“We’ve Over-Supplied The Market” In Tennessee
The Daily News Journal reports from Tennessee. “While the high cost of housing may have stalled in other parts of the country, the housing market in Rutherford County continues to flourish in a way that benefits buyers, sellers and home builders for homes in most price ranges up to $300,000, said Bud George, the general manager for Bob Parks Realty.”
“Affordable townhouses are the new starter homes for many who can’t afford big high-priced houses, yet first-time buyer Amy Childers was looking for more. ‘I wanted a yard not a patio,’ said Childers.”
“Home buyers this year have closed on 5,883 through November at an average price of $172,240, and about 44 percent of them were new houses, according to RealTracs MLS.”
“Buyers looking for starter homes are now having to buy townhouses because of the high cost of land and building materials, said Rob Calk, the sales and marketing manager for Ole South Properties in Murfreesboro.”
“‘We’ll close 750 to 800 homes in the year 2006, and 50 percent of those are going to be townhome sales,’ said Calk, whose company is building several subdivisions in Rutherford County with townhouses in the $110,000 to $140,000 range. ‘That’s what we’ve replaced our affordable houses with — townhomes.’”
“Ole South Properties began the previous decade building single-family starter homes in Evergreen Farms subdivision in west Murfreesboro, and these 1,100-square-foot houses on quarter-acre lots sold for about $70,000, Calk recalled.”
“‘That same house today is pushing $130,000,’ said Calk, noting that those homes are being squeezed on about an eighth of an acre to keep them affordable. ‘You have no yard at all.’”
“Not all first-time buyers, though, want high density. ‘I’ve already lived in an apartment, which is not a whole lot different than a condo,’ said Childers.”
“Home shoppers searching for larger houses here have numerous choices, but this makes it harder on the sellers, a real estate professional said.”
“‘The problem we’ve got is we probably have 350 on the market right now,’ said Bud George. ‘Once you get over $300,000 in general…we’ve just built many more than we’ve built before. We’ve over-supplied the market above $300,000 in Rutherford County.’”
“The remaining houses in that range represent about a one-year supply based on the rate of selling, said George, noting that Realtors consider a sixth-month supply to be a balanced market for both sellers and buyers.”
“‘Locally, we don’t have a bubble. Our sales prices average 96 to 98 percent of list prices. There’re lots of opportunities for buyers and sellers in this market,’ said real estate agent Joi Sherrill.”
“Although real estate professionals remain upbeat, rumors have spread about home builders turning in keys to the bank for unsold $300,000 houses because they can’t make payments.”
“Those stories are exaggerations, said Tad Craig, board president for the Middle Tennessee Association of Realtors. ‘The upper-end market is the only thing that has slowed down,’ said Craig. ‘A year is longer than they want to see, but it’s not the end of the world.’”
ok we get it- everywhere’s over built- how about focussing on the futre ?
why is UK up ?
Why are equity markets saying the bubble threat is discounted?
done, over with NBD
We are just fixated on this topic and get true joy out of every blissful percent decline in property values. There, you busted us.
You keep saying that, but you can answer your own question if you have the data. What is the rent to buy comparison? What’s the vacancy rate? How do incomes match up?
I just watched the Montana video posted in the bits bucket. Great piece.
Ben,
I just love Doug’s work on the Billings market! In ways his approach to covering the topic puts it into bites you can chew. It’s also a great case study b/c “I” don’t know a lot of people that get all emotional about Billings. Most of us can’t point to it on a map so we tend to be more objective about it.
The effects of the “rolling bubble” are important to note. What kind of mania would lead any builder into thinking there’s an active market for 859K homes in Billings is beyond me! It’s also important b/c it tells us A LOT about our future. Legions of demographers and countless visionaries have been leading us to believe that cities (w/the advent of the internet) are irrelevant! People can now live where they choose! I for one would like to see how these “distance markets” fare.
“How these distance markets fare”? Hawaii is having a hard time right now.
