“Why Would I Buy Now When It May Even Go Lower?”
From the Idaho Stateman. “Slumping Treasure Valley single-family residential real-estate sales have begun to affect the area’s once-skyrocketing housing prices, according to September industry statistics released Thursday. An Intermountain MLS report for September revealed the median price of a home sold in Ada County last month was $240,000, a drop of $8,900, or 3.5 percent, since July.”
“Boise State University economics professor Don Holley said an inventory of almost 7,000 unsold homes has created a market where homeowners have to slash their asking prices to compete for buyers.”
“According to the MLS September report, 1,165 new and existing homes were sold in the Valley last month, or 37 percent fewer than the same month in 2005. Sales in Ada County were off 41 percent from a year ago, while Canyon County saw a drop of 31 percent.”
“Nampa Building Safety Director Dennis Davis said that last year was an aberration and that the market is simply returning to normal. Don Hubble, owner of Meridian-based Hubble Homes, was not convinced. ‘I think October is going to be even worse,’ said Hubble. He said he may have to cut the price of his homes up to 10 percent to generate public interest.”
“Kent Proesch, a real estate agent with Columbia Village Realty in Boise, had to take $74,000 off the price of a 2,428-square-foot, four-bedroom home he owns on the Boise Bench before he received his first offer. He didn’t hesitate to take it. ‘Right now, at $249,900, I’m just going to break even and get out what I have in the house. And I’ll be glad about it,’ Proesch said.”
“‘Land in north Meridian, which was the hottest market in Idaho, was selling for $140,000 an acre two months ago. Now it’s going for $80,000,’ Hubble said. ‘Now we have to get back to building homes that the general public can afford.’”
The Las Vegas Sun from Nevada. “With more than 20,000 homes on the MLS… buyers are in the driver’s seat and calling the shots. ‘In this market, we are competing head to head in a big way with new home inventory,’ said Linda Rheinberger, president of the Greater Las Vegas Association of Realtors.”
“Some sellers are simply pricing their homes too high, agents said. Rheinberger said those sellers would rather turn to incentives than lower the price of their home as a matter of pride. ‘They want to tell people at cocktail parties how much they made on their house,’ Rheinberger said.”
“The number of home foreclosures in Nevada has more than tripled in the past year. Chief among those being foreclosed on are investors who purchased homes about a year ago with minimal down payments and are now holding mortgages they can’t afford. Some homeowners who paid the barest, or zero, down payments now owe more than their homes are worth.”
“Since May, foreclosures in Nevada have increased 83 percent. The foreclosure rate shows no signs of slowing in Nevada with predictions it could triple again in the next six to nine months. Michael Krein, president of Nevada Real Estate Services, which handles foreclosures for banks, said the worst is yet to come. ‘This is the tip of the iceberg,’ Krein said.”
“About a third of the homes now in foreclosure were bought in 2004 and 2005 with adjustable-rate mortgages. ‘They are going to sell them for whatever they can, whether they take a loss or not,’ said Steve Schauer, a local mortgage broker. Many overstretched homeowners are trying to refinance 100 percent loans, only to be rejected because their homes’ appraised values have dropped and they don’t have the cash to make up the difference, he said.”
“The majority of properties foreclosed on are vacant, Krein said. More than 40 percent are owned by investors who bought in late 2005, hoped to turn them around for quick profits and didn’t even make a payment, he said.”
The East Valley Tribune from Arizona. “Bill Yakobovich’s ritzy north Scottsdale estate sat vacant for nearly five months before he decided to ditch his real estate agent and put the home up for auction. ‘Nobody stepped forward to give me the greenbacks,’ he said. ‘I said ‘I am not going to go through another winter. I am just going to sell it at auction.’”
“Next month his 4,500-squarefoot Desert Mountain home, which was originally listed for $2.9 million, will sell regardless of price, for no minimum bid and no reserve. ‘I’m not using the home,’ he said. ‘If the market tells me it’s worth less than I expected to get when I listed it a year ago, then that’s OK. It’s really worth it to me, just to get rid of it.’”
“And the majority of the Valley’s million-dollar home auctions are taking place in Scottsdale, said Bob Boone, the local designated broker for a company that specializes in luxury-home auctions.”
“Potential buyers can peruse home listings online and actually watch desperate homeowners slash their prices on a weekly basis, Butler said. ‘What gets into your mind is, why would I buy now when in fact it may even go lower?’ said Jay Butler, director of the Arizona Real Estate Center.”
