“Home Prices In The Doldrums Now”
Some reports from the Arizona Republic. “The 1,276-acre parcel of state trust land in Fountain Hills has been re-appraised at $95 million, about 27 percent less than the original appraisal. The Arizona State Land Department was forced to abandon the first appraisal of $130 million this year when the Valley’s housing market slowed and developers no longer were interested in the property.”
“The hottest topic of conversation in most Tempe neighborhoods is home prices and how they skyrocketed during the hot sales time of 2004-05 and how they seem to be in the doldrums now.”
“Real Estate agent Doug Roys says that the fact that Tempe, ‘is landlocked, has the biggest university in the United States, has a two-mile lake, is near the airport and has a small-town feel,’ makes it one of the most attractive destinations for home buyers in the Valley.”
“Did you experience a significant drop in business during the sales slowdown?”
“‘Yes, we all did. I saw the market begin to cool last fall, and saw it get real cold last May and June. I know there are market forces at work, but I also think the media contributes to the problem with negative articles predicting a downturn and people believe it because it’s in print.’”
In Business Las Vegas. “What’s up with the Las Vegas housing market? Steve Bottfeld of Marketing Solutions, argues that Las Vegans can be thankful that the housing market defies the laws of gravity and economics.”
“Dennis Smith makes no mention of smiling in his prognosis. Just looking at the number of sales per subdivision paints a picture of what’s happening, he said. That number dropped to 0.6 and 0.7 in the first two weeks of November, a level of demand that hasn’t been seen for 10 years.”
“One of the deterrents is the continuation of the soft resale home market, he said. Without the equity from selling their home, consumers can’t buy a bigger and pricier home, he said. ‘A strong resale segment is the only way we can reclaim our new-home move-up market segment,’ Smith said.”
“Resale closings have dropped for three consecutive months and are down 27 percent for the year, Smith said. Las Vegas, Clark County, Henderson and North Las Vegas reported 864 new home permits in October, the lowest monthly total since January 1993, said Smith who added he never thought the number would ever go below 1,000 again.”
The Review Journal. “Nothing effectively generates a buzz about the launch of a condo-hotel project like a powerful Web site and an experienced, knowledgeable sales and marketing team, a panel of experts said at a two-day IMN Condo Hotel Symposium at The Mirage.”
“Even with the folding of projects such as Aqua Blue, Las Ramblas and Hard Rock, Las Vegas is a hotbed among leading condo-hotel markets, said Joel Greene, president of Condo Hotel Center in North Miami.”
“‘You discover more about what people want and you always keep that vibe that if you don’t buy today, the price could increase tomorrow,’ said Michael Landau, vice president of marketing and public relations for the Edge Group, which is developing the $1 billion W Las Vegas.”
“Another panel at the conference focused on the ‘dirty words’ that can’t be used in sales and marketing in compliance with the Securities Exchange Commission.”
“‘Legally, we’re not allowed to mention the ‘R’ word (return) on investment. Never ever do we discuss numbers,’ David Schwartz of The Management Consortium said. ‘Our buyers are sophisticated, college-educated people with lots of disposable income and they like to vacation. We’re selling them a vacation experience.’”
“Greene said any buyers who are disappointed with anticipated cash flow from rental of their units may have been misled during the purchase process.”
“‘The SEC specifies that you cannot sell the investment aspect of the hotel, only the real estate and the lifestyle,’ Greene said. ‘You can’t get into occupancy rates or return on investment. It’s basically meant to be sold as a condo. You want an 8 percent return, buy a shopping center with Wal-Mart as your anchor.’”
The Nevada Appeal. “Forty-one Carson City single-family homes sold in October with a median cost of $302,000, down from $310,000 in September, according to the Northern Nevada Regional MLS.”
“Carson City’s housing boom hit a high in 2005 when the median price of a single-family home jumped 34 percent over a year to $348,500. The market has inched down in the last year. Officials have noted that fewer California buyers are coming into the Nevada market and are instead traveling farther east.”
