“The Anxiety Has Transferred From Buyers To Sellers”
The Albuquerque Tribune reports from New Mexico. “The market, locally and nationally, reversed itself this fall, realtors and economists said. The number of existing homes on the market in Albuquerque, 4,695 as of September, has more than doubled from the 2,319 a year earlier. The anxiety has transferred from the buyers to the sellers.”
“‘There’s a clear deceleration in the market. You are having a build-up in the inventory of existing homes. That’s all true,’ said Lee Reynis, of the University of New Mexico.”
“Real estate investors, seeing that a souring market means less profit, have moved on to safer investments, Reynis said. ‘In the housing market, there isn’t the expectation there might have been a year or two ago that housing prices will continue to go up,’ Reynis said.”
“With the inventory of unsold homes so high in Albuquerque, some sellers have been forced to reduce their prices just to compete, she said. ‘Some sellers are willing to negotiate a little more or have already dropped prices,’ (realtor) Sandra Creek said.”
“The rising inventory of homes appears to be taking its toll on the construction industry as well. The number of building permits for single-family homes dropped to 319 in September. That’s a 52 percent drop from the 670 permits issued the same month a year earlier and a 67 percent drop from the year’s high of 964 permits issued in March.”
“Jim Folkman, of the Home Builders Association of Central New Mexico, looks toward developments on the horizon and assumes building will remain steady. A master-planned development south of Albuquerque International Sunport, is projected to add more than 30,000 homes to the city’s southeast quadrant.”
“Also, shareholders of 55,000 acres of West Side land voted last week on whether the land should be sold to a California development company. Folkman estimates that the land could yield up to 100,000 residential lots.”
The Denver Post reports from Colorado. “Homeowners aren’t the only ones having problems paying mortgage loans. Some investors in Colorado have also had rental properties foreclosed upon recently, especially in and around Longmont and Greeley, where there’s a big rental market, some Realtors say.”
“Recent ‘for sale’ listings show at least 10 duplex and apartment buildings owned by banks and on the market in Longmont.”
“‘(Investors) thought they were going to make a fast buck, and they got caught, because the housing economy goes in cycles,’ said Lynn Bishop, a spokeswoman for the Colorado Mortgage Lenders Association. ‘You’re going to ‘walk’ on it if you can’t find a renter.’”
“If an investor with renters faces foreclosure, those renters are forced to move when a bank takes over, said Bryan Potter, a property manager at Alert Realty in Longmont with more than 2,000 rental properties. Potter said he has seen such cases two or three times in the past six months.”
“If rental properties go into foreclosure, it’s usually because investors have taken on interest-only mortgages with high monthly payments, said Lu Etta Legler, a Realtor in Brighton who also owns investment property. Investors who manage to find good renters still have to plan for a softer market and potential vacancies. For example, a rental home Legler owns in Greeley that used to take in $1,000 per month now reaps only $800 per month, she said.”
The Arizona Republic. “The median price for existing single-family homes in Mesa fell to $235,000 in October, a 4 percent drop from a year earlier and the sharpest decline in the Southeast Valley.”
“The number of homes on the market throughout the Southeast Valley has hit a record in recent months. It reached 17,629 in September, the last month for which data are available.”
“Like the rest of the Phoenix area, sales slowed in Mesa from 1,015 to 555 sales. Condo sales also dropped from 260 to 100 sales, and the median price dropped from $154,100 to $153,000.”
The Arizona Daily Sun. “Even though Michon Javelosa’s three-bedroom, two-bath home on the far East Side is newly built and never lived in, she just couldn’t raise much interest from buyers after listing it for sale in May. The same was true of two other homes in the same neighborhood she later listed for sale.”
“So, borrowing a page from home builders who offer everything from free swimming pools to six months of mortgage payments, Javelosa is offering a brand new Toyota Corolla with each home at the time of closing.”
“‘They can pick the color,’ said Javelosa, a Long Realty agent.”
