“The Numbers Are What They Are” In Colorado
The Durango Herald reports from Colorado. “Durango home prices are up 11 percent compared with a year ago, but home sales have fallen 39 percent. The median price of a Durango home was $436,050 in the third quarter. Durango’s newest median price is $12,000 lower than last quarter’s record high of $448,000.”
“The story is similar throughout La Plata County. The median price of a Bayfield home in the third quarter was $306,000, up 13 percent from a year ago. But home sales dropped 57 percent.”
“It is too early to make concrete forecasts about the local housing market, said Dave MacLaird, president of the Realtors Association, but this could be the beginning of a buyer’s market. ‘They are definitely negotiating a lot harder than they were at the beginning of the year,’ MacLaird said.”
“Don Ricedorff, a broker associate in Durango, said that median prices are affected by the sale of expensive homes. As Durango settles into a more balanced market, median prices will come down. ‘When we get into more of a balanced market where we have buyers throughout all price ranges, those median prices will actually come down some,’ he said.”
“Liza Tregillus and her husband, Peter, bought a home in 1989. ‘If we moved here today, we couldn’t afford the house,’ she wrote. ‘Our son just paid more for a one-bedroom condo than we paid for our four-bedroom house. We had to loan him money for the down payment.’”
The Rocky Mountain News. “A Dallas company plans to auction about 75 foreclosed homes in Denver next month, a sign of the continuing high rate of foreclosures plaguing Colorado. Colorado foreclosure activity jumped 24 percent from the second to the third quarter, with 14,374 properties entering some stage of foreclosure, the eighth-highest foreclosure total in the nation.”
“Some local experts, including Kathi Williams, executive director of the Colorado Division of Housing, and Chris Holbert, president of Colorado Mortgage Lenders Association, question whether RealtyTrac’s numbers are accurate.”
“‘We are not trying to make the numbers worse than they are,’ Rick Sharga, a VP at RealtyTrac said. ‘But if I were representing a state-based mortgage lenders association or a state political entity of some sort, I would really want to downplay the numbers. But the numbers are what they are.’”
“Such auctions were common in the late 1980s, during the last foreclosure crisis. But in recent years, most of the auctions in the Denver area have been for expensive real estate rather than distressed properties.”
“‘Basically, they go to the highest bidder,’ said Dave Webb, co-owner of Hudson & Marshall. ‘They can be opportunities in a declining market,’ he said. ‘The lenders are motivated to sell.’”
“He said he expects to hold more large auctions in Denver as the market continues to worsen. He said that foreclosed homes aren’t the bargains they were in the late 1980s, although he said there likely will be opportunities at the auction to buy homes below the asking price. ‘Back in those days you could buy a HUD condo for $12,000,’ he said.”
The Denver Post. “Personal incomes rose faster than expected in September, boosting hopes that the U.S. economy can overcome the drag of a housing downturn.”
“Economists are divided on whether weakness in housing will tip the economy into recession, but most lean toward a ’soft landing.’ Consumers are leery and not spending as robustly as they have in the past, said Jeff Romine, an economist in Denver.”
“Romine said a study he did a year ago found that 20 percent of retail spending was due to the ‘wealth effect,’ or consumers cashing in on higher home and stock values. ‘We are moving into an economic slowdown and will probably have a soft landing,’ he said. ‘The big question is what will happen this Christmas.’”
“U.S. Bank regional economist Tucker Hart Adams, who has forecast a recession for the second half of next year, said wage gains won’t overcome the hole of debt that consumers have dug for themselves. ‘The problems are too large for a little jump in income one month to help out,’ Adams said, noting that many homeowners face large increases in their adjustable-rate mortgage payments next year.”
Durango must be fraud city…wonder how many cash back deals are hidden in the numbers
We had to loan him money for the down payment unless it was disclosed isn’t this fraud?
What is the basis of the economy in Durango? I visited the place several years ago and it appeared to be tourism based.
implosion,
Well what is the economy in Bend, OR based on? Didn’t stop them from having one of the most overpriced markets in the country! You my good sir are living in the “old paradigm” where the number of new housing starts and prices charged were anchored to things like income and the ability to repay the loan.
Well that’s all changed. No economy of note OR jobs required! Just some half decent scenery and upscale developments sprout up on their own! Simply lie your way to the top and get a “leg up on the pile”. No probalo.
Yeah, I’m just another 50 year old “peak” boomer watching from the sidelines. These places sound like Santa Fe, NM - except maybe their crime rates are lower. Figure there will be some reasonably priced stuff when I’m ready to leave NM in a few years. That’s why I like this blog. I get to hear from all over the US.
