“Buyers Saying, Wait A Minute” In Virginia
Two housing reports from the Virginia Pilot. “The field of dreams for Hampton Roads home builders has been reversed – if they don’t come, you won’t build. Faced with falling sales across the region, some builders are slowing construction, cutting prices and offering incentives unheard of in the recent seller’s market.”
“The number of permits issued for residential home construction fell by nearly 22 percent in South Hampton Roads and Isle of Wight County during the first nine months of the year.”
“‘We’re going through a down cycle, that goes without saying,’ said Vincent Napolitano, president of Virginia Beach-based Napolitano Homes, which has acquired 20 to 25 percent fewer permits so far this year. ‘How long it’s going to last is anybody’s guess.’”
“New developments sprouted and thousands of new homes were built and sold at a blistering pace in Hampton Roads in the past few years. ‘They were building to keep pace with the market we had a year ago, and it’s not there anymore,’ said John Olivieri, president of the Tidewater Builders Association.”
“Even in a slower market, builders are reluctant to drop prices, fearing it hurts the perception of their homes. ‘We have not reduced our prices … and we don’t intend to,’ said Tuck Bowie, president of Terry-Peterson Residential Cos. in Virginia Beach. ‘That’s about the worst thing you could do. We’re not in the used-car business.’”
“Terry-Peterson has more than 1,200 units in the pipeline. ‘We want to get slabs in the ground so, when the market readjusts, we’re in a position to capture as much of the market as we can,’ Bowie said.”
“Still, prices have come down on some new homes. On Tuesday, agent Joan Revell was preparing to drop the listing price on a 3,900-square-foot home in Chesapeake’s Edinburgh development to $799,000 from $838, 000 . The price had already been cut from $858,500 ‘just to get it moved,’ she said.”
“A sign in front of one massive red-brick Edinburgh home on Sunday advertised ‘closing costs paid.’ Builders have offered to pay closing costs and give $10,000 in options at Chesapeake’s Riverwalk Estates condominium development, and they’re throwing in stainless steel appliance upgrades at Graystone Reserves in Suffolk.”
“The incentives from builders are ‘pretty huge,’ said Lee Halyard, who owns a Chesapeake real estate agency. ‘The ones that have inventories sitting, that’s a pretty big nut to pay down.’”
“The number of home-shoppers in new developments is about 30 or 40 percent lower than it was last year, Bowie estimated. Prospective buyers think they can get a better deal by holding out, he said. ‘Until that perception changes … you’re not going to get the traffic.’”
“A major cause of the current slowdown in new-home construction is the difficulty homeowners encounter as they try to sell their houses and move up to new ones, said Rip Montague.”
“‘You’re dependent on a continuous supply of buyers who, up until this point, had been able to sell their houses,’ said Montague, who has a stake in a company that renovates homes for resale. ‘But those prices continued to rise, and they got to the point where the mid-income buyer started saying, ‘Wait a minute.’”
“Developers and buyers in Hampton Roads have poured millions of dollars into condominiums, a market known to fluctuate wildly with real estate cycles. Some warn the pace of development is a sign that the market is overheating, but building continues.”
“There are about 1,500 condos on the market, according to the region’s MLS. There are ’signs of overbuilding relative to anticipated demand,’ particularly in downtown Norfolk, warned an Old Dominion University study released last month.”
“‘The problem in the condo market is they’ve already built up a lot of inventory, and now there’s a lot of inventory waiting to come onto the market,’ said ODU economist James V. Koch, the study’s author.”
“Developers of a planned condominium project on 21st Street in Norfolk decided to convert it to apartments. Known as 201 Twenty One, it was approved last week by the city’s planning commission.”
“‘We have not reduced our prices … and we don’t intend to,’ said Tuck Bowie, president of Terry-Peterson Residential Cos. in Virginia Beach. ‘That’s about the worst thing you could do. We’re not in the used-car business.’”
Ironic analogy. Auto dealers reduce prices because vehicles depreciate. Sellers shouldn’t dismiss the idea of looking at car dealers techniques so fast. One thing about car dealers, they know how to move inventory when they need to. They also don’t get emotionally attached to the inventory, nor do they let their ego about how nice their cars are keep them from pricing them accordingly, in most cases.
