Homes Overpriced By Feeding Frenzy “Aren’t Selling”
The Detroit News reports from Michigan. “When James and Gabriela Rudin bought their 3,100-square-foot Tudor on a cul-de-sac in the well-manicured subdivision last year, they expected to spend the rest of their lives there. The housing market was healthy at the time, and they figured they were spending $375,000 on a solid, long-term investment.”
“But over the last year, the ailing automotive industry pulled Michigan’s economy down. They want to move quickly. So they’re taking the bold approach of putting the three-bedroom, two-and-a-half bath home up for auction with a starting bid of $1.”
“‘If there are 5,000 on the market like that, being 5,001 doesn’t really matter,’ said Gabriela Rudin. ‘We just want to get it sold. It’s going to go to the highest bidder no matter what it is.’”
“The Rudins aren’t alone in going the auction route. Chicago-based Neumann Homes plans to auction 47 Metro Detroit homes and 40 undeveloped home sites in November as part of an effort to reduce its inventory.”
“The Rudins are confident. ‘If we have to lose money, whatever,’ Gabriela Rudin said, adding that part of the motive for selling the house at auction is to avoid paying real estate agent fees she estimates would total about $25,000. ‘We’d rather see that money go to somebody else than an agent.’”
The Minot Daily News from North Dakota. “The inflation in housing prices in Minot over the past several years appears to be slowing slightly, possibly indicating that home valuations could be on the way to stabilizing, according to figures from the city assessor’s office.”
“‘The values are still up from last year,’ said Mike McEown of Minot Multiple Listing. ‘I can’t actually say that prices are coming down.’ McEown said he doesn’t expect the housing market to crash as it has in some parts of the country.”
“However, the appreciation appears a bit more modest heading into the later part of this year. ‘We are hearing that there’s a little bit more inventory out there and that the time on the market is probably a little longer than what we have had for a while,’ city assessor Kevin Ternes said. ‘As we get into the winter season, it’s possible things might slow down a little bit.’”
“There were 335 houses listed this past September, compared to 293 in September a year ago. Although homeowners have had the benefit of an asset appreciating in value, many taxpayers won’t mind seeing valuations stabilize.”
The Daily Inter Lake from Montana. “The Flathead Valley’s real-estate market may be beginning to level out, a shift from the red-hot business it’s been in recent years. ‘I think it’s definitely done some adjusting, there’s no question about that,’ said Dave Gawe, a Realtor in Whitefish. ‘Maybe even a little correcting.’”
“Broker Mike Osler in Bigfork, agreed. ‘I think it has softened a little bit, but I don’t see it having the turnaround like some of the other places,’ he said.” “The change is the result of having so many houses on the market, said Realtor Lee Denmark. ‘We’re seeing a lot of inventory,’ Denmark said. ‘It’s shifting from a seller’s market to a buyer’s market, because we have a lot on the market.’”
“These are the times when many people buy vacation homes, or, when the market is extremely hot, buy property with the intention of ‘flipping’ it, immediately reselling it for a profit. A couple of things happen to cause the market to cool, Denmark said.”
“‘It’s a common economic deal where if anybody fears that the interest rates are rising, people hold a little bit tighter to their money,’ he said. ‘But the market doesn’t change really until the media says there’s going to be a change.’ Because media across the nation have been talking about a rapidly decelerating housing market, would-be home buyers are considering their purchases more carefully, he said.”
“‘When times get a little bit rougher, we do see a big change in speculative buying,’ he said. ‘What we’re seeing right now is not so much a burst in any bubble,’ he said. ‘A lot of homes that were overpriced before because there was a feeding frenzy aren’t selling.’”
‘A lot of homes that were overpriced before because there was a feeding frenzy aren’t selling.’
I thought they were overpriced because of easy money, lax underwriting standards, rampant speculation and appraisal fraud. I am not sure what a feeding frenzy means, or how that explains why homes were overpriced.
Nothing has made sense the past 4-5 years, why should we start now?