Some info on the mos. of supply in Albuquerque, NM for August. In the higher priced areas: Placitas - 12.3; High Desert - 7.2; N. Abq Acres - 7.1. In the lower-priced areas, most are 2-5 mos. except Corrales, which has 9.6 mos. Foreclosures seem to be increasing as well.
I do have several relatives there but they have lived there for a long long time. I’m sure they’re not too concerned about any of this. Any time I see examples of far flung places having bidding wars and whatnot it really makes me scratch my head and wonder. Was any of this really necessary? What will become of these “imploded” retirees when they realize they could have bought the same place had they waited until 2008 for 1/3 to 1/2 less of what they paid at peak before they were going to be priced out?
I saw interesting places in both Placitas and High Desert this summer. Both with wildly unrealistic sellers. Too bad. Placitas especially is nice.
It is nice since it’s actually a bit outside of Abq. On the other side of I-25 though is Bernalillo, not a place you want to stop - even during the day.
12.3 mos supply, highest in all of Albq area. Maybe it’ll get there pricewise. My guess is not many of the locals can afford it. Those that I know who live there retired from Los Alamos National Lab.
The largest homebuilder here in Madison, WI is now using Craigslist to try and rent out the their glut of specs homes now on the market. When I look up the owner of these properties on the city assessor website, they are using multiple “shell” company names to conceal their identity. Too funny.
Exactly the same in my little town north of Bend. r/e has been driven to ridiculous levels by a bunch of Californians and flippers. No way a local could afford the average house here in Hood River without a suicide loan.
Alot of houses on the market here, many of them have been empty for months and months now, 4 or 5 on my block alone. Hope all the speculators get what they deserve, and I finally can afford a house in a year or two…
Does anyone know if La Plata county is where La Plata, the little mountain town is? If so, there is a serious price problem there.
one and the same, along with the la boca, ignacio and bayfield metroplexes- no mans land. durango is the county seat and about 99% of the population of la plata county.
Good Point Indeed -
My wife and I have visited Durango several times in the last few years. We love it there.
From the 2004 Chamber of Commerce literature I have read: The largest employer is the City. Number 2 is the ski resort (based on seasonal jobs added together to combine into 2080 full time employee hours), Number 3 is the local Wal-Mart, Number 4 is Ft. Lewis College. The majority of the jobs are in local tourism (minimum wage / no benefits). The median income as of two years ago was $22K/year. The locals are totally priced out of the home market. The employment base simply does not support the ridiculous housing prices. Most of the houses are vacant bought up by speculators or out of town investment groups which rent to the locals at a fraction what it would cost to own.
True – Durango is a wonderful place and there is a lot of retirement money going into there. There are some nice “retirement / golf” communities in the area. Also, there is a regional hospital under construction which will bring higher paid jobs. But things still don’t add up.
We’ll see what happens to Durango and a lot of other vacation markets – I think these places as the market turns down. It may be the best bargains ahead.
Yes,
$30k!!! Sweet Je$U$! Durango is a lot like Ashland and Bend, OverR. Seems to have attracted a bunch of Califoniflippers just like us. Damn their eyes! Hope this thing outgases like a some Texas rednecks after a chili cookoff…
That’s supposed to say $430k!
Yes, a lot of the runup in Durango is from Californians buying second homes, or those have jobs from which they can work anywhere. All the Californians even changed the demographics of La Plata county from solidly red to blue.
there is no basis to justify the home prices. spillover from cali to vegas to st. george to salt lake to durango, summit county, eagle, steamboat springs, etc.- californication. the income levels in these areas are ridiculously low compared to housing costs, but the californians think they’re getting a steal compared to what they would have to pay in tahoe. on top of that, many are buying second homes/resort rentals because they can make a killing on the appreciation, even if it doesn’t cashflow. i love the state but when these knuckleheads figure out that it’s a seven hour drive to a real airport (god forbid they should actually work), they might have second thoughts.
I worked there 20 years ago or so right out of high school. Lovely place. I waited tables for breakfast, skiied all day, waited tables again at night. A good life as a recall, but I lived in a singlewide tincan for $110 a month. I suspect many of the locals still do. Another town bites the dust….
Great - more “data” that shows prices continue to rise.
If I hear another Realtor tell me how a rising median is proof of appreciation I am going to puke.
56% of adjustable loan users will refi
A national consumer sentiment poll of homeowners by Wells Fargo found this …
One in seven of the homeowners in this survey (14 percent) has an adjustable rate mortgage (ARM). Those most likely to have an ARM are:
• younger homeowners (27 percent of the Generation Y respondents have an ARM, while 19 percent of Generation X respondents, ages 30-41, have one)
• those with a higher income (19 percent of those with annual incomes of $75,000 and up) and,
• those with a higher valued home (17 percent of those with homes valued at more than $200,000).