“‘It is the complete opposite of what it was when the market was a sellers’ market,’ said Stacey Atwell, associate broker in Chandler. ‘The buyers last year were saying, why do I have to pay $20,000 above price? That’s not fair. Well, do you want it or not? Now, the same thing goes for the sellers, saying why do I have to take $20,000 less than what I have it listed for? Well, do you want to sell it or not?’”
Having troubles with the link to this report from the Nevada Appeal:
‘Prices in Carson City will correct in the next 18-30 months,’ Ted Jones, chief economist for Sa mortgage service company said to a group of about 75 Realtors, lenders and developers . ‘Anyone who bought a house 18 months ago is OK, but those people who bought the house with the ugly mortgage and paid the price at the height of the feeding frenzy, those houses are coming on the market and they’re not going to get the price they paid for them.’
‘Jones said lenders have approved mortgages that people could not afford. He urged Realtors to do a better job counseling clients. He lambasted the media for worrying home buyers at a time when many are uncertain where prices are going. The median cost of homes in Carson City has fallen this year. The median cost dropped about 11 percent over the year, from $348,500 to $309,000.’
Hubble said. ‘Now we have to get back to building homes that the general public can afford.’”
Hallelujah! A builder finally gets it. Now, we’ll see if they actually do it.
Yes, but as always, too late. Who the hell did he think were buying homes before? Oh, wait, that was the general public. Who absolutely stretched their budgets to the max to “afford” (note the quotations) a moderate home? Oh, wait, that was the general public too. Who is going to be absolutely screwed since every builder and his mom wanted to rape the, ahem, GF’s? You get the idea.
I’ll cut Hubble some slack - he’s a LONG time local builder in the Boise area and if you follow his comments throughout the madness, he has been a relative voice of reason. Good to see him step up to the plate with affordable houses - hope he follows through.
Audet,
I agree, he has been consistently skeptical for over a year, and said so publicly. So has the Statesman.
“The median cost of homes in Carson City has fallen this year. The median cost dropped about 11 percent over the year, from $348,500 to $309,000.”
I think this estimate (down 11%) is right about were we are in Southern Oregon too, and falling fast. Some folks are cutting prices by 15-20%, others are going down with the ship.
Can you tell me where to get some Oregon price data. I sure would like to prove a point to a friend.
I can give you Portland anecdotes…
ISOLDEARLY,
I typically get paper handouts with Real Estate Summaries each month with actual sales prices.
You can check out listings at:
http://www.ashlandrealestate.com/bin/web/real_estate?acnt=AR51376&ZKEY=&action=ACTIVATE_FRAMES&button=&tm=&linkout=http%3A%2F%2Fsomls.rapmls.com%2Fscripts%2Fmgrqispi.dll%3FAPPNAME%3DSooregon%26PRGNAME%3DMLSLogin%26ARGUMENT%3DPaT%252FttyuSdEMEw291qn0Bw%253D%253D
(sorry it is so long!!)
This is a list of Oregon Cities from a study of value/overvalue out of 297 cities nationwide. It give a pretty good view of the bubble in Oregon. California equity locust have driven up Bend and Medford the highest. I would add that Ashland is more overvalued than even Bend (median ~ 450-500k but now declining), but it is typically excluded or lumped with Medford.
Rank City
5 Bend, OR 76%
14 Medford, OR 66%
54 Eugene, OR 42%
55 Portland, OR-WA 41%
94 Salem, OR 27%
132 Corvallis, OR 16%
Don’t cheer yet — instead of building $800K+ McMansions, they’ll build “affordable” $600K+ cape cods.
Both are a rip off.
Prices in Carson City will correct in the next 18-30 months,’ Ted Jones, chief economist for Sa mortgage service company said to a group of about 75 Realtors, lenders and developers . ‘Anyone who bought a house 18 months ago is OK, but those people who bought the house with the ugly mortgage and paid the price at the height of the feeding frenzy, those houses are coming on the market and they’re not going to get the price they paid for them.’
It is wishful thinking that the prices of 18 months ago will be the bottom as they were already super bubbly then. I think they need to be back at 2001 levels to be affordable to the locals. If not, then there would need to be an endless supply of retirees, locusts, etc. and that just is not going to happen in Carson City, NV.
