Post Local Housing Market Observations Here!
What do you see in your housing market this weekend? Price reductions? PhillyBurbs, “The average price of homes sold in Lower Bucks County plummeted 14.5 percent in November, compared to prices in November 2005, according to data from Prudential Fox & Roach Realtors in Doylestown.”
“‘We’re seeing similar declines in central and Upper Bucks,’ said Megan Leitch, a spokeswoman for Prudential, adding November-to-November sales prices dropped 7 percent there. Overall, Lower Bucks housing prices declined in September, October and November of this year.”
Unattended open houses? Washington Post, “In a market gone soft, with a glut of property available, agents are dusting off sometimes rusty marketing skills, honing new ones and making sure the word gets out to their peers.”
“For Ty Hreben, brokers’ opens have been less successful. There are so many out there now that ‘I’ll do a catered brunch or desserts from Whole Foods, and I won’t get more than five to 10 people,’ he said. ‘Sometimes I end up eating it all myself. . . . Luncheons can be a total waste unless the agents who know the area know [the house] is well priced.’”
Construction trends? Illinois. “The terms ‘overvalued’ and ‘Rockford housing market’ don’t normally appear in the same sentence. The number of large manufacturing employers has shrunk significantly over the past decade, with many of those workers moving into lower pay scales. The Rock River Valley’s per capita personal income has plunged in the past decade.”
“If income doesn’t grow, how can home prices keep going up? ‘It’s all supply and demand,’ said Vic Nafrano-wicz of Homeowners Concept. ‘You see all these big homes being built, and you have to wonder if there will be people here making the kind of money necessary to buy them in 10 or 15 years.’”
Homebuilding costs? Montana, “Stimson’s VP, Jeff Webber, confirmed Thursday that the company will cut some 43 jobs at the Bonner mill, effective Jan. 2. Stimson has seen its margins squeezed flat by high stumpage prices on one end and low lumber prices on the other, said Michael Woodworth. Average lumber prices have fallen by half, to a 10-year low of $240 per thousand board feet.”
Or foreclosures? “North Texas home foreclosure postings are up more than 20 percent from a year ago. This year, 38,809 D-FW area homes were posted for foreclosure, an increase of 19 percent from 32,513 postings in 2005. It’s the largest number of home loans in default since the 1980s regional recession.”
Arrrgh.
My buddy just got rid of a spec house that was killing him and yesterday he asks me about buying some lots that his buddies are stuck with.
After everything he has experienced and everything I’ve explained to him the lure of easy money is just too strong.
Just say NO to FBs looking for GFs! Friends don’t try to sell friends overpriced real estate.
If you just listened to 2 hours of FOX business news this Saturday morning ,as I just have, you would have heard stock market prediction of it being either too low and going up and there is no housing bubble.
I just wonder what planet they are on and where am I.
I’m in the Martinsburg area(WV) in the eastern panhandle of DC suburbs, about 75 miles from DC. Here the builders are not effectively reducing the prices. Initially the SFH(4000 sq ft.)were around 400K with free options like morning room and finished basement. Now the price is down by 40K with no free options. I’m not sure how these houses are selling and who is buying them. Salaries in WV are very low and the commute to DC is sickening due to rush hour traffic.
People who bought houses in 2004/5 are putting their houses at 450K for sale, at least 50K more than builders price as of today. What are they thinking? Still in denial mode and the houses have been sitting for months. 50% houses here were bought be speculators and are being rented at half the mortgage cost. Moreover, the builder maybe telling sellers not to reduce prices, maybe this will allow builder to sell at slighlty cheaper price and reduce inventory. Sellers are fools not to understand that builders are playing games so that they can sell their own new houses and the ones built in the last few years, and sellers get convinced that they shouldn’t take a loss. This is WV, I’m shocked with avg. household income of 32K.
I’m guessing that the sellers did 100% financing with an interest-only loan. If they drop their prices, they are going to have to eat the loss out of their own account. My guess is that they probably don’t have $40k to lose.
SO it means the prices don’t go down, until the bank takes the home.
Looks like everyone here is in a Cartel to not to reduce prices.
Exactly! the builders talk about a bottom and recovery in 2007, existing home sellers keep their prices high and the builders steal the available buyers with cheaper prices.
Martinsburg and Hagarstown are sad old places. They had their glory days in late 19th century - you see many fine examples of the German influence in the buildings. Now, most of neighborhoods have deteriorated into trashy slums, and the locals look like extras from “Deliverance.”
TOLL Brothers is building 900 houses in Martinsburg. I’m not sure who they are selling these houses to and there are another big communities coming up in Martinsburg in the price range of 400-500K. The demand is not there, still a lot of development.
Really, I think it speaks volumes that West Virginia has “DC suburbs.”
If you just listened to the FOX show at 10 Eastern they had one guy on saying housing is crashing, it is all based on foreign borrowing, and they practically yelled him off the set
just got finished listening to the 2 hours of the running of the bulls weekly on fox and they did run the bubble theory guy off the set.
also one quack said the market is at least 80% undervalued
with a straight face
and tobin smith was pimping the same stocks as cramer this week, uarm and garmin
i am priced out forever in nyc now that all the wall street bonus boys are done snapping up all the new condo’s they could buy
regardless of price
well after they were done snorting, drinking and screwing the bulk of it away first
That “quack” was K. Fisher who manages about 6 billion in assets.
That “quack” was K. Fisher who manages about 6 billion in assets.
Yeah he’s so good he has to send out spam mail to get business. I have a seperate recycling bin for all the junk mail I get from him.
so if he is so smart take all your money and put it in the very undervalued market
I’m glad I don’t have any money with HIM.
“and tobin smith was pimping the same stocks as cramer this week, uarm and garmin ”
LOL! Both high on my list of short candidates.
The FOX bulls know if real estate goes everything goes and they are scared of that. They believe in the equity markets and will do anything to protect that.
BPLI posts ” one guy on saying housing is crashing, it is all based on foreign borrowing, and they practically yelled him off the set”
I recall they did the samething to Bill Fecksteine some years go when he stood up to Abby Joseph Cohen and Joseph Bagfullofdonuts…. When Bill told them to sell and head for the hills in regard to Dot Com. I might add in time for all to take a profit BEFORE the crash!