A feeding frenzy is what happens when a bag of Oreos is left on a kitchen counter in plain view of three children under age twelve and (temporarily) no adult supervision.
A feeding frenzy is what happens when a bag of Oreos is left on a kitchen counter in plain view of the Argentinian ants during California’s rainy season.
Amen, Getstucco. The FBs threw caution to the wind and dove in like monkeys at a salad bar. Now the day of reckoning has arrived.
Do we have Montana reperesented here yet? Speak up! Sounds like you’re the proud recipient of another in a long, long line of “It’s-Different-Here-Idiots”. Tell us what the real deal is.
Yes, remember the fellow who made the video?
Here’s the Billings bubble video.
No offense to the guy who made the video, but between his voice and that background music, I will use that video as a cure in the event of insomnia.
Thanks for the link!
Hey, none taken. I was trying to get a better and more lively voice for the narration, but my buddy backed out because he feared his boss/clients in the REIC would recognize his voice! So I had to do it myself. And the music, for some reason I got stuck on the idea of using music from Home Alone since the theme is called “Somewhere in my Memory.” I tossed it together during a late night and called it good.
It’s a no-budget production with a cheap digital camera and MS Movie Maker, you get what you pay for.
Look for the companion webpage to the Billings video this week. Written and graphic is more my thing, not spoken.
LOL! You tell ‘em Johnny; you tell the WORLD!
Great video - really, I enjoyed it. Having lived out west for 8+ years, and now experiencing the bubble down here in Florida, it really hit home.
And for an amateur effort, I thought it was excellent. Especially the shots taken from the bicycle - loved that!
Bozeman, MT here.
Folks here believe to the marrow of their bones that real estate prices can never decline in Bozeman. I can’t tell you how many times I’ve heard: “everyone wants to live here.”
So the main consequence of the bubble bursting is that NOTHING sells and inventory is unreal (probably 2000 homes total in a valley with 70k people).
That said, median home prices have been dropping MOM since June, the Sept median price was slightly positive YOY and we’ll probably go negative YOY before Xmas.
Median income: $28k
Median home price: $290k
Median home price is a bit understated as there are a lot of really small, old, crappy houses and condos here (10 years ago this was a very poor town), the minimum price for a standard new construction 3/2 out in the wheat fields would be $300k.
Anecdotally, a colleague of mine has had his vacant house on the market since April with no action (bought new house before selling the old). A grad student’s parent have had their speculative condo on the market since late July with no offers. We just had our first big snow and almost nothing sells over the winter.
To add insult to injury, it is looking more and more likely that Sen. Conrad Burns will not be re-elected, which means a loss of ~$20million/year in pork to Montana State University, which means a loss of hundreds of soft money jobs.
Yet builders are still throwing up new spec houses and condos as fast as they can be built. Bozeman is SOOOO toast. Probably the worst bubble in the Northern Rockies.
Then become a Democrat! Why keep Conrad Burns just for the pork?
Don’t misunderstand, I’m hoping Burns is tossed out. The guy is a joke and embarrassment. Just stating that his loss will impact Bozeman more than any other town in Montana because he gave so much to this university.
You mean the U.S. taxpayers gave so much to the university.
Yes, the US Taxpayers gave quite a bit to the University. It might also turn out, that through Abramoff, the US Taxpayers also gave quite a bit of money to Conrad Burns.
I find it ironic that Montana folks are fiercely proud of their western independence (the less govn’t the better) but take in FAR more in federal money than they give in taxes.
I grew up in Billings, MT and in the Gallatin Valley (Belgrade….before it was “Below-grade”). Grandparents still live up on Churchill. I was up there looking to possibly move back after being gone for 12 years. No professional jobs in my field. Technical degree (EE). Couldn’t believe the price of housing compared with the lack of good paying jobs. If it weren’t for the wealthy out-of-staters buying up land (thanks Ted Turner, et al.), I don’t know how prices could have gotten that high. Unbelieveable. Maybe after a few years, it’ll tank and I can go ahead a move back.
