October 29, 2006

“A Disaster Waiting To Happen”

The US News and World report looks at Arizona. “Roger Maehler has good reason to feel smug about the panoramic mountain views from his new backyard. ‘I think I got a good deal,’ the Scottsdale, Ariz., resident says of the acre-plus adobe ranchette he snagged last week for $655,000-a 23 percent discount from the original $850,000 asking price.”

“Complete with swimming pool, spa, and a big-screen TV in the great room, the sprawling five-bedroom property was high on his list when he began shopping for a new home in May. But like many buyers these days, Maehler decided to hold off and see how the weakening market shook out over the summer. ‘I guess it was worth the wait,’ he says.”

“(In) the Phoenix area, the number of homes on the market has more than doubled to 45,000 since last October. ‘I literally could have spent eight hours a day, five days a week looking at houses,’ says Maehler, who toured more than 30 properties before making a bid.”

“Economist Mark Zandi says it could take a ‘Roto-Rooter’ to finally flush stubborn sellers-and their market-clogging inventory-from real-estate listings.”

“In the short run, he expects the market could stabilize somewhat. ‘But it could very well be a dead-cat bounce,’ the economist says of the chance that a strong economy and persistent inflation will push up mortgage interest rates-just as sellers move to relist their houses in the spring. If that happens, ‘it’ll come right out of housing prices again.’”

The Gazette Journal from Nevada. “New condominium projects for downtown Reno are sprouting up like Starbucks in downtown Seattle. But for all the proposed condo projects, including eight major condo towers planned to be built through 2009, there is a critical question; is there a large enough market for condos in downtown Reno?”

“According to the assessor’s data, 72 condos, or 58 percent, have been sold to buyers with addresses other than 200 W. Second St., signifying them as second-home owners. Of those, 18 condos are owned by people in Reno-Sparks, but with a different mail address.”

“Nearly 2,000 downtown condo units are in some phase of planning or construction. But few of the recent flurry of announced condo projects have opened to residents, which means that the effect of the new downtown residents is something still on the horizon.”

“‘The major ones aren’t built yet, so I don’t know how that will be,’ (retailer) Denise Rush said. ‘I hope it will be good.’”

“Debbie Branby, VP of the California Avenue Merchants Association, says she hopes the new residents and the retailers feed off each other, Branby envisions California Avenue being something similar to some of the more quaint neighborhoods in San Francisco.”

The Review Journal from Las Vegas. “Many homeowners in Las Vegas are ‘upside down’ on their home mortgages, owing more than their home is worth, largely because lenders came to rely on inexperienced appraisers who predicated their business on speed and fees in the past few years, a local real estate appraiser said.”

“Lender pressure, a major problem in the residential field, has been passed on to the homeowner in some markets, said Ronald James, president of the Las Vegas chapter of the Appraisal Institute.”

“‘We are seeing assignments where the home is not worth what was paid within the past two years, or refinanced for,’ James said. ‘In that case, there’s no equity. That’s how a person ends up upside down.’”

“James looked specifically at new housing developments in the northwest valley. People who bought there two years ago are now finding they can’t sell those homes for what they owe, he said. One person bought a home for $460,000 and added a $40,000 swimming pool. Even if he finds a buyer at $500,000, after he pays broker commissions, transfer taxes and legal fees, he’s still ‘behind the eight-ball,’ James said.”

“‘The market’s not there,’ he said. ‘We as appraisers don’t determine value. It’s the market.’”

“Observers say some people may have taken a risk by purchasing more house than they could afford simply because they were offered creative financing, a danger for those who bought at the peak of the real estate bubble.”

“‘I predict that things will be bad in Reno, where we have 6,000 houses for sale with less than 500,000 people,’ retired investor Gary Anderson said. ‘We already have a disaster. Add to this mess mortgage and appraisal fraud, the huge amount (of equity) people have taken out of their homes for cars and boats and tightening of lending standards and you have a disaster waiting to happen.’”