But this FOX thing is really great! Just watch it, and you
know EXACTLY the opposite is true. The Soviets understood
this too.
-M
Ah the good old days.
It was said that a soviet leader could survive anything except the sniffles. If the soviet media reported that a leader had the sniffles, then he was already dead.
The bears are usually out- numbered on any of these business new reports TV shows .
Following the “stunning” 8.2% decline in the median home the loal fish wrap has started running articles, front page no less.
http://tinyurl.com/ymxw94
Prices have dropped 10 percent to 20 percent at RiverPark, a development of 2,800 homes in Oxnard north of Highway 101 and west of Vineyard Avenue, officials said.
And my persistent favorite:
“We were all surprised by how fast the market slowed down in the beginning of the year,”
Robert Cote posts ” Prices have dropped 10 percent to 20 percent at RiverPark”
I drive past that mess afew times a week on biz. It defies logic and any common sence. Aside from the timming/prices/loan…. That land looks rotten. It is river bottom land and will not fair well in bad rains. Even worse if there is an earthquake it will sink like Mexico City.
In Filmore just up the 126 they are doing the same damm thing on a smaller scale?
“Prices have dropped 10 percent to 20 percent at RiverPark, a development of 2,800 homes in Oxnard north of Highway 101 and west of Vineyard Avenue, officials said.”
I actually went inside their sales office and got the price list. There will be a variety of home types offered, the affordable townhome units start in the low$400,000,s. The highest SFH’s are as high as the high $600,000’s.
Looks like only the low-priced townhome units are up, at least from looking at the project off the 101 fwy. Estimate that only 15-20% of total units bulit so far: this project will take as long as 3-5 years to complete, if they actually complete all the phases. They do incorporate a flood catch basin in the plans, 2 elementary and 1 middle school, as well as a shopping center. They better have a good flood control plan as the santa clara river has a major flooding event every decade or so.
It’s pure denial on the Central Coast. While there have been some people forced to “give away their homes”, the vast majority believe that everything will be OK if they can just keep making the payments until spring 2007.
I now have several accounts from real estate agents that are in the process of being sent to a collections agency - they won’t pay their bill or return my calls.
2007 will be the new 1929.
Lots of kool-aid in SLO. Things appear to be slowing in the No. County area.
Think I have posted this before, but I do love it. One of the rental properties being advertised in Morro Bay (and just sitting there, not disappearing from the listings) is a suite at 798 Morro Bay Blvd, which happens to be the Coldwell Banker office.
How are prices in Los Osos with that sewer project looming?
Los Osos has the biggest YOY median decline on the Central Coast: -20%.
That -20% is great news! Thanks for the follow-up!!
I recall that horrible show “Million Dollar Listing”. I watched it a couple of times and that crabby old jew with the nasty wife was doing these “broker opens”. He would buy the nastiest and cheapest food/snacks to boot. My impression was that this was filmed at the peak in 2005, so maybe RE agent practices vary across the country.
Here’s what I see… There’s a duplex in my L.A. neighborhood (90048) which has been on the mkt for many months at 1.7 million. I laughed heartily every time I passed it. “Who would pay that for a duplex?!?!” I smugly thought. It’s in escrow. I give up….
in escrow at what price?
honestlt don’t know, but let’s generously assume they sold for %20 less than asking… Still way too much… L.A. is full of GF’s… sadly for me…
I patiently watched a house across the street sit on the market for over a year. I thought it was just a matter of time before I could pick it up at a price that would cash flow as a rental. Nope. It sold to an out-of-state family who told me they thought it was a “steal”.
Average lumber prices have fallen by half, to a 10-year low of $240 per thousand board feet.”
That IMO, is a ominous sign…..
Could also be telling us that additions to current inventory will be slowing.
Yes especially when the mill in lincoln was paying $500 / 1000 bd ft for douglas fir logs this year. They scale the lumber based on old formulas so if they say a log scales out at 1000 bd ft they will actually get a lot more due to efficiency’s in milling lumber these days. The most profitable logs are small ones for them because of the vast overrun they get. You might sell them a small log and it scales at 100 bd ft but they are able to actually yield 200 bd ft. In larger logs without much taper there is a lot less overrun for them.
I’m watching a house for sale on realtor.com that’s been on the market since about Apr 06. Same model we sold in Feb 06 in Oceanside, CA. The “asking” price is now down $100K from what we “sold” but they started above our price and have been chasing the market down.
I’m watching a house for sale on realtor.com that’s been on the market since about Apr 06. Same model we sold in Feb 06 in Oceanside, CA. The “asking” price is now down $100K from what we “sold” but they started above our price and have been chasing the market down.
And how much of a commission is Ben getting for saving you that $100,000?
On the other hand, there is this;…
Spoke with a friend who is building 9 houses 5 almost complete and 4 just finishing the framing….He said he is having a horrible time controlling costs….He is over budget $35. per foot at least…Now approaching $200. per foot….Material prices have softened but labor has gone through the roof…His last project, 2004, for same type of product cost $140. per foot….
How is it that he cannot control his labor costs? I am not a builder so forgive me.
Bbear;…He does what any competent builder would do…He gets multiple bids from Licensed & Insured sub contractors…..The “Burden” costs have gone up exponentially…Where the actual wage for the employee may not be rising that fast the costs associated with that employee (Ins. etc.) have exploded….Add onto that the government raising the fee’s on everything associated with the building process and there you have it…
I live in Rhode Island, and you can certainly get more money for the house that you could last year but many decent size homes from the 2000 sq ft variety are still in excess of 450,000. Sure you can buy a dump in the 200,000 area but I dont think 200,000 is exactly very affordable for most people anyhow.
I worked out some numbers the other day for affordability. For the avearge firefighter, construction worker, nurse and police officer making 70k a year in my neck of the woods to afford a traditional 30 year fixed mortgage, the most they could afford to make payments on is for a $1500.00 a month.
The old standard for calculating what you could afford is based on 25% of your gross at the top of what you could afford. 70,000 x .25 = 17500. Divide 17500 by 12 the number of months in a year and that comes out to 1458.00 That number should consist of your taxes, insurance and principal and interest. So the most house someone making 70k a year could afford with a home that had taxes of 3500 a year and 800 in insurance would be 210,000 a year.
