“There’s No More Flipping”
The Associated Press reports from Pennsylvania. “After years of gains, the Pennsylvania real estate market decelerated in earnest this year as buyers balked at paying ballooning home prices and speculators left the market. A growing economy, low mortgage rates and new types of loans had fueled a decade-long housing boom, but declining affordability has put a dent in the market, especially in eastern Pennsylvania.”
“When Tim Schieber bought a luxury town home a year ago without first selling his house, he didn’t think it would be hard to find a buyer for the Bucks County stone farmhouse. But it would take 15 months, a $190,000 price cut, $16,000 worth of remodeling and a new real estate agent before the Schiebers were able to sell their 3,600-square-foot home near Doylestown.”
“‘The days when you put a house on the market and it sells (right away) - those days are gone,’ said the business owner. ‘We just sat back and it got really tough.’”
“‘There’s no more flipping,’ said Austin Jaffe, chairman of the real estate department at Penn State University. ‘It’s not the same psychology that you build a house and by the time you’re done with it, it’s time to flip it and do your next deal. There is no bubble bursting here,’ Jaffe said.”
“The hot demand for homes in northeastern Pennsylvania had been partly fueled by buyers who were shut out of the more expensive New Jersey and New York markets. ‘People are willing to travel, to commute a great distance in order to get cheaper housing. That has bolstered the northern part of Pennsylvania,’ said Celia Chen, director of housing economics at Moody’s Economy.com.”
“One of the most expensive markets in the state remains downtown Philadelphia, even though prices have fallen 10 percent to 15 percent this year. Overall, downtown seems to be recovering from its slump, when ‘real estate people were slitting their wrists,’ said (broker) Allan Domb.”
“Prudential Fox & Roach, whose firm handled the Schieber home sale, said buyers have been returning to the market in the past month, attracted by lowered home prices. ‘The buyers are coming back,’ said Alan Reburn, VP at Prudential in Devon.”
“Still, it took some creative marketing to get a sale for the Schiebers. The realtor put the house on a historical homes tour. It sold for $650,000, far below the family’s original $840,000 asking price.”
The Toledo Blade from Ohio. “When Ben Konop decided he wanted to live downtown, the single lawyer was able to bag a roomy two-bedroom condominium for under $150,000 last year. Mr. Konop paid $300 less than the original purchaser had three years previously when the warehouse was newly converted.”
“He recognizes that, given the volatility of the downtown market, he may not recoup his purchase price when he sells. ‘I didn’t buy it for investment purposes,’ Mr. Konop said. ‘I realized I was something of an urban pioneer down here. But I think the condo has the potential to be a good investment.’”
“Like residential resale markets elsewhere in Toledo and in most areas of the country, downtown could hardly be characterized as red hot.”
“A small sampling by The Blade of recent sales of downtown condos and lofts found that they brought an average of 6 percent more than the original purchase price. But one downtown seller, who spoke on the condition he wasn’t identified, said profits can be illusory. Official records suggest he made $8,000 on his sale. But he said he lost money because of upgrades and other expenses he put into the unit when he bought it new.”
“The downtown area has about 200 condos and lofts in complexes and scattered sites, said Kathy Steingraber, executive director of the Toledo Warehouse District Association. Although that number is not large, it is up considerably from 2000 when few such units had been built.”
“Trent Thompson has been trying for eight months to sell his one-bedroom 1,600-square-foot unit at River West Townhomes on South St. Clair Street. Although he and wife are disappointed, they don’t blame the downtown market.”
“‘A lot of people are sitting on houses for eight months throughout Toledo,’ he said. The two-year-old unit s listed at $198,000. They bought it two years ago for $195,000.”
“Agent Cherie Posadny agreed that, like real estate elsewhere, the downtown resale market is hurting. One owner accepted $145,000 for a unit he bought new for $154,000.”
“‘People who buy are thrilled about living downtown. I think we have so many available condos with unsold units at the Bartley Lofts project. We don’t have enough buyers who are looking to live in an urban setting,’ she said.”
Looks like my dream of a pied-à-terre in downtown Toledo may soon be realized.
Look on the good side. You and Clinger can watch the Mud Hens, and drink beer, on double header saturdays throughout July.
How can you not love a M*A*S*H* reference on the housing blog?
Eh bien un pied-à-terre à Tolède ?
De toute manière c’est juste un sale tas de brique dans le désert.
Religion du tas de brique.
‘It’s not the same psychology that you build a house and by the time you’re done with it, it’s time to flip it and do your next deal. There is no bubble bursting here,’ Jaffe said.”
I didn’t buy it for investment purposes,’ Mr. Konop said. ‘I realized I was something of an urban pioneer down here. But I think the condo has the potential to be a good investment.’”
Anyone else having trouble figuring out what the heck these people are trying to say? Is it an investment or is it not, Mr Konop? And Jaffe, what in your previous sentence supports your conclusion?