“Javelosa is among thousands of agents and sellers looking for ways to draw the attention of buyers in Tucson’s slowed housing market. Many are turning to price cuts and other incentives on both new and resale homes.”
“The reason: Buyers have more power than they have had in years. Tucson’s inventory of houses for sale reached an all-time high of 9,401 in August, according to the Tucson Association of Realtors. The number was down, but just barely, to 9,336 last month.”
“Tucson’s median home price last month was $211,500, a 5.5 percent decrease from last year, though up slightly from September.”
“Builders, offering commissions of 5 percent or higher, are sending out notices to agents advertising deals on ‘quick move in’ homes, those near-finished or completed homes that became available because of a cancellation or at the end of a subdivision’s production line.”
“A list sent out in September of 25 US Home and Lennar home projects in Marana listed incentives ranging from $25,000 and $90,000 on select houses. One home — a two-bedroom, two-bath house, shows an asking price of $288,501 with an incentive worth $90,000.”
“A recent ’spec home’ list from KB Home listed three dozen homes with reduced prices, including a four-bedroom, two-bath near Downtown selling for $200,000, a reduction of $40,000, and a five-bedroom, 2 1/2-bath home in Sahuarita selling for $399,000, a reduction of more than $100,000.”
“For new-home builders, sales cancellations are running as high as 40 percent, double the rate a year ago. And while new-home prices have fallen nationally, even those lower reported prices don’t take into account the extras that builders are throwing in to lure buyers. In other words, effective prices are even lower than reported.”
“Another factor in builders’ urgency to sell homes is their quarterly earnings reports, in which they hope to meet Wall Street expectations. ‘They, then, will do something to make sure that homes are sold. They want to make their quotas. They just can’t say ‘I’d like to take a breather over the next two years,’ said John Strobeck.”
So this Tucson agent has three new homes to flip and is competing with the national home builders. I wonder who will win?
Amazing isn’t it. I’m sure it must feel great to watch the HB’s cut the prices and add a $100,000 in incentives when you’re sitting there holding on to two or three of these pigs!
Not just incentives, but price cuts:
‘and a five-bedroom, 2 1/2-bath home in Sahuarita selling for $399,000, a reduction of more than $100,000.’
YOU GET A FREE TOYOTA COROLLA!!!!!! HAHAHAHAHHA
Are you kidding me???
Got a new post called ‘REALITY CHECK’ up…
http://www.housingbubblecasualty.com
SoCalMtgGuy
Toyota Corolla will last longer than most new homes.
So true. I just saw an 81 Corolla Tercel out on the road today. In 81 the Tercel was a special model corolla. And I bet this one was faring better than some houses that were minted in 81. Cause it was well maintained.
Toyotas do last long. I had one for 23 years and it still ran. Mine was a 1981 Celica.
SoCalMtgGuy — Your blog says we ain’t seen nothing yet. I agree we are probably in the earliest stage of a catastrophic slide. It will be interesting to see how the REIC tries to cover it up.
Ben posts “Not just incentives, but price cuts”
It was bound to happen. Just 6-8 weeks ago this blog was ripe with slams about incentives vs just cutting the price. It appears the “incentive” phase is slipping away and we will get straight to the bottom line.
It was just another form of denial, another wishful delay.
“two or three of these pigs! ”
In Spanish Marana = pig
-
Standing there holding their dick in their hands while builders cut prices!
“Hey, listen, I want somebody good - and I mean very good - to plant that gun. I don’t want my brother coming out of that toilet with just his dick in his hands, alright?” - Sonny, “The Godfather”
“‘They can pick the color,’ said Javelosa, a Long Realty agent.”
That ought to do it, sweetcakes!
There is so much bloggy goodness in the above post…it will so much fun to see everyone riff on it. Oh, Sammy, where are you?
The thing I enjoy most is seeing the greedy realtor-vestors getting what they deserve, gagging on and drowning in their own Kool Aid. Good for them.