So if someone were married to another person making 70,000 a year the total should not be 420,000. What if that person loses their job or gets sick. In either event, 420,000 would be the most that this family could afford and still take a few vacations every year.
Prices will surely be coming down.
Or many buyers get large salary increases (inflation).
Hey, gang. Ever notice that Ben never posts anything from the Philadelphia Inquirer or Daily News? It’s not his fault. Those papers were bought out in March — and BRUCE TOLL is now the co-publisher.
Well, here’s something you won’t see in the Philadelphia Inquirer any time soon. Toll’s biggest Philadelphia project, Naval Square, has dropped prices 25% (!!!) since last year. I found this nugget on phillyblog.com:
http://www.phillyblog.com/philly/showthread.php?t=28421&page=2
Here’s the text:
“On the whole Toll subject I have an interesting observation that I thought might stimulate some discussions. Sitting in front of me I have a price sheet dated August 22, 2005 from back when I purchased one of the condos in Biddle Hall [in Toll's Naval Square]. So, I took the old price list and went up on Prudential’s site to see what they were going for today. I found two that were on the old price list:
The Gimbal - Was $537,975 - Now $402,475 (Diff. = $135,500 Change = 25%)
http://www.prufoxroach.com/search/search_results_profile.cfm?propID=08a5a43c-d7d5-43c9-98d7-c7de6766e0e7&propNo=48
The Ramsey – Was $531,975 – Now $389,475 (Diff. = $142,500 Change = 27%)
http://www.prufoxroach.com/search/search_results_profile.cfm?propID=bc846d17-36af-4131-b0ff-f3fba392553d&propNo=66“
Control the media and you control the truth. Unfortuantely Bob Troll can’t control the blogosphere!
Not yet anyway, but it is coming. The powers can not allow this ability to communicate without filtering to continue. This is just the beginning.
http://www.infowars.com/articles/ps/internet_mccain_bill_lethal_injection_for_net_freedom.htm
I’m a buyer at $175K
More from Philly.
I sent to this site photos a couple of weeks ago of a building scheduled to go condo. (It’s now # 6/209 on the Photo Gallery link above.) I was skeptical that it would ever be completed. The developers pulled the plug on it this week. The new plan is to build rentals. Not holding my breath. Not a peep in the Toll-owned area newspapers, of course.
Here’s the original announcement:
http://www.findarticles.com/p/articles/mi_m0EIN/is_2005_Nov_8/ai_n15783949
Here’s their website now:
http://southbridgephilly.com/
Single family homes for sale in Portland, Falmouth, Cumberland and Cape Elizabeth, Maine paint a picture of a market without major movement:
11/3/2005 425
12/5/2005 406
1/3/2006 352
2/2/2006 344
3/3/2006 345
4/4/2006 351
6/4/2006 409
7/22/2006 477
9/9/2006 467
11/5/2006 437
12/15/2006 355
You can’t say much without saying anything about prices…
Prices are down about 1% vs year ago, but that could be biased by what was selling. It seems to be a real stare down.
Waiting for prices to go down further before I buy. I waiting for Spring.
Houses in Maine generally go at 2000 to 2400 square feet 400 to $549 thousand. Over $187 a square foot
Been watching patiently to buy for over 8 months and the houses that do sell are priced comparable to the 2002 price. Most of these listings the price is marked up 30% from 2002 prices. Have been seeing alot of withdraws until Spring. One house has been on the market relisted twice, crappy location in the middle of field between two intersecting roads.. The first realtor reduced the original price by 50000, didn’t sell So the Seller relisted second time with another agent.When it was relisted the price went up $20000. I have been to many subdivisions with empty houses not selling for over 8 months.
See here
http://tinyurl.com/v2php
It doesn’t include appliances either.
No wonder why there isn’t any major movement. Most of these houses overpriced, crappy location or formica countertops..and sellers are waiting for the GF
The listing you showed is in Scarborough. That place seems to bee exploding and I’m sure once the mega sized Cabela’s moves in, it will become even more well known. It’s very close to Portland, has a nice head start to Boston if you travel that way and has incredible beaches. The only thing I don’t know about Scarborough is how highly the schools are regarded. My impression is the best schools around Portland are in Falmouth, North Yarmouth, Cumberland, Yarmouth and Cape Elizabeth.
By the way, I believe the BIGGEST price cuts will be on ski area condominiums. Places like Sunday River seem to me way, way overbuilt as compared to demand.
2002 pricing would be a 30% ? haircut from peak= wow
SD ziprealty inventory is down to 18,351 (but shows no new listings for 12/16/06 — today). Paradoxically, there are 200+ homes showing up as “newly listed,” with listing dates on 12/14/06 or later. In other words, over 1% of the current inventory was just listed in the past two days!
Last year’s inventory nadir was reached around 1/2/06, at 13,896, if memory serves. So unless there is a huge drop in listings over the next two weeks, then we will start 2007 with close to 4500 more listings than at the beginning of 2006. I am also guessing that buyers will be considerably more cautious going forward than they were earlier this year, with all the MSM “scare stories” about falling home prices.
There is a full-page shill piece in the Sunday SD Union Tribune today run by the Building Industry Association of San Diego County
( http://www.biasandiego.org ). My rebuttal to their talking points is provided in parentheses.
“Don’t be fooled by the headlines
If you’re just reading the headlines, you could be missing a great opportunity to buy a new home (sorry pals, I read the full stories, not to mention numerous articles from newspapers around the world posted on the housing bubble blog, which explains why my feet are frozen solid at the moment).
CONSIDER THE REAL FACTS…
1. Demand has slowed for now, but San Diego needs 18,000 homes each year* just to keep pace with population growth (but I thought there was currently net outmigration from SD; SANDAG must be including illegal aliens in their count. And I heard a rumor that there is a glut of new homes on the market, which usually indicates prices will be lower in the future.).
2. The current supply offers a range of choices for every budget (so long as you are willing to rent at $0.38 on the dollar of ownership costs for a comparable home).
3. Our local economy is strong, and mortgage rates remain at near record lows (but I thought the local economy was heavily dependent on real estate, which is obviously in a recession?).
