Pending Home Sales Post Third Consecutive Decline
Some housing bubble reports from Wall Street and Washington. “Fewer Americans signed contracts to buy previously-owned homes in November, suggesting weakness in the real-estate market may extend into the new year. An index of signed purchase agreements fell 0.5 percent, a third consecutive decline, to 107 from 107.5 in October, the National Association of Realtors said. The index was down 11.4 percent from November 2005.”
“The sales gains are barely starting to make a dent in inventories. The number of previously-owned homes for sale decreased 1 percent to 3.82 million last month, last week’s sales report from the Realtors showed. The supply was just less than the record 3.861 million reached in July.”
“Figures from the Commerce Department showed the number of new homes completed and waiting to be sold were at a record 169,000 in November.”
From MarketWatch. “Regionally, pending home sales fell 2.8% in the Northeast, 1.1% in the South and 2.6% in the West. Pending home sales rose 4.8% in the Midwest. Pending sales are down about 16% year-over-year in the West.”
From Bloomberg. “Anyone who thinks ‘housing has bottomed should talk to Lennar,’ says Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago. ‘Inventories of completed homes continue to increase, both in absolute terms and relative to their total inventories,’ he said. ‘Historically, until the relative inventories of completed homes begin to decline, the starts of new homes continue to decline.’”
“Because the Census Bureau, keeper of the new home sales data, doesn’t capture cancellations in the monthly statistics, sales are probably being overstated and inventories understated.”
“The lag between turning points in residential and non- residential construction is variable, economist Ian Shepherdson said, but one follows the other as night follows day. ‘The plunge in housing construction promises tough times ahead, sooner or later, for the non-residential construction business,’ he said.”
From the Street.com. “Homebuilders rivalry is intense. The result is shrinking home prices and eroding profitability. Lennar remains the biggest bully in many markets, cutting prices and aggravating fellow builders.”
“Lennar announced this week that orders were down 6% in its latest quarter, but its backlog of homes fell 42% year over year in dollar terms. JMP Securities analyst Alex Barron says those numbers imply the prices of Lennar’s new orders fell at least 30%.”
“‘If that is remotely true, I don’t see how or why any builder, public or private, will just sit there and not eventually have to begin cutting prices down to match or beat that,’ Barron says.”
“The only real way to hold steady on prices in such a market is to offer a differentiated product. If you travel around the country, you’ll find Lennar’s homes similar to other builders, Barron says. ‘There is not a huge noticeable difference from one to the next,’ he says.”
“The threat of substitutes remains high for builders. There is a glut of existing-home inventories, and rental apartments and houses are often more affordable across the country. In some communities, builders selling new homes are facing competition from buyers looking to sell a version of an identical home purchased a year ago.”
From Forbes. “Automatic Data Processing on Wednesday forecast a 40,000 decline in American jobs. If the payroll processing firm is correct, it would be the first time in nearly four years that U.S. employment rolls have declined.”
“‘Given the economic slowdown, particularly in housing, firms could be getting more cautious about hiring,’ Goldman Sachs economist Andrew Tilton said.”
“Tilton said the most vulnerable employees are those working in the residential real estate market. ‘You have seen huge declines in home sales,’ he said. ‘Yet housing employment is just slightly off. So this sector needs to shed some employment.’”
“Members of the Federal Open Market Committee agreed unanimously in December that inflation remained the primary risk to the economy, although they acknowledged that the economy may have been a ‘touch softer’ than they had previously believed, according to minutes.”
“All the policymakers agreed that housing remained a drag on the economy, but they noted ’some indications’ that sales might be starting to stabilize. Residential investment would continue to decline for several more quarters, however. The risks of a broader drop in spending would rise ‘if housing prices were to decline significantly.’”
From CNN Money. “Economist John Norris said the Fed may not look to lower rates until its May meeting at the earliest. ‘Most folks will agree that we will get a rate cut at some point this year. But the minutes suggest the Fed could be on pause for a while.”
From Reuters. “The U.S. House of Representatives will pass legislation this year that will create a new regulatory regime for mortgage finance companies Fannie Mae and Freddie Mac, the incoming leader of the House Financial Services Committee said on Wednesday.”
“‘We will pass a bill,’ Rep. Barney Frank told reporters. ‘(It) will substantially increase the ability of the regulators to oversee Fannie Mae and Freddie Mac. That has never been in question.’”
Fitch Ratings has this:
‘While upgrades will continue to vastly outweigh downgrades for U.S. CMBS in 2007, the increased presence of interest-only loans likely means that the ratio of upgrades to downgrades will decline in the long-term, according to a report by Fitch Ratings.’
‘Deals issued last year averaged 70% of full or partial interest-only terms in a CMBS pool, compared with 60% in 2005,’ said Senior Director Britt Johnson. ‘As these deals will amortize more slowly than more seasoned transactions, the number of upgrades will drop unless the low interest rate environment lasts and there continues to be a significant amount of defeasance.’
From the first link: ‘The sales gains are barely starting to make a dent in inventories.’
‘gains’ I assume this is a typo.
Ben-
Is partial io a negam loan?
I would assume they mean option mortgages with this term, i.e. all mortgages that have not full amortization baked into their first payments.
It’s more than a typo. It’s a direct contradiction of the previous fact.
“‘There is not a huge noticeable difference from one to the next,’ he says.”
This is the understatement of the day. The cookie cutter homes are pretty pathetic. And yet sellers still think they are holding on to a Rembrandt. Watching the builders in 2007 will be fascinating as they race to the bottom trying to capture whatever market share remains.
Yup, cue up that old “Little Boxes Made Out of Ticky-Tacky” song.
Revised version:
“Big Boxes Made Out of Stucco-wucko”
A stucco white elephant ?
A stuck white elephant.
My folks bought into a cookie cutter neighborhood that over 30 years became very diversified. (New roofs, porches, added rooms, gardens, etc.) So over a long time, its ok.