I think 2001 is a good date to go back to, not just because price increases accelerated then, but because I can think of several specific houses whose 2001 actual prices would be supported by TODAY’s rents. Which is not to say that tomorrow’s rents couldn’t be lower.
‘Jones said lenders have approved mortgages that people could not afford.’
The new predatory lending: Bag’m & tag’m.
“He lambasted the media for worrying home buyers at a time when many are uncertain where prices are going.”
Damn that media. It’s all their fault.
‘I’m not using the home,’ he said. ‘If the market tells me it’s worth less than I expected to get when I listed it a year ago, then that’s OK. It’s really worth it to me, just to get rid of it.’”
Now that’s a smart seller. At least he understands how it works.
Yea,
He is going to take a serious mule kick in the netherlands, but as T.R. used to say, “if you must grast a nettle, grasp it firmly.” This guy is probably already having his acountant figuring out ways to write off the losses.
Not necessarily - these home were going for $800K in 1998. It is a very beautiful area, but NO WAY over $300 per sq. foot.
I wish more sellers would take his approach.
Wonder what that one will go for. I’m trying to find a pic on the auction site. I’d hate to have to air condition 4500 square feet though.
A $2.9M 4500 sq ft house sitting empty (I guess this is his winter home). This is not your average upper middle class boomer.
txchick
Desert Mountain is in WAY North Scottsdale. It is a serious commute to EVERYTHING. It is really nice with 4 or 5 golf courses but, I wouldn’t want the drive.
Not a serious commute for her! I wonder how many square feet she could write off?
p.s.: Tx, if you buy it, the bubble party’s at your place!!!
bought 05 = screwed till 2010 ?
04= will be uynderwater soon
I think 2005 is screwed for 10-15 years, an untouchable high-water mark.
I think we will bottom before that and start rising again…but it won’t make it back to 2005.
“‘It is the complete opposite of what it was when the market was a sellers’ market,’ said Stacey Atwell, associate broker in Chandler. ‘The buyers last year were saying, why do I have to pay $20,000 above price? That’s not fair. Well, do you want it or not? Now, the same thing goes for the sellers, saying why do I have to take $20,000 less than what I have it listed for? Well, do you want to sell it or not?’”
The first shall be last and the last shall be first.
- ‘Right now, at $249,900, I’m just going to break even and get out what I have in the house. And I’ll be glad about it,’ Proesch said.”
THIS WINDOW OF OPPORTUNITY IS CLOSING. These sellers better take what they can get and be thankful.
“I’m just going to break even” Sounds a lot like all my friends that come back from Vegas and said they broke even..And vegas keeps building 2 billion dollar gambling halls. Amazing how everybody breaks even, and those stupid hotel owners keep investing into more gambling ventures.. Bet this owner loses his shirt, but can’t admit it.
“Well, do you want to sell it or not?”
Well do you, punk?
I gotsta’ know!
LMAO!!
OT. From Bloomberg. The “suburbanization of San Francisco”
http://www.bloomberg.com/apps/news?pid=20601109&sid=alqcnnVBl9W8&refer=home
Urban sprawl svcks, and SF Bay liberals can thank the bubble for the huge increase in sprawl over the past eight years.
Not all sprawl is equal or evil. If population increases, you will have to have some sprawl if you don’t want to lock people into ghettos. A discussion about how to steer sprawl, however, doesn’t seem to fit on this blog, because contraction and not sprawl is the name of the game in a housing bust.
I don’t think this has very much to do at all with the very few people from American Canyon, Byron or Morgan Hill (or Tracy, for that matter) who might be coming in to the City on Halloween.
The “suburbanization of San Francisco” is referring to the fact that many more of the City’s homeowners, as well and including its productive class, are turning into moderates as they age their homes climb in value.
A story in Noe Valley about the recent “forced” moving of a church that wanted to help homeless women proves, yet again, that NIMBY’ism is one of their cherished behaviors/defenses.
And further, hence, the term “faux liberal.”
This place is full of them.
Oh, and I should add the author did a good job of sensationalizing all the negatives that happen when 250,000 revelers get together every year…
Eh? What are you talking about. It’s the cons that wish to cover every square inch with pavement as far as the eye can see. They’re hard at work trying to gut Oregon and Washington land-use laws. I wish they’d all move back to Socal.
Getstucco, How funny that you blame it on “liberals”. I know many in that sprawl region and they are all alleged Republican “conservatives.” You need to adjust your target somewhat. Aim for stupid greedy instead. You will cover all groups.