4. The market is favorable for buyers today (so long as they don’t mind catching a falling knife), but that won’t last forever (although it became increasingly favorable for buyers over a period of about six years the last time there was a real estate bust).
Headlines sell newspapers — we build homes. We are San Diego’s home builders.
*source: SANDAG
Southern NH(nashua for me) is definately starting to lower asking prices. I’m looking for a townhome or starter home and have seen some stuff that just wasn’t there a year ago. One condo area has homes at 160 or so, they were 190-200 a year ago. Some of the older, down town homes are at 170-200 now, still expensive for the high property taxes/job base but unheard of just a year ago. Couldn’t even find a house of any sort under 200 last year. Me and my wife may actually start house hunting this summer, something I wouldn’t even discuss with her over the last 2 years. Some of her coworkers(nurses assistants maybe making 12 an hour) bought places in 2004 or so and their ARMS are adjusting. They are struggling and working overtime. I hated not owning a home but me and my wife didn’t have to stress over paying mortgages that are doubling like they are for many of her coworkers. Some even bought dumps that are literally falling apart and require tons of cash just for repairs. The flip side is a considered buying something in 2002, the market was getting hot but I should have pulled the trigger, oh well.
If you are planning on starting a family, I would be careful about some of those downtown neighborhoods. Assuming you’re talking about the places east of downtown.
Or even slightly west of downtown. There has been a big demographic change in Nashua resulting in a lot of problems in the school system that parents have to deal with in the middle and high schools.
Too bad we are not allowed to discuss race honestly (without being labeled a racist).
Mark posts ” Too bad we are not allowed to discuss race honestly (without being labeled a racist). ”
Mark you can as long as you are not white. Ton’s of Blacks and Latino people make a living doing that very thing. In Show Biz many do “talk honestly” and are funny but if you are white you may not. Red-neck and white trash jokes are OK for all and Jeff Foxworthy does well by them BUT if he went where Martian Lawrance, Eddie Murphy, Chris Rock and Richard Pryor go he is a Nazi period.
Selective perception or selective permission?
I guess that there are some benefits to being in a minority group.
I don’t live in Nashua but asked parents that do about the stories about the schools that have been in the local paper and they’ve been pretty candid with me about the stories.
Or Israel without being called anti-semetic.
Or Israel without being called anti-semetic.
There has been a big demographic change in Nashua resulting in a lot of problems in the school system that parents have to deal with in the middle and high schools.
You must be referring to the recent surge in Amish drive-by shootings. Clip-clop, clip-clop BANG BANG BANG! Clip-clop-clip-clop-clip-clop….
I live and work around here. It’s still one of the safest small cities in the country. Nothing is perfect. I’d rather live near hispanics in nashua than be hours from MA.
I’m not talking about safety. I’m talking about the effect that it has had on the school system. There have been many articles
in the Telegraph on the problems in the district since the start
of the school year.
you’ll be back to 2003 by SUPER BOWL
“The flip side is a considered buying something in 2002, the market was getting hot but I should have pulled the trigger, oh well.”
Don’t sweat this, NH. You’ll get your chance again and, when you do, you’ll be in a much better position than you were in 2002.
Not really. Had NH bought in 2002 NH could have sold at the peak …sat on the sidelines (profits in money market or certificates)and if prices revert to 2002 or further back he could almost pay cash with those gains alone. Or alternatively, the equity could have been capitalized into other markets …all the while NH enjoys the home without moving or renting or paying realtor fees or increasing property tax base, depending on the locality of course..Your willingness to be sympathetic is appreciated though. I am not trying to be mean, as Yours truly makes mistakes too. It just seems objectivity is buried on this blog frequently( perhaps because of the like mindedness of the participants).
Can anyone imagine? Real estate fraud has been uncovered in N. San Diego County…
——————————————————————————–
The San Diego Union-Tribune
Real estate fraud trial under way in N. County
By Dana Littlefield
STAFF WRITER
December 16, 2006
Testimony began this week in a trial in which operators of a North County real estate venture are accused of defrauding investors out of more than $1 million and promising homes that were never built.
Prosecutors told a jury that First Latino Group promised low-cost homes and services to more than 100 investors, many of whom are members of Hispanic churches in the North County. The group is no longer in business.
Lawyers for the four defendants – including organization president Rolando Montez, 51, of Vista – told jurors their clients acted in good faith.
Witnesses testified in San Diego Superior Court that they attended presentations by Montez and others associated with the organization and were persuaded to pay $7,500 each to reserve one of several homes to be built in Vista.
http://www.signonsandiego.com/uniontrib/20061216/news_1mi16latino.html
“Witnesses testified in San Diego Superior Court that they attended presentations by Montez and others associated with the organization and were persuaded to pay $7,500 each to reserve one of several homes to be built in Vista”
How do 100 investors coughing up $7500 each plan on ‘owning’ their own homes? The article states that THE ‘operators’ purchased lots for several(or 13 homes)which were never built. Did the investors plan on communal living? What a bunch of dumb a**es! Being taken to the cleaners by a supposedly honest churchgoing group and promised 20% returns. Anytime someone promises a 15-20% return on anything that should raise a red flag!
I took a self-guided tour through Black Mountain Ranch today — a San Diego community nearby where I live. I would guess there are maybe 1000 new homes in the area (the web site says 942, but that is only for Phase I) at an average wishing price of $1m, for a total base value of $1b before the inevitable inventory writedowns when the McMillionaire shortage becomes too obvioius to hide.
This glut of supersized, overpriced homes will weigh down the prices of used homes in nearby communities like 4S Ranch, High Country West, Rancho Penasquitos and Poway. Good night and good luck!
http://www.blackmountainranch.com/
Went with the family tonight to a production of The Nutcracker ballet out in Poway. We saw a large number of For Sale signs during our short drive there and back home. I feel sorry for the used home sellers in Poway, because the inventory avalanche five miles to the west in Black Mountain Ranch, where the homes are brand new and the climate is much more Mediterranean, will prevent many Poway used-home sellers from getting anywhere near their wishing price.