But not while they’re new…
Don’t buy in 2007… I’m happy to report I’ve already talked two people out of it.
Both relatives. Heck, I’ve gotten my grandmother to agree to do the sell and rent! Partially due to her desire to simplify estate planning… 
For her, that’s 5 properties!
Neil
I too talked a coworker out of buying.
Several couples who listened to my advice to wait on a home purchase last year are chomping at the bit to buy a house now. My energy is sapped as they come at me every day with newspaper articles or e-mail me stories about this being the bottom, prices are set to go up, a great time to buy, etc. I have come to the conclusion that it isn’t my job to play devil’s advocate against the housing “bulls”.
My New Years resolution is to stay out of “bubble” discussions with my friends and family.
It does get tiring. I have a coworking itching to buy. I finally said, “Its your quarter million to lose.” He likes to point out what if I’m wrong? So I’ve just taken to telling him I’ll just taunt him if he buys and I’m right… That delayed him probably another 30 days.
Plenty of people will catch the falling knife. They’ll just be the comps on the way down.
Neil
Screw ‘em, it’s their money.
love the attitude, passtb
Screw ‘em, it’s their money.
Well… actually it’s some Chinese banker or hedge fund’s money, but I get your point.
Real good point. Real good point. But guess who will be paying for the mess when the banker and the moron hedge fund manager go bust ?
My folks bought into a cookie cutter neighborhood that over 30 years became very diversified. (New roofs, porches, added rooms, gardens, etc.) So over a long time, its ok.
Yes, but now the homeowner’s association garbage is so prevalent that these cookie cutter homes won’t be able to diversify.
“Yes, but now the homeowner’s association garbage is so prevalent that these cookie cutter homes won’t be able to diversify.”
Excellent point.
Yea, NO HOA for imploder…. ain’t nobody gonna tell me I can’t park my 73 Vega, that I’m “workin on” wheren I got space to…. kiss my behind….
I was going to reply with the same, palmetto. Even in the single family units one winds up with housing nazis. I have a feeling most won’t be able to make many major modifications, at least to the exterior. Also, I question whether today’s construction will still be around in 30 years like Neil’s parents is! In my opinion, with the exception of custom jobs and some of the recent modular designs, most residential construction has taken a big turn for the worse over the past couple of decades, both in quality and architecture. But that is just my $.02.
That and the fact that a new home built with 10′ setbacks all around don’t allow for much post-construction change. These current neighborhoods (minus trees) will look just the same in twenty years.
Another good point! Nowhere to build but up! And we all know that will not fly. Seriously, some of these new homes are so close together it makes me wonder why they are even considered to be single family. Because everything is two-story these days, one almost needs a camouflage net over their back yard in order to get any privacy.
That’s why the floorplans have one side wall that is entirely bereft of windows. That way your neighbor isn’t looking into your bedroom from 15′ away. Of course the house on the end looks very strange with a completely blank wall.
jim A,
the elevations on the types of homes you describe are nothing short of architectural abortions. I don’t know why the public gobbles that junk up. Then again, I don’t understand why folks read People and US magazine. Guess I’m in the minority.
I shouldn’t get too snarky I live in a tract home built in ‘49 and my bedroom window is about 15′ from my neighbors kitchen window. Of course nobody is living in the house on either side of mine so…
Older Levittown-type tracks were all ONE-STORY homes, or 1.5 story homes with a low second floor, and the houses themselved didn’t have a big footprint. Although the 15-foot space between houses was small and cozy, it was well proportioned, and bright. All these new homes are TWO stories with 9-10 foot ceilings + full roof, big footprint. That SAME 15-foot space is now tall, thin, and dark. It looks like a scummy city alley. I half-expect dumpsters and rats. (Don’t get me started on the front “yard” which is half concrete driveway.)
I agree on the HOA’s. One poster here said that her HOA wouldn’t even allow a garden in back!
Has anyone who’s unhappy with thier HOA considered getting on the board and then introducing a proposal that the community property and association assets be divided up among the owners and the HOA disolved?
I bet for most HOAs, you could build enough self-interest into such a proposal that a majority of owners would go for it.
–Shannon
Most people in AZ are drinkin’ the HOA koolaid. They believe that allowing the neighbors to do anything different might lower property values.
Having been through some AZ neighborhoods (especially with all the rentals) they are correct in their assumptions.
“Lennar announced this week that orders were down 6% in its latest quarter, but its backlog of homes fell 42% year over year in dollar terms. JMP Securities analyst Alex Barron says those numbers imply the prices of Lennar’s new orders fell at least 30%.”
Is this a 30% decline in pure home price (excluding incentives/cash back)? Either way, a 30+% price cut is huge. Kinda puts underwater all the flippers and ‘end-user’ buyers who bought during the bubble frenzy.
42% less backlog can sound good- untill you know it’s the VALUE of the stading inventory
wow
In our neighborhood the resales have already put 2005 buyers underwater. I have seen titles, and there is quite a bit of 100% financing around. Over the past 18 months or so, builders have purchased new land nearby and are still building on it. Not sure if anything is actually selling, but ouch their margins must be getting thin considering their land cost.
Hey CA Guy which part of CA are you in? There was no blog dedicated really to Los Angeles Ventura county so I just started one posting flopped homes where sellers lost money. There is a bubble in bubble blogs, awsome.
http://realestatehaircuts.blogspot.com/
Keep up the good work, Crash Landers. I’ve been wondering when a good site for SoCal would start up. I think you’re entering at a great time.
Excellent. ****Very interested.****I’ll have some flops for you soon…Studio City…they haven’t sold yet.
Crash landers: I’m the the eastern bay area. Your blog is a cool idea, love the graphic of the home sliding off the cliff! I haven’t seen any examples as extreme as yours yet, but I know it’s coming. Bay Areans seem to hold on to their delusions the longest. Those were some good haircuts you had posted. The interesting thing is that they appear to be nice, large homes, and the owner didn’t hold on to them very long. Kind of goes to show you just how crazy the lending industry got.