Double speak
biggest loser with this is NJ since PAs property taxes are like 50% of NJ’s taxes for a similar home
and a lot of people live and end up working in PA since the commute is too much to put up with
“‘There’s no more flipping,’ said Austin Jaffe, chairman of the real estate department at Penn State University. ‘It’s not the same psychology that you build a house and by the time you’re done with it, it’s time to flip it and do your next deal. There is no bubble bursting here,’ Jaffe said.”
There is no bubble busrsting — it is a good, old-fashioned real estate bust.
‘real estate people were slitting their wrists’
Well, it seems like an overly dramatic way to reduce the supply of Real Estate People; I wonder if it was effective.
Q: What do you have when half the Realtors® in the country take themselves out? Ans: Still too damn many future real estate clerks.
I live in Philly and people are still saying “it’s different here” because they compare it to NY or California.
It may not be exactly the same as NY or Cali, but it’s not that different either. I bought my unrenovated home in 1998 for $190K. My next door neighbor just sold his unrenovated home for $467K. (He would have gotten at least $530K last year.)
Philly prices have doubled or tripled since 1998.
The tide has turned fast, too. Toll Bros recenlty dropped prices 25% in its Naval Square development in Philly. They actually sold a bunch of units last year at 25% more, too.
Amazingly, someone on a local Philly blog disagreed that Toll’s 25% drop meant that RE values had dropped. Instead, that blogger-in-denial stated that Toll was just practicing “price discrimination”!!!
Price discrimination?! Too funny!!
It sounds funny, but this remark is actually very much on target, if you understand the economists’ definition of “price discrimination,” which means you charge different customers different prices. Practiced intertemporally, price discrimination amounts to charging those customers who are most impatient to own an item a higher price than those who are less impatient, which has the effect of increasing the producer’s profits over what could be earned by charging the same price to all customers. This is a time-tested strategy for new technology product introductions, but I am guessing it only became a significant factor in the housing market with the recent mushrooming of the subprime lending sector (low doc, no doc, no downpayment, no interest, no income etc.).
“Anyone else having trouble figuring out what the heck these people are trying to say?”
That’s funny, JJ, exactly what I was thinking when I read it the first time. After reading it for the 11th time and taking out my secret decoder ring, I have definitively determined that what he is trying to say is that he purchased the condo with the money he used when he sold his Pioneer TV and urban cowboy hat. He also made an investment in Mr. Jaffe’s real-estate psychology sales course, where they learned all about double talk, i.e. “But I THINK the condo has the POTENTIAL to be a GOOD INVESTMENT”. Great way to sell products without the liability. The hat had the potential to be a good investment too, he did get a condo out of it. They sell all kinds of stuff from Lysol to wrinkle cream. “MAY HELP REDUCE the SIGNS of aging” and so forth. Not that complicated when you put the work into it, or if you are an urban pioneer investing by accident genius.
“I didn’t buy it for investment purposes,’ Mr. Konop said. ‘I realized I was something of an urban pioneer down here. But I think the condo has the potential to be a good investment.’”
Translation: “I am an idiot.”
I’m glad I could clear that up for you.
I realized I was something of an urban pioneer down here.
i.e. member of the Donner party.
They were pioneering a resort area.
Bad thing happen when you start too late in the season.
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it’s the pioneers that take the arrows!
I keep hearing the buyers are coming back. I’m not ready for them to come back just yet. It’s too early for them to come back. We need to see much bigga price drops or none of our wishes will come true. In DC inventory is dropping partially due to coming off the market and partially due to contracts. Is it wishful thinling on my part that we have more drops in prices or have we bottomed like the pundits/so called economist say?
A few suckers are buying the dips, nothing to signal a bottom.
Not only that, but you can’t do a cash out refi while your house is listed. I think this is a little bit of people burning furniture, for a few months of cash reserves. Spring should be fun.
The subprime lending meltdown has only just begun. I can’t see how the bid can begin to approach its lofty recent levels without suicide loans to prop it up.
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>I keep hearing the buyers are coming back.
don’t believe the hype.
“Official records suggest he made $8,000 on his sale. But he said he lost money because of upgrades and other expenses he put into the unit when he bought it new.”
Isn’t it amazing how none of these articles EVER specifically mentions closing costs?
As I explained once before, the moment you buy a new home you just LOST 7-10% of your “investment” because of the immediate and future closing costs. Your home better appreciate about 10% by the time you sell it, or else you’ll lose money.
Hmmm, how many people are going to jump into the RE market when they no longer think prices will appreciate.
They call it cognitive dissonance.
7-10% is too high.
In today’s market anyone paying more than 4% on a realtor is a fool. When you buy you have your seller pay all closing costs. When you sell 1% of selling prce is about what closing costs go for. So 5% is about right and if you sell FSBO 1%.
“7-10% is too high. In today’s market anyone paying more than 4% on a realtor is a fool.”
True. But this blog exists only because those buying homes over the last few years ARE fools. : )
“When you sell 1% of selling prce is about what closing costs go for.”
The variety of transfer taxes and other closing expenses applicable to each jurisdiction makes this statement too general to be useful.
In the city of Pittsburgh, the total transfer tax approaches 4%, typically split 50/50 between buyer and seller. Also, I’m not sure just how negotiable commissions might be. After all, agents don’t need sellers as much as they need buyers. Seems to me that agents have the commission leverage when dealing with sellers.