Of the homeowners with an ARM, 79 percent said that they are concerned about the interest rate on their mortgage increasing, and more than half (56 percent) indicated that they would refinance when their interest rate adjusts. One-fifth (21 percent) plan to take no action
The fed rate might go up another quarter, but rate cuts also seem in the works and that would reduce interest rates. As long and the dollar doesn’t collapse, rates are probably going down over the next couple of years. All of this refinancing, unless it’s to take money out (which it often is) seems more like a scam for the lenders
That 20% is actually the “direct wealth effect” of homeowners spending (and borrowing against) their perceived appreciation of wealth. But that shouldn’t be confused with the far greater percentage of consumer income and spending which is ‘downstream’ from the real estate market as a whole.
If we’re talking about just “direct wealth effect”, we’re going to see a drop off in consumer spending of 20% (which is horrific all by itself). But since the real estate industry as a whole has stimulated such massive revenue generation nationally, consumer spending actually has a much larger than 20% “real-estate component”. What this means is that we’re going to see consumer spending drop to a degree that’s going to be truly terrifying.
From a macro-economic perspective: a decline in spending (and the resulting relative overcapacity in manufacturing) mean the risk of deflation is very, very real. The Fed knows this and their standing at the ready with the age-old deflation fighting remedy: increased liquidity.
Of course, the Fed can’t just come out and say that they’re standing at the ready with a massive package of financial stimulus because people would flee the already tanking US dollar in droves. (Although, there’s already plenty of evidence since Bernanke already outlined this plan before he was appointed Fed chief). So the Fed will keep blowing hot air and paying lip service to the good old “Strong Dollar Policy” while standing at the ready to make cheap dollars available once again.
As a regular reader of this blog, I’ve become a little concerned that housing prices might not come down as much as many people here are thinking. Not because I don’t believe in the housing bubble: to be clear, there’s a massive, unprecedented and altogether horrific housing bubble in America. The question is, is the housing bubble so big, and so scary that it threatens deflation and systemic risks to the banking system itself. Because if the housing bubble is *that* big (and it very well might be) the Fed will increase liquidity, create inflation and keep the bubble from bursting. In other words that pathetic condo selling for $1 million, might just stay at that price because the dollar might get much, much cheaper.
The answer isn’t to run out and buy that silly overpriced condo though. Its to get the hell out of US dollars, buy gold, buy oil and watch the meltdown from safe distance.
I don’t think the Fed can do squat about housing prices. Just look across the Pacific in Japan where overnight lending rates were 0% and housing continued to be pummeled.
Real wages have been flat (or declining) and here in CA renting costs 1/3 to 1/2 of owning. Even with significant inflation (dollar devaluation) housing here is in store for a 50% (or more) haircut.
ditto SLO bear. Japan’s example is the best available. Now I don’t doubt the culture is far different than ours but even if the Fed could do something about RE prices they’d first WAIT until there was a clear, dramatic, problem and, by they time they started adding liquidity it would likely be too late to change the psychology of the market. Is this what happened in Japan? I think so. You can’t force people to spend when they are seeing problems around them (they save). That’s the big problem of deflation. Inflation you can tame (with higher rates). Deflation, getting frightened people to spend, is a completely different cat…..one that I haven’t seen any economist suggest has a predictible solution.
The solution is, make Lereah chairman of the Fed and everyone will sheepishly swallow his lies.
Agreed. The real issue is the one that stems from ” The expectation of appreciation”, as if it were a guarantee. The truth of the matter is RE is an EXPENSE - PERIOD!
It’s traditionally been an albatross when the time comes to move, for whatever reason - even before the advent of the HELOC & CASH-OUT-REFI. Pretty soon a home will be viewed as a noose rather than an albatross nuisance.
It’s a good time to be a patient bear. The trickle of hard luck stories is about to become a flood.
Japan’s a different animal. They reduced rates and it didn’t help housing at all. The US reduced rates and we got the biggest housing bubble in history. IMHO you can’t cite Japan as a counter argument to the effects of increased liquidity when the current US bubble *already represents* the effects of increased liquidity.
I have to agree about Japan. I think Japan’s slump was more of a cultural issue - not big on taking losses because of silly pride, not big risk takers and don’t suffer from excess-consumption-disorder like we do, however, they were about where we are now when their bear market got started. Their market was greater than 50% overvalued on speculation.
COmparison or not - We’re just going to see a big time bear maket here once the defaults turn into foreclosures and REOs in great enough numbers.
Well the Japanese reduced rates AFTER their bubble burst (if I recall correctly). We reduced our rates and CAUSED the bubble to inflate.
So, after lowering rates, creating a bubble in housing, getting the resulting crash when rates rose (a bit)…..the Fed can simply go back to this well and inflate housing again with lower rates? With no impact on buyers from the debacle they’ve just witnessed in housing prices?