[waves at GS] Hi GS, we are in Rancho B visiting family. I thought I saw you crossing the street over by the whatsits and the thingy over by that building with that part on it that looks like a thing.
Martin from Martinsburg……
I moved to the panhandle over one year ago…..I sold my home in Columbia, Md for a nice price and built a home near Harper’s Ferry, WV. My neighborhood (nice development with all custom homes from 3000 sq ft and up) had about 7-8 listings over the past 7-10 months. Only one sold and I know it sold for a meag discount….The others either continue to sit on the market, or they were pulled off the market for now. There are several cookie cutter developments (one over 4000 homes) still pushing forward……..I don’t get it? I know our homes true value has probably dropped about 100-150k from it’s appraised value. We bought the 2 acre lot about 4 years ago for 100k and we spent about 475k to build the home…….I see a lot of empty spec homes gathering dust in this part of the handle…… :o) I still say the worst is yet to come…….. Good luck!
For Stckpkr7000:
One builder here is asking for $400K with some options. DO you think if I negotiate it to $350K, would it be a good deal. Or the prices may go down by 2008/9 to 200 levels. The sellers are selling similar houses for $450k range. I have to buy something now.
Martin, can I ask why you hav to buy now?
I’ve been waiting for almost 5 years now since late 2001. I’m under pressure from my family to get something. I’ve been trying hard for the last 4-5 years to convince that the rent is 1/3 the mortgage and is cheaper to rent. Now, my family feels that the bottom may come in 2008/9 and we’ll not be able to enjoy the life of living in a house. They feel that you live only once and even if we take a 50K loss it doesn’t matter for them as we plan to live there for at least 10 years. I would like to wait but I want my family also to enjoy and in this case I’m thinking even if it comes at a higher price. Ultimately it is for their happiness.
Martin, you should tell your family to pay the mortgage if they want you to get something now. It’s one thing to plan to live there 10 years and another to be forced to do so. When the house down the street that is much better than the one you bought is selling for less than you paid, you’ll be regretting the purchase. We did this in Calfifornia in the 1990s and watched the market fall while being trapped in our house.
Martin, rent a house. Better yet, with rents 1/3 to 1/2 that of buying, rent a NICER HOUSE than you could afford to buy, and STILL save money.
What kind of mortgage would you have to get in order to “afford” the house? Would your family be pushing you into an “Option-ARM” just to say that you are owners?
Martin,
If you’re the man of the house, start acting like one.
http://www.youtube.com/watch?v=Ubsd-tWYmZw
Martin,
I don’t think we can fairly answer that question for you. Nobody here can accurately predict what the future holds, however we can speculate based on resrach, data, trends, gut feel, etc….. My gut feel tells me more pain will come as foreclosures sky rocket and the HUGE supply of exotic lending runs dry…….I would suggest buying a house if you can get a nice deal from the builder…..They’re truly desperate and you’re calling the shots now……I would look at 300k or so and give them your number……Walk away and don’t look desperate when negotiating…..Either way, you should/might be ok 10 years from now…..Do you plan on staying in the home for at least 10 years? It’s a tough decision, but happiness is very important………Do what will make you and your family happy……….Good luck to you!!
use a formal bid letter -low ball 10 places- then low ball 10 more - AND LOSE the realwhore
that’s 5% wasted
Rent and told them you bought.
The GREED of many people and institutions play with lives of simple people like me and it seems to me like the unethical values prevail for longer periods in a capitalistic economy.
Martin,
I can understand your situation. In fact I am in a similar situation in Northern Virginia and under pressure from family to buy a home, even though I am a firm believer that this bubble has a long way to go down. It may not be a big deal to lose $50K.. but what if prices decline by $150–200K ?
You might conisder renting a bigger place that may give more of a home feel for your family. Also, in some rare cases, rent-to-own options might give you the option to go for the reduced prevailing market price at the time you are ready to buy–I doubt there are many, but you may want to have a look.
In Alexandria, a builder advertised a pre-cosntruction town home for $750K in mid 2005, then reduced it periodically and by last month it was at $499K. This month they have riased it to $550K.
Can someone here comment on this?
This bubble may take a long, long time to fully burst and if it is only a $50K loss, you may be OK in the long run.
“It may not be a big deal to lose $50K.. but what if prices decline by $150–200K”
And again, would you have to get an “exotic loan product” in order to afford the monthly payments? Just another layer of risk. Go find a big, nice house to RENT.
I too am under a lot of pressure from my fiancee’s family to buy.
I’m stuborn. I’ve just made it clear I won’t buy in 2007. I state how much I think prices will drop. This only delays the battle. But at least once prices are plummeting they’ll listen as to why prices will keep dropping. This will probably create the ironic situation where I buy when they think I should wait.
Neil
I went through the same doubts two years ago when my husband and I decided to move. A housing “bust” was looming, and we were thinking of moving to a higher priced area, and I was terrified of making a bad decision. Finally, I realized that homes are not just investments. We buy things that drop in value all the time. For example, cars. We had good reasons to move, and did not plan on using any creative financing in buying our new home. Obviously, it is not wise to buy more home than you can comfortably afford, but you also can’t wait indefinitely while hoping that prices will crash to some arbitrary level. Home values vary by region, and there is no one answer to the question “When will home prices bottom out?”. In some areas, they aren’t going down, in others they are dropping dramatically. Remember, there are advantages to ownership other than equity. If you want to buy a home, find out what you can afford, start looking, and if you find one that you feel is “right”, buy. Caution is wise, but you can’t let your life be ruled by fear.
Diane,
Plain and simple, until you can buy a house for roughly the cost of renting the same square footage there is no good reason to buy.
Not really. There are several advantages of buying. First, you are building equity. Even if the value of the house doesn’t rise a penny, you have the equity from the principle you are paying on the mortgage. And in the long run (5 or more years) home values almost always go up, although not necessarily like they have in the last few years. If you get a fixed rate mortage, owning insulates you from inflation. You also get to deduct your mortgage interest, which can save quite a bit in taxes. And this does not even take into account the intangible advantages of owning, such as knowing that any improvements you make will benefit you and not some landlord. Or knowing that in 15-30 years the house will be paid for and you won’t have any more “rent” to pay. My husband’s primary motiviation for owning a home was the fact that his grandparents had to struggle to pay rent when they were old, because they had never had enough money to buy. The intangibles are significant. Even if your mortgage is higher than the equivalent rent, there are good reasons to buy instead of renting as long as you are buying a home that is within your means and you plan on staying a while. Generally, the people who get in trouble are those who take high risk loans to buy homes that are beyond their means. Anuybody can have a major illness or job loss, but home ownership tends to insulate against financial problems, not cause them, if done carefully.