Would those be the same equity markets that a few years ago were telling us that profits didn’t matter anymore?
Once again, we have another REIC member proclaiming that there’s no bubble in her locale. Sorry, hon, but you need a new script. Better call the NAR on your cell to see what BS is on special this week.
SM_landlord
The address of “Orbela” in Oxnard is: 3648 W. 5th Street, Oxnard, Ca. 93035. Phone# is: 805-857-2606. The cross street is Victoria Avenue/5th Street.
Something very funny. The invitation card (opening is on December 23rd) states that “Orbela” is “beach close”. How that differs from close “to the beach” I have no idea but I think it means in realtorwhore sales pitch: “Well, it’s beach close as opposed to close to the beach because if it’s close to the beach you can walk to the beach or actually see the beach whereas Orbela is beach close which means you can drive the short distance to the beach.” Huh? These realtorwhores and their builder masters are so full of crap.
If you blow up the map large enough, everything is waterfront! I saw this done at a zoning hearing where a man wanted to go from agricultural to commercial because they were so “close” to one another.
Even a true waterfront property is not necessarily a pot of gold. Have posted about my tenancy in a “spec” house advertised as 3BR 4BA brand new waterfront $1000/mo. How can this be? About half of the reason is that the bulider needs some lessons in how to get around the environmental police, if he wants to take down enough trees to get anyone interested in his $575,000 asking price. The property has at least a couple of hundred feet of actual waterfront, but from the living room, you strain your eyes peering between fir trunks to see it.
“Those stories are exaggerations, said Tad Craig, board president for the Middle Tennessee Association of Realtors. ‘The upper-end market is the only thing that has slowed down,’ said Craig. ‘A year is longer than they want to see, but it’s not the end of the world.’”
rotfl
A year “not the end of the world?!?” rotfl
Once inventory breaks 8.7 months, prices decline until inventory is below 5 months or so. Thus, we can expect 7 months of declining prices if no more homes enter the market. Since more homes will enter the market… we’ll see a multi year decline.
“Its different here.” my left…
To think, mortgage lending is just starting to get tougher. Imagine what that will due to 1Q sales.
Neil
You are forgetting the unseen army of spring buyers. David Lereah has them all assembled in one of his training camps and is preparing to unleash them in a brilliantly executed attack wave ‘a la Pickett’s Charge on his command this spring. Wall street apparently sees it this way, anyway…
Press board, we’ve seen this army of buyers drilling. They market along singing the famous “Real estate never goes down.” Chant. The problem is, too many of them have gold jackets and I couldn’t help but notice they keep marching in circles to make their numbers look larger.
And their huge band is rented. Its not part of the army that goes into battle.
Is $ really drying up that much? These stories of ‘bought 12 homes with no doc ‘ are everywhere.
Pleeeeease Mr. Custer …. I don’t wanna go.
LOL - great post.
And I have a feeling that quite a few of their potential foot soldiers have deserted, renewed leases or decided to stay put in their current homes. There’s nothing like watching your neighbor or colleague or family member go through foreclosure or bankruptcy or emergency cost cutting or getting a second job or just plain watching their paper wealth evaporate to reduce your enthusiasm for doubling your mortgage payment or buying at the top of the market.
So you’ve got a situation where you’ve got A) very few potential buyers in the first place, B) zero first-time buyers, and C) deserting ranks of wanna-be buyers … It’s gonna be ugly.
Good points. But you forgot to note that they’re also increasing the requirements to join the army (sub-prime).