Anyone else catch the story that Lennar just sold a 62% interest in its LandSource partnership for around $1.3 billion to MW Housing Partners (owned by McFarlane Partners and CalPERS)? Story is here:
http://tinyurl.com/yjbq4n
Hmmm, does Lennar need cash? Were they worried that the projects were going to lose money? Both? Some other reason?
looks to me like Calpers is trying to catch a falling knife. Im sure when they realize the loss from this “investment”, the guys who put the deal together will be long gone.
I wonder who will buy the rest of the deal from these scam artists?
Morons from Saudi Arabia or chineese generals in need of a good place to hide the money they stole to the state.
TIME TO SHUT THIS BLOG DOWN
DL says all bottom was quite sometime ago!
“The index is pointing toward fairly stable home sales in the near future,” David Lereah, chief economist for the trade association said in a statement. “That is another indicator that home sales likely bottomed-out in September.”
No wonder I haven’t been posting much.
It couldn’t possibly be due to the fact that some of us actually enjoyed the holidays and spent time with friends and family? Naaaa…
Or that inventory is doomed to explode.
My current favorite topic is the implossion of the sub-prime mortgage world. I’m betting on the return of down payments. Just as trends overshoot one way, might they not overshoot the other (require 25%+ downpayments for all but starter homes)?
By may this will fall apart.
Whatever you do, don’t buy in 2007. Heck, I still think the earliest it might possibly make sense to buy is Fall of 2008. But only then if you’re good at negotiating (can we say low-ball?).
Neil
Inventory due to explode? You got it. Commuting in this morning, I already saw several houses sporting brand new For Sale signs. Is the spring sale-a-thon starting already? Perhaps, but I’m not expecting any bargains. Not yet.
I’ve been wondering whether the “spring sales season” will start early. With so many would-be sellers planning to list in the spring, it wouldn’t surprise me if some of them decide to try to get a jump on things…
With the weather in the NE so warm, I think Spring selling will have another excuse to start early besides ‘Beat the Tsnuami of Neighbors’.
I’m seeing LOTS of ‘For Lease’ signs sprouting in North Hollywood….At least 5 new in my 10 block area.Those…. flippers…just …gotta…hold…on…a…little..bit …longer…
I did an informal count of For Sale signs in my 25-mile commute to work yesterday. Counted 52 signs. There are usually about four or five in a normal market.
Inventory here already back to where it was pre-holiday….last year many didn’t put inventory on until March or even April. I saw several new homes that weren’t on the market previously. Of the sitters, the homes that have been on the market for 6 mos or more, some have reduced their prices or changed realtors but I’m amazed at the majority that are just sitting without a budge in their asking price. I’m wondering just what these people think they are waiting for.
Same here, N. AZ….new listings bounded back up the day after New Year’s…tons of expired, then BOM, with all kinds of incentives….but still refusing to lower price. I hear all kinds of antedotes of really really really stupid and stubborn sellers still singing the “spring rally” song.
Time for Phucktheflippers to come out of hibernation.
*sigh* Ok…I can wait this thing out. My goal is to buy a place before my son starts kindergarten so we can settle into a school district. He’ll start kindergarten in fall of 2009…
Are you renting the equivalent of what you’ll be buying anyway? If so, so sighing necessary.
I meant “no sighing necessary”
No. I’m currently renting a 2BR apartment and trying to sock away more money.
You sound exactly like the East Coast version of me. Only difference is that my daughter starts kindergarten *next* year, so the whole timing thing might be a little off for us.
Guys, we sold our house in 2004 & started renting. While living in a rental, we conceived and had another baby (refuting the idea that one needs to live in a mortgaged home in order to conceive & give birth) AND our eldest child started kindergarten this year — in one of the best schools/districts around.
Seriously, don’t let renting keep you from the rest of your lives. Even if you eventually have to move, it’s not that big a deal for the kid(s) to change schools. Preferably, you could rent where you eventually intend to live and stay in the same school as well!
Best of luck!
Timing seems just about perfect. If the down cycle lasts 46 months,which was what was suggested by Kunstler (I believe), and it topped out in October 2005. We should be at the bottom around August 2009! Keep the faith eastcoaster!
Mish has a post about this up. Look what Fannie mae is up to.
http://globaleconomicanalysis.blogspot.com/2007/01/significant-shifts-in-psychology.html
Fannie Mae
On December 20th Fannie Mae announced Selling and Servicing Amendments the most significant of which was “requiring borrowers to be qualified at a fully-indexed rate that assumes a fully-amortizing repayment schedule.”
http://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2006/0626.pdf
The Washington Post reported on Janunary 2nd States Swift to Warn Mortgage Lenders.
http://www.washingtonpost.com/wp-dyn/content/article/2007/01/01/AR2007010100669_pf.html
Nineteen states and the District of Columbia have moved quickly to warn state-regulated lenders about the hazards to consumers from nontraditional mortgages.
Tens of thousands of state-licensed lenders and mortgage brokers are affected by the advisories, also known as a “guidance.” Such loans include interest-only mortgages and other arrangements where the borrower cuts monthly costs by paying back less than full interest and principal.
The states are following closely behind federal banking regulators, who issued a sternly worded advisory in late September to the lenders they supervise, telling them they should not make these loans to borrowers who may be unable to repay them. Within 24 hours of the federal guidance’s release, six states had issued similar warnings to their own lenders, a notable flurry of activity in a field known for its slow-moving bureaucracies.
Significant Shift In Lending Standards
This is an initial but very significant shift in lending psychology and it does not matter whether the 800 lb. gorilla (Fannie Mae) is leading or following. What we clearly see is a change in trend at the national and state levels. Prior to this shift recall that down payments were gradually lowered to zero (and in fact to a negative 25% in some cases via 125% mortgages) and credit standards were lowered and lowered and lowered again. This is the first significant shift in lending psychology that we have seen in ages and it is going to dry up mortgage lending in its wake.
