“Prices Are Soft And Softening Further”
The East Valley Tribune reports from Arizona. “Buyers welcome. That’s the message the East Valley’s new home market is starting to send to people looking to buy homes, especially those who held back as prices escalated to new records. What’s telling is the average new home price, which was $331,336 last month, down from $343,116 in August.”
“‘There’s a clear indication of a change in direction in the marketplace,’ said R.L. Brown, Valley housing analyst. ‘The bottom line is prices are soft and softening further in both the new and resale markets, and that’s what’s important to the consumer. That’s good news for the consumer, and bad news for the resale sellers and bad news for the homebuilding industry because it’s going to cut into their profits.’”
“Homebuilders have a clear advantage over homeowners, said James Bortz, a real estate agent in Chandler.”
“‘They’re giving out a lot of concessions to get these houses sold, whereas the people who are already in them and trying to sell are more or less locked into a price or have a price that they have to have,’ he said. ‘I’ve gone out to new home sales with a buyer and they automatically will give them $40,000 off, then they’ll come back and say we can give you another $10,000 if you use our lender, and we can throw in a washer and dryer, etc.’”
“As for ‘flippers,’ ‘it means that the risk they assumed when they started speculating in real estate is for real,’ Brown said. They’re seeing the size of the risk for that kind of investment,’ he said. ‘Frankly, they shot the dice. Its a tough time to sell right now.’”
“A lot of people bought houses thinking they could live in them for a year or two, and then they would double in price, ‘and it’s just not happening,’ Bortz said. ‘You have a lot of people who took these low interest rates (adjustable rate mortgages) that are now coming due and they can’t afford the payments now, so they’ve got to get rid of the house,’ he said.”
“‘Homebuilders are desperate,’ Bortz said. ‘You still see a lot of building, but those were the ones that were already started or were planned, or paid for. They have to move their inventory. Worst possible scenario for them is they’ll roll them all the way back to a break-even point for them, which is still in their favor and not the resale person.’”
“In the meantime, the number of single-family homes on the Valley market was 45,500 last month, up sharply from about 15,000 homes in August 2005, and lots of homes are just sitting on the market month after month, he said.”
The Review Journal from Las Vegas. “Someday, Larry Murphy, president of a Las Vegas real estate research, called for a ‘paradigm shift’ in how locals view resale supply.”
“He said resale inventory from January 2003 to April 2004 stayed below 5,000 units. Today’s for-sale inventory is nearly 21,000 units. ‘20,000 listings is very normal,’ Murphy said. ‘I think inventories will stay at that level or go higher. We have to change our thinking on what’s normal.’”
“In the third quarter of 2007, he said, analysts may even be discussing local housing shortages.”
“The starting price per square foot of the city’s mid-rise and high-rise sector has jumped significantly, from $342 in the first quarter of 2004 to $596 in the third quarter. Much of the increase is because failed projects whose prices were too low to cover rising construction costs are no longer factored into Murphy’s reports.”
“‘If you see a project with base prices under $500 (per square foot), that’s a big red flag,’ Murphy said. ‘At those prices, they won’t get built.’”
In Business Las Vegas. “The Las Vegas housing boom attracted everyone from strippers and schoolteachers to waiters and blackjack dealers to try their hand as a part-time or full-time real estate agent. Membership in the Greater Las Vegas Association of Realtors more than doubled to nearly 15,000 between Jan. 1, 2002, and 2005 and now exceeds 17,500.”
“But the landscape changed as prices rose and investors dropped out of the market. The number of listings has swelled, and the buyers who remain are exercising caution and waiting for prices to drop.”
“The Nevada Real Estate Division reported this week that since July 1, nearly 2,700 real estate agents failed to renew their licenses, which requires a fee of less than $300. In Clark County, 26 percent of the more than 17,700 agents don’t have their licenses activated to handle real estate transactions.”
“Realtor Karen Pincock, an agent since 2000, said many newer agents have gone back to their old jobs and careers where they have a steady paycheck. Some newcomers have gone months without a sale, she said. Many agents can’t afford to stay in, she said.”