Bye bye Aegis. The first of this week to go under.
http://www.originationnews.com/plus/#4
Neil
Neil
Tennessee is on such a totally different level in terms of cost compares to say CA,FL, NY, and even other new choice relo states like NC and TX. For one, there are indeed more expensive areas like Brentwood in Nashville and West Knoxville in Knoxville where homes can just about match CA in price with homes in the 450-500k range. But the upper end of the market is quite small compared to the rest of the market. In every major metro in the state, plenty of homes can be found for under 100k. Take this home for example in Nashville at 89k: http://nashville.craigslist.org/rfs/249993842.html
Not that it isn’t exactly a charmer or what one would call large, but it is old and if it were in CA, it would be 550-600k, be bought by some yuppie couple, fixed up in arts and crafts style complete with mica porch lights and granite countertops. BIG difference. Instead what’s going on that I saw a LOT of while visiting was endless developments full of monster-sized Mcmansions. Entire subdivisions full of about 3 different models repeated like a pattern of wallpaper, all with 3 car garages, little pear trees in the front, and 1/5 acre of a miserable yard in the back. These were all in the 3-450k range. They are known locally as houses for people who are from out of state. Floridians, New Yorkers, and other mainly Northeasterly newcomers seem to be streaming in along with a stream coming in from California into Nashville, which is being seen more and more as an entertainment mecca.
There is something this article means that probably isn’t transparent to most of you who haven’t lived in the Southeast. People there are used to having acres of land, sprawling estates, long driveways, and yards that sometimes require tractors to mow. When they suddenly start realizing that instead of 3 acres of land they expected to buy for 75k suddenly costs 130k, they are encountering something foreign to them, which is land being priced more than is traditionally expected. land prices has never been a big deal to TN natives. My parents own 14 acres plus 2 rental houses that all together is worth less than half a small house in West Oakland. The idea of housing being super expensive is strange to them. They are also well aware of just how insanely overpriced houses are here in CA. Again- it is a totally different parallel there, and hopefully will stay that way.
I know a guy from TN who is aching to move back and buy a big ol house. But he has to get top $ for his CA home in the hoped for spring bounce to do it. rotsa ruck.
Anyways there is no rush to move to rural area, the land there appreciates so slowly. I’m to starting to develop the ’stay in CA till you get a ton of cash then move out’ mentality. I think its infectious I got it from all the H1B immigrants.
where homes can just about match CA in price with homes in the 450-500k range.
Ha ha. In TN, a “high-priced” home is 450k. In CA, 450k buys you a condo conversion- maybe. TN may be overbuilt, but they’re not overpriced.
great blog!
‘Buyers looking for starter homes are now having to buy townhouses because of the high cost of land and building materials, said Rob Calk, the sales and marketing manager for Ole South Properties in Murfreesboro.’
‘We’ll close 750 to 800 homes in the year 2006, and 50 percent of those are going to be townhome sales,’ said Calk, whose company is building several subdivisions in Rutherford County with townhouses in the $110,000 to $140,000 range. ‘That’s what we’ve replaced our affordable houses with — townhomes’
The message is pretty clear. I need to make more money building so you worker bees out there better get used to living in multifamily digs. As far as the upper end over-supply, when a thing is artificially over-valued, the economy will over-produce it, every time.
As far as the upper end over-supply, when a thing is artificially over-valued, the economy will over-produce it, every time. ”
What’s stupid about these upper priced townhouse developments is that unlike CA and NY where land availability is actually somewhat limited for hours outside of the major cities, When we were in Nashville for example, all we had to do was drive about 15 minutes and we were suddenly in rural areas. There is only so much room to grow for prices in this area before people will seek other options- like moving outward. This seems obvious to we who live in CA and think nothing of driving an hour each way to work, but totally new to people in other areas such as these. The lack of heavy development and lower population in TN and other less developed states will be their safety-net in terms of preventing a overblown bubble like that as occurred in other states.
I thought the coasts would be less bubbly due to communications/working online etc
-not so
The saying goes: If you can do your job from a computer in your home in Murfreesboro, then Apu can do your job from a computer in HIS home in Mumbai. Under the current system, pure telecommuting just won’t catch on.
‘I need to make more money building so you worker bees out there better get used to living in multifamily digs.’
You are onto something here. Maybe they could incorporate the actual honeycomb hexagon shape into the units to really maximize profits… the condo of the future.