“The median price of a new home fell to $329,897 in August from $337,272 in July. SalesTraq President Larry Murphy said new prices are being propped up by $20,000 to $40,000 in incentives and upgrades offered by home builders. Those incentives must be factored into the true value of a house, appraiser James said.”

“‘According to Fannie Mae, you have to deduct dollar-for-dollar concessions,’ he said. ‘All the guidelines say that all appraisals are a reflection of actual cash value, the cash that goes in the seller’s pocket. If it’s a $100,000 home and he gives $10,000 in concessions, the value of the house is $90,000.’”

“(Small mortgage brokers) ‘make their money off of points, passing the loans on to major lenders,’ James said. ‘They’re the ones pushing it. That’s how they make their existence.’ Mitch Ohlbaum, principal of Legend Mortgage in Los Angeles, said mortgage brokers aren’t the only ‘pushing’ force. On the refinance side, homeowners are pushing to get that equity line and make the deal work, he said.”

“‘On the purchase side, you have Realtors pushing because their business is down and they’re starving. There (are) 500,000 starving Realtors in California,’ Ohlbaum said.”

“Glenn Goodman has had his Las Vegas home on the market since March and eventually lowered the price to $379,000 from $430,000. Interesting, he said, that he now has in his possession an offer for the home at $460,000. ‘The buyer wants us to give her $57,000 cash at the close of escrow. Obviously this buyer will then just walk away from the house, leaving it to be foreclosed upon,’ Goodman said. ‘It smells like fraud all over it. The Realtor’s got to be in on it.’”




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88 Comments »

Comment by Ben Jones
2006-10-29 12:31:13

‘Yes, homebuilders are glum because they’re sitting on a big pile of inventory in Las Vegas. Many people who qualified to buy a new home in Las Vegas did so under what the industry calls “creative financing.” It’s anyone’s guess how many holders of adjustable-rate mortgages face a balloon payment beyond their financial reach or a budget-straining fixed-rate mortgage payment schedule. Many of them will probably be forced to sell their homes at a loss or simply walk away from them, which will add to existing inventory and dampen price appreciation.’

‘Currently, mortgage companies in Las Vegas are turning down about one-third of prospective new-home buyers. One sales executive for a homebuilder told me these rejections are hurting his company’s numbers and forcing the sales staff to actually sell houses rather than simply take orders for them.’

Comment by GetStucco
2006-10-29 12:36:39

Does this mean that some people who can fog a mirror can no longer qualify for a loan? If true, that is a very important change which goes a long way to explaining why prices are dropping almost everywhere.

Comment by Ben Jones
2006-10-29 12:46:42

See, they knew it was a bubble all along:

‘For half a year, investors have rejected Wachovia CEO Ken Thompson’s argument that it made sense to pay $24.2 billion for a California-based mortgage specialist, Golden West Financial Corp., amid signs that the U.S. housing market was peaking made sense. Then on October 16, Wachovia turned in disappointing third-quarter revenue figures amid interest-rate pressures.’

‘Thompson maintained that buying Golden West was right, and that once investors realize it, Wachovia’s share price will recover. ‘One of my surprises is the market almost acted like, ‘Were you under a rock? Didn’t you know we had a housing price bubble here?’ Thompson said. ‘Of course we did … We knew there would be some retrenchment. (But) we didn’t buy this company for the next six months. We bought it for the long term.’

Comment by TulipsAllOverAgain
2006-10-29 12:50:02

The problem is they bought it at the peak and paid top dollar. The guy should be out.

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Comment by Sensible Lender
2006-10-29 14:03:20

Thompson is covering himself. He paid too much for a lender over exposed to California loans ….Option ARM loans.

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Comment by Sunsetbeachguy
2006-10-29 15:29:30

Jeez, he could have just done some Due Diligence here.

We told them so, when that deal was news.

 
Comment by NVMojo
2006-10-29 18:20:02

can this man be stupid??? LOL!

 
 
Comment by diogenes
2006-10-29 14:30:04

Please tell me what American Business executive buys for the “long term?”
Give me a break. He was still caught up in the finance mania and was just too stupid to know the end had come.