“‘It seems middle-range housing has had a modest reduction,’ said mortgage broker Sherry Negrete. ‘The lower price range properties have dropped significantly.’”
“New construction by Syncon off Curry Street and the Centex townhouses on Roop bring hope to agents. ‘There’s a lot of new construction going on, which is a sign the market is picking up,’ said Realtor Jim Shirk.”
From a post yesterday:
‘Like the rest of the housing market, however, condo hotels are not immune to the slowdown, and several projects, after splashy sales releases, have quietly curtailed building plans because of sluggish sales and rising construction costs.’
‘Turning a profit may very well be an unattainable goal, according to Dante Alexander, CEO of the National Condo Owners Association. ‘Most should not expect to make a profit even with full participation in the rental program,’ Mr. Alexander said. ‘The average condo hotel will generate $7,500 a year but cost you $12,000 a year.’
More Arizona news:
‘A lull in home sales is prompting builders to get creative with incentives for would-be home buyers. DMB Associates, the mastermind behind the 8,800-acre Verrado community in Buckeye, is offering a free neighborhood electrical vehicle to new-home buyers through Dec. 15. The electric vehicle is worth about $9,000.’
‘Jeff Cline, the developer of the troubled hotel-condo project at Chandler Fashion Center, has obtained a bridge loan of $24 million - saving the project from a foreclosure auction. The loan won’t be enough to get work restarted, but it buys Cline time. One of the subcontractors, Tim Drexler, owner of Ace Asphalt of Arizona, was skeptical about whether he would go back to the site.’
‘The fact that he had to file a mechanic’s lien has given the project a taint, he said. ‘It won’t be an automatic yes that we’re going finish the project,’ he said.’
‘Customers of a defunct local contractor are out more than $666,000 on remodeling jobs that were botched, abandoned or never even started, state records show. The only recourse for many customers will be to take legal action against Tucson-based Albrite Bath & Kitchens, which closed its doors Nov. 5. The company laid off its employees and stopped work on all jobs.’
‘Unless they have a huge pile of money somewhere, they’ll be declaring bankruptcy pretty soon, so even if people do sue, they’ll be looking at pennies on the dollar,’ said Al Sterman, vice president of the Arizona Consumers Council. ‘It’s ridiculous that the recovery fund and the bond for a company doing this much business is so low. It’s completely ridiculous for somebody to put up $15,000 to do $1 million of business, or in this case, $5,000.’
Lots of contractors are getting the shaft:
http://bakersfieldbubble.blogspot.com
crispy,
I am friends with a local developer who preps lots to go ‘verticle.’ His co. is in ruin. He accepted a job up north in Sacramento where they will be developing homes (3800 units) at 199,000 a piece 1400 sq ft. and 229,000 at 1700 sq ft. wow. right? I asked him what the margins were and at first he gave an astronomical number but later told me another figure that was less glamourous. Does anybody know enough about the new home market to give a ballpart of pure profit from breaking ground to complete finished product. ie cost of building a new 1400sq ft home?
Now those prices make sense. That’s a bit below Portland, OR. but if they sell the 1400 SF places for $199K, they may move them all. IMHO.
A GC (general contractor) generally makes about 20% on the product during reasonable times. They make a killing when they bank land early during times of high appreciation. They go bk when they keep buying land at the top, but then the market goes down.
“Real Estate agent Doug Roys says that the fact that Tempe, ‘is landlocked, has the biggest university in the United States, has a two-mile lake, is near the airport and has a small-town feel,’ makes it one of the most attractive destinations for home buyers in the Valley.”
So if it is so great to be landlocked, I guess San Diegans should soon expect to get a discount for living in water-blighted coastal areas like La Jolla instead of naturally-warm, landlocked areas like Borrego Springs?
http://www.desertusa.com/borrego/du_borregosprings.html
That’s two days in a row with ‘landlocked quotes out of the Arizona press. Do the reporters not even think to question this nonsense?
Comment? See blue lettering on the right side (solid sellers market in Sedona)
http://realtytimes.com/97/JoelGilgoff
He has a lot of nerve.
Do you think it’s “nerve” or just blind panic?