Buddy from college moved there for the outdoor experience. Last time I talked to him, he was on a saw crew building log homes in Big Sky. He is also on the volunteer fire department. Whenever he asked people what people did around there, they always responded “construction.”
Another buddy of mine still lives in Billings. He got his degree as an Environmental Engineer. Billings was getting the same way. I asked him what the hell people did around there (same story as Bozeman….no technical jobs, manufacturing, etc.), he couldn’t come up with an answer. A lot of retail moving in, but nothing to support the price of housing. His dad rattled off some line of railroads hiring, yadda-yadda-yadda, but no way could that justify the prices.
My conclusion…..dragon is feeding on itself and it has just finished eating its tail.
Hey, now. I hear this figure tossed around a lot.
And I’m not defending pork. But consider this.
Montana has around 1 million people, but it’s the fourth largest state in the U.S. There are many thousands of miles of Interstate and U.S. highways. It’s a long way to nowhere out here. And millions of acres of National Park, National Forest, BLM, and FWS federal land. That’s a lot to administer, and compared to the tiny population, the federal money that comes here must look like a lot.
States like California have lots of roads and federal lands, but they also have 30,000,000 people to make the “per capita” figure look much lower.
Good points. But Groundhog’s musings on the compatability of “fierce individualism” and eagerness, even entitement. to welfare ranching, mining, and logging on federal lands is spot on. One of the ironies of intermountain region.
I can’t tell you how many times I’ve heard: “everyone wants to live here.”
Thanks, got a good laugh out of that.
The North Dakota thing does sound “different” though … an increase of ONLY 15% in the inventory since a year ago … their decline will be at least delayed if not avoided.
Wasn’t it Tango_in_Uniform from Billings?
“The Rudins are confident. ‘If we have to lose money, whatever,’ Gabriela Rudin said, adding that part of the motive for selling the house at auction is to avoid paying real estate agent fees she estimates would total about $25,000. ‘We’d rather see that money go to somebody else than an agent.’”
Did this comment make anyone else smile or was it just me? Poetic justice.
Don’t knock ‘em. Sellers who are willing to take lossess/lowball offers are the ones who ultimately will be setting the new comps (downward), regardless of how stubborn or “insulted” their neighbors are.
I was referring to not giving the agent $25K. Sorry for the confusion.
Yeah, that is sweet. Disintermediation, ain’t it a bitch.
That presumes a $375,000 sales price @ a 6% commission. But hey - who’s quibbling?
I’m from Detroit, and have to say what A$$ wipes.
Those auction people must do those just for fun Eh? someone has to pay them.
My daughter lives in Michigan and has been looking for another house in the Birmingham area but is in absolutely no hurry.
Lots of desperate folks there, the prices are beginning to drop big-time. This is a beautiful town with some very nice places (owned/formerly owned by auto execs).
We looked at a few places and of course the realtors were very nice (at first). But my daughter is very, very aware of the housing bubble and the economic problems in Mi. Both her and her husband are doctors, finished their residency there and have decided to stay.
Anyway, the realtor asked about purchasing a couple of places, my daughter said she was thinking 25%. The realtor was … well, horified at a 25% reduction, went on and on. The discussion ended abruptly when my daughter told the realtor not 25% OFF the price but 25% OF the price.
work in Birmingham and there are still many knock-downs going down/up; many condos haven’t been selling for a number of years. Finally, there is a house that was finished about when I started to work here (6 yrs ago) and, as far as I can tell, has yet to sell.
I have a few relatives that live in Birmingham. it is one of the highest dollar areas. The only thing I could say for our area is the prices never did go way up. In fact from about year and half ago they started dropping.
Our home is in South Lyon, about 20 minutes from Ann Arbor.
The Minot Daily News from North Dakota. “The inflation in housing prices in Minot over the past several years appears to be slowing slightly, possibly indicating that home valuations could be on the way to stabilizing, according to figures from the city assessor’s office.”
