“When People Start Believing It, It Makes It Real”
The Chicago Tribune reports from Illinois. “The housing market isn’t dead, it’s stuck. There’s a standoff between home buyers and sellers, and the health of the 2007 housing market may depend on who blinks first, according to Chicago-area consumers, real estate agents and analysts who are scratching their heads about how to move housing out of the post-boom doldrums in 2007.”
“‘This situation is unknown to me, and I’ve been doing this for 26 years,’ said Stephen Baird, CEO of Baird & Warner Real Estate in Chicago. ‘The market is irrational right now.’”
“As that impasse has formed, home sales have hit the brakes. October home sales in Illinois were down 9.7 percent a year earlier, and when November data are released Thursday, few expect improvement.”
“The housing thud seems to transcend the usual holiday-period slowdown, analysts say. Fitch Ratings, for example, recently said housing is in a fairly severe, multiyear contraction. It’s being driven by perceptions, the Fitch analysts said.”
“‘A negative buyer psychology seems to have become pervasive,’ Fitch reported this month. ‘The expectation or fear is that home prices have peaked and buying now would be a mistake.’”
“Frustrated condo seller David Waters said he buys that. ‘I suppose part of it is people are waiting to see if prices drop even further,’ said Waters, who has been trying to sell his Edgewater two-bedroom unit since August, without a single offer despite several price reductions and incentive offers.”
“‘Because experts were predicting [the market slowdown], things tended to snowball,’ Waters said. ‘People bought into the fear that it’s going to be a tough sell. When people start believing it, it makes it real.’”
“‘I’m more of a second-quarter, third-quarter guy,’ said James M. Merrion, regional director of Re/Max Northern Illinois. ‘The NAR is a little too optimistic,’ Merrion said. ‘We’ve had too strong a market. When you’ve had prices go up in Illinois as much as they have in the past five years, people’s salaries haven’t increased that fast. I think we need to see some price moderation [brought on as sellers lower their prices] in order to get back to a healthy market.’”
“‘I think it could take 18 months for the market to normalize,’ said Naperville real estate agent Eileen Landau, who said the bloated inventory of homes must clear before the market will regain momentum.”
“One year ago, about 28,000 single-family homes were listed for sale in the greater Chicago area, according to Alvin Wagner, president of the Headrick-Wagner Appraisal Group in Naperville. By the end of September, houses for sale had swollen to about 48,000, he said. By mid-November, the number had ebbed to about 43,000, or a 6.5-month supply, Wagner said.”
“‘I went to show two homes the other day and found they had taken them off’ the market, said agent Karrie Lange, who said she suspects frustrated sellers are taking a break during the holidays and will be back early next year. If so, inventory will swell again, as old sellers replant their for-sale signs alongside the new listings that inevitably show up in January.”
“Which would bring the market back to the blinking point. Most of the betting is on sellers budging first by cutting prices.”
“‘Sellers are in denial,’ said Lange, based in La Grange. ‘I don’t think they realize how much inventory is out there. If the buyer doesn’t think a house is a value, he will skip it.’”
“But others say it’s not necessarily greed causing sellers to stick to their guns; many sellers who bought at or near the top of the market can’t afford to bend much.”
“Naperville agent Landau said the ‘list-to-sell ratio,’ may not paint a true picture of pricing strength in the marketplace. ‘Right now, the majority of properties in Naperville, for example, are selling at 96 percent of list price. But that’s not accurate because the list-to-sell is based on the latest price,’ and ferreting out the original asking prices would tell a different story, she said.”
“And the numbers don’t account for the significant amount of houses that aren’t selling.”
The Herald News from Illinois. “A downturn in the local and national housing market has area builders searching for ways to bring in buyers. ‘Sales have been slow at best,’ Jeremy Sentman of Neumann Homes told Joliet plan commissioners recently.”
“For a while the fast-growing areas in Will and Grundy counties were insulated from the cooling market in other parts of the country, said John Latimer, president of Will-Grundy Counties Home Builders and Associates.”