Ben is right. The housing boom has pidgeonholed us into the false choice of condo, townhome, or McMansion. I can’t help but notice this:
“You have no yard at all…” Not all first-time buyers, though, want high density. “I’ve already lived in an apartment, which is not a whole lot different than a condo,” said Childers.
Home shoppers searching for larger houses…
The journalist says that Amy Childers was looking for more… and goes on to make it sound like Childers wants a larger house. Wrong, she wants a larger YARD. But the journalist — and the builders — can’t seem to grasp that. No, you get a condo, a townhouse, or a McMansion. Nothing in the middle.
*sigh* Whatever happened to the average ~1500-1800 sq ft house on a 1/4 acre? That seemed to me to be the perfect happy medium. Unfortunately, it’s apparently not profitable enough.
Ben could you make the lack of yard a weekend topic?
Oxide,
Solid observations. That, as much as price is what’s holding my wife and I back from seriously looking to buy. Even in our small town in OR surprisingly the choices are exactly as you describe! Only very recently have we seen anything resembling diversity. We’re now officially empty nesters and we’re seeing the first new 1,200 to 1,600 sq. ft. homes coming on the market in almost a DECADE! Up until now it’s been builders overpaying for lots and absolutely trying to wring every last dime of profit out of it! Now, they’re s t a r t i n g reluctantly to realize this is time to hunker down, build what is actually selling and just try to manage to be in business when the appetite for 3,500 sq. ft. homes returns. (It won’t, but it keeps them going)
“…we’re seeing the first new 1,200 to 1,600 sq. ft. homes coming on the market…”
To me, most of that reflects the developers’ / builders’ desire to preserve a highly profitable selling price per square foot. It might work on newbies and those who don’t have much facility with numbers, but overall, I think it will flop. Price per square foot is all that matters to me, for a given quality and type of structure and separate from the value of the lot.
Think about it and post what you come up with inthe topics thread on Friday. We”ll see what everyone thinks.
I won’t be around on Friday, maybe others can post their thoughts. I’d love to read them.
Man, I’d die for a 1/4 acre here in Cali but I don’t have $2 mil unfortunately…
If you had $2 million, you wouldn’t have it for long.
I see I’m not the only one who caught on to that arrogance screaming from behind that barrage of BS.
People today don’t know what a $300K house should look like, and it doesn’t sit on a postage stamp size lot and look like every other house in a tract. People today don’t realize that with a decent sized lot they can put in fruit trees, veggie garden, and maybe get some hens to lay eggs, especially if times get tough.
Sounds like you been reading too many Peak Oil blogs, a la Mother Earth News. Not that I disagree, being a long time Peaker myself - but something about laying hens and backyard survival gardens just doesn’t jive with the current crop of latte-swilling, Beemer-driving yuppie that’s never seen the business end of a cow.
you just summed up why this country is weak. weaklings have become the standard.
No I just grew up when my grandfather had the farm, when we pumped water into the house with a hand pump, when the horse drawn cart delievered the ice for the ‘ice box’ daily, when we milked the cow, made cider from the left over apples, gathered the eggs and killed the hens for a chicken dinner. But the chickens tasted better, the produce was ripened on the vine or trees and had flavors most of you have probably never tasted.
Salinas, I grew up partly in a cattle ranch in Argentina. I do get what you are talking about. We still pump the water from underground (with windmills, not by hand, though). Most people don’t know what real cream and real butter taste like…
Had the same rich memories of rural life from years ago, so this summer I visited the place. What a shock!! Much smaller than I remembered and not nearly as grand as the memory either. hmmm .. maybe love made that place hum not the opulence. Whatever .. it is still grand in my mind. I don’t want to hang wash on the line, pump water or milk a cow but I would like to own an acre or so with a 1600 sq ft. house — my small circle of friends say the same.
Yes, yes, the good old days.. that never were. Been there, done it. That was when your favorite sibbling died of whooping cough.
It was a pure pleasure to take cold showers.