I wonder if those warnings have anything to do with the sub prime lenders failing ?
” they should not make these loans to borrowers who may be unable to repay them.”
Isn’t that…like…duhhhh?
Nope. You just securitize the sh-t, take your percentage and sell it to a japaneese insurance company. You make the loan and get rid of it as quick as possible. It’s a kind of sophistacated dumping in the blind capital maket. You sell to a stupid foreign buyer from Asia or Saudi Arabia.
Neil,
I’d have to say it’s become my favorite “side bet” as well. What’s really interesting is just how “disposable” and temporary these sub-ops were? It’s almost as if they were designed to fail or at the very least, be expendable.
I said ain’t this boogie a mess?
I have to agree, it looks like the sub-primes were shells set up to take a cut as Merril Lynch (amoung others) made their profit packaging the bonds.
The fact they’re failing without enough cash to make final paychecks says a lot..
Neil
“I still think the earliest it might possibly make sense to buy is Fall of 2008. But only then if you’re good at negotiating (can we say low-ball?)”
Neil, agree with you 100%. There is no rush what so ever. We are going to see a huge inventory pile up in ‘07. As many here have stated, one should wait until the populace is completely turned off to RE. We’ll know it when we start seeing marriages come apart, and co-workers openly curse realtors and bankers.
We’ll know it when we start seeing marriages come apart, and co-workers openly curse realtors and bankers.
They are just now saying we’re past the peak, but they still believe the market will recover.
Rotfl. So true. I have a couple of coworkers that I use as a “reverse barometer.” In other words, I invest contrarian to their recommendations.
I tell them if prices don’t improve in 18 months, I’m moving out o the state. That little statement gets them thinking…
Neil
Oh, I forgot to mention, I know of one failed marriage this week due to high CA home prices.
The wife was pressing the husband for a year to sell and relocate. Well… she just did. With the kids. He’s been invited to follow if he can get a new job and sell the home. Otherwise, she made it quite clear he’s welcome to keep the home.
Yet… this hasn’t even started.
I’m still predicting a recession. But a really ugly one.
However, I have raised my risk of depression to 5%.
Neil
I see you’re making progress…
“My current favorite topic is the implossion of the sub-prime mortgage world.”
I agree entirely. The financing boom let this housing mess get this far. The signs of liquidity drying up a bit is the leading indicator for things to get worse.
I live in an area where truly supply hasn’t grown much, so I’m not expecting a LV/Phoenix/FL style inventory boom, which should help prices hold up better than other areas. That said, I will not buy a home as long as knuckleheads without two nickels to rub together can buy a home without proving their income and putting nothing down.
I refuse to compete to buy a house in that lending environment. I’m reading about the implosion of subprime lenders with great interest…
“I will not buy a home as long as knuckleheads without two nickels to rub together can buy a home without proving their income and putting nothing down.”
The implosion of this type of lending is why housing in non-bubble areas will tumble, too.
I think you are already winning your bet! And there are 361 days left. Ah Connecticut! The state of Long Term Credit Management and Amaranth Holdings.
Not so Happy New Year: Another Sub-Prime Lender Cuts its Workforce By Steve Christ
Baltimore, MD * Jackson, WY * Missoula, MT Thursday, January 4th, 2007
The New Year got off to rough start for the employees of Mortgage Lender’s Network (MLN) yesterday, when the Connecticut-based sub-prime lender announced that it was no longer in the business of funding or originating loans.
MLN announced that some 1,440 employees or nearly 80% of its workforce would immediately be placed on “temporary furlough” as the company continues to struggle under the weight of “deteriorating market conditions.”
Outside the company’s Rocky Hill, Conn. office, hundreds of teary-eyed employees were seen leaving the complex with nothing but boxes of belongings in their hands.
The news amounted to a stunning reversal of fortune for the privately held multibillion-dollar company. In fact, the company had recently broken ground for a new $100 million Connecticut headquarters and also announced plans for major expansions into the Phoenix, Atlanta, and Philadelphia markets.
Primarily a wholesaler, the company specialized in funding sub-prime loans to the broker end of the business. But the slowdown in the housing market led to a string of defaults and late payments that ultimately forced the lender to cease its wholesale operations, which accounted for about 90% of its loans.
In a press release, CEO Mitchell Heffernan said, “Until we see that credit quality and margins return to acceptable levels we have determined that MLN needs to pause from wholesale broker originations.”
This cutback is just the latest sign of trouble in the sub-prime mortgage business.
Last week another sub prime giant, Ownit Mortgage Solutions Inc., filed for Chapter 11 bankruptcy protection. Earlier in the month the company had laid off some 800 employees nationwide when it announced that it was closing its doors immediately and had no money to pay its employees.
The bankruptcy filing revealed that Merrill Lynch & Co., JPMorgan Chase & Co., Credit Suisse First Boston and other mortgage purchasers were demanding that Ownit buy back more than $165 million in loans on which borrowers had missed payments.
But the pain in the industry hardly ends there. Numerous other sub-prime lenders have closed their doors, including Harbourton Mortgage Investment Corporation (HMIC), which ceased operations on December 20.
Like Ownit, Harburton was forced to take action when it was unable to satisfactorily resolve mortgage repurchase claims asserted by investors that had purchased mortgage loans from HMIC.
Even beyond that, numerous sub-prime companies are also reportedly on the auction block, including Irvine-based Option One Mortgage, a unit of H&R Block Inc., and ACC Capital Corp., the private holding company for Ameriquest Mortgage Co. and affiliates.
Sadly, for those still employed in the business it is just a sign of things to come. Issuance of sub-prime mortgage bonds jumped from less than $13 billion in 1995 to $594 billion in 2005, according to analyst Michael Youngblood at Friedman, Billings & Ramsey Inc., with a slight dip to $521 billion expected in 2006.