“But builders with local projects have been feeling the pinch during 2006. ‘The tract builders, they’ve really pulled back a lot,’ said Latimer.”
“Custom and semi-custom builders also have seen a decline in sales, said Latimer. The middle-range of the market, or homes selling from approximately $250,000 to $400,000, has experienced the largest slowdown, Latimer said.”
“Buyers also are canceling contracts on new homes because they have had a hard time selling their existing residences. ‘There’s a lot of inventory on the market,’ Latimer said.”
The Detroit News from Michigan. “After lack of demand grounded an ambitious high-rise condo and retail project in Troy, developers…are looking for ways to redesign the project.”
“Joseph Freed and Associates closed its sales office for The Monarch this month after pre-selling about 24 of 156 condos planned for the $104 million mixed-use development. Several factors hurt the project, including the local housing glut, the condo prices, $400,000 to $800,000, and the relative novelty of upscale high-rise living in suburban Detroit.”
“‘The design wasn’t where the marketplace is right now,’ said Kris Gosselin, director of sales. ‘We want to be really thoughtful about what we decide to do given the current oversupply of homes on the market,’ Gosselin said.”
This just in:
‘Home sales and prices across central Indiana fell further in November, although the declines were not as steep as October’s, according to the latest MLS statistics from the Metropolitan Indianapolis Board of Realtors.’
From the article:
“But others say it’s not necessarily greed causing sellers to stick to their guns; many sellers who bought at or near the top of the market can’t afford to bend much.”
Sellers have a choice to either “bend” or “break”. If they don’t have the flexibility to lower their price, who’s problem is that? I’m tired of agents saying “They are at their cost right now and can’t afford to accept your offer”.
And since when does the value of the house get pegged to the seller’s cost basis. If that’s the case, why wasn’t their “rule” in effect when prices ran crazy. Oh, I forgot…..that’s different.
Let ‘em break…….
It’s just a matter of time. The longer you wait the cheaper the price will be.
Greedy buyers are sinking the market.
it is either that or the bitter renters, or maybe the bubble bloggers or liar loans or or or etc etc etc
I think it’s the price of gas
Greedy oil companies!
Excellent points.
Yeah, let the thing go into foreclosure then!!!
Too bad they can’t find a greater fool.
And since when does the value of the house get pegged to the seller’s cost basis.
It is at this time that we remind the seller of market fundamentals and that their home true cost basis is whatever the market will pay. Then tell them take it in the axx and get on with their life.
DAVID,
Well here’s yet another “first” in this particular RE cycle. Along with giving buyers Land Rovers and vacations it’s like there’s some new unwritten rule that says NOBODY will ever have to take a loss on the sale of a home EVER again! It’s guaranteed!
I couldn’t agree more especially since Mr. F’d Buyer took the plunge when bldg. materials were at highs! Dimensional lumber and every thing from copper to concrete has taken a nose dive. (But seller’s realtwhores prefer not talk about that). Look, if rising prices for materials drove prices for “existing homes” on the way up it’s definitely gonna be a factor on the way down, like it or not. It’s a YP, not an MP.
Good comment. There is little discussion regarding falling materials prices. There’s also a lot of room in the fat general contractors’ margins of recent years - 30% +.
Well since sales are public records, just tell the realtor that you will only look at houses that the current owners have been in more than 10 years. THEY should have room to bargain.
Doesn’t Indy already have some of the highest foreclosure rates in the US? I thought I read this a few months back, although it probably has since changed.
and low prices w a decent biz community- a new car factory and on the verge of going Right to Work
What new car factory? Who is pushing the right to work legislantion? First I’ve heard of either, although I haven’t lived there in over a year.
The BRAC committee that was looking at military base closures and consolidations recommended relocating several thousand office jobs to Indy as well, although with Republicans out of power nationally that may not fly.
Indy is a cultural wasteland, although very family-friendly and with a lot of good-quality housing stock at very reasonable prices.