-
The past can’t be brought back. Dwight Eisenhower said that the good old days (as we remember them) will never come back again, because they never were. We can turn the clock back, but time rushes on. The river of life runs one way and never back upstream. You can’t beat the baked-cake back into the batter, the concrete sidewalk back into the cement mixer, the cut lumber back into the tree, the grown person back into the child. If you are yearning for the good old days, just turn off the air conditioning. Nostalgia is like grammar; you find the present tense and the past perfect. The good old days are gone, no matter how we tend to idealize or fantasize.
“We seem to be going through a period of nostalgia, and everyone seems to think yesterday was better than today. I don’t think it was, and I would advise you not to wait ten years before admitting today was great. If you’re hung up on nostalgia, pretend today is yesterday and just go out and have one hell of a time.” - Art Buchwald
“The past is never there when you try to go back. It exists, but only in memory. To pretend otherwise is to invite a mess.” - Chris Cobbs
“Romance like a ghost escapes touching; it is always where you are not, not where you are. The interview or conversation was prose at the time, but it is poetry in the memory.” - George William Curtis
And to think that my great-grandfather’s Victory Garden was the envy of his neighbors. My 80-year-old mother STILL likes to brag about it.
Not that she’s a lazy person. She still does her own yardwork. Slowly, of course. But she does it.
And, if of Italian parentage, a pig for Easter!
We are learning how to grow veggies and fruits and it’s real work.
No shortcuts alllowed, you can’t cheat on mother nature~
“Although real estate professionals remain upbeat, rumors have spread about home builders turning in keys to the bank for unsold $300,000 houses because they can’t make payments.”
“Those stories are exaggerations, said Tad Craig, board president for the Middle Tennessee Association of Realtors. ‘The upper-end market is the only thing that has slowed down,’ said Craig. ‘A year is longer than they want to see, but it’s not the end of the world.’”
Sorry Turd Craig but when an investor, greedy idiot in this case, has a monstrosity of an illiquid asset burning a hole in his pocket the size of a moon crater, you can better your first born it feels like the end of the world.
These maggots and their feeble attempts and re-characterizing the wall they’re about to hit makes me vomit.
Tad=Turd.
C’mon, it’s not a wall. It’s called a gradual slope-barrier.
How about the 4 years of inventory we have down here in S. FL? Is that the end of the world? If so, I would like to go tell a few of the idiots I know that the world is ending.
No matter how bad it gets you will always have some moron saying “Its not that bad” or thinking up some reason why the inventory is going to disappear overnight “The boomers are coming”.
It is that bad, it may NEVER have been worse in some areas.
The boomers are not coming. Even if they do, they are not going to buy an overpriced albatross to drag them into their grave. And guess what, everyone thinks the boomers are coming to their area. Most/all of them are WRONG.
Here in Tucson, there’s still a bit of “The Boomers are coming here! To retire!” sentiment. But, truth be told, I don’t know many Boomers who can afford to stay out of work for very long.
—->”And guess what, everyone thinks the boomers are coming to their area.”
—->”And guess what, everyone thinks the boomers are coming to their area.”
BINGO brother!! I have to tell about this encounter with a sibling over this past weekend at a family Christmas Party. My brother lives around Glens Falls NY and he owns a 3/2 ranch and 100 acres of the most worthless dirt you can imagine. The land is the top of a mountain with the only means of access is a deeded right of way. Not really part of the story.
He asks, “Are you looking buy RE?”
Me: Hell no, I’m not gonna lose money. I’d have to be out of my mind.
Him: You’re not gonna lose money. The market will plateau and continue up.
Me: Like it did in 89-99?
Him: It’s different this time.
Me: (trying not to fall over in my chair) Why is that?
Him: Because the “city people” are selling there and retiring here.
Me: Just as they always have. How will that preclude the market from going through it’s cycle?
Him: No comment.
There was far more interchange than that and for every excuse he made for his contention that RE doesn’t go down, I came back with sound economic principles that he had no retort for. Yet the general theme of the RE bulls(hitters) is the boomers are coming.