“‘The values are still up from last year,’ said Mike McEown of Minot Multiple Listing. ‘I can’t actually say that prices are coming down.’ McEown said he doesn’t expect the housing market to crash as it has in some parts of the country.”
I’m sure he’s right. Why, just the other day, I was saying…Gee! I wish I could sell my properties in California and Florida and move to sunny North Dakota! I’m sick of being able to wear shorts and T-Shirts all year round!
And I hardly get any exercise because I never have to shovel snow!
Yes, North Dakota has so many advantages…and let’s not get started on all the job opportunites! I could get a job at the University of Southern North Dakota at Hoople, for example.
You can open a snow cone stand….or a surf shop!
Yes, well, that’s one of the reasons why just today I turned down a request to lend $185000 on a house here in sunny shortsleeves Maine, that even the realtor (friend of the re-financing borrower) says is worth only $175000. I told him (the realtor) Hey, if Countrywide, which is now desperate for originations, doesn’t want this business, I don’t want it either.
You can’t compare Maine to North Dakota. At least Maine has some charm. People actually take VACATIONS to Maine.
I’m sure you can still buy plenty of land for $1000/acre or less in North Dakota.
(Ever see those ads in the in-flight magazine for 5-acre “ranches” in New Mexico, etc, for $35,000? If you’re willing to live off-the-grid (no untilites at all), there are much better deals than that.)
Hee! Big props for the PDQ Bach reference!
“I could get a job at the University of Southern North Dakota at Hoople, for example. ”
On the bright side: your average student in ND would in fact enter the school with a better education than your average student in either Florida or California.
They do have a great music department at the USND at H, as the locals call it. I don’t think they have music in California or Florida.
http://en.wikipedia.org/wiki/Hoople,_North_Dakota
Hoople-heads.
Seems like the Rudin’s are haboring a smidgen of bitterness towards RE agents. Perhaps they are looking for el scapegoat.
Gabriela Rubin rocks. Sounds like they’ve had bad experiences with RE agents and have no desire to enrich any more of them. Good for her.
“‘It’s a common economic deal where if anybody fears that the interest rates are rising, people hold a little bit tighter to their money,’ he said. ‘But the market doesn’t change really until the media says there’s going to be a change.’ Because media across the nation have been talking about a rapidly decelerating housing market, would-be home buyers are considering their purchases more carefully, he said.”
Oh right. It’s the media’s fault. I forgot. It was the media that lowered interest rates down to obscenely low levels. Yup, you gotta keep an eye on that media ’cause they are tricky.
‘But the market doesn’t change really until the media says there’s going to be a change.’ Because media across the nation have been talking about a rapidly decelerating housing market, would-be home buyers are considering their purchases more carefully, he said.”
Here we go again with the “media is causing a crash” BS. Right… the extreme bullishness of the media for the past 5 years ON THE WAY UP had NOTHING to do with prices doubling or tripling. But now that they’ve started to change their tune, the media has suddenly become ALL POWERFUL and can manipulate Trillion-dollar international credit markets at will.
Galbraith sums this pass the buck behavior best in ‘A short history of financial Euphoria.’ He argues speculative behavior never gets blamed after a bubble fallout. It’s always something or someone else not speculators. Perhaps this time around he will be proven correct once more and the population will accept the argument that it was the media’s fault not their wanton speculation. Remember, speculator by definition are a delusional group after all.
“The housing market was healthy at the time.”
How can you describe a market as healthy when it’s full of speculators? The housing market was heathy [and full of speculators] at the time. What an oxymoron!
> The housing market was healthy at the time.
That figure of speech has disturbed me many times: healthy = high prices. I guess if all goods and services are in a healthy market, we have some healthy inflation in an sick economy.
“They’re taking the bold approach of putting the home up for auction.” Is this part of that ridiculous “Bold moves … they happen every day” Ford ad campaign?