Those kind of statements used to get you in trouble with the AZ Dept of RE. But hardly anyone pays attention to the “code of ethics” anymore. It’s a free for all for any clients out there.
You would think. To tell people prices are going up 10%/year at this point is close to the line.
No worse than the “Get rich quick with real estate investing” ads that run 24-7 on cable TV.
Grgg Swann is franchising?
One of his gems:
“Buyers have a source of investment capital that they haven’t considered — their pensions.”
“There are estimates that say there is approximately a trillion dollars sitting in pension plans in America. Imagine what that money could do in the real estate market. So if you are looking for new sources of capital to expand your real estate portfolio, get familiar with the basics of pension fund investing.”
How is this guy not in shackles just for suggesting this? We really need to build a lot of public squares throughout the U.S. and bring back public corporal punishment. I would love to grab a few beers, some hot dogs from Papaya King and watch the realtors squirm on the rack. It would be fantastic on so many levels.
He’s not the only one. I got the exact same newsletter here on the east coast. All the “articles” are boilerplate from the NAR, with the “blue letter special” added by the realtor “TM” .
Landlocked? LMAO! Must be a good time to buy??!?!!?
Don’t you know they’re not making anymore landlocked land? With global warming swallowing up the coastlines, there will be less and less landlocked real estate in the future
Is it time to bring back the “x-locked” jokes?
If I remember correctly it was a Flagstaff article that kicked off that series of bad jokes.
“‘You discover more about what people want and you always keep that vibe that if you don’t buy today, the price could increase tomorrow,’ said Michael Landau, vice president of marketing and public relations for the Edge Group, which is developing the $1 billion W Las Vegas.”
I hope this clown gets stuck with Paris Hilton working the “vibe” at the W Las Vegas.
That line about keeping the buy now or pay more later vibe just disgusts me.
“you always keep that vibe that if you don’t buy today, the price could increase tomorrow,”
There’s the “sense of urgency” ploy. I just wish more of the public realized when this ploy was being used on them.
“Greene said any buyers who are disappointed with anticipated cash flow from rental of their units may have been misled during the purchase process.”
If you purchase vacation property, you should assume that it will be vacant most of the time. If your income can handle that, plus the maintenance etc, then fine.
Also, you should not be buying any investment property that you yourself would not live in, because someday you might have to. Hence, I would only buy vacation property if you plan on retiring to that place someday.
In a couple of years there will be plenty of vacation props for sale at very low prices.
This schemes are really pretty old. I know of several on the gulf coast that operate under major hotel names, but are individually setup. The buyers get tired of the fees and negative cash flow, and sell.
The hitch is, the guy who sets it up collects the management fees, bar and food revenues and usually even brokers the sales as they come and go.
It is fascinating how maniacal greed, just blinds people to business risk.
If you want to “invest” in this type of property, the could have simply purchased shares in a REIT or a hotel chain. The exit barriers are far easier.
I’d be very reluctant to purchase any vacation property. There are too many places on this planet that I’d like to visit instead of going back to the same place, every year.
“Also, you should not be buying any investment property that you yourself would not live in, because someday you might have to.”
Is it possible to live in five different houses at the same time? Just asking a hypothetical question here, as I am sure that nobody would be dumb enough to invest in five houses…
If you own five houses, you can’t live in any of them. You have to live with your in-laws. Just ask Casey Serin.
“Carson City’s housing boom hit a high in 2005…”
Yeah, and it took OVER A YEAR for these dunderheads to discover this and even longer to admit it. Now these same people who have been driving through their rearview mirrors want us listen to them when they say current conditions are holding steady. We listen all right.
lol…I haven’t seen “dunderheads” in a while…that and “numbskulls”. Funny.
Danny DeVito would use the term “num nuts” to describe these morons.
“Numb nuts” from sitting on their a$$e$ so long.
Why in the world does anyone believe anything these industry beards say? They’v been wrong every time for more than a year with no end in sight.
