estimates downward. So far, they have had downward revisions in about 10 of the last 12 month.
“‘A lot of people go in under the guise of buying vacation property for personal use only to turn around and rent it out,’ says Keith Gumbinger, of mortgage researcher HSH Associates. “I have never heard of people getting caught.’”
This would make a great topic Ben. Aside from the specu-flippers, I know alot of dreamers, delusional JoeSixPacks, upper class suited criminals and other assorted liars, creeps and fantasy freaks who bought/own “second” houses far and away from their own locale with varied reasons for buying said 2nd house. How long can they go before the burden of month after month utility/property management/tax bills can they endure before capitulating?
So how many “vacation homes” down the road in Stockton are there around the country?
“How long can they go before the burden of month after month utility/property management/tax bills can they endure before capitulating?”
We own a condo in Mammoth Lakes, Ca that is almost 400 miles from our current home (rental) in the Phoenix area. I have discussed the possibility of selling the place with the realtor we bought it through in 2001. At its peak it was worth about 2.5X our purchase price. Vacation property usually fluctuates wildly but with long term trends upward.
I have met many of my neighboring owners and they, like ourselves are from 50 to 75 years old who own the property for their family and future grand kids use. Many are owned free and clear or are not a financial burden. If you visit in the summer you will see that many of the people at the local grocery store are in their late 40’s to mid 70’s and are owners who are getting out of S. CA for the summer. Mammoth is about 4 square miles that is surrounded by some of the most beautiful scenery in the country that is owned by the Federal Gov’t. I checked MLS listings about one week ago and did not see any listings for sale in our development. However, the total listings are up significantly from recent years. We have no intention of selling even though it may be financialy advantageous. We have 25-30% LTV with a 15 year 5.125% fully amortized loan. We have the unit in a rental program that grossed about 23K last year. This covers all our expenses on the condo leaving it totally for our use from April to Dec. as we choose. This would not be possible at todays prices.
The realtor stated that they have found that real estate prices in nice vacation locals are more tied to the stock market that to housing market price fluctuations in the rest of the country. If the stock market collapses, it will be time to look for vacation home bargains.
Mammoth will get hammered, it is really just a far flung suburb of LA.
Mammoth season pass holder
If you consider a 5 hour drive across desert still a suburb. It will fall with the general econony more than housing prices in Canoga Park.
Everyone knows that Nevada & Arizona are suburbs of California.
You can also insert “north Tahoe” for “Mammoth” in first sentence just above.
Correction; insert “north Tahoe” for “Mammoth” in this part of this sentence:
“Mammoth will get hammered…”
Inventory is running about 3x of one year ago.
Friend of mine lived in Mammoth in the early 90’s. She said in one year (I forget which year) the whole place emptied out with everyone putting their keys into the night-deposit slot at the bank.
- That must of been the year that the volcano rumbled a few earthquakes. Folks were running for the burbs.
Wow,
KB says they may default on credit lines and they are under an SEC investigation?
I wonder how much lower they will drop prices as they need to raise cash to stay off defaults
The SEC protological exam is really styming their ability to manage their *asset value and so on. What’s more, HUD recently forced them out of the mortgage business. In the current asset management environment, it’s a double whammy. Guess who they sold too? CountryWide. FNMs number one horse in the origination game. Gotta love this industry. Very creative. Full of surprises.
I had a minor SEC investigation once 3 years ago over trading in an illiquid stock. Nearly messed up my U4. Trust me, even the most mundane SEC harrassment is nothing you’d ever want to go through. Worse than the IRS audit, which I’ve also had.
Does anyone have a rough estimate of how many companies are currently under investigation for backdating options? Join the club, KB.
Yesterday David Lereah’s prediction for 2006 received it’s 10th update. Surprisingly he did not see the slowdown that has occurred coming, but things are still great and they’re getting better!
Home Prices Correcting, Buyers Returning to the Market
“Existing-home sales are forecast to be fairly stable in the fourth quarter and sales for all of 2006 are expected to drop 8.9 percent to 6.45 million – still the third strongest year after consecutive records in 2004 and 2005. New-home sales are forecast to fall 17.3 percent this year to 1.06 million, the fourth highest year on record. Housing starts should be down 10.9 percent to 1.84 million in 2006.”
For the record, his “prediction” for the year that is now 9 months old is a drop of more than twice what he first predicted on existing home sales and nearly three times his call for new home sales. Back in January his call was a decline of 4.4 and 6 percent respectively.
The funny thing is, with 9 months in the bag, he’s still to optimistic. I think we get to a drop of at least 10 on existing and 20 on new.
“Buyers Returning to the Market”
They are? What’s his evidence? Does he know what “evidence” is?
So, does anyone here believe the recent stock market rise is largely due to money moving from several years of housing market gains?
That and people are looking at oil. “Everyone” thinks oil’s breaking 50, and even at current prices, retail gasoline still has a ways to go down in most places.
It’s because if you don’t buy now, you’ll be priced out forever.
LMAO! Turn your sarcasm switch off. I’ve never seen a government as entrenched and complicit in manipulating securities markets as this one.
there’s a conspiracy hiding under every bed
GoldmanSachs manipulation of unleaded fuel by way of reindexing has been established here today.
What conspiracy do you speak of?
which branch of government is Goldman Sachs?
Working Group on Financial Assets branch of government.
They’re part of the PPT, I believe.