Given those monumental figures it is only a matter of time before more of these risky loans begin to go into default, forcing their originators to buy them back.
The banking debacle continues.
Funny stuff. I also wonder about the NARs median price numbers. If I recall correctly, they published a 3% decline in the Coachella Valley (Nov to Nov), yet my observation based on properties I have owned (or still own) I have seen a decline of 10%+ percent. Plus incentives that are not factored in, so I would estimate that it is closer to 15%. How can tyhe numbers be so far off?
What Statistics on Home Sales Aren’t Saying
http://www.nytimes.com/2006/12/06/business/06leonhardt.html?ex=1168059600&en=b3735c5936e3f71b&ei=5070
Good article. Wish they’d start writing stuff like this in the LA(Let the Good)Times(Roll).
Nice clear paragraph:
“In reality, homes across much of Florida, California and the Northeast are worth a lot less than they were a year ago. The auction in Naples may have exaggerated the downturn in the market there, but not by much. Tom Doyle, a Naples real estate agent, estimated that a typical house there, sold in the normal way, would go for about 20 percent less than it did the previous fall.”
Thanks
Decrease price per square foot and people buying larger places causes a little change in median price but fails to show the actual decrease on the market. That’s why the futures market uses the Case-Shiller index. It uses same house selling prices to indicate market condition.
Lereah ‘It appears we’ve hit bottom’ Again!
http://tinyurl.com/sfexb
I predict our friend sees a bottom at least a dozen more times in the years ahead. (That is, of course, if he doesn’t give up and say “f**k this job. Go find yourself another puppet economist”)
Why DOES Liereah keep going to work? He must have been getting paid good money at the NAR, and he’s old enough that he could have bought years ago when prices were reasonable. If I was him I would say eff off and head into the sunset. Maybe he drank his own Kool-Aid and now finds himself holding several cash flow negative condos. If that is the case then he MUST believe!
He’s only saying that because Blogger David tracked his claims of “we are at the bottom” and served his drivel up for all to see since he keeps changing when the bottom happened. What a fscktard!
Topped in August ‘05… bottomed in September ‘06… just your typical RE cycle…
Hilarious, isn’t it. The tragedy in this comedic logic is that a lot of lemmings are buying it. Oh well, some have to learn how to think for themselves the hard way.
” David Lereah, chief economist for the trade association said in a statement. “That is another indicator that home sales likely bottomed-out in September.”
Lerah’s current “marching orders” are to do, and say everything he can to try and make spring as good as possible.
This is the final battle, their Stalingrad…or “Springingrad”
Funny!
“Lerah’s current “marching orders” are to do, and say everything he can to try and make spring as good as possible.”…….and it’s becoming glaringly obvious that this is the case.
“tick…tick…tick…tick… Every tick represents another dollar of equity that you’ve lost in Springdalegrad…tick…tick…tick”
Imploder posts ” This is the final battle, their Stalingrad…or “Springingrad”
You nailed it from very early spring until the end of summer the battle will be waged. By July we will know the truth. The well oiled high tech army armed with “free” money will meet the endless divisions of the truly broke and will be crushed. The unwashed zillions with no shoes and holes in thier pockets and matching holes in thier heads will smash the machine with human wave attacks.
Then everybody will be broke ….happy now?
Jah, Jah, Jah!
The real irony is that, if NAR convinces the general populace that “we’ve hit bottom”, then there will be a massive listing of properties, leading to accelerated “inverse appreciation”.
“Oh well, some have to learn how to think for themselves the hard way.”
I repeated this exact statement many many times over the Holidays. I was stunned by the level of stupidity still out there. It makes me so nauseous; I want to puke.
They will not learn to think for themselves. They will get angry at the person they were following and then turn and follow somebody else who says “this time it’s different.”
You nailed it.
They will not learn to think for themselves.
I spent two weeks over the holidays with lots of friends and family in the Midwest … the Automatic Data Processing prediction sounds aboout right compared to my anecdotal conversations with people. My brother-in-law talks about sales drying up at his industrial tools distributorship; my cousin (a pharmacist) said the medical corp that employs her is planning big layoffs in accounting and will outsource those jobs; my buddy from high school (a lawyer) mentioned more and more of his clients are unable to pay cash and offer goods and services in trade. He had one client build a new bar for his rec room in his basement in exchange for a $1500 overdue bill; another client painted a lovely painting that hangs in his dining room; another client gave him a huge antique skee-ball table to settle a bill. My sister, who is married to a fairly well-off retired airline pilot, for the first time ever complained about the costs of educating her children and also that her two adult step-sons, both recent college grads, are living at their home and unable to find anything besides service sector entry level jobs, and one of her step-sons graduated magna cum laude. And in my mom’s vast suburban tract development (which is very nice and woodsy but a bit sterile), it appeared that every other house had a For Sale sign in the front yard.
I didn’t hear a soul tell me how great things were going.
Anecdotal, I know, but a bit scary.
Even in the best of times, the mid-west seems merely to plod along. And when America catches a cold, the mid-west comes down with flu. I’m not really sure why that is, but I guess some region has to be the poorest.
The midwest seems more rooted, stable and not so prone to flash fads.
It’s nice to hear some people are moving past denial. Denial is all I see/hear in my area.
(btw, I’d love to have a skee-ball game!)
And by denial, I mean denial about the true state/future of our economy (not just housing). Everyone around here thinks things are bright and rosy!
Eastcoaster,
Where are you located? I’m on long island and we seem to have the same disease or selective hearing or something. Except when talking to people one on one I hear about how tight things are in their household, the cost of living sucks, yada yada yada, but when I tell them my opinion on the housing they say “What? Bottoming out? That’s impossible. Because that would mean everybody would lose equity in their home and that can’t happen!”
Uh, that’s right, that would be just impossible.
I love my friends but boy, talk about head in the sand.