Im shocked. You mean gay ‘make out’ parties, public drunkneness, loud music, and drunken transvestites do not contribute to a family friendly stable neighborhood? I thought that was moonbat nirvana? Iguess it does not take a village of Village People.
There you go dissing Huntington Beach again.
That sounds more like Laguna Beach.
Or the back halls of Congress
I thought Fooley was from Florida!! Oh, I forgot, homos in the Republican party only go after underage boys
PENIS!!!!!
——-boo!——-
“That means it’s a good time to buy a house. There may not be any better deals in the future than right now.”
______________________________________
Of course it is. I am sure you said this last year - at the peak!
“There may not be any better deals in the future than right now.”
___________________________________________________________
I’ll take my chances.
playing to people’s fear - again.
they do it on the way up, and the way down.
OK that’s enough…have to stop…am getting PTSD flashbacks from when I worked for Prudential Fox and Roach…bye (gasp) bye
(…breathing into paper bag…)
And you’ll say it again next year — after the DCB…
DCB?
Dead cat bounce?
Thanks. That would make sense.
“We were all expecting to see this increase, and this looks like this is it,” said Richard Lee, vice president of First American Title. “I think we are going to see it pick up over the next four to six months and be over by next year. It means it will be a good opportunity to buy.”
_____________________________________
Two times in one article? “good time to buy” - who edits this crap?
Another bubble is about to burst. The “RE bubble blog” bubble. It was fascinating to watch BH’s and HH’s debate whether there was a bubble or not. And more recently, it is interesting to read the confirming news, and opinions which now leave no doubt of a bursting bubble.
So what do we do now for entertainment? Soon the bubble-watching hobby will be passe, because it will be obvious and pervasive.
It was clear that RE was dead when there were 4 house-flipping TV shows. It will get to the point where bubble-blogging will have covered all the aspects multiple times, and even the most stubborn RE cheerleaders will have no excuses left.
Beating a dead horse is not as much fun. One entertaining social experiment will be to see how the RE-heads react then the realization sets in. Blame others? Acknowledge mistakes? Try again?
Also, wonder what the next wanna-be business fad is going to be. 80’s was yuppie pseudo-business people, 90’s was day-trading, 00’s was flipping. 10’s?
Beating a dead horse is not as much fun
________________________________________________
Thousands visit here - many millions left who have NO IDEA about the bubble.
yes and we still have a long way to go - for me it’s not happening fast enough. sellers are still deluded and stubborn around here!
True, it took a couple years for the majority to realize RE was going up, it will take some time for them to believe it is crashing. Especially since it is easier for people to hang on to ideas which sound promising, than they do facing the fact that they are in trouble.
2007 will be panic….
late 2007-2008 will be many, many foreclosures…
2008-09 will be the beginning of the end for RE and people will all know it.
2010-11 will be the bottom (unless we are in a longer term deflation of these assets like 1869-1896, if so, then it will drift slowly down from 50% off bubble areas already for a long time).
I think General Lee has a vested emotional interest in this bubble taking housing prices all the way to zero. Sorry, but the bottom will be 2002 prices, and it will be reached next year. However, it WILL take a very long time (over a decade) to reach 2005 price levels again.
The MSM and the die-hard bubble bloggers will miss the turn by 10 to 15 months. By then the bargain hunters will have snapped up all the best deals.
Actually, the true die-hard bubble bloggers may NEVER acknowledge that the bottom was reached. “Oh, this is just an anomaly. Wait another quarter and you’ll see blood in the streets.”
*Sniff, sniff*… I think I smell Troll.
I think General Lee has a vested emotional interest in this bubble taking housing prices all the way to zero.
Right. So unlike all those REIC shills and media talking-heads who swore up and down (until doing a complete 180 just recently) that there was NO BUBBLE. Not to mention that ANV never said that prices would go to zero –just fall 50% (a reasonable correction for bubbly regions, based on historic price/income & price/rent ratios). But never point out FACTS to TROLLS.
Sorry, but the bottom will be 2002 prices, and it will be reached next year. However, it WILL take a very long time (over a decade) to reach 2005 price levels again.
Your powers of prescience are truly amazing. Could you also provide the winning Lottery numbers for this week, please? Thank you.
The MSM and the die-hard bubble bloggers will miss the turn by 10 to 15 months. By then the bargain hunters will have snapped up all the best deals.