And “it’s possible things might slow down” during the winter in North Dakota? I’ve never been there, but from the Weather Channel I know there are long periods when leaving your house is not advised.
According to the Weather Channel website, it is snowing in central North Dakota right now.
Well, but I do like this kind of bold move (no-reserve auction). If more people could/would do it, it would rationalize the market in no time flat.
snake charmer… thats awesome
OMG! If there is a bubble in Minot, ND we are all doomed! That place is on the edge of the earth. Lots of cold air, cows, and corn. The only hope they have of any kind of economic growth is from wind turbines or the military base there. Minot is the coldest most boring place I have ever been in the entire US.
N. VA,
I’ll have you know Minot is less than 2 hrs from Bismarck!
Is being 2 hours from Bismarck a good thing or a bad thing?
Useless info frenzy continued, waiting for the ballgame: halfway between Bismarck and Moose Jaw, Saskatchewan, birthplace of Art Linkletter.
Minot is the coldest most boring place I have ever been in the entire US.
You haven’t been to Hebron, ND.
Or Bel Air, California
Why not Minot? Freezen’s the reason.
Seems like last week or so, USA today had an article about Bismarck’s real estate market. Some local was crowing about the fact that now that they have their own Gap and Super-Target, they don’t have to drive to Fargo for the fancy shopping any more.
A cousin lives in Fargo. Rents a nice 1 bedroom for $360 a month less than ten minutes drive from the office. Heat is included.
Just got home to my apartment. Beazer Homes had an ad on the mailbox bulletin board advertising that they would buy your lease (up to $3000) if you buy one of their homes and “become a homeowner.”
Also, can somebody please tell me why I’m seeing more ‘for lease’ signs on commericial property in Tampa Bay? Is this a national trend?? Is the downturn rolling over into commericial real estate as well???
“So they’re taking the bold approach of putting the three-bedroom, two-and-a-half bath home up for auction with a starting bid of $1.”
I have to wonder if having an auction would get you the best price for your home, even in a declining market.
It would seem that auctions would only have so many people attending them, as opposed to the numbers of people who at least look through the MLS.
I would think that listing the house at 10% lower than “comps” and then dropping the price by 5% per week would get you a higher price than hoping the right person is there the one day you do the auction.
Is there any data that shows the best way to sell your home in a falling market? (by “best” I mean the way that nets you the most money)
Isn’t the lender going to have a problem with me buying it for $1, when the Rudin’s still owe $375k …..because they put no money down and got an I/O loan?
Yes
the lender will create a 1099 for whatever amount the couple is short:
I’d agree with your idea to start low and go lower. You’ll succeed as long as other sellers sit on their prices.
Unfortunately, the longer you wait, the higher the probability you’ll get competition using your same tactic.
There’s something I’m not getting with these Michigan folks. They bought an expensive house in a nice neighborhood planning to spend the rest of their days there. Now they’re panicking - “We just want to get it sold. It’s going to go to the highest bidder no matter what it is” - and selling at the worst possible time. If they stayed put and followed their original plan, wouldn’t they be OK? Or at least not holding a fire sale a year after they bought?
It’s in the article: “But over the last year, the ailing automotive industry pulled Michigan’s economy down.” These people want to get out before Michigan’s economy becomes a black hole. Arguably, they may be too late.
I got out of Michigan 25 years ago. The economy was the reason. I’ve never regretted leaving that state. (Not that I had much of a choice!)
Posted by Wildgoose on October 17, 2006 at 06:36:33:
Here’s your buyer! from Forclosures Discussion. Wonder how he’ll do?
I live in Palmdale Ca ~ 80 mile north of Los Angeles. Im not sure but….. do we have a market problem here??? “For Sale” Signs are poping up everywhere!!!!
Im looking to Buy my first home before years end as an investor..I plan to be creative with my financing… Any good Foreclosure listing services for this area…Thanx
Ah… The Greater Fool. Take the plunge, Wildgoose!
note the liberal use of the word “little”