Danni
Danni,
I’m just outside Philadelphia bordering Montgomery and Bucks counties. Everyone I talk to thinks the economy is doing so well (their only reasoning being that the stock market’s been looking so good and the housing explosion of the last few years). They also think their jobs are tightly secure (including a 20-something kid working in the mortgage industry who is just certain he’d never get laid off). They simply will not entertain the idea that things could turn for the worse. Pure denial.
Seeing the same in Northern California (near Oregon border). Everyone thinks the economy is strong and will be even stronger during up-coming election year. They give a nod to the fact that housing had a slight correction. but believe that is over and by spring that sector will be back on track. However, there are subtle changes .. fewer stops at Starbucks, walking rather than re-newing gym membership, taking left-overs to work rather than going out to lunch — so under all the rosy talk, there are some signs that a tiny pinch is being felt here and there. Ya think?
ISOLDEARLY,
Your analysis seems spot-on for Eureka, CA. People will commonly say that “housing isn’t going up as fast as before…” and leave it at that. Admittedly, I am surprised that things here have not gone down—properties are not changing hands nearly as fast, but just when you think people are starting to get the hint that RE isn’t the best place for your money, a greater fool steps in and buys.
Places like Medford, Ashland, Bend, Eureka, et al seem to have dodged the first round of depreciation that is affecting the rest of California and especially Florida. I just hope this place doesn’t hang on too long! In any event, I’m in no rush to buy!
Let me ad to the chorus on denial.
But I’m seeing some transition to the next state, fear.
Wait for credit to tighten, that will change things…
Neil
Total denial here in Amarillo, Texas, too. But then we have very secure healthcare and military aircraft manufacturing holding up our economy. I’m sure there won’t be any cuts in defense spending ever again…
Anthony,
Actually, prices have been down YOY in Humboldt County since June, and sales are off 13% or more. The bubble peaked in Spring of this year on the NorthCoast, but it’s already begun to pop.
More evidence of monetary collapse. Money in circulation as measured by total asset quantity that money supply will buy is shrinking. You can print more money, but the total value of that money is shrinking.
A bit paradoxical, but what both depression and hyperinflation were about.
Snarl
Is that what they call a liquidity trap ?
Getting paid for professional services with In kind payments. Boy, sounds like a ’30s rerun to me.
“Figures from the Commerce Department showed the number of new homes completed and waiting to be sold were at a record 169,000 in November.”
“Because the Census Bureau, keeper of the new home sales data, doesn’t capture cancellations in the monthly statistics, sales are probably being overstated and inventories understated.”
So 169,000 “homes completed and waiting to be sold” is not only a record, but also probably understated?
Sales are different from completions, but yeah, given how commerce does the numbers, I would assume that the 169k is understated. By how much is the question.
On the construction side of the REIC we have developed from an initial decline in sales to the use of incentives and lower prices to a few small HB BK’s and now we have Lennar with a major write down.
Similar developments are found on the financial side of the REIC with drops in originations, squeezed margins, and the use of desperate financial products to keep volumes up. Recently we have seen the first round of BK’s in the subprime market.
Anybody care to guess when our first big financial fish or prime bank announces a significant write down of their MBS portfolio? How much time do we have until the rot reaches the prime banks?
Fannie Mae?
Can’t be Fannie Mae. I think they are still trying to close the 2004 books.
Ah! Burn the books and let’s forget everything. Anyways accounting at Fannie Mae is real funny funny stuff. I think it looks a lot like the accounting the communist used Stalin.
Make a nice number. Make a nicey nicey number. Alice in Wonderland Accounting manual.
No. “Fannie Mae in wonderland.”
We have already seen big MBS writedowns. Friedman, Billings Ramsey and H&R Block.
That’s right– H&R Block’s subsidiary had the right down last summer.
right=write
“The lag between turning points in residential and non- residential construction is variable, economist Ian Shepherdson said, but one follows the other as night follows day. ‘The plunge in housing construction promises tough times ahead, sooner or later, for the non-residential construction business,’ he said.”
I admit my ignorance on this subject (the relationship between residential and nonresidential construction), and I am hoping some of the resident experts here are willing to shed light on the subject. Why would a residential construction slowdown inevitably lead to a non-residential slowdown?
This above all: to thine own self be true, And it must follow, as the night the day, Thou canst not then be false to any man.
– Hamlet –
… and speaking of Hamlet, subprime borrowers and lenders might want to refresh their memories on this timeless advicie from Lord Polonius:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
viagra and cealis to boom
we found it -the next boom !
don’t need them 7/11’s an pizza huts afterall
reits are nuts !
“the relationship between residential and nonresidential construction”
They build all the Mini malls and Big Box Blights, I mean Blocks, 6 months to a year after the future customers houses are built. So Commercial building lags Residential.
imploder has it exactly right. Because most of our shops and restaurants are chains today, they all have strict development guidelines. That is, they won’t come into an area until there is sufficient population and income, at least according to their own models. In the bay area we have had a commercial explosion the past couple of years, but now that it is slowing down in housing I am starting to see and hear about future commercial projects being cancelled.
That is an oversimplification. Franchise operations may compete aggressively in order to push out potential competitors. This is one of the reasons that you see things like Starbucks places only a few blocks from each other. Technically the demand may not be enough to justify every store, but having sufficient coverage can enable market dominance.
True, although they walk a fine line with aggressive plans. I think that is part of the reason behind Wal-Mart’s recent decision to slow down new store expansion. But I do agree that my explanation was very much on the simple side, as I don’t know every little detail behind retailers, just what I observe.
The huge commercial developments follow the big residential spreads.
You know, the usual commerical package at least throughout California — Home Depot, Target, Jamba Juice, Circuit City, Costco, a couple of food boxes and a few more stores, but the commercial packages are primarily the same, ditto the next 20 miles ditto, and so on down the road.
Just like the backdrop in a Flintstones cartoon.
albrt … clever.