Actually, the true die-hard bubble bloggers may NEVER acknowledge that the bottom was reached. “Oh, this is just an anomaly. Wait another quarter and you’ll see blood in the streets.”
Right, MSM = die-hard bubble bloggers. We were in lock-step all the way to the top. When media talking heads were still insisting there was no bubble as late as early ‘06, us Bubbleheads were right there with them, cheerleading RE all the way. Plus, we’re so stupid and in denial that even when house prices are back in line with fundamentals (rents & incomes), we still won’t buy. We will wait futilely for words in the sky to spontaneously appear: “The Bubble is Over, it’s Safe to Buy Now!” This will never happen, and we will all be condemned to a sad existence of renting and will die alone and unloved.
Thanks for clearing that up.
I have a house in old Atlanta; so why would I want prices to collapse. The main benefit to this location is the builders can’t overbuild anywhere near me. Plus, what power do I have to take prices anywhere?
I’m just extrapolating what happened in Austin TX in 1985-92…perhaps a bit worse for the bubble areas this time.
Unless we get into a long term deflation of housing prices with a nationwide shift of thinking about houses being like automobiles, consumables…THEN, we could be in for a long slow late 19th century style housing deflation after the main run down. There have been long term downward trends in real estate values over the centuries many times over…it certainly is possible here in the USA too (again). Particularly if the energy / gasoline equation changes dramatically in terms of cost and availability.
Bill,
You won’t be reached next year. Why?
1. Too many option ARM’s resetting.
2. Too many people who can afford to “feed the alligator” with rent making up 50% of the payments. Eventually they’ll accept reality and sell. But not for two or three years.
3. Jobs. This region has far too many jobs in construction and real estate for a quick turnaround.
4. Prices are horribly out of whack for buying. Its time to answer the question of what happens when all first time buyers are priced out of the market…
5. Normal pricing ratio for homes is an oscillation between 8 times median salary and then drop to 6 times due to job/people flight in “nice costal areas”. They are not at 11 times salary. I’ll buy if inventory gets low (
Army No. Va., you wrote:
> we could be in for a long slow late 19th century style housing deflation after the main run down
That was at a time of gold money, which made deflation frequent and sometimes long and painful, remember: You shall not crucify mankind upon a cross of gold. The advantage of paper money is the ability to reduce and shorten deflation, its disadvantage the possibility of high inflation and sometimes even hyperinflation. Some deflation is still possible with paper money, see Japan.
Our paper money is backed by “cheap energy” and “military power”.
Signficantly reduce the availability of the former and voila, housing deflation. Particularly in those exurbs and places not really tenable without cheap A/C or close location to ecomonic centers.
Failure and/or reduced capability of the latter, coupled with dollar dumping by foreign powers and rising costs of food, energy, imports and necessity items will direct dollars away from purchasing housing; indeed with that instability who will take the bet on housing at anywhere near these levels? Leads to housing deflation.
I’m sure Ben uses something like Google Analytics to monitor traffic. It reports on how many visitors hit your site in a day, how many new visitors etc. The blog is definitely getting thousands of hits a day. In fact some say for every one visitor that comments there are a hundred visitors that don’t.
IMO - There’s at least a few years to go before this is passe. I’ll continue to sit back, read and learn until then.
May as well add the hedge fund bubble to the list of bubbles soon to burst. Or have they become too big to fail since the LTCM incident in 1998, warranting blanket protection from the PPT which will guarantee unbounded future growth in this industry? Lots of economists seem to think otherwise; see section C article in today’s WSJ for details (sorry I don’t have a better reference available).
Next?….
Many of the best experts say that there is barely 300 million ounces of silver in refined, deliverable form. With 300 million people in the U.S., then if you have even one single ounce of silver, then you may have “more than your fair share”, and are either an evil, greedy, capitalist pig, or a wise steward of your own wealth.
There has been less than 5 billion ounces of gold mined in all of human history, worth about $3 trillion dollars. But there is about $50 trillion of paper money in the world, and about $50 trillion of debt
Shhhh, I’m still accumulating.
and how much in net assets? $50 Trillion?
If you ever come over to my house, I’ll count my silverware before you leave!
Demand for silver fell off a cliff with the decline of film cameras.
Not even close to true. Do some actual research.
Future, I agree. And, I have to give credit where credit is due, so here are some neat tidbits from Ted Butler.
Silver is in every TV, washer, light switch, fridge, etc. Why? Because silver is a great conductor, and it does not corrode or cause overheating, which can lead to fires.