“‘So many agents got into the business when it was crazy, and they thought there was money for the taking,’ Pincock said. ‘But it is not that way. When we get up every morning, we are unemployed.’”
“mountain of unsold completed homes”
Inventories of completed new homes is actually skyrocketing not falling (see Chart 2 on Page 3):
http://www.billcara.com/ML%20Oct%2026%202006%20D%20Word.pdf
NOTE: the above file is a PDF.
Hope that’s not a problem… it’s quite an interesting PDF, however, apparently from a reputable source (Merrill Lynch).
Not for some. I like to warn folks cuz when I used to link to PDF’s, I would get many emails complaining about crashed computers. Apparently, some systems handle these files better than others.
No PDF here. Check out this linky I found on craigslist!
http://phoenix.craigslist.org/rfs/227184197.html
David Rosenberg
North American Economist
As Merrill Lynch North American Economist, David Rosenberg is responsible for formulating and communicating North America economic, interest-rate and earnings outlook to clients.
Mr. Rosenberg joined Merrill Lynch in May 2000 as the Canadian Chief Economist and Strategist. He began his investment career in 1983 at the Bank of Canada as an economist. Prior to joining Merrill Lynch, Mr. Rosenberg was the senior economist at Nesbitt Burns as well as the Bank of Nova Scotia.
—>>>>In the 2002 Brendan Woods International Survey, Mr. Rosenberg ranked No. 1 in economics.
Was Mr David Liareah on this international survey list… anywhere? OK to Stop laughing now.
NAR handpicks its chief economists. Shamelessness is the only necessary credential, along with some PHD award from any school that will sell one.
Yea, That corresponds with something I was just told on the phone. In the IE a builder is auctioning off 6 homes that will just kill the comps up there. IMO not a true auction because of the min bid. But the minimum bid is substantially lower than what the last comp sold for. Last Comp was 520k for a smaller home than the one listed minimum bid 350k
Any chance you can post more info? would love to see the results.
Here in the OC, they were supposed to auction off a 16th floor condo in the Marquee Place towers yesterday. Same unit # in other tower on MLS @ 1.2m, auction min $650k.
NOT to be a broken record, but the results are meaningless until the deed is recorded. The fraud of the last few years with exagerated sales, exagerated median prices, exagerated profits is continuing under the latest scam “auctions”.
Just another marketing tool to see if there is any buyers left standing.
All I know is it’s in Moreno Valley west of the 60 Freeway by Pigeon Pass. A client got a mailer on it wondering what it would do to the value of his home. I just refinanced him about 3 months ago into a 30 yr fixed for about 50 grand less then the minimum bid. He was wondering if he should sell or not. Basically doing a state of the market check doesn’t like the idea of losing the equity. I have very little info other then that.
And they say it may be bottoming out………BS
In the 90’s. People would call the bottom every new quarter. By the time the bottom really came and then ended people were so sick of it all no one was bothering any more. It didn’t sell newspapers.
The crash this time around should be far more spectacular. It’ll sell plenty of newspapers, early on. After it flattens out and drags for years with less and less YoY drops, that’s when RE market psychology will guarantee nothing related to RE gets printed. Everyone will know a lot of peoples lives that got completely crushed by their housing debt. Everyone will hate RE. That’s when the NAR can say it’s never a better time to buy… only problem… no one will be listening.
Lots of ominous insights in that report (see below). I have some footnotes to add:
1) Chart 1 shows that new home price deflation just smashed the all time record, and that the previous lows were in the middle of recessions.
2) Based on the completed home inventory graph (Chart 2), we can see that we have already smashed the last record for new 1-family homes for sale — currently heading off towards a stratospheric 160,000 units — and the previous record (around 120,000 units for sale) was around 1996, at the *end* of a seven-year bust (we are just at the beginning, folks).
3) To further support the previous point, it appears the YOY change in completed inventory jumped from maybe 17% in 2005 to 47% in 2006, supporting the observation often reported here that the builders are accelerating the rate of building into the crash.