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Comment by builderboy
2006-10-29 15:40:09

He’s not stupid, made the sellers pay him a billion under the table like all the others.

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Comment by GetStucco
2006-10-29 16:43:45

That’s just it — don’t prejudge anybody’s stupidity until the under-the-table money is fully disclosed (or not!).

 
 
 
Comment by Neil
2006-10-29 13:06:34

No, fogging a mirror remains the minimum criteria. What happened is that they are now looking at the mirror and realizing 1/3rd of the applicants were unable to create the “fog.”

Credit tightening? Not really. Not yet. Soon… very soon… all it takes is one quarter of being able to package those MBS’s…

Neil

Comment by Neil
2006-10-29 13:37:36

typo, “all it takes is one quarter of being unable to package those MBS’s…” With the conclusion that then credit will tighten. When? By end 2Q 2007. So everyone be patient.

Neil

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Comment by emcee
2006-10-29 15:04:45

Ex-actly.

 
Comment by AE Newman
2006-10-29 17:19:39

Neil ““all it takes is one quarter of being unable to package those MBS’s…”

They say China bought alot of these “packages”…. In China if a Bank fails the bank prez is shot dead. There could be some culture shock when we say ….” sorry suckers!”

 
 
Comment by John Law
2006-10-29 13:39:18

“we bought for the long-term.” there is no long-term when you’re losing money year after year. I wouldn’t have liked to buy nasdaq stocks in 2000 for the long-term, nor silver in 1980.

what they(meaning investors in general when they talk about the long-term) basically mean is we’re going to hold on forever to make some money off this.

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Comment by Judicious1
2006-10-29 14:40:32

“…and dampen price appreciation.”

That’s an understatement.

Comment by Housing Wizard
2006-10-29 16:26:30

Right on everybody above me .

 
 
 
Comment by GetStucco
2006-10-29 12:38:32

“New condominium projects for downtown Reno are sprouting up like Starbucks in downtown Seattle.”

Anyone who has been to downtown Seattle knows that this translates into one condo project per block.

Comment by Ben Jones
2006-10-29 12:41:20

I know a fellow who moved to Reno briefly. What he described doesn’t sound like San Francisco. It’s interesting that almost every city in the US discovered thousands of people wanted to pay huge prices to live where no one had before, all at the same time!

Comment by crash1
2006-10-29 12:53:17

It’s interesting that almost every city in the US discovered thousands of people wanted to pay huge prices to live where no one had before, all at the same time!

In my area you’ll see places where people are building homes where I thought nobody would ever build. Land that’s been vacant for the last couple of hundred years because the pioneers saw it as uninhabitable, cold, wind swept, rattlesnake infested land with no water. I guess the new pioneers see things different.

Comment by John Law
2006-10-29 14:14:40

equity pioneers.

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Comment by Reno Guy
2006-10-29 19:01:09

These “new” condo’s in Reno are old casinos that went out of business. Flamingo, Reno Hilton, Comstock, Sundowner, Colonial Inn, King’s Inn. Pieces of crap! Construction is coming to a standstill. Reno is going to be crushed in the crash. Downtown Reno is a ghost town . I remember back in the 70’s and 80”s people everywhere. Now just a few casinos hanging on for dear life.

 
 
Comment by BanteringBear
2006-10-29 12:47:50

These condos are never going to sell. Downtown Reno is not a good place to live. It is where all of the homeless people hang out, and right amongst the hotel-casinos where people are drunk beyond words. Walking around Reno, particularly after dark, has become much more dangerous in the past 5 years. This is just another example of spec condos which will go awry. And all of those high end boutique shops will go away in due time. Downtown Reno has never been able to support shopping. The only thing it supports is blind drunk individuals losing all of their money with the occasional lost soul jumping off the roof of a parking garage. These builders have lost touch with reality. Reno IS flipper central.