You sound like a realtor reading from a script.
None of your excuses can overcome the mistake of buying a assest when it has strayed so far from historical relationships. (Income/mortgage, comparative rents / mortgage, etc.)
“but home ownership tends to insulate against financial problems, not cause them, if done carefully.”
yup, which is why I’m going to carefully enter this market with a purchase after all the neg-am monkeys fall from the trees, ca. 2008.
“Even if the value of the house doesn’t rise a penny, you have the equity from the principle you are paying on the mortgage. And in the long run (5 or more years) home values almost always go up, although not necessarily like they have in the last few years. ”
True, but this current bubble has been the biggest RE bubble in many decades. It will take far more then five years to break even for those who bought in 2003 or later. Better to be fully into T-Bills and reinvest all them. 2011 or 2012 should be the years of rock bottom prices in real estate.
Consider the flexibility, carefree lifestyle, and lower cost of renting in the next few years. Jobs could be hard to get in the U.S. I expect more outsourcing to occur, forcing more people to downsize their annual salaries.
Diane,
You are clearly a “realtor-troll”, but I will reply, anyway. As to your arguments:
First, you are building equity. Even if the value of the house doesn’t rise a penny, you have the equity from the principle you are paying on the mortgage.
If housing drops $10K per month, and your principal payments are $2K per month (and that would be for a high-earner), you are losing $8K/month, NOT “building equity”. You can use whatever numbers you like, but buying a house at the peak of an unprecedented run-up is pure foolishness.
And in the long run (5 or more years) home values almost always go up…
Actually, in 5 years, we will likely be at the trough (best case) or still in the downtrend, based on historical cycles and the record prices/monthly payments/credit bubble. If you bought a house in LA during the last peak (which was nothing compared to this one), it took you until 2001 to **break even**. And the Baby Boomers were still in peak buying phase, unlike this downturn when they will be coming up on a selling phase.
If you get a fixed rate mortage, owning insulates you from inflation.
This is the only reason which might have some validity. However, if we experience the kind of inflation which would cover the cracks in the credit bubble, we would have much bigger problems than “wanting to paint the walls yellow”. It’s called hyperinflation.
You also get to deduct your mortgage interest, which can save quite a bit in taxes.
After this credit bubble implodes, I hope to never hear this lame argument again. The benefit from those tax deductions is dependent upon many things, including: amount of interest paid relative to income and standard deduction; the difference between tax deduction and “equity loss” as the market falls through the floor; AMT, and whether or not you are subject to it, etc…
Just because there is a deduction does not mean it is a net benefit to the buyer.
And this does not even take into account the intangible advantages of owning, such as knowing that any improvements you make will benefit you and not some landlord.
Again, with the realtor-hype. If we make improvements to our home, it is because we want to enjoy them while we live there. Our rental is our home, and we enjoy the fruits of our labor **just the same** as if we made the same improvements on a mortgaged home. Historically speaking, one does not recoup costs for home improvements (with very few exceptions)…so exactly how are you benefiting more than the renter who makes the same improvements?
Or knowing that in 15-30 years the house will be paid for and you won’t have any more “rent” to pay.
I’m with the other poster. A person can invest the downpayment and monthly savings, made by renting, and likely come up with better returns than if he/she bought a house. At retirement, they can move wherever they please and either buy a house with cash or live in a rental, using the returns on their investments.
There is NO GUARANTEE that housing prices will be equal to or greater to those seen today. The only way that can happen, is if we experience some nasty inflation (in wages, as well). Good luck with that one!
Oh, the peak of the LA housing market was 1989/1990, so it took a good 10-11 years just so you would not have to lose/take money to the table in order to sell.
Here’s why I think that you’re wrong:
If you buy a house at 600K, but the house is really only worth 300K and you finance it today at 6% fixed rate for thirty years you’ll end up paying around 3.4 million dollars.
By contrast, if you rent a place for 3000 a month for two years and get the same house at market bottom with the same financing you’ll end up paying only 1.7 million plus two years of rent raising your cost over thrty-two years to less than 1.8 million.
You haven’t really built any equity just by buying when you buy into an inflated market. You’ve reduced your standard of living in the long run (in the short run, too).
I know that you don’t want to hear this, but the numbers don’t lie. Housing prices can’t stay this way without compensatory inflation in which case sitting out of the market is fine.
That’s an enormous difference. It pays to wait five years in this market as long as the rent advantage continues. Houses come with lots of additional costs beyond what I calculated, and renting comes with almost none of the extra costs.
Never Bought, please explain your math
I get very different numbers than you do. The total payments on a $600,000 loan paid over 30 years are around $1.3 Million. Regardless, your gamble only pays off if home values lose 50% of their value in 2 years. I think that is a big gamble. There are corrections on both sides of the market. People stop buying if they can’t afford a home, which is why we are seeing drops right now. But many people will wait to sell their home if they feel they can’t get enough money, which reduces the supply and slows the home value loss. A 50% loss of home value across the nation is a lot to expect.
I know that everyone says that those kind of asset bubble losses are impossible, but they are simply ignoring the history of asset bubbles.
Prices were highest in Tokyo’s Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime “A” property in Tokyo’s financial districts were less than 1/100th of their peak, and Tokyo’s residential homes were 1/10th of their peak, but still managed to be listed as the most expensive real estate in the world. Some US$20 trillion (1999 dollars) was wiped out with the combined collapse of the real estate market and the Tokyo stock market.
This is from Japanese Asset Price Bubble in Wikipedia.
The only question of relevance is: what should the value of the property be in a rational market? I contend that real estate should track inflation since it represents a basic commodity that more or less determines the real rate of inflation, and the government sets a target of 3.5% or less. If I’m right, the price of houses should double every twenty years, not every five. There’s an enormous difference that can’t be dismissed by claiming that you’re just building equity whenever you buy.