Fairly simple. Look around any development and estimate the construction time required in housing stock as opposed to commercial construction. With housing flagging, the pent-up lag in commercial work will be quickly eaten up - and that’s when the shoe really drops on REIC employment.
“With housing flagging, the pent-up lag in commercial work will be quickly eaten up - and that’s when the shoe really drops on REIC employment.”
And yet the majority still cannot seem to connect the dots!
Besides the points made by other posters, I think that the stalling of liquidity vis a vie MEWs will impact consumer spending. This will definetely stall the rest of the economy. Doesn’t anybody remember what happened to commercial vacancies (and lease rates) in the last down-turn? Both retail and office space (especially office space) was hit hard. IMO this one will be worse…
A true renassiance man.
Hamlet? Is that like the Hamburgler’s brother?
Except the meat is pork. It’s not kosher.
You’re going to jail Mr. Lereah…… you’re going to jail.
It still ain’t against the law to give an opinion as far as I know, no matter how lame. Otherwise we’d all be in the cell with him, yes?
Only if we were wrong. Which we’re not.
Corporate criminal statutes are drafted so vaguely and generally that as long as you’ve made a big enough economic mess, and gotten the notice of enough people that an ambitious publicity-hungry prosecutor starts fantasizing about frog-marching the mythic Great White Defendant, you’re hosed.
Captain Credit
Don’t be such a tool.
And a nameless half wit will be sharing a cell with him.
this is from the Florida realtors association from last year, I wonder how long it will take them to remove the archives???/
Therefore, expect some reasonable slowing in both unit sales and median sales prices across the first half of 2006,” Scott says. “The Federal Reserve should be finished with this wave of interest rate increases as the economy pushes into the 2006 second half. Double-digit growth rates in both unit sales and prices will cease for now and more closely track the performance of the economy. As a professional sector, Florida’s Realtors have done an admirable job of supporting this important element of the Florida economy.”
GlendaTheGoodWitchFromTheNorth(blog RE agent) hasn’t been around much. Anyone heard from her?
Where’s LV Landlord
Glenda was on commenting a few days ago.
“‘If that is remotely true, I don’t see how or why any builder, public or private, will just sit there and not eventually have to begin cutting prices down to match or beat that,’ Barron says.”
Hey, Alex Barrron, between you and me, builders have already cut prices/offering incentives for at least a year. Margins are shrinking dramatically, so much so that home building is quickly lossing all profitability. With their capital already sucked dry, a significant portion of private and small builders will go bankrupt. This will begin in earnest this quarter. Most, but not all, public builders will likely survive due to deeper pockets or will merge with other publics. It’s our secret, though, Alex. I won’t tell your bosses at JMP Securities that you are a little late with your analysis.
Hey everyone, Inman news is asking for people to leave comments on the market, the realtors are already there making happy noises…
When do we get numbers for December? They need more time to massage them into something a little more “palitable”?
This is slightly O.T but it’s to do with office/commercial sales. I don’t know if this is out of the ordinary but my wife does some accounting work for a company which, a few months ago, were thinking of moving to Ventura from Westlake. The CEO decided he would buy instead of rent and found a building in Ventura which suited his needs. The building was priced at $1.4 million. The CEO counter offered at $1.2. At that time there were “rumblings” in the press that even though property sales seem to be declining, commercial property was on the rise. Also, a friend of mine told me that he knew a realtor in Las Vegas who said SFH sales were terrible but commercial/office buildings were looking good. In other words, it looked like commercial building was going to boom and pick up where housing left off.
My wife did all the paperwork and everything seem to be fine but then the counter offer was rejected because the commercial/office side of real estate looked strong. The outcome was the CEO decided that he might “miss the boat” and told the broker he would to pay the $1.4 full price. A week or so later, the broker called back and said the seller had decided not to sell. I suspect the seller felt momentum was building and he could get a better price in a year or so.
Yesterday, the broker called and said the commercial building owner was wondering if my wife’s boss was still interested in buying the property. Mmmmm. Wonder what that means in the over-all picture? Has the “fear” in the housing sector started to spill over into commercial real estate?
I can only assume that the commercial building owner is having trouble selling at not only a possibly higher price he was asking but also the original $1.4. I was wondering if there is a smell in the area of a recession and anyone running a business doesn’t want to make a move if business starts to downturn.
Mike, you can bet on it that the commercial building owner sees things differently today.
Nobody (and I mean NOBODY) ever wants to come back to someone they’ve rejected with the idea that they’re now willing to reconsider the original offer. Besides looking stupid they KNOW the other party knows they have the upper hand in negotiations?
$1.4? Gee, too bad. I’d be thinking 900k…….tops.
Just took a loan app for a lady making 25k a year and no other income (no friends family or roomates) in riverside california. BOught her house 4 months ago for 400k. I said, “your mortgage is more than your GROSS income?”. She said, ” i know, can you fix that?”
I said, “your mortgage is more than your GROSS income?”. She said, ” i know, can you fix that?”
how about a balance-transfer to one of those zero percent capital one
funny
Who would have originated such a loan? If this is typical we really are in deep doo-doo.
Next app i just took was from nowhere, utah. They had TWO payoption arms. First house, where they live is 360k, they refi’d to a pay option arm to get 20k in equity to put down on a rental prop for 180k and another POARM. Total hhld income, 40k. W………….T………….F…….? Both loans done in the last 6 months.
Whoever originated it is not stuck with it.
Bet Fannie Mae is the bagholder.
No. You are the bagholder.
That’s the way the system is set up.
That is a truly staggering story! I doubt she is alone in her “predicament.” Jesus, if that anecdote doesn’t turn someone into a housing bear, what will? MDMORTGAGEGUY: how much are you guessing we will drop before this is all over? He in CA I’m thinking 40%.
I can see the area codes from where applicants are calling before i answer and take the app. I cringe everytime i see a CA area code. The first thing i ask is do you have a POARM, no sense beating around the bush. i dont feel this way about any other state.