New uses are being developed, such as a reflective film on window glass (won’t this be handy for those that have to pay $400 ++ per month to air con their home in TX? It is now used in “smart tags” (a bar code replacement), batteries, lead free solder, silk screened circuit paths, defrost lines for car glass, pharmaceuticals, and the list goes on and on.
“Another bubble is about to burst. The “RE bubble blog” bubble.”
Agree on this one Dave. The only reason that I still read and sometimes post here is because of the comments pertaining to economics and investing. Reading about a home price going down on the coast for the nth time is a little redundant at this point.
But then again, I am not in the real estate business and own a home in an area where they aren’t considered investments. As for the next trend, that’s anyones guess, but I think it will be focused on living more simply.
Gold, silver, uranium (!), Russian Ruble (backed by energy resources), organic agriculture, solar and wind energy, ….those are next decades bubbles…get in now.
Ethanol is already running its bubble course….
Not as sure about historical artifacts…coins, docs, civil war items, WWII items, etc… maybe already in a bubble…maybe just starting.
> Not as sure about historical artifacts…coins, docs, civil war items, WWII items, etc… maybe already in a bubble…maybe just starting.
There is a TV program called Antique Road Show, on PBS, I believe. It presents historical artefacts and tells interesting stories about them. The story about each item must end with a dollar value that this item should be worth today and (most often) an “Oh, I never would have guessed” of the owner. I listen to the stories and laugh at the prices. Yes, the easy money is chasing this stuff. Deflation will hit collectors’ items hard, if the Chinese or Indians don’t develop an interest in them.
It will be international investing.
Yup, that’s where WE’RE all going, n’est-ce pas?
Don’t underestimate the masses who still don’t have a clue. I promise you, I talk to people daily who still think real estate is the one way they are going to make money and retire.
In 3 to 4 years this thinking will be beat out of most people. Then ONLY if there aren’t dramatic changes in other areas (energy prices/availability, stability / value of US $, employment picture in US), then we may see a bottom and slow increases starting in prime neighborhoods close to major employment.
How unoriginal
I mean the idea of using RE to retire. . . If everyone did the same thing, it turns into a zero sum game, you all end up where you started. They need fresh ideas.
I like the idea of international investing being the next bubble. I hope it is.
On the more pessimistic and realistic side of things look at the world as it really is. Politics is actually a lot like economics - everything works until it doesn’t. When it doesn’t it’s usually the accumulated effects of multiple policies and decisions with something stupid small thing acting as the tipping point. There is at least as much accumulated systemic political risk built up right now as there is systemic economic risk.
The next bubble - what would profit from systemic political risk blowing up?
> So what do we do now for entertainment? Soon the bubble-watching hobby will be passe, because it will be obvious and pervasive.
The main reason and justification for the existence of the housing bubble blogs is the scarcity of unbiased information elsewhere. THERE IS NO ORGANIZED GROUP LOOKING OUT FOR THE BUYER. The so-called buyer’s agent is paid a percentage of the selling price and has less interest to reduce the price than the seller’s agent has to increase it. Groups that support renter’s interests have no interest in helping renters to buy under favorable terms, because homebuyers stop being renters. The preferred working mode of the mainstream media is quoting on every question two opposing opinions. It fails when the second opinion is not well formulated, because nobody has paid for that. You can even see it today, at the verge of the bubble bursting: The facts of falling prices are recorded and then somebody interested in higher prices is allowed to announce without opposition that this is the bottom or very close to it.
For me personally, bubble blogs were always more than entertainment. Last year this time, we entertained the thought of buying a house. One year later, I have learned about the housing market in the US much more bad things than I ever believed existed.
What can the blogs do now? There are still potential buyers out there that need a second opinion. They are a worthwhile audience. Additionally, now that the bubble has started to deflate, the eyes will turn to the government, to help the poor, poor homeowners. When the market was on steroids, regulation was belittled, like: “stated income” means that you can state your income - now the government will be asked to help, because, like it or not, governments’ policies have still a big influence on prices, through taxes, regulations etc. While I have obviously less influence on government than on my own homebuying decisions, I still want a place where the political dialog is not skewed by interests wanting to prop up home prices. Maybe all we can succeed with is preventing government from doing much at all, and that could be a great success.
> One entertaining social experiment will be to see how the RE-heads react then the realization sets in. Blame others? Acknowledge mistakes? Try again?