Most dealers attitide is, “this is not a car museum, we are here to sell them”
I predict Tuck Bowie’s attitude will change within six months.
Or his Chapter 7 trustee will administer an attitude adjustment!
I predict Tuck Bowie WILL BE a used car salesman when all this is over.
Besides, it is not just used cars. Any product, if they do not sell, will either go off the market or reduce prices to sell. That’s a really dumb quote.
Also, you can live in your car, but you can’t drive your house.
Yes, but if things got really bad, Tuck may find himself living in his car.
Check this article on CNN. Record October SUV and large truck sales due to gas price pullback. I guess we know where people are spending their evaporating home equity. America gets yet another notch in the stupid belt.
http://money.cnn.com/2006/11/01/magazines/fortune/pluggedin_taylor_SUVsales.fortune/index.htm?postversion=2006110210
that was funny
CHEAP GAS ! 240
Man that was a condescending article. If I see Alex Taylor III, I may have to run him off the road with my Hemi Pickup.
That’s right, stand on those prices! Buyers will be willing to pay them again a few years…
This guy and his partners richly deserve the BK that will hopefully follow shortly after the realization that the sucker stream has dried up…
I took a look at the homes this guy is building. The ~160-200K starter homes look cheap, with that lovely prominant garage, and the froofy decor hides the plain-jane interior. But not too bad, comparatively speaking. The higher-end stuff actually doesn’t make me cringe, which I consider a high compliment.
But still, the houses don’t have that much of a perception to uphold, not enough to justify that attitude. Bend down that pinky a little more, Tuck!
‘We have not reduced our prices … and we don’t intend to,’ said Tuck Bowie, president of Terry-Peterson Residential Cos. in Virginia Beach. ‘That’s about the worst thing you could do. We’re not in the used-car business.’
I bet he changes his tune from cocky to desperate 6 months from today.
No, I’m not double posting; my post took the long way home, packets and switches.
“Even in a slower market, builders are reluctant to drop prices, fearing it hurts the perception of their homes. ‘We have not reduced our prices … and we don’t intend to,’ said Tuck Bowie, president of Terry-Peterson Residential Cos. in Virginia Beach. ‘That’s about the worst thing you could do. We’re not in the used-car business.’”
…, when the market readjusts, we’re in a position to capture as much of the market as we can,’ Bowie said.”
Obviuosly this idiot wants to hold onto the homes for years. or may be he is just bluffing, I think he is cocky and idiot at the same time.
Didn’t that Home Builder in New Jersey report record earnings in August and filed BK 1 month later. You are right, Mr. Bowie, I find used cars dealers have more ethics today than lying, scheming homebuilders who forgot the word INTEGRITY around 2004
Yep, I think it’s name was Karra homes, a large private builder. The HB CEOs tend to cheerlead to the end. And it’s not just to create customer demand. It’s also to keep the bond market excited about their prospects.
They all need more money to cover their existing bond debt. Take Centex’s most recient qtr. They had to take out $500M more of new debt just to cover $200M in interest and a misguided stock buyback. It will get really ugly for the debt loaded HBs.
‘But those prices continued to rise, and they got to the point where the mid-income buyer started saying, ‘Wait a minute.’
Where do you stand on this issue: Are buyers waiting in the wings for price declines OR has everyone who wanted to buy already bought more than they can handle?
You’re always going to have a few people catch a falling knife. But I think the previous few years has shown us the following types of buyers:
1) People who could honestly afford it.
2) Speculators/flippers trying to make a quick buck.
3) People who really couldn’t afford it and got sucked in due to greed or a strong sales pitch from the RE industry.
That basically leaves the following:
1) People who can still afford it, and don’t mind paying these prices (very few and far between).
2) The last few greater fools.
3) People who are going to wait - either not enough money, not willing to pay these prices, only willing to pay these prices if appreciation is a sure thing, etc.