Maybe. Maybe over time. But who’s going to rush in to buy?
Won’t the news be all about “uncertainty” (as if “certainty” ever exists anyway). If people are “sheeple” isn’t it going to be a little tough to get them to rush back into a market, with leverage, where they’ve just seen plenty of lives destroyed?
Besides, between the psychological damage of a bubble bursting, damage to credit ratings and damage to the economy in general how exactly do you see enough buyers coming back….enough speculators as well, to soak up the existing surplus of housing?
I don’t know what’s going to happen but to discount the experience of the Japanese event, to me, would seem to be ill advised. Deflation is a threat and, from everything I’ve read in thirty years of the subject, if it happens it isn’t so easy to turn around.
True. And I wouldn’t discount Japan entirely, although I do think there are big differences in consumer psychology. In my original post I was simply saying that I had become “concerned that housing prices might not come down as much as many people here are thinking.”
Certainly the effects of a decent portion of the population getting “burned” will scare many away from the market permanently. But as they say, “inflation favors the debtor”. The level of individual financial distress will ultimately be mitigated to some extent by an increase in liquidity. How much? That’s debatable, of course. But IMHO its pretty clear that its a factor.
If you are convinced it will crash, why not just short the dollar instead of buying all the other assets on your list?
“The answer isn’t to run out and buy that silly overpriced condo though. Its to get the hell out of US dollars, buy gold, buy oil and watch the meltdown from safe distance.”
There is a potential pitfall in your plan: In order for the Fed to carry out the program you described w/o spooking the markets, they also need to have a coordinated program of keeping alive the appearance that they are not doing so. This would require, for example, making sure the price of gold does not spike up towards the stratosphere.
I agree. Gold does have that one big caveat attached to it. Its widely known that the Treasury sells gold to keep its price from spiking. But the counter argument, which I support, is that as foreign banks divest from US dollars they are buying gold. The question then becomes — can the US Treasury alone suppress the price of gold as its appeal grows internationally as a safe-haven. I recognize that’s a huge unknown, and meant to mention silver, uranium and other commodities in that final list. I wouldn’t want to hang my hat on a single dollar-hedge commodity.
But I agree with you, the Fed has to “have a coordinated program of keeping alive the appearance that they are not [increasing liquidity]“. Which, I’d say they’ve already got.
Doesn’t rumor have it that central banks have been selling gold for the past month or two? Has not the fed been increasing (m3?) money supply and continues to increase money supply even as we blog and speak?
Central bank selling is actually an indicator of higher gold prices ahead, as it means they are afraid of exactly that happening and are trying to suppress it by selling. However, the difference between gold and fiat paper “money” is that you can’t print gold, which means that the maximum the central banks can do is sell all the gold they have. But of course then they wouldn’t be able to sell any more and the price would go into orbit. So it should be safe to buy and hold gold so long as you don’t use margin so you can’t get shaken out by the violent downdrafts that occur from time to time.
I guess it is different now than back in 1869? (No central bank back then, for one…)
http://en.wikipedia.org/wiki/Black_Friday_(1869)
If you are bearish on the dollar, buy a good solid foreign bond fund like PIMCO’s unhedged fund and combine it with lots of foreign stocks (in an etf like PID or EFV).
I tend to agree that big inflation is where we are headed. Am I wrong in thinking this would be the bail-out for the housing market as well? Because now that huge mortgage wouldn’t be as daunting to pay off?
Yes, and that could really bite those who don’t already own. The only thing better than holding an asset during inflationary periods is holding a highly leveraged asset during inflationary periods. Those who bought homes in the early 70’s know all about this.
The last thing I want to hear an FB say is “Your gold doubled? Your oil doubled? Great. My 1,000,000 dollar house which I put zero down on is now 2,000,000.”
So I for one am certainly not hoping for inflation…
Imploder you have to remember that homes in the early 70s were still about 2-3 times max, the annual salary of most Americans. An average starter home that was 1mil that now goes for say 2mil in 2-3 years because of inflation is unsustainable at best. Very few, considering the flatness of wages, will be able to buy anyway so all that paper equity is useless. I for one would not want to buy into an asset that costs 2 mil that has all the other costs associated with it and I don’t think many of us on this blog would either.
You are assuming wage inflation will keep pace. It hasn’t through the run-up and won’t move going forward. That’s what has caught up to the housing mania. We’re in a bear housing market until wage inflation + ordinary inflation + price declines = 50% OFF NOMINAL. Wage inflation should come in around zero and ordinary inflation should be offset by interest hikes so the only flexible number here is price. The sooner prices drop the better for the overall economy.