These articles are scewing more negative as we go, funny to me “sales in Illinois were down 9.7 percent a year….housing thud” If 10% is a Thud what is the 33% reduction we need (1million/yr from 1.5mill) to align production with demand.
This is just sales (macroecon) and does not address pricing (affordability, micro to mac) reductions which will go drop much faster (50-60% in “hot markets” ie. where the people with 90% of the US economic impact live) than sales flooding the market with even more listings to add to the 1/2 million extra homes the builders are making.
The entire econ supply/demand will equalize.
1 million starts to 1 million new housholds. At that point we can start to talk of a bottom. Even uttering about a bottom now is like worrying about a shark in your shitter, much to do about nothing.
Until we see housing starts approach new houshold formation and affordability closes to a realistic range (3-6 X incomes, not 10-15) the housing pony will no longer pull the US economy and only add to overall economic pessimisom, thereby slowing the entire US machine.
“The housing market isn’t dead, it’s stuck.”
As in “stuck on stupid.”
mad_tiger,
Well if you’re a starving realtwhore, then yeah, it’s stuck. Or is that a waffle, pancake or soufle’? Yeah it’s stuck (right up Mr. Greedyseller’s @ss).
“‘The design wasn’t where the marketplace is right now,’ said Kris Gosselin, director of sales. ‘We want to be really thoughtful about what we decide to do given the current oversupply of homes on the market,’ Gosselin said.”
An important omission in detail is the associated cost of starting and abandoning a large project. There are serious financial ramifications. It is not simply “whoops, that did not work - we will give another idea a shot.”
Not greed?
Of course it’s greed.
People who bought at or near the top who are selling are flippers and specs who expected continued double digit inflation in prices. They didn’t buy a home to live in it, they bought it to live in it while they flipped it to a greater fool. They are waking up to the fact that they were the greatest fool.
”
“But others say it’s not necessarily greed causing sellers to stick to their guns; many sellers who bought at or near the top of the market can’t afford to bend much.””
Technically, this could be true. It might not be just greed –it could also be stupidity.
I know people who “can’t afford” to sell, because they are underwater, but who are hoping their (ARM) payments will not rise beyond their ability to pay. They prefer to lose loads of money very slowly rather than go bust and then try to get a lease. I dunno, they may be right: landlords may not look upon walk-away buyers as trustworthy tenants. Certainly they haven’t got the wherewithal to pay multi-month deposits.
I have mentioned this before, but I will just reiterate as you set me up perfectly for it.
I just moved into a new rental and had to put down 1st, last and security before move in. Right around 6K.
Now for the fun part. The RE agent, as I am writing out the checks, mentions “I can make that home “yours” without any money down at all, you won’t even have to make a payment for 6 months as a seller concession”.
Ugh, that makes NO sense. I thought before buying a home you had to “prove” your finacial stabliity by coming up with a signifiant downpayment, as well as good, verifiable income?
Oh, I forgot, that’s the old paradigm. I am so outdated!
New paradigm: Prove to me that you are a certifiable GF.
“‘A negative buyer psychology seems to have become pervasive,’ Fitch reported this month. ‘The expectation or fear is that home prices have peaked and buying now would be a mistake.’”
I see debt people.
“I see debt people”.
ROFL…..the new “Sixth Sense”……
Ha ha….I’m going to use that one at cocktail parties.
I see debt people.
LMAO
Sorry guys, I have to call “first” on this one –from way back in July, 2005: http://patrick.net/wp/?p=35
HARM — sorry to recycle your stroke of brilliance without proper attribution. It was far too appropos to pass up the opportunity.
Cheers,
GS
‘People bought into the fear that it’s going to be a tough sell. When people start believing it, it makes it real.’
It sounds as though the housing market just got religion.
“People bought into the fear … ”
The RE market has been driven by fear (and greed) for a few years now. Remember “buy now or be priced out forever”?
I only remember “rent now or be priced in forever.”
“It’s being driven by perceptions, the Fitch analysts said.”