I think that there is only one important question: how should housing values evolve? I claim that they should track inflation since they represent a fundamental need and purchase, so there should be about 3.5% growth per year in the value of real estate. Home values should double every twenty years, not every five. The market in the last five years is off given that analysis, which by the way accurately models real estate markets with 400 years of data. I think that a major correction is unavoidable, and the government has sworn never to permit inflation above 3.5% meaning that incomes aren’t going to grow to justify the housing prices.
Everyone claims that major real estate losses as the result of an asset bubble are unlikely. I disagree.
Prices were highest in Tokyo’s Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime “A” property in Tokyo’s financial districts were less than 1/100th of their peak, and Tokyo’s residential homes were 1/10th of their peak, but still managed to be listed as the most expensive real estate in the world. Some US$20 trillion (1999 dollars) was wiped out with the combined collapse of the real estate market and the Tokyo stock market.
That’s from the Wikipedia article Japanese Asset Price Bubble.
Someone posted a chart the other day on San Diego real estate values supporting my claim. The growth in 1984 dollars was flat until two or three years ago, which is as you’d expect (no growth when adjusted for inflation). All of the growth in the last two years has to disappear either in inflation or a market collapse.
Of course you have to judge you local market separately from other markets—it might not be askew—but you should judge it by a rigorous standard.
I want to add one thing to my last comment. In the analysis that I offered the difference between the 3.4 million and the 1.8 million should be regarded as a loss since the holder of the 3.4 million lifetime morgate ends up with a house whose real initial value was only 300K. That 1.6 million difference just goes up in smoke when it could go into retirement or college tuitions. (My analysis didn’t even consider that a renter able to do debt service on a 600K loan can always invest their rental savings in low-risk, modest return investments like CDs and magnify their long run savings by making a large down payment on a home purchase in the future. Where is it written that when you save money by renting you must throw away the savings?)
One more thing:
I chose Never Bought for reason. I’m not entirely certain how interest is calculated on home loans. I assumed that the APR was used to compound the principal annually which is how I performed my initial calculations. This might not be the case. However, the best possible case is that the interest on the principal times the number of years of life of the loan is the actual method of interest computation. In such a case, you can revise the figures that I used above to be a lifetime repayment amount of 1.68 million on 600K and 840K on 300K. After adding rent, buying into the market at a high value still results in a 700K loss at the end of the repayment.
I’m not sure if this got lost in nesting, so I’m posing it again at a higher level. Sorry.
I think that there is only one important question: how should housing values evolve? I claim that they should track inflation since they represent a fundamental need and purchase, so there should be about 3.5% growth per year in the value of real estate. Home values should double every twenty years, not every five. The market in the last five years is off given that analysis, which by the way accurately models real estate markets with 400 years of data. I think that a major correction is unavoidable, and the government has sworn never to permit inflation above 3.5% meaning that incomes aren’t going to grow to justify the housing prices.
Everyone claims that major real estate losses as the result of an asset bubble are unlikely. I disagree.
Prices were highest in Tokyo’s Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime “A” property in Tokyo’s financial districts were less than 1/100th of their peak, and Tokyo’s residential homes were 1/10th of their peak, but still managed to be listed as the most expensive real estate in the world. Some US$20 trillion (1999 dollars) was wiped out with the combined collapse of the real estate market and the Tokyo stock market.
That’s from the Wikipedia article Japanese Asset Price Bubble.
Someone posted a chart the other day on San Diego real estate values supporting my claim. The growth in 1984 dollars was flat until two or three years ago, which is as you’d expect (no growth when adjusted for inflation). All of the growth in the last two years has to disappear either in inflation or a market collapse.
Of course you have to judge you local market separately from other markets—it might not be askew—but you should judge by a rigorous standard.
I don’t know why none of my replies are showing up on my browser, but I also wanted to write that my gamble doesn’t only pay off if housing prices fall by half in two years. It pays handsomely in that case. I think that if you run the numbers, it also pays if they fall by a third. In that case you pay 1.12 million to less 840K, more than a 200K benefit.
Only a fifty percent correction over the next two years in some inflated markets will bring the housing market back into line with growth forecasts based on inflation and real estate history.
Real estate as an asset isn’t a money maker; it’s a hedging tool. It protects you against losses from inflation since it grows with inflation. Talk of equity and investment in a home is silly.
Prices were highest in Tokyo’s Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime “A” property in Tokyo’s financial districts were less than 1/100th of their peak, and Tokyo’s residential homes were 1/10th of their peak, but still managed to be listed as the most expensive real estate in the world. Some US$20 trillion (1999 dollars) was wiped out with the combined collapse of the real estate market and the Tokyo stock market.
This was from the Wikipedia article on the Japanese Asset Price Bubble. It can happen here, too.
I think that a tag that I was using was screwing up my posts, so here’s one last try:
I wanted to make one final point. My projection for a fifty percent price decline is based on the historical growth of real estate and the recent history of inflation. A fifty percent price drop would bring the growth in real estate values into alignment with inflation, at least in any market that I’ve been observing. (That housing should track inflation seems pretty well established from both American and foreign markets, some of which, like Amsterdam, have four hundred years of available data.)
There are positive feedback processes in the economy as in other dynamic systems, and we might be activating some of them. That’s how I’d answer the claim that inventory comes off the market in response to low demand. Not always. Banks sell short out of foreclosures to maintain liquidity, and owners with financial trouble enter foreclosure unwillingly. The positive feedback comes from the drag on the economy of the losses pushing more homeowners over the edge and further depressing prices. Maybe we aren’t in that positive feedback situation, but I’d bet that we are. A lot of mortgages are going to reset in the next couple of years, and a lot of people are poorly positioned to ride out any problems.
When market psychology goes sour, the bottom could be lower than the historically justifiable value of a lot of the real estate, but all that I’m arguing here is that if you buy a home at a historically justifiable price, you can’t go wrong. Right now, you’re better off saving and investing for the time when the real estate markets are back to normal.
TedK “Can someone here comment on this?”
Buy a baseball bat and use it any time someone say’s something you know to be untrue or self-serving.