“Carson City’s housing boom hit a high in 2005…”
I think prices in Northern NV will steadily decline for the next several years now. We may see the occasional blip upwards in median price when some high end stuff sells. But the fact that prices in places like Reno and Carson City reached these levels is disturbing and ludicrous. I found a couple of humorous posts on craigslist.
http://reno.craigslist.org/rfs/242260798.html
http://reno.craigslist.org/rfs/242700940.html
Desperation should become the norm in the not too distant future…
‘Our buyers are sophisticated, college-educated people with lots of disposable income and they like to vacation. We’re selling them a vacation experience.’”
I sure am glad I’m not “Sophisticated” or I’d be throwing money down the toilet too ! I RENT my vacation destination and never have to return to the same place twice.
Ditto.
I can keep my principle, and with the interest, vacation in the nicest places, in the best season, with no worries about taxes, maintenance, etc.
I never understood “owning” vacation homes. Everyone I know who has had one complains about it. They are compelled to use it at every vacation…they rarely go anywhere else, because they wouldn’t be using their “investment”. I’m sure there are people that really love their second home and are happily using it whenever they can, but I don’t see much of that…especially with all the “sophisticates” buying condos in Vegas. Yuck.
Thank god I never got that college degree. I would be too sophisticated to say “no” to a condo-tel ponzi scheme. I must write out a check to my high school and thank them for taking my desire to get a college degree away from me. It has saved me a lot of money and headaches.
Do any of these real estate people have the filter inside their brain that keeps them from saying such obviously stupid things? Don’t answer that.
IMO the media should be reporting on the areas that are in trouble . The fact that the real estate industry doesn’t want this sort of reporting goes a long way toward showing just what this scam market was all about ….Hype ….. Prices aren’t just going into a lack of appreciation mode they are going into a crash mode .
I get sick of the statement ,”sales have slowed down a bit “. Well, with incentives and price discounts needed to sell ,this is big news that the market has turned so fast .You should see the media questioning this more . What are the reasons for this fast turn-a-round to a down when the interest rates were about the same ?
A good point that I have been wondering about. Why doesn’t the media approach this with the finances of the public in mind instead of treating it like some meaningless game?
If all hell breaks loose, will the public remember how the press spoonfed this stuff to them?
The problem facing all the people I know who want to move - can’t sell their place at a decent price, so they are staying where they are. Only one friend who moved is selling his place at a loss here in SD county, because his new job pays better. . .other friends are renting their places (for a loss) and are hoping the market improves. . .this is killing the move-up market.
“can’t sell their place at a decent price”, Decent price means selling above what they owe from the ARM adjustments and their HELCO loans. It suggests to me that there might not be a massive amount of new listings in the spring as the sellers realize the gravy train has ended and they have no place to go, especially if the job market tightens up.
“It suggests to me that there might not be a massive amount of new listings in the spring…”
Are you factoring those who borrowed too much to buy homes they could not afford (on the assumption of 10%+ annual price appreciation forever) and whose ARMs are soon to reset into your prediction? Or those who invested in not just one, but two, three, four or five investment homes, again on the assumption of 10%+ annual price appreciation forever?
Because my impression is that there are many such folks in markets formerly referred to as a bit frothy… Won’t know for sure until after the Super Bowl, though.
This one especially I found interesting:
New construction by Syncon off Curry Street and the Centex townhouses on Roop bring hope to agents. ‘There’s a lot of new construction going on, which is a sign the market is picking up,’ said Realtor Jim Shirk.”
bring hope to agents….
That is desperate hope. Price and sales are both falling, construction is going up. That indicates market is picking UP??
I guess It does, if my paycheck depended on that.
Or the realtor is smarter than I assumed, he might be meaning with more supply coming into market, thus the prices will come down FAST and there will be more buyers who can afford a home and more SALES…
The REIC should hope for a fast 50% crash, which would bring affordability to new buyers.
Whooooo - hoooo !!!! More inventory — allllllllright!!!!
“‘There’s a lot of new construction going on, which is a sign the market is picking up,’ said Realtor Jim Shirk.”
C’mon, Shirk, anybody could have seen this from the acceleration in starts and permits the last few months.