If inflation of the money supply were to happen all at once, it wouldn’t have any side-effects. Unfotunately, that is not how it happens. The people with access to the new money first have the greatest benefit. The folks who recieve it last as it reaches equilibrium are the ones that lose. That is why it didn’t work to solve the problem in Japan. No one there could afford the extra debt based on the lack of ability to command higher incomes.
Japan attempting to fix their problem is part of the reason for ours. The carry trade hasn’t helped as we tried to fix our problem after 9/11. I hope Greenspan isn’t still scratching his head wondering why he couldn’t get rates to move as he raised the FFR. I’d say the conundrum was solved. Savings glut? No….just damned near free money in Yen.
That’s why I like buying gold. The price of a house, in terms of ounces of gold, tends to stay the same over time. Same thing with clothes. An ounce of gold will buy you a good pair of shoes and a good suit. Same as in ancient roman times when it bought a pair of good sandals and a good toga.
The wildcard in all this is whether or not the gold price has been artificially suppressed in recent years. Personally, I think the US Dollar is a lot weaker than any of us imagine. I have plenty of dollars in the bank, but I don’t feel comfortable about it. Feel much safer with gold and silver.
I also wonder if we really have property rights left. I mean, the government has done away with Habeus Corpeus. What makes you think they would think twice about snatching your property out from under you. One more reason to be a renter IMO.
“The price of a house, in terms of ounces of gold, tends to stay the same over time.”
Whoa, I don’t know about that one. I’d put it in the urban myth category. At the very least it has no real meaning over the course of people’s lives.
From 1970 to 1980 gold went up 10X. Houses tracked nominal GDP roughly. From 1980 to 1990 RE went up 2-3X. Gold went down 50%. In fact the only period in which gold has roughly tracked housing in my lifetime has been in the last 5 years.
Most FBs that put no money down on a million dollar house couldn’t afford to keep it long enough for it to appreciate. Once the I/O ARM resets, that’s it for them.
Yes, you are wrong. Mortgages will continue to be daunting if there’s no WAGE inflation, and with American’s competing with a few billion Asians and Chinese, as well as 20 million illegal Mexicans and OTM’s from South America, you won’t see meaningful wage inflation matching any Fed induced credit/debt reflation in the future. Affordability will continue to decline, as will our standard of living.
Americans plural. Dammit.
Imploder, you’re half right: Oil doubles, gold doubles, housing cut in HALF or more. Stagflation, recession, oh my.
Among the many problems with inflating our way out of this is actually getting dollars into hands not through credit, but pay.
Any actual pay increases given to offset inflation will only come long after inflation has become apparent. The time between inflation and offsetting wage increases is the pinch time. Quick inflation across the board will sink many boats. Handing out more credit to battle inflation will only make things worse as most Americans are already highly leveraged.
Bingo. Only wage inflation will never equal actual inflation. Anyone, NvMtgBroker?, care to do a median price to median income comparison to see how much wages would have to increase to purchase today’s median home at traditional income ratios of 28-30% and current “low” interest rates??? Leverage is a two-edge sword.
Fred, based on just the generic numbers i think a 50% reduction is needed. All other things aside, like LA, Boston, SF, etc., look at the averages. Average income in the US is roughly what, 40K. Based on tops, 3X income, the average home should be 120K, but it is not. The latest numbers show an average of say 220K, so right there we now the number is 100K too high. Therefore, I’d say about 50%, give or take dep. on where you are. Of course those are rough figures, but I think we can start with those, if anyone wants to delve deeper the percentage drop may even be higher. I would just like to add OT that I think must of us here are not opposed to making something on the house over a long period of time, but the greed of these sellers and the fact that, for me and my family, the cost of the land plus the building are far less than what it is currently selling for kill me. Some of these homes selling for a mil wouldn’t cost more than a third to buy the land and build. Hey, if a home actually cost a million to buy and build and the owner wanted 1.2-1.3mil after X amount of years, so be it, but not 2 mil, or 2.5 mil. For me it has become a matter of principle now.
the catch is that to save the FB’s (anyone bought in the last 3-4 yrs), you’d have to inflate at post-war German rates. Remember that they’ve got a nut to make each and every day. And with them go the retail trade.
sohonyc,
Interesting issue you raise, one that has been the subject of much debate. I find myself going back and forth. How much influence can the Fed truly exert? Not sure there is a definitive answer at his point. We’ll have to wait and see when they actually do something beyond what they’ve been doing.
Another important question is what their target is going to be when they finally do act. Someone on this board (forgive me, I can’t remember who) made the brilliant observation that the calling it a housing bubble is to ignore the larger issue. It’s actually a credit bubble and the housing bubblette is merely the essence. So far, the bursting of the housing bubblette, has only caused minor collateral damage in the overall scheme of things. Will it turn into a bunker buster that causes systemic stress that threatens the world economy? Could be, I’d even go as far as to say it’s probable. But it hasn’t happened yet. The credit bubble continues unfazed and unabated. That, I think, is what the Fed is going to target when the time comes. So in the meantime, they might not do much, keeping their powder dry for a much bigger event.