Although I don’t know why the Tucson inventories could be climbing, seeing as how everyone wants to live there. I mean, where else can you see 40 year old drifters riding BMX bikes to the cantina at 3pm on a Tuesday. Truly a mecca of southwestern culture.
OMG that description brought back memories.
For those that don’t know…
Have you ever wondered where all the bums go in the winter?
Shadash, the answer is right here! To beautiful Tucson! Where the local bleeding hearts can’t see that these “travelers” are playing us all for fools!
I thought they moved to the streets of downtown San Diego, Ocean Beach or Pacific Beach. You mean they’ve relocated?
I woke up one morning in OB and found a mother and kid living in my garage.
So….you have landlord experience?
LOL. Yeah, I’ve had a few mice and rats living in the garage.
This was (is) the time we’d see lotsa bums showing up in Sarasota. You see them walking down the ramp from I-75 with their bedrolls and duffels.
In Chicago, the bums are on upper Wacker during the day and lower Wacker at night - all summer, all winter. (There are nice big heat releasing vents from the buildings on lower Wacker).
Another good byproduct of the Pacific Northwest rain…not even the bums want to put up with it!
Yippee-skippee! I always wanted a free Toyota!
Uh, wait. Do you mean I have to buy a house too? No, thanks.
“‘They can pick the color,’ said Javelosa, a Long Realty agent.”
Um….k…i would like mine painted in 24k gold to a thickness of a quarter inch. Now we have a fair deal.
Why does the jackass agent just lower the dam price? Stupid morons!
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because in this market “you need gimmicks”. or so they think.
Manitowoc
Other Info:
“‘They can pick the color,’ said Javelosa, a Long Realty agent”
I see red.
You’ll enjoy the comments that follow the Tucson agent’s story. Have fun:
http://regulus2.azstarnet.com/comments/index.php?id=155503
I love it! Here is the undisputable evidence that these braindead realtors have been drinking their own Kool-Aid. This guy is done. Thousands of these so called “investment” homes in all bubble markets were purchased by realtors. As I scour the mls listings, there are numerous which mention “seller is licensed real estate agent.” This is really getting good!
Talk about a double-whammy. Lower sales means comission checks are way down plus you have an “investment property” mortgage to feed. Poor realtors. Bad news for them is that they aren’t considered a disadvantaged minority in this country so no government support/bailout for them.
Nah, realtors will find other realtors to swap their way out.
Let’s say both realtor A and realtor B each owns 1 investment house at 100K. The houses are now only worthed 80K. Instead of just letting the banks foreclose on the houses, here’s what A and B can do:
A will buy B’s house for 120K.
B will buy A’s house for 120K.
Now A and B have 20K each in his pocket, then let the bank foreclose. So the same end result of being foreclosed, but now
they get 20K each.
What I’m interested to know – and have not been able to clearly see – is how today’s # of listings and # of sales compare to the historical seasonal norms. I understand listings are way up and sales are way down year-over-year, but that’s compared to the extreme numbers of the past 5 years. How do these numbers compare to numbers prior to the run-ups? If we compare these numbers to the “normal” data, are these numbers still at the worse end of the spectrum?
Not the worse end yet but the worse end is rapidly approaching as the days go by…
We are NOWHERE near the end. Yes, these stories are nice…but 2007 is when things will REALLY happen.
500 billion of ARMs have/will adjust in 2006. Next year, we have (depending on whose numbers you want to use) 1.6 to 2.1+ trillion dollars worth of ARMs to adjust.
Not to mention all of the ‘new’ inventory that will hit the market in 2007/2008 that will have to compete with already sky-high inventories.
See my new post titled ‘reality check’ for more indepth info…
http://www.housingbubblecasualty.com
SoCalMtgGuy
Do most of these ARM’s have a built in penalty if the FB’s try to get out of them via attempting to change to a fixed rate loan? If they cant sell which they soon wont be able to.