Comment by Karen
2006-10-29 14:31:15

I agree 100% I live in Carson City. Last time I was in Downtown Reno was for Hot Aug Nights…2005. We had always gone to Sparks or the Peppermill for HAN…. We took the kids, and it was SOOOO not a family thing. This year we stayed to our old hang outs.

Comment by NVMojo
2006-10-29 18:25:39

I work in Carson City …I find it to be ugly and uninteresting. It’s just as rundown in the downtown area with no condos in the city center.

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Comment by NVMojo
2006-10-29 18:24:31

that’s sad to hear. I love going downtown to the river, the theater, Java Jungle, the new 7 tea house …we were interested in Arterra if the prices come down …wonder what it will all be like in a year from now???

 
Comment by RenoNVGuy
2006-10-29 23:14:48

Flamingo, Comstock, Sundowner, Colonial Inn, Kings Inn, a bunch of wornout, tired, out of business casinos. Now “new” downtown Reno condo’s. Give me a break! Half of these conversions will never be completed, the builders will go bankrupt.

 
 
 
Comment by GetStucco
2006-10-29 12:39:39

“Economist Mark Zandi says it could take a ‘Roto-Rooter’ to finally flush stubborn sellers-and their market-clogging inventory-from real-estate listings. In the short run, he expects the market could stabilize somewhat. ‘But it could very well be a dead-cat bounce,’ the economist says of the chance that a strong economy and persistent inflation will push up mortgage interest rates-just as sellers move to relist their houses in the spring. If that happens, ‘it’ll come right out of housing prices again.’”

Is Zandi changing his tune already?

Comment by imploder
2006-10-29 13:07:10

he might as well start now…. he knows what’s coming

Comment by John Law
2006-10-29 14:38:30

wasn’t zandi a plateauist?

Comment by Sunsetbeachguy
2006-10-29 15:32:03

He was fairly bearish early, but seems to have capitulated to a down slightly position similar to Moody’s.

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Comment by GetStucco
2006-10-29 16:45:31

That was last week… This week is different.

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Comment by AE Newman
2006-10-29 17:28:00

John Law posts ” wasn’t zandi a plateauist? ”

That sounds like a skin flootist….

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Comment by chris in la jolla
2006-10-29 17:36:58

“Economist Mark Zandi says it could take a ‘Roto-Rooter’ to finally flush stubborn sellers-and their market-clogging inventory-from real-estate listings.”

Dude, did he just call all those sellers and their houses, um, sh*t?

Friggin’ poetry.

 
 
Comment by need 2 leave ca
2006-10-29 12:41:47

Ben, I hope that you have plans to make a nice book from the past 2 yrs of blogging. It will be like reading history in the making as the bubble plays through nationwide, and even worldwide. I will be greatly interested to re-read many of my own comments, as well as other fellow blogger bubbleheads as we have gone from being made fun of, to being right.

Comment by jr
2006-10-29 17:37:11

And then the movie version!

Comment by Recovering Homeowner
2006-10-29 18:53:35

For the movie version of the Housing Bubble Blog, we need the other famous Jones, that would be James Earl Jones, to do the voice-over. Just like God talking down to us from heaven.

 
 
 
Comment by GetStucco
2006-10-29 12:42:39

“‘According to Fannie Mae, you have to deduct dollar-for-dollar concessions,’ he said. ‘All the guidelines say that all appraisals are a reflection of actual cash value, the cash that goes in the seller’s pocket. If it’s a $100,000 home and he gives $10,000 in concessions, the value of the house is $90,000.’”

Then I guess you can’t get a deal like this done without the lender turning a blind eye to $10,000 worth of appraisal fraud?

Comment by GetStucco
2006-10-29 12:44:55

Clarification: I am referring to the situations we keep reading about here where the buyer finances $100K for a $90K home and gets $10K back in cash or goods of equivalent value at closing, not the traditional kind of concession which comes off the amount of the loan.