Perception is the humans beings interpretation of their sensual imput with which they form their reality. What are people suppose to base their decisions on, fantasy?
Despite the fact that it is now blindingly obvious to everyone that these “affordability loans” are in fact suicide loans, companies are still pimpingthem. I just saw an ad on Yahoo Finance for Lending Tree that read “$300,000 loan for only $1000/mo”. I’d love to see the fine print on that. No wonder every $20/hr mechanic thinks he can afford a $600K house. The big question is: how are they still finding anyone dumb enough to underwrite these loans in a falling market?
Have you ever seen a chicken continue to run around after its head was chopped off?
(Caution: If you don’t want to watch a chicken’s head being cut off don’t watch this clip.)
http://www.goyk.com/video.asp?path=870
Hehe hehehe, a little knife would have done the trick just as well.
Ewwww!
Sickening cruelty.
Joy kill is what it is.
Sorry if I offended you, and I agree the clip is in poor taste, but I think it makes a valuable point — chickens do quite literally run around after their heads are cut off. Something similar seems to be currently underway in the subprime lending sector.
“The housing market isn’t dead,”
Mr. Praline: Never mind that, my lad. I wish to complain about this parrot what I purchased not half an hour ago from this very boutique.
Owner: Oh yes, the, uh, the Norwegian Blue…What’s,uh…What’s wrong with it?
Mr. Praline: I’ll tell you what’s wrong with it, my lad. ‘E’s dead, that’s what’s wrong with it!
Owner: No, no, ‘e’s uh,…he’s resting.
Mr. Praline: Look, matey, I know a dead parrot when I see one, and I’m looking at one right now.
Owner: No no he’s not dead, he’s, he’s restin’! Remarkable bird, the Norwegian Blue, idn’it, ay? Beautiful plumage!
Mr. Praline: The plumage don’t enter into it. It’s stone dead.
Owner: Nononono, no, no! ‘E’s resting!
Mr. Praline: All right then, if he’s restin’, I’ll wake him up! (shouting at the cage) ‘Ello, Mister Polly Parrot! I’ve got a lovely fresh cuttle fish for you if you
show…
(owner hits the cage)
Owner: There, he moved!
Mr. Praline: No, he didn’t, that was you hitting the cage!
Owner: I never!!
Mr. Praline: Yes, you did!
Owner: I never, never did anything…
Mr. Praline: (yelling and hitting the cage repeatedly) ‘ELLO POLLY!!!!! Testing! Testing! Testing! Testing! This is your nine o’clock alarm call!
(Takes parrot out of the cage and thumps its head on the counter. Throws it up in the air and watches it plummet to the floor.)
Mr. Praline: Now that’s what I call a dead parrot.
Owner: No, no…..No, ‘e’s stunned!
Mr. Praline: STUNNED?!?
Owner: Yeah! You stunned him, just as he was wakin’ up! Norwegian Blues stun easily, major.
Mr. Praline: Um…now look…now look, mate, I’ve definitely ‘ad enough of this. That parrot is definitely deceased, and when I purchased it not ‘alf an hour
ago, you assured me that its total lack of movement was due to it bein’ tired and shagged out following a prolonged squawk.
Owner: Well, he’s…he’s, ah…probably pining for the fjords.
Mr. Praline: PININ’ for the FJORDS?!?!?!? What kind of talk is that?, look, why did he fall flat on his back the moment I got ‘im home?
Owner: The Norwegian Blue prefers keepin’ on it’s back! Remarkable bird, id’nit, squire? Lovely plumage!
Mr. Praline: Look, I took the liberty of examining that parrot when I got it home, and I discovered the only reason that it had been sitting on its perch in the
first place was that it had been NAILED there.
(pause)
Owner: Well, o’course it was nailed there! If I hadn’t nailed that bird down, it would have nuzzled up to those bars, bent ‘em apart with its beak, and
VOOM! Feeweeweewee!