Ultimately, it’s going to depend on what the foreign debt holders do. Their positions are humongous, they couldn’t dump all their dollars or treasuries or agencies if they wanted to. The economic carnage would be breath taking, so they continue to add to their holdings, not so much as a favor to us, but as an act of self preservation. But as every historical bubble has proven, somebody will blink first.
So it brings us back to the central question, will the Fed target the falling housing market or wait until the larger credit bubble starts to burst. I think the Fed would like to see lower housing prices, they knew it was unsustainable and feared housing was the pin to pop the credit bubble. If collapsing home prices start to threaten the worldwide credit bubble, they will have no choice but to act. Will it work? Most likely not. Will it buy them some time? Probably. Any gambler will tell you, when you’re jammed up, the last thing you think about changing your behavior, all you want to do is buy yourself a little breathing room. Until you can’t anymore.
Our foreign creditors will most certainly not dump their dollar holdings. Why would they? It would hurt themselves as much as it would hurt us. No, the death of the U.S. economy and standard of living will be slow. What China, et al will do with their dollars is to buy resources globally and physical assets in the U.S. They will slowly but steadily convert their dollars into “things” as well as building up their domestic infrastructure. If in the meantime they continue to accumulate more dollars than they are able to convert into things, so be it as far as they are concerned.
“Liza Tregillus and her husband, Peter, bought a home in 1989. ‘If we moved here today, we couldn’t afford the house,’ she wrote.”
The familiar refrain (”We couldn’t afford to buy our own house”) even applies in Durango…
Trammell Crow bought out by CB Richard Ellis. I take that as a smart money seller (TC) getting out while the getting is good. They don’t want to go through what they did in the early 1990s.
Loved your DL book “Title Revisions” btw!
Just for review, stock market money managers in;
1999: We’ve reached a permanently new higher plateau.
2000: This is just a bump in the road.
2001: This is the buying opportunity of a lifetime!
2002: We’re not doing any worse than anyone else on the street. Please don’t fire us!
I remember in 2001 the big joke was “what the difference between a stock broker and a pigeon?”
A: The pigeon can still make a deposit on a BMW.
We’re not there yet with realtors… We will be soon (mid 2007?). And yes, I know brokers who remained well to do individuals… Exception, not the rule.
Neil
Don’t be so sure. CBRE didn’t get to be #1 buy being stupid. They bought TCC so that they can continue to grossly overcharge Fortune 1000 clients. TCC was their only competitor in that space.
A very smart move by CBE.
“Economists are divided on whether weakness in housing will tip the economy into recession, but most lean toward a ’soft landing.’”
Based on what poll? Or what theory? Or what historical evidence? Or is this just hearsay?
And how many “soft landings” have there been accompanied by an inverted yield curve AND a housing price decline?
In fact, how many “soft landings” have there ever been? One? 1994-95?
“1994-95″
Does the landing count as “soft” if the housing market has already been landing hard for five or more years (1989-1994 in many places)?
Worth a read.
Reverse Mortgages Jump by 77 Percent over Last Fiscal Year
http://tinyurl.com/y99xja
Seeing numbers like this really signal the end of the line for this economy. Before everone gets all over me for doom and gloom, hear me out. Looking at the percentage of reverse mortgages tells me that retired people just don’t have enough saved for retirement. Additionally, what does that mean for the current bumpre crop of boomers that will retire soon? We all know that most of this demographic have not saved anything, but spent it all on cars, vacations, toys, the McMansion, etc. Third, we know SS barely covers half of what most people need to live on, if that much. Therefore, when I see people reorting to using the house to live off of in retirement it makes me a little more nervous about where we are all headed as a country. It seems like the solution to every problem is to just take out a loan. More debt MEANS MORE TROUBLE in the long run. I realize that some of these people are in tight spots, but what I see is more and more debt creation in this country.
The way I understand a reverse mortgage, it’s an awesome idea for somebody older to get one now, isn’t it (at this point)? Aren’t they based on the price of the house? So if my house is way, way over-valued, isn’t getting a reverse-mortgage scamming the people? It seems like they’d lock in the ridiculous house price, but still get to live where they live. Caveat: I’m not sure I understand how reverse mortgages work.
What happens to a homeowner’s estate or other savings when the reverse mortgage has to be repaid and the home value is down by 30-40 or 50%?
Reverse mortgages generally don’t have to be repaid. Think of it as an annuity. Your house has a principal value which is amortized over time. I believe that this prinicipal value is established at the time of the reverse mortgage and not adjusted. The biggest risk is living too long and using up your annuity. The greatest payoff for the annuiter is early death of the reverse mortager.