In that clip sammy posted I would have 2 I would do some “reserch” with.
I don’t know what you are trying to say here. I am just bearish as anybody in this forum. But we have to acknowledge the reality–in the Northern Virginia area, prices fell until November but since the mortgage rates declined slightly builders are trying to increase the price and reduce their incentives in the hope that market is picking up slightly or going to pick up in the spring. You can check zillow.com or move.com and search for the Ashton Commons in Alexandria to see what I am saying. I don’t think Builders’ expectations will hold up over the next few years, but I am just worried the mania may last longer than any of us expect.
These instituitons play normal healty emotions against you. Like the nesting instinct in women. Which leads to arguments, and makes men feel inadequate since they can’t earn enough income to provide a house for their family.
So, many men are forced to fall on an I/O ARM grendade to end the arguments.
It’s sad. And why I would like to see FBs go to debtors prisions for all the damage they’ve done.
Most Americans are as immoral as Martin and would vote for communism if it were called something else. Maybe just calling it the soft socialism of Hillary or Obama might be enough for such enemies of individual freedom.
Mark,
Individual freedom doesn’t mean that middle class people have to be hurt or pay prices due to poor regulations. Do you think it is moral to cheat buyers? Most buyers are naive and don’t understand the fineprint. Or maybe you have a few houses stacked up to sell.
If buying and selling property is so full of danger for the peasants out there, don’t you think the gov’t should just own all of it, and distribute to each according to his need?
That’s been tried. It didn’t work out so well.
please take your psychosis somewhere else. kthx.
Martin,
Shoot me an email (stckpkr7000@yahoo.com) and we can chat since we’re neighbors and both familar with the local markets…….
Apparently MARTIN has never read anything about the Soviet Union.
Not exactly a paragon of “ethical values” there Martin.
http://tinyurl.com/yaqoat
Nice house in Ahwatukee Foothills AZ, but $3600/mo. Lived in the area for a long time. I would not want to pay more than a $2000/mo mortgage payment on this house let alone $3600 for rent. Plus it’s right up against the preserve, got to beat the scorpions off with a stick as soon as the weather heats up.
Anybody in Portland OR area. This is listed at basically 400K. What would it have gone for 5 years ago?
http://sadlerealestate.vflyer.com/home/MsgIndex.jsp?acctName=sadlerealestate&msgCode=2&siteDir=4
Dunno - looks similar to our current rental here - we pay $1800 a month and zillow prices it at around $430k - which would seem typical for the area.
Owner bought it in 2003 for $220k
Oddly enough, the local market here is pretty good. I’m in Nevada County, California. All around us houses are selling slowly and prices are going down. Locally, although there are fewer closings, the prices have risen for both new and existing homes. I think it’s because we didn’t have as much of a rise in prices during the recent boom and we didn’t have a huge building boom because it’s hard to build in the mountains. My husband and I bought a moderate priced home June 2005, planning on staying a while and waiting out any price drops. We have been pleasantly suprised, so far, to see an increase in our home value of about 15%.
If you try to sell, that 15% you think is in the bag is probably not there. Many home owners remind me of the fox in a “Road Runner” cartoon. The fox is run off the edge of a cliff and for a moment stays in the air until he looks down. With due respect I think you are kidding yourself.
I’m actually reporting numbers I read in the regional paper (the Sacramento Bee) based on regional home sale closing values by county, not theoretical increases. As for whether the number is “real”… no home value is real until a sale occurs. We bought a home to live in, not an investment. Zestimator has the value increase since we bought at 20%, which I think is ridiculous. The point is that the housing bubble did not hit equally everywhere, and home values are not declining everywhere. People who bought modest homes in a price range they could afford and didn’t take high risk loans are not at this point in danger of financial harm. That may change, but there are no current signs of it happening.
Diane.
Give yourself a reality check. call up a realtor and ask them about selling your house. let us know what selling price they suggest.
That 15% is in the bag! Zillow says it so it must be right!
Bear posts ” the fox in a “Road Runner” cartoon. The fox is run off the edge of a cliff and for a moment stays in the air until he looks down.”
I loved those cartoons! You are very right, after the poor guy gets smashed into the ground…. the usual Acme safe comes piling in behind.
June of 05 was pretty much near the top. What did you pay per square foot?
$91 per sq. foot is the charge in Martinsburg area right now plus an
additional $80k for the land is what the builders are charging right now.
Under “Data for data-heads”
our local Sunday newspaper real estate section stated “Syracuse metropolitan area prices were 7 percent higher during the third quarter of 2006 than they were a year ealier, according to the”…OFHEO.
This kind of surprised me. Although I have seen quick sales of estate homes, the higher priced homes have been what appears to be experiencing the longest DsOM. I thought we would have seen median price reductions….I expect by Spring the cracks should start to show
…just as the million dollar neighborhood in Manlius gets started….
Ya’d think the industry info would have these contractors acting more cautiously. I’ll have to follow the sales on that development.
Volume has dropped severely but, unfortunately, the expected fall in Silicon Valley prices has yet to manifest itself.
Here’s the latest snapshot of Silicon Valley RE:
http://www.viewfromsiliconvalley.com/id287.html
Westlake Village (Ventura County/LA County border), CA rents are falling. I was expecting them to rise as the number of renters who have been sold mortgages leave their temporary lodgings and “home owner” status to return to renting but they are falling and empty condos bought by speculators enter the rental market in large numbers. I have also found many SFRs available as rentals for very negotiable rates (about $2300-2800 in WLV) as FBs attempt to staunch their bleeding. I think this puts downward pressure on rents as does the net outflow of families earning between $50-150K. Everything I’ve read indicates rents are rising, yet I’m doing a search now and find rents are negotiable and falling so much so that I’ve decided to ask for a few extras AND a shorter lease. This apartment ratings site also reports a decrease in the past year: http://www.apartmentratings.com/rate/CA-Westlake-Village.html
“One bedroom apartments in Westlake Village currently rent for $1255 to $1255 per month. Westlake Village renters report average rents are down $70 per month compared to the previous 12 months. “
Damnit, u silly easterners. ITS A FRIGGING COYOTE! If ya can’t get that right I’m sure as hell not gonna believe “up 15 percent”.