Mr. Praline: “VOOM”?!? Mate, this bird wouldn’t “voom” if you put four million volts through it! ‘E’s bleedin’ demised!
Owner: No no! ‘E’s pining!
Mr. Praline: ‘E’s not pinin’! ‘E’s passed on! This parrot is no more! He has ceased to be! ‘E’s expired and gone to meet ‘is maker! ‘E’s a stiff! Bereft of life, ‘e
rests in peace! If you hadn’t nailed ‘im to the perch ‘e’d be pushing up the daisies! ‘Is metabolic processes are now ‘istory! ‘E’s off the twig! ‘E’s kicked the
bucket, ‘e’s shuffled off ‘is mortal coil, run down the curtain and joined the bleedin’ choir invisibile!! THIS IS AN EX-PARROT!!
[Feel free to substitute housing market for parrot.]
Nobody here is old enough to know what you’re referring to there.
Come on, Monty Python is timeless.
This blog full of young people? That’s a hoot. Mostly geezers here!
If we are, do we admit it?
I am.
Me too
No one expects the Spanish Inquistion !
No one expects the Spanish Inquistion !
LOL, Hell, stop it! just swallowed a hit of skoal on that one
the housing market has no arms left but tis merely a flesh wound!
Go away, or I shall taunt you a second time!
ditto
I’m 29, and I remember it. monty python is timeless!
Thank you, Robert! You just made me go out in my pijamas by -6°Celsius(freezing cold) to do some ‘funny walks’. Just couldn’t resist.
f’ing CLASSIC MP !! great !!!
Laura
Brilliant!
“Englander, I piss in your general direction!”
I wonder is current buyers might have said “Please let me have just a little peril”
I’m hungry for spam.
“When People Start Believing It, It Makes It Real”
.
Housing downturn, recession… take your pick. That’s exactly why so many people are cheerleading so damned hard, because they don’t want J6P to realize the truth and start acting accordingly
So nice of CNBC to trot out the experts today and declare a housing bottom and recovery in 2007 with lower interest rates for all and oh yes 2007 will also be a great year for stocks SIS-BOOM-RAH !!!!!
Not every ‘expert’ agreed. A few pointed out it is ‘different’ this time. This time affordability is a bigger issue than ever before.
Yeah, wasn’t CBS the same lying group that brought out that fraudulent 9-11 movie just before the election in November? Liars don’t change …
Housing Slump Could Be Ending
http://www.cbsnews.com/stories/2006/12/27/business/main2301165.shtml
Growth in the Home Price Index in the East North Central, the past few years seems to be less than some areas, e.g., the Pacific. The bigger they are the harder they fall.
http://tinyurl.com/ycljwf
26 years ? never seen this
try 1990 to 1994 dude
rebound 2000 with inflation maybe 2002
well mr.gillespie the head of coldwell banker has proclaimed we are at the bottom and it was soft landing 5 minutes ago on cnbc
thank god for that
i’m off from work this week and after watching some cnbc i am ready to buy a mcmansion and all the stock i can get my hands on
He knows it was soft landing because it made a soft, squishy sound when cratered on those poor FB’s. Hardly any crunch at all.
Back home for the holidays here in Michigan and was talking to my BIL… This guy is retired and was an accountant, finance guy for Fords. They would like to sell there home and move to Tenn. But he knows the resale market is crap and because of family is in no hurry.
The point,
We were talking about the economy and such and because of this blog, with all the national news gathered together for us to sort though, I pointed out the housing mess in CA and other states, pointed out the toxic loan bombs ready to go off, about foreclosed properties around the country.
Talked about the economy ready to take a big dump.
He was unaware of a lot of this.
The upshot is that there are a lot of people, not just the plumbers and bartenders, that are in the trade of “money” AND seeming are unaware of what is going on thoughout the country in regard to Homes and housing. Something that is basic and the largest purchase many people will make in there lifetimes.