Yes, right now, anyone who reversed mortaged in the last couple of years is looking golden - sure these deals are tougher to do now.
I think that is the point of the loan. These people don’t have any other savings or they wouldn’t be getting a reverse mortgage. It is a tremendous play if you are trying to keep your entire family tree down for generations to come.
Durango, of all places median price of 426K, It’s been a few years since I’ve been through their, but it isn’t exactly Aspen, I can’t imagine anyone living there making above 40k
Everybody playing the “game” seems to have mapped out the same exit strategy. Naturally they personally being smarter and swifter they always knew that if/when the market soured they could get out ahead of the crowd. Only now they are discovering the internet and information revolution have cut off their only exit. Everybody knows and everyone apparently had the same plan. I was sweating bullets in April as they were lowering the last lifeboat. If you are still on the ship you are stuck.
‘Our son just paid more for a one-bedroom condo than we paid for our four-bedroom house. We had to loan him money for the down payment.’
Anyone still interested in whining about the “lucky” boomers? They all drank the kool-aid in oh so many different flavors; vacation homes, retirement homes, investment properties, intergenerational wealth transfers, consumer debt, underfunded retirement in lieu, on and on.
Good news, this means instead of retiring at 57 they’ll be contributing to the US economy for an extra 20 years.
As a 39 year old I have always said I will work until they put me in the ground because the cost of living keeps rising. Joking aside, depending on where you work, going until 75 is not that bad with all things factored in. Considering what health insurance will be for me and my wife in 36 years, if I have company coverage as opposed to be out there by myself, I think I will hang on to the job as long as I can.
Related OT: One of the tangents that we as a society have not really considered is teh increased cost of longer life. Okay, so you go until you are 100, but at what cost. If you have to spend several 1,000/year, what good does it do. As someone once said those extra years of life are not like extra years in my 20s. Give me those years where I could play ball and have fun, not an extra year on the respirator.
Anybody who makes it to 100 lived damn well and happily until at least 90! Bob Hope, George Burns, and then the 90-somethings still going like Jack LaLanne, Art Linkletter. Old age only sucks until you get there.
Getting old - it’s the only game in town - bring it on!
Basically, all the extra years added to your life due to “karma”, living right, being prudent, etc., are at the end.
implosion posts “Basically, all the extra years added to your life due to “karma”, living right, being prudent, etc., are at the end.”
No No NO …. get old and mean!
I don’t see it as a bad boomer issue.
I see it more as a if you are gonna be dumb, then you better be tough issue.
“U.S. Bank regional economist Tucker Hart Adams, who has forecast a recession for the second half of next year, said wage gains won’t overcome the hole of debt that consumers have dug for themselves. ‘The problems are too large for a little jump in income one month to help out,’ Adams said, noting that many homeowners face large increases in their adjustable-rate mortgage payments next year.”
Our doom and gloom predictions are quickly becoming reality…hope you stocked up on the Tums and Rolaids…its all starting to look, feel, smell, sound, and taste nauseating.
Consumer slowdown…. no problem…. its the Chinese that will lose jobs, we don’t manufacture anymore so we won’t lose jobs
They manufacture for us, the cuts will happen here more likely as well further shifting what can be shifted regarding R&D and other tasks like IT centers. After all that is what tech has always done since the Mainframe days.
This is waaayyy OT but… I’m considering leasing a house that has been for sale for like a year or something. I know the owner *definitely* can’t sell it for what he paid (was listed for less than he paid a year ago) The rent is *really* cheap (about 1/3 what I guess the mortgage is), with the understanding that I’ll do some work on the place. It’s been vacant for a llooonng time. My worry is it’ll get sold/foreclosed out from under me. So #1- Am I crazy?
#2, can any realtors or landlords here give me an idea of some boilerplate I could put in the lease to cover my butt as much as possible? I know I’d be screwed if it foreclosed, but short of that… any suggestions? This is in Los Angeles. Thanks!
“‘Basically, they go to the highest bidder,’
Fake or otherwise, LOL!
Some people have yet to catch on that realtors are manufacturing fake bids out there. The market place is NOT transparent to buyers as the realtors would want to believe. This is very clear when they jerk appraisers and loan officers to hit the numbers. Yet, its practically invisable what the actual bids are!
For a couple of years now.. all you heard was at first meeting with realtors … there are multiple bidders out there. You will have to go over asking by several % points. When I made bids the realtors kept saying you need to go over 5-7-10%… but were unwilling to tell me what the other bids are? And you ask why? they kept saying…well you want this home right?
This market is peppered with fraud… way too much fraud!
Agreed. Six offers with escalation clauses. How much do you want to bet that listing agents took the highest bid and maxed the escalation clause without going around the table properly. Ultimately, many buyers purchased for far more than they should have because of this. If no one is around to witness the crime did one happen?