Most do, in fact, the broker gets a better commission for selling a loan with a longer term prepay penalty. Most people don’t realize it’s there until it bites them in the arse.
I think you misinterpreted or I wasn’t clear. This will not be a soft landing if that was your intrepretation with a quick up in a year or two. Right now everyone is trying to sell the fact it’s the end of the year and everything is slow. So people are kind of laize faire about the market. But if my breakfast meeting with some industry guys was any indication the slide to the bottom is going to be hard and fast between the first of the year and next summer you are going to see mass dumping of property as people try to avoid those resets and looming quicly increasing R.E.O. inventory alot of it locally is sitting. That’s the buzz I’m getting. You’re going to see big decreases in price. It’s already started really I was passed a flyer this morning about a guy who is dumping 44 lots in the Valley area and the message was very clear that the price is highly negotiable on any and all and from my perspective the prices were good not spectacular to begin with compared to what I have seen. L.A. is going to hit the toilet and be flushed hard and fast. Had a guy predict by mid summer we should be at 1999/2000 pricing which I thought was a bit of a stretch but he seemed to be convinced. With what is called here on this blog jingle keys and R.E.O.’s being the order of the day for the rest of the way. I even floated Wiz’s scenario I think it was of a rate decrease down to 3 % saving the market all agreed not going to help not going to happen. I got the impression that only the truly uninformed, stupid and illegal were buying right now and the people servicing them were either new or crooked the experienced ones are just trying to load up on listings also a lot of refinancing while equity was still there so I can weather the storm type of stuff for those who can and are going to try and hang in there untill the market comes back. No ne of them were under the impression that the market bounces back in a year or two. All agreed that some serious changes were coming down as to how business is conducted as far as panic legislation by both the state and federal. Still don’t see the internet as a threat to eliminate but too increase the bang for the buck for the client in regards to services performed. they have all noticed the increase in the MSM awareness but indicated they really haven’t touched on how bad it really is which I thought was kind of interesting.
Anyway just trying to be clear that I was not predicting a soft and quick landing.
Ready to join the depression camp yet?
There may not be a smoking gun per se, but there’s a mountain of circumstantial evidence and it’s growing daily…
Mrincomestream . Your post is interesting . We should call the soon to be market a “dump market “,not a buyers or sellers market ,(course that’s like yelling fire in a movie house ).
i agree, saying sales are down 50% from last year isn’t necessarily anything for us to cheer about. When they are 50% less than in 1998, then we can cheer/and buy.
Well… for the “southland” Nov 1998… 20,470 sales. How we doin this month?
In my county, September sales in 2006 were the lowest September sales since 1994, exlcuding 2001 (with its 9/11 effect).
So, I’d say that this certainly qualifies for a major drop in sales!
Here are some links to get you started…
First, new homes for sale data going back to 1963 (PDF Link):
http://www.census.gov/const/fsalmon.pdf
We had 557,000 new homes for sale as of September. That is down slightly from the summer peak of 570,000. But other than three months this summer, it’s the highest in U.S. recorded history. In other words, it’s not just way above bubble levels, it’s way above ANY level. Just to pick a “normal” month in a strong year for the economy — say, 7 years ago in September 1999 — there were 303,000 homes on the market.
Now in September 1999, we sold homes at a seasonally adjusted annual rate of 826,000 that month. So we’re still above that pace now (1.075 million SAAR) but well off the high of 1.367 million in July 2005. You can either view that the optimistic way (”Phew, we made it to a soft landing. Let’s count our lucky stars!”) or the pessimistic way (”If you think this downturn is over, you ought to get your head examined.”) Count me in camp two.
Now, the Realtors’ existing home inventory isn’t available publicly going back years on their web site to my knowledge. But here’s a recent sales report for September (PDF Link):
http://www.realtor.org/Research.nsf/files/EHSreport.pdf/FILE/EHSreport.pdf
It shows the past few years (2003, 2004, 2005) and what was normal in those years. The sales pace for September was 6.18 million SAAR, well off the 7.03 mil. level for 2005 and 6.78 mil. level for 2004, but roughly in line with the 2003 level of 6.175 mil. Once again, you can interpret it two ways.