Treasury
The “dynamic duo” JPMorgan and Goldman Sachs are running rampant, making money like bandits, coming and going, in market sectors which rise or fall. Or are they “evil twins” instead? They have a partner in the USGovt and immunity from investigation, audit, and prosecution. What has this country come to? A laundry list of questionable market practices and government activities can be cited. Start with the GSax commodity index (GSCI) whose unleaded gasoline weight was reduced from 8.45% to 2.3% without warning or justification. Fully $100 billion is invested in indexed commodity funds tied to the GSCI, managed by fund managers, brokers, and individuals. They were forced to sell a lot of gasoline contracts to abide by enforced weightings.
Let’s be real clear. It would be great if I could put my personal $30 thousand short position in place on a trade, then change an index weightings, then wink to the Dept of Defense on selling a scad of crude oil from inventory, then pull a string at EIA on a weekly story on reduced national energy demand, then sell the heck out of positions which my client hedge funds hold (knowing their important support lines), then to sit back and count my $100k profit a month later. Wow! Isn’t it great that the USGovt has JPMorgan and Goldman Sachs as partners to protect our freedom and to ensure market vitality? This media debate on the realistic belief of one third of the public harboring suspicions of election engineering in the energy market is interesting. THEY OPENLY DISCUSS EVERY IMPORTANT FACTOR EXCEPT JPM AND GSAX!!!
http://news.goldseek.com/GoldenJackass/1160673957.php
Fannie also has immunity from investigation and indefinite forebearance on filing financials.
Notice how smooth the oil-price graph is since the price drop started:
http://quotes.ino.com/chart/?s=NYMEX_CL.X06&v=dmax
Not a free fall, not a jagged slope, but a nice straight line.
Those guys know what they are doing, except they are too good. And they have plenty of money. Your tax-payer money.
Yes, in an act of politcal brilliance Bush got the price of oil to rise from $35 to $45 by October 04.
So, explain to me how this “manipulation” by the “brilliant” Bush worked to his favor? And, while you are at it, explain to me why W has clout that his father, the former CIA Director, Vice President and President couldn’t muster when he ran against Clinton?
So we’re to understand W RAISED oil prices before HIS election but now LOWERS oil prices to make sure Republicans get elected? Most of whom (like their Democratic brethren) reside in safe, well gerrymandered, districts?
Yeah, that makes sense.
My theory is the naturally optimistic market is buying into a number of “false positives” statistical data and commodity price trends are producing. Its difficult to differentiate between the characteristics of a “soft landing” and a “hard landing” to date.
I am waiting to see if the third quarter GDP growth figure kicks us over the grey area and into a hard landing. I am expecting the figure to come out between 1.2% to 1.8% for the third quarter.
“Bubbles are only visible in the rear view mirror”
AG
In ‘99 I constantly said to people: either the stock market is overvalued or housing is under-valued (to get their reaction). Most people agreed with the first but I also thought the second was at least partly true as well.
Now, either the housing market is overvalued (we know it is) or the stock market is undervalued. If even just a little of the latter is true, then buying equities is probably a pretty good hedge for people waiting on the sidelines who want to eventually get back in the housing market.
Paul in Jax,
Got stocks?
(CAUTION: PDF)
http://www.imf.org/external/pubs/ft/weo/2003/01/pdf/chapter2.pdf#search=%22imf%20when%20bubbles%20burst%22
Auger, Thank you for mentioning JPM Chase. They’ve played are large role and are complicit in the market interference with GS and the Govt.
I find it odd how some view well established market data as a “conspiracy”. We live it some strange times.
GS - Thanks for the link. I agree that if housing falls as badly as you and I think that the stock market will not be able to advance. The point is simply that I feel confident the stock market will outperform the housing market over the next, say 12-18 months. Thus, an arbitrage or hedge idea for renters, in case the housing market holds up better than you/me/this blog forecast.
Sorry, both are overvalued, and there is no inverse relationship.
The stock market may outperform housing, but seriously now, how much bragging rights do you get from stating that you only lost x dollars instead of 2x?
they just “found ” it !
http://biz.yahoo.com/ap/061012/fed_economy.html?.v=4
their a-s w both hands
“they just “found ” it !”
Without really searching for it! Are they lucky!
http://www.financialsense.com/editorials/rubino/2006/1012.html
Just how weak is the Boston real estate market?
We got an idea yesterday. And if you’re looking to sell your home in the near future, the news isn’t good. Brand-new luxury condos downtown saw hundreds of thousands of dollars wiped off their value in the Hub’s first public real estate auction in a decade.
The 31 condos up for sale in the Folio building on Broad Street sold on average for 30 percent below their asking prices. Some barely fetched their minimums. Even the building’s marketing boss couldn’t hide what happened. “I think the buyers got a better value than anybody expected,” Paul Gollinger said after the two-hour auction. “But we’re satisfied, very satisfied…We hadn’t had a sale in the last four months.”
“Wimpey’s financial director, Andrew Carr-Locke said that the increase in houses coming back onto the market had pushed up housing supply, increasing the downturn. ‘Speculators are flipping the product back on the market,’ he said. ‘I think the market underestimated the scale to which that was going on.’”
It is understandable how such underestimation might occur, given government beancounters’ willingness to count cancelled orders as homes sold.
Anyone have time for an anecdote from Simi Valley?
Some friends of my girlfriends parents bought in ‘01 for around 500K. After getting the house in a divorce (sad to say…about the divorce, not about her getting it), listed it for 820K 10 months ago. After sitting on the market for nearly a year without a single offer, she dropped the price to 760K last week.
While the price drop is encouraging to me (who has been telling my girlfriends parents that the market is destined to come down), it is still only a drop of less than 10%.
Will this be enough? Stay tuned to find out. It has been almost two weeks and still no offers. I will let you know how it shakes down.
Great to hear. Keep me posted.