Many of them are salespeople and get paid to say what makes their employers richer. They will try to sell another thing. Remorse is a private emotion, not a professional one.
> Also, wonder what the next wanna-be business fad is going to be. 80’s was yuppie pseudo-business people, 90’s was day-trading, 00’s was flipping. 10’s?
You think of these phenomena as fashion fads, but in the background debt was built on debt, to finance the show. The housing bubble in itseld is minor to the gigantic credit bubble that has swept first through stocks and then through housing. What will happen to it? Some people think deflation, see e.g.
globaleconomicanalysis.blogspot.com
other expect a dollar crash. Not everybody can be right, but looking out for the next fad supported by debts might very well be a useless exercise.
Beating a dead horse is not as much fun.
Are you kidding? This is the once-in-a-lifetime show you simply cannot miss!
Congress should have a new law against media that covers current housing slump. They should announce it a “Treason” to offer lower offers by buyers. They should be procecuted as KGB agents. This is United States, prices on homes should only go up!
All Sellers United.
USA = United Sellers of America
Soon to be Underwater Sellers of America
Already there, but nobody has told them yet…
All Flippers United, or AFU.
(oh, sorry …. well, same applies)
“About a third of the homes now in foreclosure were bought in 2004 and 2005 with adjustable-rate mortgages. ‘They are going to sell them for whatever they can, whether they take a loss or not,’ said Steve Schauer, a local mortgage broker.
I wish I could remember which semi-bullish poster (one of the landlords maybe?) was opining that banks would simply hold foreclosures “until the market turns around”.
I wish I could remember which semi-bullish poster (one of the landlords maybe?) was opining that banks would simply hold foreclosures “until the market turns around”.
———-
I wish you could remember that poster too–that’s ludicrous. Banks love to have non-performing loans on the books, not to mention they love paying property taxes, HOA dues, insurance, and maintenance on assets that are trending down in value.
Who could possibly think a bank would hold onto a foreclosed home? Banks will sell the foreclosures as quickly as they can at the highest price they can. It’s as simple as that.
Banks DON’T hold on to their foreclosed homes. I know, we bought one last year. For considerably less than the total first and second mortgage balance, I might add.
A new spec house next door (same size but new) sold last year for more than double what we paid. A fairly new house next door on the other side (50% larger, 6 years old) just sold for about triple what we paid. Woo-hoo!
There is always a risk to buying foreclosures. Banks only sell them as-is, and you never know what expensive surprises you may discover. Home inspectors don’t find every problem. Fortunately our surprises were minimal in cost to fix. And our seller (a bank) even threw in a paid title insurance policy. I guess they wanted to truly be able to wash their hands. That was a pleasant surprise at the settlement table.
Don’t wait too long to snag your bargain. In any economic cycle, declines are always faster than the upside. The turn will come sooner than you think and the MSM will be late to recognize it, just like they were late to recognize the downturn.
In California, the last downturn took 6 years (1990-1996) to play out. The last bubble pales in comparison to this one in magnitude. What makes you think this will all play out so quickly? Or is it “different this time”?
Way too many ARMs will be resetting to drag this out for very much longer…way too many people like that SeattleEric speculator who quite his good paying job to make a fortune in the real estate biz…it will be like an avalanche…a few, a few more, then all hell will break lose as everyone runs out of money.
It’s not hard to recognize the bottom….the foreclosure list shrink quite a bit and prices firm in the best areas close to major employment or down/mid/uptown. In the meantime, it remains very difficult to sell w/o discounting even further in suburbs (unless close to employment, etc..) for some time after e.g., 1-3 years. Another metric for rental areas, particular suburbs is when the prices are such that a buyer can buy with 20% down and the mortgage payment is 25% LESS than rent. 10% down money may be available to people with sterling credit.
“Banks will sell the foreclosures as fast as they can.”
Yup. I have repossessed only three properties in my 13-year lending history; the longest I was stuck with any of these elephants was 4 mos, lowering the price every 2 wks.
To think, historically most people have mortgage payment issues in year 3 through 5 of the mortgage…
There normally are very few problems in year 1 and 2…
I’m afraid this downturn will take much longer than I would like (I want to buy at *sane prices*.