Please remind me again why builder stocks always go up?
It’s all to do with SASQUATCH sightings………see below
(forgot the “below” part)
Here is one excerpt from David Rosenberg’s Merrill Lynch report which I especially liked, though I must admit it leads me to doubt whether they are still “bullish on America” these days:
“Now this may come as a surprise to some, but the inventory drawdown was actually less impressive than meets the eye. When we get the sales data, what we receive are (i) units not started; (ii) units under construction; and (iii) units completed. While the sales of completed units rose 12% y/y in September, the unsold inventory here actually rose 4% month-over-month and is up a record 47% year-on-year. The inventory/sales ratio at 5.6x in September compares with 4.3x
a year ago and the highest backlog for finished product for this time of year since 1991 – the last time we experienced a prolonged period of real estate distress.
There is still a mountain of unsold completed homes that have to get worked off and that means prices are probably going to be headed lower, perhaps much lower considering the lingering large size of the inventory problem, which for some reason remains misunderstood or underappreciated by many pundits. Where the inventory did ‘correct’ was in the “spec” or units not started – down 2.2% y/y and units under construction (slowed to 6.2% year-over-year in September from 11.5% the prior month) – and these may well reflect the accelerating trend in cancellations. All in, this is a troubling report for the housing bulls – or at least it should be.”
Luckily, builder stocks always go up
Wow. Anyone should be able to look at those graphs and see at least 3 years of declining prices coming. You don’t need to be a bubble fanatic. Housing inventory is very slow to change trend. Which ever direction it goes, it has a lot of momentum… and stays on that course for years.
Right. For instance, one interpretation of the new 1-family home inventory sitiuation is that we are nearing the culmination of an inventory correction which lasted from 1997-the present. Perhaps the $500K capital gain exclusion (under Clinton) drew down the inventory to “shortage levels” which the builders have worked furiously to correct ever since?
“The Nevada Real Estate Division reported this week that since July 1, nearly 2,700 real estate agents failed to renew their licenses, which requires a fee of less than $300. In Clark County, 26 percent of the more than 17,700 agents don’t have their licenses activated to handle real estate transactions.”
~~~~~~~~~~~~~~
When I lived in No. NV (Tahoe), the rumor was that there were more licensed real estate agents than there were houses on the market.
- ‘“In the third quarter of 2007, he said, analysts may even be discussing local housing shortages….and SASQUATCH sightings.
Yeti probably believes it, even though he put his Bigfoot right in it…………. Murphy’s law I guess.
imploder as “rare” collection of “Sasquatch Droppings” he bought from unemployed realtor. imploder keeps them under his “tin foil hat”. a rare find for imploder!
think realtor’s name was Gary something. he told imploder “Here is your 15%, “it’s in the Bag”
Don’t forget the aliens out in Area 51.
” Murphy said. ‘I think inventories will stay at that level or go higher. We have to change our thinking on what’s normal.’”
“In the third quarter of 2007, he said, analysts may even be discussing local housing shortages.”
Imploder read this mans full article. Imploder think this man been out in desert picking up strange plants and eating them. man must have found weird “mushrooms”. Friends should stay with this man for next 6 to 12 hours. by then he should be OK, but he may not remember these brilliant “insights”. He speak wacky talk.
“In the long term, housing prices in Las Vegas have continued to go up,” Murphy said. “If you measure hour to hour or day to day, you’ll see fluctuations. But year to year, the Las Vegas housing market is perfectly healthy and intact.”
Man is correct, just requires further clarification:
First year he speak of was 2004 Vegas healthy and intact. Next year he is speaking of is 2020 which is the NEXT YEAR that Vegas will be healthy and intact. Decade in between? Vegas will be in Cardiac Arrest.
David Lereah says that we are at the bottom and prices should take off soon, so there is nothing to worry about.