You owe my employer a new keyboard from the nose spew.
That is a classic comment.
“Lady, there ain’t any cure for your kind of stupid.” Although a little jail time my help to cure the fraudsters who got her the loan.
Sounds like it’s time for my trademarked Pay Anything You Want™ Loan. RE only goes up, so who cares about the principal, Pay Anything You Want™! You don’t even have to pay anything at all… and if you’re short a couple grand this month just go downstairs to your pre-installed Housing ATM™ and take it out.
The great thing about zero payment loans is you can treat the accruing interest as income, and there is no possibility of a default!
“… you can treat the accruing interest as income, …”
So is it then taxed as income?
Not even.
Of course, that laughable loan application gets counted along with the ones that have a snowball’s chance of being funded. So when REICers tout an increase in mortgage applications as their latest evidence that we’ve “hit bottom” (listening to those guys, the market looks to be hitting more bottoms than a Dickensian schoolmaster), it means pretty much nothing.
It’s like using the length of the breadline to guage the strength of the economy.
MDMortgageGuy — outstanding anecdotes. Sad, to be sure, but lots of things in life are sad. Keep the stories coming — they bolster my resolve.
MDMORTGAGEGUY: Please keep us informed on these types on anecdotes. I couldn’t agree with you more, WTF were these people thinking? How could they possibly think that they could afford these loans on their salaries? And what banks are giving out these loans? Truly amazing. You mentioned that you always ask the CA callers if they have a POARM - roughly what percentage do that are calling you?
i dont track it but it is enough to invoke the response i gave above. Someone posted a site either in this blog or one from today that showed a map. Cali was the worst by far, some areas approaching 40% of all loans in 2006
If you travel around the country, you’ll find Lennar’s homes similar to other builders, Barron says. ‘There is not a huge noticeable difference from one to the next,’ he says.”
Anyone remember the article money did on the young couple in Visalia, California that got caught up in the bidding/lottery process for a home which wasn’t even the one the wanted. They were packing bags and heading back to NY. Well their home was one of those Lennar-specials. Still for sale I might add. The neighborhood they lived in is full of 2000-3000 sqft homes on 5000-7500 sqft lots. If you go outside and wash your car in the driveway you can be watched by at least 8 families all from their livingroom windows. I went to a friends BBQ out there this summer. I went out back and and noticed there was nowhere to hide form the overwhelming number of 2nd story windows peering right down in his backyard. More than 1 of those windows were draped with bed sheets as well. The entire neighborhood was developed in 04/05. I drive through there and feel for alot of those families. One of Lennar’s most popular models The Windsorwas as over $400k early 2006. I saw an add this fall, a special price of $333k and that was 4 months ago.
I think you just described 85% of the housing built during this bubble. The remaining units are condos that will guarantee construction defect lawyers have work for decades to come. I wouldn’t be surprised if realtors and builders that sold those subdivisions start getting death threats before this is done. I would never buy in a place like you describe. Just driving through there feels surreal, and not in a good way. The bed sheet “curtain” detail was classic!
were those hunter douglas bed sheet window tratments?
ah yes… but 400 count
I live an hour east of Visalia and am there once every couple of weeks, and there must be a dozen builders and 50 house lots, in various stages of completion, from freshly graded, to 3/4’s done, all over the place. This in a city of 107,000, that went from 400′ish houses for sale in July of 2005, to well over 2,000, in July of 2006.
Visalia isn’t a bad city, certainly heaps better than Fresno, but from a making a living standpoint, there is agriculture and the usual service industries and little else. In the winter, Tule fog, dense as pea soup is with you on a constant basis, as well as 110 degree days to counter the fun, in the summer. On a positive note, the winter time views of the Southern Sierra from Visalia can be amazing~
I live in DC (the arm pit of the usa) and traveled to Madison, WI for new years. My sister bought a home in a new neighborhood just outside madison. When she bought there was a line for homes, about a year and a half ago. Now most of the lots are empty, not even built homes, and about 5% of the homes are for sale. These homes were going for 200-270 and are of a super build quality, not like the crap they slap together in dc. I am completely shocked at the level of overbuilding that is taking place nationally. DC, understandable, nothing but a bunch of wannabe get rich quick nut jobs, but the midwest? The demand is very steady there, not very much inward migration to the region. Luckily my sister bought at about 2.1 x income with a 30 year fixed, so, they should be ok.
I just got back from my lovely, well maintained friend’s house. She was in tears because everything is so tight. She doesn’t inderstand how things got so bad so quickly.
Well’ the vacation in Disney that they “deserved” and put on credit and perhaps some of the presents from christmas…….well, you get the drift
There is a real old solution to her problem.
It’s called making a budget and living within its own means.
I know it’s unamerican.
But it’s the way most people live in the rest of the world.
Spoiled brat westerners!
The hell with Disney and the 900 million dollars paychek to Eisner.
My husband has me hooked to this site. I love popping in and seeing the hilarous comments. I also enjoy seeing that there are people that think like me. I was so tired of defending my choice of selling our home a couple of years ago and renting, everyone thought we were crazy not buying a house right away. I predicted a bubble and everyone looked at me like I was on CRACK. I was off by 2 years so we have been renting now for a while. I am still glad I sold when I did, we made a nice profit. I use to be a RE agent. I quit a few years ago. Most agents and lenders are scumbags in nice suits. The majority of them would sell their mother to make a buck. I quit the business because I could not deal with these people day after day. I felt guilt and anger at the many underhanded deals. I am happy to be out of the business.
My problem is things are not moving fast enough for me -$. We live in the Folsom area in CA. The F***Heads that live in this community are stubborn, they can be pretty snobby tooo. I have not seen much in the way of home prices dropping. I have seen just a few homes upside down, forclosure and such. I was wondering if anyone knows this area and what they think? Do you think Folsom will take longer to pop????