In Oregon it’s the Boomer Equity Barons are coming! But they are doing fine; got this in a email from an Eugene RE agent just this morning: “The numbers are in for October and it looks like the Real Estate market in the Eugene and Springfield area is not as poor as many would like to think. There were 603 new listings that hit the market compared with 524 for October of 2005. There were 370 homes that hit pending sale status and this is compared to 427 for October of 2005. There was 386 closed home sales and this is compared to 455 for October of 2005. The average sales price was $259,400 compared with $243,400 for October of 2005. In October of 2005 there was 2.8 months of inventory of homes on the market and for October of this year that inventory number was 3.8 months. Remember, the market technically shifts from a sellers market to a buyers market at 6 months of inventory.
Year to date new listing have increased by 12.1% and closed sales have decreased by 8.5%. The interesting fact is that with the slight market downturn, home prices continue to escalate.”
See. Everything is fine. It’s different in Eugene OR and the Boomer Equity Barons are coming in the Spring!
Ben, Why dont you set a timer on the site counting down the number of days til spring?
First define when “spring” begins. Is it when the Daffodils bloom? Those pop out early in Feb. in GA and Southern CA but you won’t see them until April in VA and sometimes as late as May in MA. And there are anxious sellers wanting the first spring listing, and they might jump the seanson by thirty days in advance.
For housing, I define Spring around the school year. If families want to move in June-July-August, then the listings and lookings should pick up in… March April May or so.
Spring starts with the Vernal equinox
00:07 UT, March 21st 2007.
I’d love to see two indicators:
1. The countdown clock
2. US home inventory (per zip reality or other source of choice).
Anxious sellers will more than jump the gun. I expect a nice start to listings in January. Even Southern California has slow sales in January and February. I expect them to be *really* slow this year.
Neil
Realogy agrees to $6.4-billion sale
http://tinyurl.com/ykrpha
“Buyers looking for starter homes are now having to buy townhouses because of the high cost of land and building materials, said Rob Calk, the sales and marketing manager for Ole South Properties in Murfreesboro.”
BUT
“…the housing market in Rutherford County continues to flourish in a way that benefits buyers…”
How do price increases that prevent people from buying a place with a yard benefit buyers? Is there no one at the editorial level who reads this garbage and says, hey, wait, that doesn’t make any sense?!
Weyerhaeuser to close 2 veneer operations in Oregon
SAN FRANCISCO (MarketWatch) — Weyerhaeuser Co. (WY : weyerhaeuser Company on Monday said it will close two veneer technologies manufacturing operations in Oregon, effective immediately. The Federal Way, Wash.-based forest products company said the shutdown of the two plants, one in Springfield and the other in Coburg, will affect 128 employees. The company cited shrinking demand for plywood panels due to the fall in housing starts and an increase in alternative products as reasons for the closures.
“‘Locally, we don’t have a bubble. Our sales prices average 96 to 98 percent of list prices. There’re lots of opportunities for buyers and sellers in this market,’ said real estate agent Joi Sherrill.”
Boy, is this nonsense or what? It sound like the NAR line all the way.
The “Our sales prices average 96 to 98 percent of list prices.”… is just a common real-estate agent ruse. Typically, they re-list the house enough times so the list price finally hits close to the sold price.
I am thinking of moving within an hour of Nashville and have seen the housing meltdown currently taking place here in Palm Beach Florida. My question is Nashville has seen a 22% appreciation according to Realty trac, so do you think it will continue into 2007 or reverse like it has here in S Fla. I know alot of people wanting and actually moving there from here. Wouldn’t that increase the deand/price? Or should I wait till early 2008?
Ben, could you perhaps discuss how and when the secondary real estate markets like Nashville will be affected by the bubble? Nashville has seen 20% appreciation this year and is due to a delay of the bubble of secondary markets? Willit stabilize and then revert like the promary markets have?