And since in today’s market buyers have the seller pay all closing costs, as you say, then the actual cost to the seller is far in excess of 10%
It really doesn’t matter whether the buyer or the seller pays closing costs. Since the buyer is the one showing up with a check from the mortgage company he is paying either way. The only difference is whether the costs are incorporated into the sales price of the property. Would you as the buyer prefer to have a lower price for calculation of RE taxes or a higher basis for capital gains.
Overall, downtown seems to be recovering from its slump, when ‘real estate people were slitting their wrists,’ said (broker) Allan Domb.”
I nominate this for dumb quote of the year. Would love to see this happening for real in California. Rid us of the surplus population. Also, this dude’s name was mispelled. It really is “DUMB”, not Domb.
A former canadian says ..
Canada is awesome if you dont plan on working there. The income tax (fed+provincial) is like 40-45% if you make 17KUS$ equiv or higher and when you want to spend your money you can pay anywhere from 7% (alberta) to 25% (newfoundland) for sales tax (fed + provinical). Also crap costs a lot to buy stuff since there is duty and GST and international shipping to pay if you want to buy stuff from south of the border (USA).
BUT!!!! If you are a bum/retired/non-working/semi-retired/semi-bum CANADA IS AWESOME, esp in victoria, B.C. where pot smoking hippies relaxing on the grass at the publically owned parks contribute to its excellent culture. Universal health care (which means companies pay for all health care not workers) also contributes to the distribution of the wealth from those that work like dogs to those that dont feel like it (its not there fault dammit ! They were just born lazy). Unemployment is also higher like in socialist countries (france). It really comes down to what kind of person you are. Laid back and cold tolerant you will love canada. Please move there.
Work your ass off, hate high taxes, hate sociasim, like owning guns … Look somewhere else. Maybe Switzerland, I dunno. The list of what you call a good country relies alot on the freedoms you adore and the ones you could care less about. Thats reality.
I too am from the worker’s paradise of Canada. I graduated college and made $29K a year in Toronto. I moved to the US a year later and made $55K. Sure I had “free” health care but paid 15% sales tax and at $29K I was in the 3rd highest tax bracket. 8 years later I make more money than I could ever dream of. I look at my friends back home and can’t believe how much better off I am. And yes I pay a lot of $$ for my health insurance premiums but even so my quality of life is far and above where it would be had I not moved.
I’m self-employed, yet every so often someone says to me “but you have no ‘benefits’ when you are self-employed”.
It’s sad how many people never experience the freedom (nor the earnings potential) of entrepreneuship because they have been brainwashed into thinking that “benefits” (aka, free health care)are oh-so-important.
It’s sad when so many people never experience the “joy” of not being able to buy health insurance at any price when they aren’t in a group plan.
but can has free hillery shty healthcare =wow
Canadian health care beats no health care.
Poor people have free health care in both countries just like poor people have free everything (welfare, food stamps, public housing, etc). The rest pay for it. In Canada through taxes in the US through co-pays and insurance premiums. Nothing is free people.
Doylestown is the area that I follow actively - being that we’ve been looking to purchase a “move-up” home for the past 3 years. We still feel that prices unreasonable, so we’ve sat tight to our frustration in the home we purchased in 2001. Prices are retreating, and listings are expiring just like other bubble areas. I think Feb/Mar is going to show an avalanche of listings, and the real price cutting will begin as expectations have been reset these past several months.
Now, for a little “coming out” party…tomorrow I’ll be on CNBC’s SquawkBox at 8:10am discussing our company. If you’re interested in knowing what some of your own do for a living, tune in. I will say this much - the folks who post here are indicative of the buyers who frequent our site - prudent, value-driven, and savvy. Reading this blog provides a better consumer profile and education than any survey every could.
I hope all of you had a great Christmas…
dd
swapagift.com?! Cool!
I love how they call it “declining affordability.”
I call it overpriced crap.
1. Philly is a no-go as far as affordability is concerned.
If you think you can do it, then inquire first about how
much you’ll pay for parking per month; and how much
you’ll pay additionally in taxes if your job (not your
home) is within “city limits.” Philly will roast you alive
with their city taxes, even if you only work there.
2. Eastern Pennsylvania is *not* a commutable distance
to newark/NYC. traffic is bad on 78 and elsewhere,
and people place other’s lives in jeopardy when they
try to make it a commutable distance. i’ve seen
people drive in excess of 130 miles an hour on 78,
trying to make it a commutable distance. if you don’t
care about your life or your family, then drive 78 every
day. it is no fun at all putting up with the commuters.
3. Eastern PA is no longer affordable. and it is
getting dangerous — most small towns now have a
per-capita murder rate that is similar within scale to
the murder rate in NYC and Philly; in large part due
to the fact that a huge part of the criminal class has
now moved to eastern PA before you (the area was
‘hyped’ but welfare-aid offices in the late 80’s and 90’s
as being a better value for a family’s welfare dollars).
i don’t want to be mean here, just honest. if you are
looking to jump in, consider the whole picture. . . .
-alpin