But the inventory is another story entirely. There 3.75 million units on the market in September, off slightly from the peak in mid-summer but up a whopping 65% from 2.27 million in 2003. I don’t have the longer-term series at my home, but trust me when I say these inventory figures too are off the charts high, when compared to anything normal for the last 20+ years.
I hope that helps give a sense of the history a bit. My quick and dirty analysis, however, is that we need prices to come down even more to clear these record inventory levels.
http://interestrateroundup.blogspot.com
Albuquerque homes sales (units per month) are almost the same in 2006 as they were in 2004. What’s happened here is that many investors bought in new neighborhoods just to flip so there is a ton for sale
SE Albuquerque. Good luck with that.
I wonder how many ‘investors’ are giving their rent houses in Alb. back to the bank, or will be soon. There are only 130,000 lots on the drawing board to go with the 4,700 houses!
Casey is one!
First came seller Denial, now we have reached Fear/Anger. Unfortunately, most sellers are still a long way from Bargaining, Depression and Acceptance.
Where’s does “Stupid” fit into the Kubler-Ross’s Stages of Grief? Cause it looks like it’s a whole new stage…
“Anger, Denial, Bargaining, Depression & Acceptance. Sounds like a Jewish law firm.”
Props to the first person who knows what movie that line came from.
all that jazz
favorite scene was the heart attack, a classic.
Very good!
Mine was the bypass scene. I passed out cold when they cut his chest open.
If I remember correctly (and there’s no guarantee), they’re actually connected, in the first part, the accountants were cutting his heart out, in the second it was the doctors. Great metaphor.
Lets ask Suzanne to research it.
“If an investor with renters faces foreclosure, those renters are forced to move when a bank takes over, said Bryan Potter, a property manager at Alert Realty in Longmont with more than 2,000 rental properties. Potter said he has seen such cases two or three times in the past six months.”
This sounds counter-productive to me. Why would the banks want to evict perfectly good paying tenants and turn a performing asset into a non-performing liability? Sounds like fear-mongering BS to me, but then I don’t work for a property management company.
Anyone in “the ‘biz” out there care to comment on this?
I’ve seen it happen before. The bank does not want to be in the landlord business even through a property manager. They want the non- performing loan off the books ASAP. At least that’s what I was told by a fellow in the banking business.
1. What if the agreed lease insnt high enough to cover the loan costs on the prop.
2. Banks arent in the business of playing landlord nor incidentally, are alot of these FB’S that say they can always just rent the place.
I get that banks don’t want to be LLs and want to unload the foreclosed properties ASAP. Even so, wouldn’t it be cheaper and easier for the bank to leave the tenants and just sell it ‘as is’? Having existing paying tenants might even be a plus for investors.
Existing tenants are a risk… even to the point of getting sued for some unknown reason.
Think of foreclosed assets as garbage. Defects. They don’t want anything to do with them.
Yeah, in my rental agreement with my FB landlord in Maine, there is a clause saying the lender’s claim is senior to mine. I interpret this to mean that if my rent is paid a couple of months ahead and some re-po action is sudden, I could be evicted by the bank without reimbursement. At the present moment, I believe my FB landlord is actually meeting his debt service (only 1/3 of which is covered by the rent — he has to work full-time for other builders to get the money to cover the rest of it).
Banks aren’t in the rental management business and regulators will not allow them to hold those assets on their books.
During the RTC foreclosure era, the foreclosure firm I worked for, needed to get the rent or out for 24 hours, rekey the locks, and get a lease agreement between the new owner (the bank) and the pennant. With the previous owner losing the house, the tennants deposit money was gone, the lease was terminated, and there was no insurance. When the number of REO’s were hitting 100 a day in Los Angeles, and nothing was selling at any price, we did do month to month rentals, with a new lease and a new deposit. The banks only discounted the real crap, to all the
seminar junkies who thought it was ez to fix foundations and roofs.