Comment by Housing Wizard
2006-10-29 14:07:01

GS , I have been saying all along that concessions and cash kickback reduce the price of the Appraisal and the loan amount. Unless its something like the seller paying for the closing costs that you disclose to the lender I would not get involved in anything but a reduction in price of the home.
People are not suppose to get money when they buy a house, they are suppose to put down money .
Apparently some people want to get big cash concessions from sellers by raising the appraisals , and than walk without making a payment ,which is fraud . As a seller ,do not engage in this practice even if a realtor says its ok because it’s not and you might be implicated .

Comment by GetStucco
2006-10-29 16:47:14

But isn’t it OK if everyone is doing it?

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Comment by crash1
2006-10-29 12:49:00

I wonder how many of the 6,000 homes for sale in Reno include the bedroom communities of Fernley, Fallon, Silver Springs, and of course Carson City. All of those places are doomed.

Comment by Karen
2006-10-29 14:44:25

Yes they are counted as part of the homes for sale; However, they are also counted in the 500K for the population.

http://www.housingtracker.net/old_housingtracker/location/Nevada/Reno/?state=Nevada&city=Reno

 
Comment by NVMojo
2006-10-29 18:31:57

I think some of those same places are UGLY sagebrush wastelands with miles of cookie cutter homes …very overpriced. Give me a reason to spend that kind of money without a view or amenities …

 
 
 
Comment by We Rent!
2006-10-29 12:45:27

‘We as appraisers don’t determine value. It’s the market.’”

Then, uh, what the hell does anyone need YOU for?

Comment by diogenes
2006-10-29 18:06:01

They provide research as to the latest selling prices to determine fair market value. That value can be rising, falling or stable.
It’s why I have said, as opposed to others here, that this is not all the fault of dishonest appraisers. They did indeed find buyers who have been willing to pay exhorbitant prices for properties.
The appraisals were accurate, but did not consider the manic psycology of the current market place. But that is not the job of the appraiser. The Lender should be more aware of the environment under which they are making a loan. But, I guess, if you can just pass the risk along to someone else, who really gives a rat’s *(ss>.

 
 
Comment by 4shzl
2006-10-29 13:02:26

WTF is Zandi talking about?? “Persistent inflation” — in your dreams sweetheart. What we have in the RE market is pernicious DEFLATION which is crushing and will continue to crush home prices. Is that so hard to understand?

As for Reno, I was just there last weekend. Talk about a doomed RE market: empty tract houses for sale in every direction as far as the eye can see. I actually went to the “grand opening” of the models at the latest Centex contribution to this disaster up off Vista Avenue NE of Sparks. The scene was total desperation — not even any looky-loos, just a few gimlet-eyed sales types who looked like they might throw themselves in front of my car to get me to stop. BTW, the first rule of survival for someone visiting one these Nevada tracts in a vehicle with CA plates: NEVER GET OUT OF THE CAR.

As for condos downtown: ROTFLMAO — beyond ridiculous. No chance most of these projects get built.

Comment by badger boy
2006-10-29 13:09:18

the first rule of survival for someone visiting one these Nevada tracts in a vehicle with CA plates: NEVER GET OUT OF THE CAR.

LOL.

Comment by NVMojo
2006-10-29 18:33:20

Very good advice!!!

Comment by Grateful in Reno
2006-10-29 19:28:30

Some people that I know just bought out in Wingfield Springs off Vista. I told them that they are crazy, but of course they didn’t listen. They got in a 2000 sq ft. with 80K in upgrades for 380,000. They thought it was a once in a lifetime deal. One road in and one road out creating a traffic nigthtmare every morning and evening. Nothing like a lack of planning - and yet the building goes on. There are several more areas currently being cleare in preparation for more homes. I’m wondering just how many oper-priced masterplanned communities can be built before they realize that there’s not enough people who can afford the prices.

There definitely seems to be a lag here in how quickly people are catching on. Because Real Estate has become such a big industry here, I think that the media outlets are a bit hesitant to carry locally any of the national news about the current state of the housing market. We are only recently seeing articles like these.