The people who bought in my resort area in summer 2006 were still in the “buy your sea view now or be priced out forever” mode. Builder of the unsold sea-view house I am now occupying is a realist in the “it will never sell” mode, so our agreement includes an idea that his brother’s family can use the place for the part of the summer when I habitually rent a BETTER sea view anyway. Buyer, shmuyer, who would pay these prices taxes insurance. As the economy stumbles, I expect the rents will not rise either.
I know we are waiting. We could afford the market now, but if we wait we could get something better.
There are a lot of other buyers waiting, they are waiting until the house that they currently own sells.
Which won’t happen because all those potential buyers are like you or are wiating for THEIR house to sell… and so on…
Potential “Tweeners”?
BOTH!
I sold last year and will wait. Most people i know are stuck or will forclose.
“‘The problem in the condo market is they’ve already built up a lot of inventory, and now there’s a lot of inventory waiting to come onto the market,’ said ODU economist James V. Koch, the study’s author.”
Bubble profit expectations still fueling growth in this region; in a couple months reality will set in and they will be turning these structures into apartments, going broke, wringing their hands, and so on just like we’ve seen in other markets.
Home prices in Hampton Roads took a significant tumble in the past month according to the Virginia Association of Realtors:
6/30/2006 $239,900.00
7/31/2006 $242,900.00
8/31/2006 $245,000.00
9/30/2006 $230,000.00
This coincides well with the HousingTracker data:
http://www.housingtracker.net/old_housingtracker/location/Virginia/Norfolk/?state=Virginia&city=Norfolk
Note the massive inventory increases - 380% from August 2006.
This is an area that saw tremendous speculative buying - even the NAR admitted that the level of second home purchases in the area was worrisome. Worse, builders in the area dramatically overbuilt in response to the “artificial” demand.
Witness the condo projects going up all over in Norfolk, including the 31 story “Granby Tower” project. More such projects are currenly in planning.
In 2005 the US Census found Norfolk to be “the fastest shrinking city in the United States”.
Have a great weekend!
Whoops… I meant 380% from August 2005.
I hear that Granby Towers has little chance of being built anytime in the near future … They drove one piling into the construction site, and the equipment has just been siting on the site with no progress made for months. Apparently they’re not close to getting the number of committed buyers they need to secure financing to begin the project.
I think buyers are waiting, but I also think there are a lot less buyers out there that can absorb all this excess inventory because many people have already bought ,(even second homes for investment) .
The industry used all the tricks to get people to buy in the last three years and many people just should not of bought because they can’t really qualify for the payment long term . More inventory is going to come on the market because of people needing to sell along with the excess new construction . So, there will be a big supply for years IMHO .
With the prediction of a up real estate market for 2007 by some people in the news ,can you imagine how many people are going to put their house on the market in the 1st and 2nd quarter of 2007 while they still need to compete with the builders inventory .
Sorry ,I posted the above in wrong spot . This was a response to mrktMaven FL
It’s relevent to the Hampton Roads area, though - we’ve had such a frenzy of buying in the past few years that even the Virginian Pilot (or maybe it was the Daily Press) said “everybody who wanted to buy already bought”.
Future demand depleted just as a tsunami of supply is hitting the shores.
Suppose anybody will bother looking at any Terry Peterson development this weekend, now that he’s announced he’s pricing himself out of the market?
I’ve seen a raft of 5% or so price reductions on the HR realtor site in the last couple of months — and the properties are almost all still sitting. My best guess is that the deluge won’t hit until all the new listings hit the market in Feb-March ‘07.
BTW, where are you getting the VAR sales price data from?
http://www.varealtor.com/Newsroom/hs_dec05.asp
Thanks, fr.
when mic gets scaled back, I don’t want to be in SE VA
I agree HW.
I believe there was enough ‘buying stimuli’ in the environment over the last 4 years to get the maximum amount of buyers possible to buy. As a result, buyers are currently in short supply.
The problem is some home builders don’t recognize or simply are’nt willing to accept that the buyer group is much smaller than yesteryear. As a result, they have not turned off or adjusted their supply. They keep waiting…waiting…waiting.