The banks only discounted the real crap, to all the
seminar junkies who thought it was ez to fix foundations and roofs.
I’ve often wondered about this. A lot of us here may fantasize about getting plum properties for deep discounts, but the reality could be somewhat different. I’ve heard other people say that the best properties usually get offered to bank insiders as “pocket listings”, which never even make it into the MLS or auction block). Of course, these insiders get very substantial discounts, before hiking the price and placing the property on the MLS.
Wouldn’t surprise me at all if the same pigs responsible for this mess also reap most of the rewards on the downside.
It’s never going to be easy. It will be easier.
Harm , it will get to the point that there will be so many foreclosures that there will be tons available if this goes like I think it will .
Those were the great old days of “$99 moves you in!” and “first three months free with a one year lease”. Will we see it again?
I’m not 100% sure about this but I think banks are not allowed to own rental property. At least I think that’s the rule in California.
Banks are not in the real estate business. They want to unload these homes as fast as possible. They are not interested in someone paying rent to cover carrying costs. They want the home sold as quickly as possible.
Here in GA, most homes are not advertised as REO’s anymore. They are listed with an agent just like any other house. There are 1 or 2 agents here in town that specialize in REO’s, so if you see a listing with this particular agent, you have a good idea the property is bank owned.
Is it not absolutely amazing how fast the wheels are coming off of the housing train? I read the blog everyday, so I’m desensitized to it. But just like home buyers who forget that here in Virginia Beach the same home would cost 50%+ less 2 to 3 years ago, I often forget that 2 to 3 months ago the masses were still cheery about housing in general. The media is going to help drive it down.
Local radio show here run by RE and Mortgage sales people started out with advice to ignore all the news about California and Florida and Arizona, because we are in Hampton Roads. I called in and started off with “What about the 290% increase in inventory?”
Looks to me like lots of markets are de-railing at the same time. Wait until the real panic hits.
ALthough VA Bch and Hampton Roads don’t get mentioned as often as some of the other bubble areas, events there have been moving toward a crash at breakneck speed. Condo overdevelopment in Lynnhaven. McMansions sprouting like weeds along Great Neck. Beach shacks doubling every three years on the ocean. And where was the money coming from to keep the whole thing going?
All people would say to me was that everyone wanted to live there.
Everybody everywhere is still in the NIMBY mentality. Here’s my poor cousin with a 2nd home in Palm Beach County for chrissake, explains away the 49-month inventory as “only at Abacoa and City Place”, trying to believe his place is different, even though purchased just a couple of years ago. He did do a good job of renovation, but I think it’s too late to get his money out whole.
Err … no. Those neighborhoods are NOT just where the inventory is. I wrote a full column about this recently, since I live in PBC. There are houses for sale all over my development … condos and townhomes all over town … and single-family homes that the builders are now offering with discounts in the $100,000 - $200,000 range off original list price (depending on how high the homes started off at … discounts in percentage terms tend to be as high as 20%)
I wish it weren’t the case, considering I live here too. But I’m a realist, not a dreamer, so trust me when I say we’re literally swimming in inventory. The broader state is in trouble, too with some builders reporting NET order declines of 90% or more. The combination of slowing sales and massive cancellations from investors and people who can’t sell their old homes are behind the dismal news.
Column:
http://www.moneyandmarkets.com/press.asp?rls_id=479&cat_id=6&
Blog:
http://interestrateroundup.blogspot.com
Whatever happened to that mortgage broker in the Phoenix/Tuscon area who bought 10 houses and didn’t even know where they were all located? Anyone heard from him recently?
In case that didn’t jog your memory, he was featured in a well publicized article, driving around with a reporter in a brand new Mercedes, and gloating about how he wasn’t sure where some of his houses were located.