Notice how all the pundits who say we are near the bottom (which is scheduled for some unspecified point in 2007) never bother to bring supporting data? I would enjoy hearing David Lereah try to spin the data in that David Rosenberg Merrill Lynch report linked in above.
LOL True. I was, of course, being sarcastic.
everyone should be suspect of what they say. Home prices are greater than a 10% drop and just two weeks ago they were saying that growth would slow - no drops.
They are a day late and a dollar short. And they NEVER have real data to back up what they are spewing….
I keep looking for that “data” too. Seriously. I’ve made a big bet that this cannot end but for a recession. If I’m wrong, I’d love to know it…NOW!
But for the life of me, I cannot find a “Bull”, on stocks or RE, who can explain how the fundamentals get better from here, where the buyers (or their liquidity) are going to come from and how RE prices can increase (but for Brazilian type inflation occuring).
DL may be the most dangerous man in the country right now. He’s offering up a ton of totally baseless BS cheerleader nonsense… but you’ve got to believe there are people that really listen to him. This is financial advice without any serious analysis from some chump that claims to be an economist and actually has the title chief economist. He’s gonna be testifying in Congress once the blame game gets rolling and he’s going to need some pretty damn good legal representation - BET ON IT.
Yes, they will be pushing the regulate the RE industry in much the same way the securities industry is regulated. YOU CAN’T say something is in the bag. Past performance is no indication of future results.
Next time somebody starts talking about “gun control” substitute every occurrence of “guns” with “words”; the results are quite telling. Most large scale human slaughter has had a — pardon the expression — “motivational speaker” behind it: Stalin, Hitler, Mao, etc.
Now, DL’s certainly not in their league, but he’s certainly leading the sheep to the shearer.
Lereah effect: it’s not so much that people pay attention to exactly what he is saying. It’s rather that Lereah & Company make it possible for every MSM report to present a “balanced” point of view — some bullish BS to go along with the frightful facts. Thus, I have friends who are NOT realtors and who have naively fallen for the story that The Media are driving the downturn. The Lereahs of this world sound sort of sensible to people who are not paying attention to factual detail, and such people mistake the frightful facts for some sort of media campaign against homeownership.
“Someday, Larry Murphy, president of a Las Vegas real estate research, called for a ‘paradigm shift’ in how locals view resale supply.”
“He said resale inventory from January 2003 to April 2004 stayed below 5,000 units. Today’s for-sale inventory is nearly 21,000 units. ‘20,000 listings is very normal,’ Murphy said. ‘I think inventories will stay at that level or go higher. We have to change our thinking on what’s normal.’”
“In the third quarter of 2007, he said, analysts may even be discussing local housing shortages.”
Ben honestly, where do the press dig up all these idiots.
If Murphy is claiming that a vast oversupply of properties is the “new normal,” I might be inclined to agree with him. Heck, by that standard, next year the market should be far, far more normal than this year.
LOL!
The good news if there is a silver lining is the underlying facts leading these idiots to this level of double-speak. I know an individual like this can do a great deal of harm in the short term, but in the end he will have lost ALL credibility.
Anyone see this show on CNN, Unbelievably they spoke with everything we talk about here..Bluntly. Crazy loans, Over building in PHX, Vegas etc..Houses as ATN’s. Refreshing to hear straight foward without a spin….
Open House, CNNH Oct 29 04:30pm
Open House, CNN Nov 04 08:30am
Open House, CNNH Nov 04 04:30pm
Open House, CNNH Nov 05 04:30pm
Yep, you won’t see them talking about that on Fox news. You also won’t hear them talking about deficits or how the President talked of smaller gov’t and how gov’t has actually gotten larger.
“As for ‘flippers,’ ‘it means that the risk they assumed when they started speculating in real estate is for real,’ Brown said. They’re seeing the size of the risk for that kind of investment,’ he said. ‘Frankly, they shot the dice. Its a tough time to sell right now.’”
This is awesome!
look you can either ROLL the dice, or SHOOT your wad which is it?
I need clarification!