Wow, I can get a free stainless steel appliance upgrade and all I have to do is pay eight hundred thousand dollars for a house out in generic suburbia? WOW! Sign me up for summa that, please!
anyone from AZ know how Bill Yakobovich’s ritzy auction faired yesterday? Here is the story on the auction.
“Next month his 4,500-squarefoot Desert Mountain home, which was originally listed for $2.9 million, will sell regardless of price, for no minimum bid and no reserve. —>>>The house is guaranteed to sell to the highest bidder when the gavel drops.”
right, that was from last month … it was supposed to go last night to hightest bidder no min/reserver. just wondered if anyone in AZ or anywhere actually knew what it went for?
Manufacturing growth slows as housing slumps
http://tinyurl.com/yhlpxg
I am very curious about that also. Txchick - did you follow the story? Did you submit a bid?
When are builders going to stop making the $800,000 homes? The buyer group for those homes just can’t be as large as the builders believe. And with ’selling to move up’ not generating as much liberated equity, and with lending standards tightening or soon to tighten, the pool is even smaller.
I especially don’t get the $800K+ market … especially in Hampton Roads, unless the house is within a couple blocks of the oceanfront. The city of Chesapeake, where the house referenced in the article is, is nothing but run-of-the-mill, nothing-special, suburbia.
I agree, really stupid market. I have been watching Williamsburg (23188). Always loved this area, (history buff). Can hardly wait for the crash so it becomes affordable again.
Me too. Go to roseandwomble.com and check out all the houses for sale in the Wellington development and the newtown condos. Don’t know if Williamsburg will tank nearly as much as the surrounding areas, but clearly there are some developers who are on the verge of a world of hurt!
Nice link, thanks. You may be right about Williamsburg not getting the big crash. Appreciation hasn’t really kept up with the surrounding areas. With a median household income of $63,000 and a 2.6% unemployment rate it’s kind of curious.
Good people at Rose and Womble, btw. I bought through them in ‘99….rental townhouse. I live in SF Bay Area and use their property management services, as well.
BayQT~
Wish this was DL!:
Sanjay Kumar, former chief executive of CA Inc., has been sentenced to 12 years in prison for his role in a massive accounting fraud scandal, according to media reports on Thursday. “I know that I was wrong and there was no excuse for my conduct,” Kumar said to the judge at his sentencing,
90% of 3rd quarter refies were cash out at HIGHER rates than prior loan!
npr radio show clip
Whiskey Tango Foxtrot?
Ok, I knew this was going on, but 90% !?! That’s the last gasp of somethign that is two steps from dead. Well, I guess if you’re going to lose the home, one might as well buy that 911.
Or maybe this is why GM’s sales are going up? Hmmm… One last Hummer sales mania! 
Unfortunately, my current internet blocks that clip.
I’ll listen at home.
I’ve heard scuttlebut that the MBS buyers are stepping back. But when will this circus stop? At some point bond buyers say “no more.” But when?
To quote Buffet: There are three types of people, those who can count and those who can’t.
Neil
Just something to keep in mind about this report. It’s based on a quarterly report out of Freddie Mac (link here: http://tinyurl.com/y64r28) And it’s TYPICAL to see the percentgage of overall refis being done for higher loan values go up at times like this.
Why? When rates fall, everyone and his brother refis to get a lower rate and payment. That means rate-and-term refis make up a bigger percentage of the overall refi pie. When rate rise, there are virtually no rate-and-term-ers. It’s all cash out/I need a new Hummer/please God get me out of this ARM into a fixed and roll the closing costs into it too borrowers. Hence, the percentage of borrowers getting higher loan amounts vs. the old loan rises (even as the overall size/dollar amount of the refi market shrinks). All of that said, the numbers are still somewhat higher than you’d expect because more people are willing to cash out equity/use their homes as ATMs than in the past. Hope this makes sense.
http://interestrateroundup.blogspot.com
When I heard that story, I yelled “Stupid!” at the radio. That’s the epithet that I can repeat here. The others? Let’s just say that they weren’t suitable for a family blog.