Oh, he must of found out that he was a identity victim ,or the properties never existed or they were tear-downs on swamp land .
Must be hard to do maintenance and upkeep if you dont know where they are located.
A 288k asking price with 90k in incentives on this new house .
I guess the final bagholder lender isn’t going to get to know about the 90k in incentives . I would rather have a 90k reduction in price ,the lower taxes ,etc. Don’t get me going on how I think this will come out as being a attempt to make lenders give higher loan amounts than warranted . Wow , I remember stating that the incentives were going to get bigger and bigger ,(whats this one 30% of purchase price ?)
The point is this . If that buyer on this 288K purchase price is also getting a no-down payment loan ,what is the true loan to value ratio of that loan? Next question .Do you think many lenders want to give a borrower a loan for 130% or so of the current market value of the home ? Do you think the appraisers are being told about the incentives so they can adjust their appraisal or do you think the lender is being told about the incentive so they can adjust their loan amount based on how they think those incentives have affected market value ?
Better question . How many borrowers can put a extra 90K down payment on this purchase because of the incentives ?
“….One home — a two-bedroom, two-bath house, shows an asking price of $288,501 with an incentive worth $90,000.”
I remember when a decent 3/2 home cost $90,000. Who are these clowns kidding? They can keep it.
So, you think the incentives are bogus ,or did they inflate the purchase price to cover the incentives ?
And do you think the bank knows that they’re buying a house with a forclosure value of no more than $198k?
I don’t think the final bagholder lender knows the true risk ,but the lenders that sold to them just make a pretty loan package look good .
It’s amazing how desperate the builders are to keep their sales prices high by offering huge incentives. It only underscores how distorted current reported prices are.
At least some of the large builders have quite a bit of wiggle room with regard to their prices. Should be interesting as we get more and more distressed sellers in the coming months. We will then get to watch them “compete” with these HBs and drastically reduce their prices.
Andy,
I hope the seller vs builder battle will be something like a ROCKY movie, bloody and an all out gutter war.
Maybe we could call it the “ROCKY HORROR”.
Oh darn, that name is taken.
(sarcasm off)
http://itulip.com/forums/showthread.php?t=602
Great graphs and analysis.
I now have a headache.
“Another factor in builders’ urgency to sell homes is their quarterly earnings reports, in which they hope to meet Wall Street expectations.”
Why? They’ve already sold their stock. Hell, they’re probably shorting it through a straw man.
Did everyone see this article on CNNMoney about “bubbleproof” cities…
http://money.cnn.com/popups/2006/biz2/newrules_bubbleproof/index.html
As I was opening this, I said to myself first entry has got to be San Francisco. Sure enough.
Now, they giddily report that from 1949-2006 S.F. prices went up 4.2% annualized vs. 2.3% for the nation as a whole. Thus, if we index 1949 to 100 for both S.F. and the nation (and prices probably were fairly close, in fact, if just a bit higher in SF) we get a 2006 index of 1001 for S.F. and 357 for the nation, meaning S.F. prices have appreciated 3 1/2 times as fast as the rest of the nation in that period (901/257). Sounds about right, actually, so we won’t quibble with those numbers.
But, if we apply this logic about S.F.’s immunity to the next 57 years, then the index of S.F. prices climbs another 3 1/2 times as fast, putting S.F. index at more than 10 X where it was relative to the rest of the country in 1949. Are we supposed to believe that it never stops? Of course! S.F. is different, everyone wants to live there!
No doubt they had a list of bubble-proof tech stocks back in 2001.
Note the clever selection of 1949 as a starting point. What did SF housing do from 1927 to 1945? Across US generally it sank like a stone.