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Comment by clearview
2006-10-29 13:55:54

This Mark Zandi guy is an economist who works for Moody’s. Just four days ago this same guy predicted that “If the decline isn’t over, it’s pretty close to over” when referring to the Boston area. In less than a week he has turned 180 degrees (if his recent comments refer to a national trend). I kind of wonder if his bosses told him to get real, because his “it’s pretty close to over” comment made him and Moody’s look like fools in light of documented evidence that real estate is in a nosedive.

Comment by luvs_footie
2006-10-29 14:15:15

I’m starting to think that as an economist you must have to learn how to wear egg on your face……..looks like this one will be learning the hard way.

 
 
Comment by imploder
2006-10-29 19:47:16

“gimlet-eyed sales types ” nic descriptive writing! and it works on many levels! A few more months of no sales and soon none will bother to mix “Gimlets” they shall all be be “Pie-eyed” and drinking straight out of the bottle!

 
 
Comment by imploder
2006-10-29 13:10:34

‘I guess it was worth the wait,’ he says.”

Get back to us in 3rd qtr. of 2007, and then report back every year for 7 years there after, smart guy.

 
Comment by Robert Coté
2006-10-29 13:46:25

Anyone who thinks they got a good deal in greater PHX in 2006 is practicing their denial. They’ll need all the practice thay can get. The foreclosures haven’t even started yet.

What worries me most is the phenomea hinted at in the article; “inflation will push up mortgage interest rates-just as sellers move to relist their houses in the spring.” Exactly. Only the most leveraged
are being forced to list. There’s three more classes of smarter but still financially motivated owners who haven’t even participated yet.

But that’s all old established thought here. I want to introduce a new possibility for places like Phoenix. There’s so much information available now it may actually come down to would be buyers able to pick among the offers from sellers to “take over payments.” Even for properties way under assessed value. This could come about as people who have to move; age, disaster, job, divorce are faced not with getting a good price. The new negotiating ploy may be: “I know what you paid and I agree with you.”

Comment by John Law
2006-10-29 14:42:01

“What worries me most is the phenomea hinted at in the article; “inflation will push up mortgage interest rates-just as sellers move to relist their houses in the spring.”

we’ll see. bernanke could look at all this and lower rates soon. it will be interesting to see if that happens, if the spread between treasuries and mortgages actual widens. could mortgage rates rise even as the fed lowers rates?

Comment by AE Newman
2006-10-29 17:25:26

John Law “could mortgage rates rise even as the fed lowers rates? ”

Hell Yes, they could !

Comment by Robert Coté
2006-10-29 19:38:03

Risk premium.

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Comment by az_lender
2006-10-29 20:28:44

Yes, for example if the Chinese start dumping long bonds that are dollar-denominated. The Fed can’t control long rates, only short rates.

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Comment by imploder
2006-10-29 21:09:56

Yep! I agree. That’s a big reason I don’t think Fed will lower rates.

 
Comment by SF_renter
2006-10-30 07:09:57

If the Chinese do start “dumping” bonds who would buy them? No one is obligated to buy them unless there is an options contract. Dollars heads down American products and vacations become less expensive relative to European products, Ameicans stay home or don’t buy there German and French toys - the Europeans loss, not the Americans. We still get our fun Asian electronics. I-pod nation. The Fed will lower rates…it hurts no one but the Europeans and CD savers.

 
 
 
 
 
Comment by Sobay
2006-10-29 13:47:07

- “‘I predict that things will be bad in Reno, where we have 6,000 houses for sale with less than 500,000 people,’ retired investor Gary Anderson said.

-RETIRED! Aha, that’s the key word. Yesterday I posted that ‘When things get negative - folks with money get negative. A few folks didn’t agree. I only base this view because of my daily contact with builders in the beach area and my in-laws.

My in-laws are very, very well off from all of there real estate holdings in Torrance, Redondo Beach and Palos Verdes Ca. They only sold a 100 plus apartment complex in Corona at the market peak and made several more million. They and their wealthy friends have been out of the market for quite a while and they continually say the market is way over priced and have no intention to invest in real estate any time soon.