Neil
Yeah, but historically banks were giving option ARMs to subprime borrowers. I think that the toxic loans and resulting quick foreclosures (compared to timing on foreclosures on traditional loans) will speed the downturn this time in relation to past downturns, when most people had fixed rate mortgages. It will be a lot harder for a lot of FBs to make payments after the re-sets, whereas in the past downturns they usually only ran into trouble if they lost their job or were forced to sell (the rest usually held on).
Oops, that should be historically banks were NOT giving option ARMs to subprime borrowers.
“Potential buyers can peruse home listings online and actually watch desperate homeowners slash their prices on a weekly basis, Butler said. ‘What gets into your mind is, why would I buy now when in fact it may even go lower?’ said Jay Butler, director of the Arizona Real Estate Center.”
Prospective buyers in SD must be asking the same question, now that they realize they have already saved $22K by not purchasing four months ago.
I was pretty amazed at the market in northern NV when I drove through there earlier this week. Elko looks the best, but not really much of a home market there unless you’re into mobile homes. Fernley, Fallon, Sparks and Reno are dead dogs.
Be my guest with Elko. A gold mining town that will have lots of foreclosures the minute mining becomes unprofitable. We just came out of one downturn from the late 90s. It was ugly. So, be my guest. A single industry remote craphole. Lived there for 17 years. I know more about what won’t work there but if I tell you, I might disappear.
Here’s the Scottsdale place. Very very nice. I’ll bet my 400K bid will not take it
http://www.national-auction.com/default.aspx?id=50
maybe not, but good luck - this place has million $ VIEWS!
You’ll need the 2 million you save to run the A/C from the looks of those windows. I’ll bet the neighbors love the comps resetting after this auction. At least a million should be shaved off this pig (but a good looking one at that). Good luck Tx.
Those pictures must have been taken right after a rainstorm. The sky in Phoenix is no longer blue. It’s more of an LA-style sickly light brown.
Sweeeeeet! Definitely not $2.4M, but nice indeed!
This interesting phenomenon of new homes vastly undercutting resale homes is further illuminated by the Las Vegas article. The microeconomics are fairly simple … builders must sell, and thus must chase demand, while homedebtors for the most part do not need to sell. Thus we see the growing differential between new home prices and resale prices.
If, at some point, the number of homedebtors that “need” to sell rises sharply in a particular locale, that’s when the real panic and ensuing foreclosure wave will begin, at least in that locale.
I think that emcee’s comments on spot on. This is really messy when the builders have a big sale to get rid of the last few house in a development, wiping out $10 million or more in comp home values to get rid of a few homes.
A few months ago a posted article mentioned that LV had over 500 active new home subdivisions. Let the sales begin!!
“Kent Proesch, a real estate agent with Columbia Village Realty in Boise, had to take $74,000 off the price of a 2,428-square-foot, four-bedroom home he owns on the Boise Bench before he received his first offer. He didn’t hesitate to take it. ‘Right now, at $249,900, I’m just going to break even and get out what I have in the house. And I’ll be glad about it,’ Proesch said.”
Kent gets it.
“Kent Proesch, a real estate agent with Columbia Village Realty in Boise, had to take $74,000 off the price of a 2,428-square-foot, four-bedroom home he owns on the Boise Bench before he received his first offer. He didn’t hesitate to take it. ‘Right now, at $249,900, I’m just going to break even and get out what I have in the house. And I’ll be glad about it,’ Proesch said.”
Interesting action and comments by a real estate agent.
I wonder if he is advising his clients to take similar action and be glad about it.
Now that *his* house has sold, you better believe he will.
This does beg the question, how many more homes does he own?
Neil
Boise, ID is just beginning to see the bubble burst. In carefully watching the market for the last year I would estimate that we have an additional 20 to 30% downward corrrection ahead (over the next two years) before the price stabilizes. Developers are already offering to make mortgage payments for buyers for the 1st 6 months. I wonder if soon that will change to the 1st 60 months!
One realtor on a local radio program last year was advocating to a caller who had just sold his house to take the $100,000 equity and buy 10 more houses. The realtor argued that in one year he would get a 100% return on his money. Wrong! In all probability if the caller followed the advice they will have lost 100% of his money by this Christmas. But not to worry–I am sure the realtor would have recieved his full commission on all ten sales. Worse yet here in Idaho we are also getting a significant amount of advertisement for seminars to show individuals how to put their IRA into real estate. Oh great! Now we can loose not only our present resources but also those set aside for the future.
P.S. I was glad to see the Idaho Statesman article about the falling real estate prices but I think it greatly understates what is really occurring.