“look you can either ROLL the dice, or SHOOT your wad which is it?” One for each hand!!!
thank you, NOW imploder is catching on!!!! LOL
Well, one does speak of “shooting craps” which involves rolling dice. In the case at hand, the FB’s rolled the dice, came up with crap, and may as well shoot themSELVES.
Well, one does speak of “shooting craps” which involves rolling dice. In the case at hand, the FB’s rolled the dice, came up with crap, and may as well shoot themSELVES.
shoot your wad. thats hot. go get your ruler. MAF53
“‘If you see a project with base prices under $500 (per square foot), that’s a big red flag,’ Murphy said. ‘At those prices, they won’t get built.’”
I dig this new paradigm shift. If the condo is below $500/sq ft. then it doesn’t get built but if its above $500/sq ft. then it doesn’t get sold. That’s cool.
Spud Murphy certainly comes out with some real gems…….
Ben, I think the following story needs its own stage on this blog:
A flipper named Casey:
http://www.usatoday.com/money/economy/housing/2006-10-22-young-flipper-usat_x.htm
He is old news on this blog.
I’d love to get some advice on low-balling. There is a house in the Oakland hills for 638 - I’d like to offer 410 for it. Should I get pre-approved for a loan? Do I need to find an agent who doesn’t mind submitting low-ball offers? What is the best way for doing this?
this post is not imploder™©. I don’t think you want association with imploder’s posts and true imploder WILL keep posting. “All who use imploder’s name shall be dub a “NON-imploder.” good name is all imploder has. well that and bag of Sasguatch Droppings.
Good for you imploder™©. “Sasguatch Droppings” could well be the next bubble.
Pssst, please… don’t talk so loud,…. this what “Gary” told me! and people think imploder dumb! I got inside “scoop”, three or four “scoops actually” and they are all “in the bag!”
Go ahead, make the offer. Don’t worry about pre-approval (assuming you are confident you can get a loan).
They’ll reject it, counter. You counter about mid-way (still grossly low) they’ll reject. Fine, you go away.
Month goes by, they counter again. Why? You’re alone. You say even the 410 was “too high” and offer $350…..and so on.
If you are the only one interested (and if this market is really bad and they have to sell, you may be) you could get a big bargain.
How do I know this? A friend did this in the 90’s debacle. Got a house, in a great area, that needed a little work for 30% below the original asking price (which was “at market”).
Worst possible scenario for them is they’ll roll them all the way back to a break-even point for them, which is still in their favor and not the resale person.
Au contraire, break even is by no means the, “worst possible,” scenario. Not even by a long shot.
Josh
Amen. Why do they somehow think they won’t be required to basically give these houses away at FAR below their “cost?” What’s so magical about “their cost?” F* the homebuilders and their arrogance in thinking they’re immune to being forced to sell at a loss! Sheesh.
You got it. Bye-bye comps.
I see all these political ads and it reulses me.
One I am looking at.
“Fight for lower tax rates”
Ok, so this person wants to fight for lower tax rates. Do they realize that we have record deficits? I guess they on’t care, they are saying elect me, I will fleece the system and give you the money. Our kids can pay for it, so what.
Just makes me sick that these people have no idea what they are talking about. What makes me even sicker is that the majority of Americans are to dumb to realize it.
Repulses
Tom, this is the real estate bubble blog, not the politics blog. Take your tax policy posts somewhere else.
In all fairness sometimes it’s hard to tell the difference.
Agree. Someone recently posted a suggestion that the mammoth run-up was in part a result of the increase to $500,000 capital gain exemption on primary residence. Certainly that was a factor contributing to some of my friends’ affection for homeownership as a tax-avoidance scheme, especially since the “renter” deductions in various states are typically restricted to persons whose income is minimum wage or maybe 2x minimum wage. (So what’s my point: tax policy does impact real-estate decisions.)
Thank you. At least someone sees the relation for what it is, unlike Grant, with his “narrow minded” approach who just does not “get it.”
Why doesn’t Grant get a life?