Their main focus at the present time is a new 50 foot Catamaran that is both Sail and Motor powered.

Comment by Karen
2006-10-29 14:35:53

I saw houses in my neighboorhood…long time rentals selling in 2005. The ’smart money’ saw the peak and left.

Comment by pismobear
2006-10-29 17:39:06

Other than some small stuff near Porterville that I have for sale (15% under market?), I’m working on my golf game and my fly fishing technique until who knows.There may be some bargains or foreclosures and decent REOs in 2008.

 
 
 
2006-10-29 13:53:47

“Roger Maehler has good reason to feel smug about the panoramic mountain views from his new backyard. ‘I think I got a good deal,’ the Scottsdale, Ariz., resident says of the acre-plus adobe ranchette he snagged last week for $655,000-a 23 percent discount from the original $850,000 asking price.”

Another idiot patting himself on the back for his Donald-Trump like negotating skills. Too bad I couln’t find his name in the maricopa county assesors’ website, I wanna see what the house cost 2 years ago. Probably $300K.

 
Comment by luvs_footie
2006-10-29 13:59:59

“Economist Mark Zandi says it could take a ‘Roto-Rooter’ to finally flush stubborn sellers-and their market-clogging inventory-from real-estate listings.”

Yeah right Mark, and then what?

Comment by Sunsetbeachguy
2006-10-29 15:36:49

Just ask any plumber, sh!t goes everywhere as you are trying to clear the blockage.

 
 
Comment by M.B.A.
2006-10-29 14:02:06

I hope Roger paid cash and really likes his view because that may be his only consolation 4 years from now…..

 
Comment by Sensible Lender
2006-10-29 14:19:57

“”The Review Journal from Las Vegas. “Many homeowners in Las Vegas are ‘upside down’ on their home mortgages, owing more than their home is worth, largely because lenders came to rely on inexperienced appraisers who predicated their business on speed and fees in the past few years, a local real estate appraiser said.””"

If some lenders had to rely on “inexperienced” appraisers, it is their own choosing because they wanted big loan volume. Now there will be a price to pay for that greed. Big lenders pumped up their volume using brokers who were allowed to choose appraisers who gave the value needed. ( a fundamental flaw in the system.)
There are some banks, who carefully choose experienced appraisers and did not lower their standards (like the bank where I work, hired fee appraisers typically have 15 years experience, and are more likely to care about quality work.) These banks did not do the huge volume, but have very good performing loans.

Comment by Mo Money
2006-10-29 15:34:31

If you have a list of those banks I’m sure we’d all like to see it. I for one do not feel good about having any money with WAMU or Wells Fargo.

Comment by SF_renter
2006-10-29 17:04:23

Desposit are 100% fed insured up to $100K for FDIC banks. Most big banks sell their mortgages to the bond makert and keep a small yearly % to sevice (customer questions, mail statements, etc) and keep cash reserves if the default rate for their bonds increases beyond some threshold. This down cycle will be felt by mortgage bond holders and individual home sellers. The banks will weather pretty well, they will operationally down sizing orginating mortgages just reading the news - already in process.

 
 
 
Comment by Housing Wizard
2006-10-29 14:23:43

“‘According to Fannie Mae ,you have to deduct dollar- for -dollar for concessions .”’
Now ,based on the above statement, how is the builder going to give a 50K car away , or 50K in upgrades without it affecting the appraisal or the loan amount the lender can give ?

 
Comment by luvs_footie
2006-10-29 14:28:08

Question: Is Pennsylvania part of the USA?

It is?

Oh well, maybe this is another one of those (It different here) places.

http://www.pittsburghlive.com/x/pittsburghtrib/s_476854.html

Comment by Karen
2006-10-29 14:41:57

This thing is global.

Comment by John Law
2006-10-29 14:43:55

wait, aren’t all markets local? what? you mean lower rates have the same effect just about all over the world?

the international housing bubble is going to collapse just as lereech releases his “all real estate is local” book.