Speaking of Seattle, our favorite smug flipper is pulling his two Seattle properties until the Spring. Hope springs eternal in the Spring of ‘07
http://seattlerei.blogspot.com/
Wow! from that blog:
On June 30, 2005, an entity (LLP, LLC, trust or the like) purchased this property for $664,000. At that point, the roller coaster ride started:
6/30/05 - Purchased for $664K
6/25/05 - Listed by new owners (even before it was closed) for $795K, marketed as a “pre-remodel” sale. They thought the market was so hot, someone would buy it for $130K more on the promise that it would be remodeled.
7/16/05 - Price increased to $895K (obviously, the house wasn’t done being remodeled yet).
11/3/05 - Listing Cancelled
12/20/05 - Relisted using a new Listing number and same agent at $998,500 (”It must be priced too low! That’s why no one is buying!”)
2/6/06 - Price dropped to $989,500
2/23/06 - Price dropped to $989,500
3/9/06 - Price dropped to $979,500
3/20/06 - Price dropped to $978,500
3/23/06 - Price dropped to $977,500
3/24/06 - Price dropped to $976,500 (these drops are ridiculous…a $1000 drop isn’t going to change the demand on this property. Clearly, it’s at this price range where the investors break even, since they refuse to drop lower, faster).
3/26/06 - Price dropped to $975,500
3/28/06 - Price dropped to $974,500 (you can almost sense the desperation…drops almost daily)
3/29/06 - Price dropped to $973,500
4/1/06 - Price dropped to $972,500
4/3/06 - Price dropped to $971,500
4/6/06 - Price dropped to $958,000 (reality is starting to set in)
4/12/06 - Listing cancelled
4/13/06 - New Listing Number priced at $958,000
4/28/06 - Cancelled
4/29/06 - New Listing Number priced at $899,000
6/14/06 - Cancelled
7/3/06 - New Listing Number priced at $895,000
7/26/06 - Price dropped to $889,234
8/4/06 - Price dropped to $849,999
8/4/06 (yes, same day) - Price dropped to $849,500
8/30/06 - Price dropped to $799,000
10/4/06 - Listing Expired
10/4/06 - New Listing Number priced at $799,900
10/5/06 - Price dropped to $749,900
11/7/06 - Listing Expired
11/8/06 - New Listing Number priced at $700,000
That’s scarier than any horror movie. I’m guessing that since the same agent is used throughout, she either is part of the ownership of the property, or is doing it for so cheaply, that the owners refused to pay for someone who was more expensive.
Additionally, here are some additional facts I was able to uncover about this fiasco of a flip:
An $800,000 private mortgage was recorded in February. This means that they are probably using private money or hard money, which means higher than market interest rates (I’m guessing 9-12%). Given the current sales price, they are way upside down.
This property has been on the market for 429 cumulative days.
It has appeared on the MLS using 8 different listing numbers.
What can we take away from this case study?
What can we take away from this case study?
(1) some sellers think that “new” listings sell better than old, discounted listings
(2) it doesn’t really make a s#it in Seattle anymore, since everybody’s sick of buying houses and it’s still raining
(3) some people spend more time adjusting their listing prices than we do on this blog
An $800,000 private mortgage was recorded in February. This means that they are probably using private money or hard money, which means higher than market interest rates (I’m guessing 9-12%).
Here in GA, hard money rates of 15% and 5 points up front are the norm. On 800k, OUCH.
txchick posts ” Wow! from that blog ”
Casey could learn alot from this.
“For new-home builders, sales cancellations are running as high as 40 percent, double the rate a year ago. And while new-home prices have fallen nationally, even those lower reported prices don’t take into account the extras that builders are throwing in to lure buyers. In other words, effective prices are even lower than reported. Another factor in builders’ urgency to sell homes is their quarterly earnings reports, in which they hope to meet Wall Street expectations. ‘They, then, will do something to make sure that homes are sold. They want to make their quotas. They just can’t say ‘I’d like to take a breather over the next two years,’ said John Strobeck.”
The reporter heard it first here.
new topic
rental rates- if you’re near new build home projects and condos are your rents falling ?
anyone want to take a shot at the YOY % drop for november or december ?