Wanted to add Happy Holidays to Ben and posters here.
i find the same thing you described, i keep my mouth shut
people start looking at me like i am a gloom and doom guy
my mil said to my wife she thinks she will never get me to buy,
lol at least not until it makes sense
Mil’s are big on the reverse psycology.
I tend to take a moderate approach when talking about housing. People are less likely to get defensive. If you can bring up the danger spots in the housing market (afforability, ARMs adjusting, the games that are being played with stats to make things look better than they are), you can get people to talk. It won’t take long until they bring up a friend/relative/co-worker who is overleveraged on an ARM and couldn’t sell them home for the debt on it, or has listed and re-listed their house several times, or people who can’t afford a home so they have left the state.
You can almost see the lightbulb go on. If you talk immediately as a bear, jumping right to the conclusion that housing is going down, the shields go up–they feel like they are protecting their equity. Better to run through the logic–they’ll come to the same conclusion.
Here’s a great deal in long island.
http://longisland.craigslist.org/rfs/253762630.html
lmao
some realtor will flag it asap
funny stuff, except it is pretty accurate
……….this is brilliant. I hope they don’t flag it down before I can forward it to some people.
I flagged it … for the “Best of” category.
Homebuilder stocks are up today. I see a huge headline on Money that says is Homebuilding Back From the Dead?
It had this quote in it, “NEW YORK (CNNMoney.com) — Homebuilding, one of the most battered sectors of the U.S. economy in recent months, showed surprising strength in November, according to a government report Wednesday.”
Yes, keep on building. As if inventory wasn’t bad enough : )
Several months back, my builder-landlord shared his tale of woe: owes about $400K, paying about $3K/mo debt service, gets no bids on his $575K almost-finished waterfront house, rents it to me for $1K/mo. I rashly asserted that I might be interested in lending him the money. (If he’s paying 9%, I could possibly bring myself to undercut it, and I suppose an absolute auction would bring $400K or more. Maybe.) Then his brother gets into the act and puts together a “proposition” from their accountant — they’d like me to pay $460K for an 80% equity share in the house ha ha. Told them I am not interested because the house is not “worth” $575K, if it were, somebody would be making SOME bid !!! Their alternate proposition is that I lend them $460K (don’t know how $400K turned into $460K), for debt consolidation, at 5% or 6%. Guess I am just going to tell them Australia govt bonds yield 5.7% w/ 5-year maturity and zero default risk. Guess it was rude on my part to suggest I might be interested in becoming their lender. They need a very Great Fool to buy the thing.
Do you need a roommate? lol
I’m amazed that you’re smart enough to save $400K but simple enough to let your landlord know that!
“‘This situation is unknown to me, and I’ve been doing this for 26 years,’ said Stephen Baird, CEO of Baird & Warner Real Estate in Chicago. ‘The market is irrational right now.’”
Yeah, that’s right Stephen - all of a sudden the market just got irrational. I just don’t know how refusing to pay 2, 3, or 4 times too much for a home = irrational.
Uh - don’t you know the meaning of “irrational”? It’s only rational if someone wants to hand him money - if not, he can’t understand why, making it irrational. See - so easy!
Quote of the Week:
The market is irrational right now.
Surprise, surprise…another real estate agent is getting an education but still isn’t learning.
“And the numbers don’t account for the significant amount of houses that aren’t selling.”
Is that true? I would think that the significant number of homes that haven’t sold is called oversupply and would already be reflected in prices, which are a function of supply, demand and psychology.
“would already be reflected in prices,”
A home in my area listed at $700K or so has sat on the market for over a year now. No comparable homes have sold recently. What can you tell me about the price of this home? (My guess: Only that it is probably worth less than $700K.)
“Grundy County” is a very offputting name. No wonder no one wants to live there.
Buying a home now is more dangerous and stupid than a 78 lb teen girl attempting to rescue a Desperately Drowning 260 lb Non-Swimmer NFL Lineman in a California Riptide. Let the sharks chew on it for a while or wait for the body wash up on the beach . This is NO TIME for heros or sheer Stupidity!