Comment by imploder
2006-10-29 21:13:11

He has been quite the predictive bell weather thus far with his publishing schedule. Just take Book Title and do opposite that it states.

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Comment by eastcoaster
2006-10-29 16:13:25

My two cents (I live in Montgomery Co. bordering Bucks). I think a lot of the new construction is 55+. There are a boatload of those developments that keep cropping up. Also, I get how they say the bubble hasn’t burst here…yet. I find this area to lag behind others timing-wise. Likely due to it being a sort of secondary (and cheaper) market to NYC/NJ. But I’m confident that our time is coming…

 
 
Comment by Byron
2006-10-29 14:29:03

This downward cycle will continue until people start throwing in the towel. That hasn’t happened yet. How can I tell? There are still far too many people who shouldn’t own a home who are still in those homes. They will be kicked out to the curb before this is over much like a diner who has feasted and now can’t pay his dinner bill. Are the people like Greenspan who are calling a bottom insane? Capitalism doesn’t allow the masses to win. The market takes their money and redistributes it to the top 1% who own 80% of stock and property. Anyone who thinks we don’t live in a society controlled by the financial elite is delusional. The housing bubble was only a symptom of a much larger problem where each successive economic cycle makes the separation between the top 1% and everyone else even greater. Of course, history has taught us that this has happened to some degree in all empires and that the end result is often revolution or, at the very least, a loss of that power. No one knows when that tipping point happens but if this separation continues, which it almost certainly will, it will inevitably happen.

Comment by Binko
2006-10-29 19:03:59

Byron, you are correct. The growth of a large middle class in America and, to a lessor extent, in the rest of the Western world after WWII was an aberration. Capitalism by nature redistributes money upward not downward. And the mind-numbing complexity of modern finance makes it much easier for the elite to job the system. Complex financial systems are created that suck more and more out of the wage earner.

When this RE bust sorts out in about a decade you can expect to see a return to historic norms. A wealthy land owning class will scoop up vast amounts of property at distress prices. And the majority of the rest of us will rent and work at our subsistence jobs.

 
 
Comment by marksparky
2006-10-29 14:55:50

500,000 starving realtors in California…..

They can all go and eat each other’s freshly baked cookies at each other’s interminable open houses that aren’t selling.

Comment by NYCityBoy
2006-10-29 16:29:48

500,000 realtors? Last I had heard there were roughly 30 million people in California. That means there is a realtor for every 60 people in California. Did anybody else just feel a massive chill go down their spines?

Comment by imploder
2006-10-29 19:50:05

Good Lord! There may even be more Realtors™ than “Actors”! Of course both are really just food service workers, if fortunate.

 
 
 
Comment by Housing Wizard
2006-10-29 16:23:19

I for one long for the days of food at open houses and new home tracts .If all they are going to serve is donuts and coffee ,than forget it .
Remember when real estate was one big party where people felt lucky after waiting in line for hours to pay 500/600 a sq. ft. for a condo .
I’m sure that people were targeted by mailers for those tracts or maybe those tracts were put on lists at seminars and touted as the next great investment places .
Now its hard to even rent these places . What a difference a year makes .

Comment by pismobear
2006-10-29 17:47:41

I will not go to an open house in my area unless they have barbeque or steak with all the trimmings. Right now we’re up to giving away Starbucks cards and scratchers. The top of the bubble is not here yet. Perhaps in the fall of 2008.

 
 
Comment by flatffplan
2006-10-29 18:34:35

zandi’s been reading this blog again

 
Comment by flatffplan
2006-10-29 18:35:56

he could have bought Skype

 
Comment by RenoNVGuy
2006-10-29 20:53:57

Another reason Home prices are too high.
http://www.denverpost.com/comics/ci_4567736

 
Comment by flatffplan
2006-10-30 04:22:44

builder contracts- since they are assigning old deposits to people that come back w price cuts and concessions does anyone here have language that could be added to a contract to insure price cuts/consessions at the future delivery date.

 
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