The term “soft landing’ has little meaning for their real estate “rotten egg” about to plumett to the earth at 120 mph !
Anyone think this landlord is a flipper?
Tenants want landlord to feel pain
http://tinyurl.com/svms3
ockurt,
I’m amazed that this landlord has gotten away with this for this long.
In NY, he’d be dragged into housing court–especially with toxic (I’m assuming asbestos) dust swirling around children. That alone would make him a major lawsuit target. Doesn’t LA have a housing courtor some legal structure to protect tenant rights?
If they do, sounds like they aren’t doing a very good job…
Re tenants’ rights in LA –
I was a tenant in Pasadena. When the roof was leaking buckets, we did get the city building inspector’s office to send a nasty notice to the landlord’s agent, and the roof was repaired. That process took two months +/-. When the furnace failed and the landlord and agent took an unnecessary week to get it fixed, we tried the city building inspector again, but the only function of city building inspector’s office would’ve been to make the repair happen, not to get us any compensation for the week of sitting in a 54F house (February). We never did figure out any means of redress. Still, it was good to live in a so-called million-dollar house for only $2700/month. I never figured out why the landlord didn’t sell the place when the market was hot. I believe it had belonged to his mother so that the tax basis was very low. Maybe he was keeping it for his own retirement.
I think mrincomestream is familiar with this area. He knows people who like to buy in the area around USC.
I would like to hear about the “gentrification” alluded to in the article myself. Remind me again how many blocks USC is from where Reginald Denny was pulled from his truck and had his face caved in during the LA Rodney King riots?
I can see it now, some young female USC students in this “refurbished” pos.
My girlfriend is from Durango and her mom sold her house there in the city and moved out of town into a new place, about the same size, for half of what she sold her place for. The guy that bought it added about 1200 square feet to it and turned it into, “what Californians think a mountain house should look like.” And he still kept the one car garage. Apparently it doesn’t match the neighborhood at all. He now wants twice what he paid for it. This is a place previously owned by a fireman and a hair dresser now going for 700k. Can’t wait to see it over Thanksgiving. I presume it will still be on the market.
http://tinyurl.com/ye3soa
Ugly thing.
That is truly hideous. It’s as if a one-story house landed on top of a completely different one-story house to make a two-story house. Dorothy, look what you’ve done!
‘Our son just paid more for a one-bedroom condo than we paid for our four-bedroom house. We had to loan him money for the down payment”
Did these parents think they were doing the whippersnapper a favor giving him money to get lashed to an overpriced shack?! Sheesh…
“Colorado foreclosure activity jumped 24 percent from the second to the third quarter, with 14,374 properties entering some stage of foreclosure, the eighth-highest foreclosure total in the nation.”
so, I ask, WHY AREN’T PRICES SIGNIFICANTLY FALLING?
nothing seems to make any sense any more; the stock market has been soaring as the GDP growth gets lower every quarter; huge numbers of houses on the market and/or in foreclosure, but no meaningful price declines?
have all the economic rules been revoked and I missed the news release?
“have all the economic rules been revoked and I missed the news release?”
The rules have been temporarily suspended, but don’t worry, they will apply with a vengeance before long.
To elaborate on this a bit, suppose a dam is built along a river for flood control purposes. Now suppose that the flood gates are held shut (kinda like the disappearance of buyers from the RE market) during a season of heavy rains (like flippers / investors / builders dumping inventory on the market). For a while, “nothing” would happen, as water (inventory) piled up behind the dam. But then, at some randomly unpredictable point in time, the weight of water behind the dam would overwhelm the carrying capacity of the structure, and the dam would crumble. You would not want to be living anywhere along the river downstream from the dam at that point in time… at which point the “laws of hydraulics” (analogous to the “laws of economics” in the housing market) overwhelmed the ability of the dam to hold back the flood.
Thanks for the dam analogy
Not to quibble, but I think the gates holding back the flood are the stubborn sellers.
I tossed the dam metaphor out off the top of my head, but it could probably be improved. For instance, I was thinking later on that the price level regulates the flow through the flood gates, and govt actions (Clinton $500K cap gains exclusion, and a liquidity flood in the early 2000s, for instance) which drove the price sky high, had the temporary effect of jamming the gates shut.
At this stage of the game, the stubborn sellers (with their unrealistically high wishing prices) stand with their shoulders to the flood gates, trying to hold it shut, while the builders and last year’s genius investors add to the flood and try to pry the gates wide open with their sales incentives and auctions…
Hi Ken,
I’ve been interested in Denver for a while now and have been asking myself the same thing. When will the prices start falling..
It almost the same as the runup. When will it ever end?
Keep the faith brother.