I assure you I have more of a life than you do, my little troll. One of the things you have to watch out for in blogs is that they don’t get hijacked by trolls such as you with a completely different agenda from the purpose of the blog. Your original post had no reference to housing whatsoever and looked suspiciously like a partisan political post, which I would argue has no place in the housing bubble blog.
I want them to raise my taxes, so I can give them back the $48 dollar tax break they gave me.
That’s $48 dollar per year tax break.
Well, aren’t you smart?
Larry Murphy, President of the Las Vegas real state research (Gee! What a surprise!) said, ….”by the third quarter of 2007 there may well be a local housing shortage….”
If anyone knows where this guy is buying his dope, please let me know ’cause the weekend is here and I’d like to relax and dream and this guy’s smoking some really powerful stuff.
Note to Larry: There’s a recession looming. There’s a trillion dollars + of resets in 2007. There’s more in 2008 and 2009. The exotic loans are gonna go bye-bye. Try drinking beer, Larry. The dope is melting your brain cells.
Eh, while lower taxes have their place, higher taxes won’t fix the problem just because spending will go up to more than balance out the increased revenue. Spending needs to be reduced, but you’re more likely to convince somebody that buying a $1,000,000 10-square foot tool shed off the coast of Florida is a good real estate investment than convince the government to reduce spending.
That, and when they talk about “raising taxes on the rich to make them pay their fair share,” oddly enough, WE all classify as rich! Pretty much ANYONE not living on hand-outs or a bit above minimum wage is rich. And then there are all those “nasty, nasty” people who have saved their money, invested it wisely, and not bought into the housing scam - they MUST be punished for this with more taxes. Why should they get to keep their money just because they worked hard for it and were wise about saving and investing it?
Raising taxes is never a solution: the money ends up taken from the wrong people, given to the wrong people, and most of it is funneled into the pockets of politicians in the between steps. This is the way the system works: if some government project need $10, the government asks for $15, skims $10 off the top, puts $5 towards the $10 that needs to be paid, and then spends even more money next time!
Hey Ponder, this is the Real Estate Bubble Blog, not the I Hate Taxes blog. by the way I work for the government, my job is flushing currency down a toilet in the executive mensroom.
Could I find out the location of this drain? I’m not above being a part of that “waste” gravy train…..
However, in their defense …. unfortunately, many housing debate issues degenerate to discussions along the much larger political issues of our time …. much like the reasons we got to this housing debacle. But I agree, don’t begin a post with the topic. Too much great housing fodder to waste time on politics !!!!
So, …… I prefer to read your input than typing my crap, so get back on track! :-*
I think studies have been done that show that lowering taxes, without planning to lower spending, actually leads to higher rates of spending; i.e. if you’re going to blow $1k, how much harder is it to blow $2k? Typical credit card consumer behavior on grand scale.
Some local market observations. I was driving south on I-5 in California and decided to go see what was going on in less than spectacular Los Banos, California. Los Banos is basically a po-dunk run down agriculture town that was about as far out from the bay area as the boom got before running out of gas. I drove around some of the newer developments and about 80% of it was empty. You wouldn’t believe how eerie it is to drive around a neighborhood looking in all the windows and seeing no furniture, no people and no cars on the street. They even stopped putting up for sale signs and now just have signs in the windows that say “Available”.
What type of homes did they (over) build ? Large 300+K boxes?
It once was a place a blue-collar guy could buy a modest, affordable home.
Off I-101, I saw a field slated for development south of San Jose. It boasted homes starting in the mid 800’s with authentic Tuscany architecture. NaGaNaHaPan
Wher not to buy…….
http://money.cnn.com/2006/10/24/magazines/business2/newrules_redbrick.biz2/index.htm?postversion=2006102610
TX realhores still spinning Austin
any links to hard data on corpus christi ?
tia
‘20,000 listings is very normal,’
‘Membership in the Greater Las Vegas Association of Realtors more than doubled to nearly 15,000.. now exceeds 17,500.’
Way too many agents, so much as RE being wealth creater.