“Some Kind Of Correction Is Warranted”
The Portsmouth Herald reports on Maine. “After a tough year in the residential real estate market, industry representatives along the Seacoast say they are optimistic about 2007. ‘Values have fallen, in some cases, to what would have to be described as bargain levels,’ said John Rice, chairman of the Seacoast Board of Realtors. ‘While values should continue to slightly decline through 2007 as inventory is absorbed, it is likely that we are near the bottom of this correction.’”
“Sales of single-family existing homes across Maine were down by more than 12 percent from November 2005 to November 2006, with median sale prices down nearly 4 percent, according to the Maine Association of Realtors.”
The Providence Business News from Rhode Island. “A partner in the team developing the One Ten Luxury Residences says the project has changed scope, with hotel space replacing almost half of the condominiums previously planned for the building. The project will now include only 70 luxury condominium units, instead of the 130 formerly planned.”
“Critics of the recent push for condominium projects downtown may view the changing of the One Ten project as a sign of a slumping market. Last year, the developers of One Ten had said that despite the other condominium projects, such as The Residences at The Westin Providence and WaterPlace, that were slated to come online in Providence, the market would still be able to absorb the combined 400 units their project would add.”
“But University of Rhode Island economist Leonard Lardaro said that while he does have some concerns about the downtown projects, he doesn’t see many signs that they might fail.”
“‘So far, things look extremely good, but they just look too good,’ Lardaro said. ‘It just seems that the condominium prices got ahead of themselves here, more than they should have, and so some kind of correction is warranted.’”
The Boston Globe from Massachusetts. “A year ago, developers John Judge and Tom Truong arrived at the edges of a still solid real estate market with a lofty goal to go along with their plan to make money.”
“Now, 13 months later Judge and Truong have built just four condos, with only two of those units under agreement. They are unloading four other stately red-brick buildings in separate sales to private investors and to a nonprofit.”
“The pair’s Chelsea retreat isn’t unusual. Developers who snapped up properties in better times now face long odds trying to sell them in a stagnant real estate market. ‘It’s not a good time to be building condos,’ said economist Patrick Newport. ‘If they started out when prices were appreciating, they assumed they would keep going up, and they would make a profit. That just didn’t happen.’”
“When the real estate market turns, the Chelseas of the world often are hit earliest and hardest. Condo sales in this city, for example, plunged by two-thirds through the first 11 months of 2006.”
“If Truong and Judge are ruing their venture, they aren’t saying so. Indeed, they offer little introspection or explanation about what went awry, other than bad timing. ‘The market did not hold up,’ said Truong. ‘We’re being prudent businessmen.’”
“Not too far along they showed signs of buyers’ remorse, and got a taste of the difficulties ahead. Last August, with permits in hand for three buildings, they put all seven properties up for auction. The pair ultimately decided not to accept any of the offers because they were too low, Truong said.”
“‘We tested the market,’ he said. ‘There was a lot of interest, but we weren’t going to give them away.’”
‘A financial research group is predicting that foreclosures on homes carrying subprime mortgages in southern Maine will accelerate in coming years — with the rate nearly tripling. In Maine, 20.9 percent of subprime loans that originated from 1999 to 2005 entered the foreclosure process, a study found.’
‘There are backlogs. Then there are backlogs, like the monstrous 66,289-case paper jam at the state’s Land Court. That is the tally State Auditor Joseph DeNucci came up with after a months-long audit of the downtown Boston court, which handles everything from foreclosures to property disputes from across the state. That amounts to roughly four or five years worth of filings at the court, based on the pace of activity in recent years.’
ME suffered a painful slide into the price abyss (45% in real dollars)after the late 80’s runup without the push from subprime lending which is big here. Yet all I hear from the boosters who bet their life savings on frozen dirt and the “aura of Portland” is that “the boomers are coming”.
Sound familar Floridians?
But Maine is special. They have Amato’s and LL Bean - Florida doesn’t.
‘There was a lot of interest, but we weren’t going to give them away.’”
I’d say it’s time to do just that, BAGHOLDERS! Give them to the bank, morons!
“We’re being prudent businessmen.”
The new term for FB’s
‘There was a lot of interest, but we weren’t going to give them away.’”
Ah, a fine example of the mating call of the endangered real estate seller or in latin “Ignorati Gigantus Greedus Stupidous”
LMAO
“…‘While values should continue to slightly decline through 2007 as inventory is absorbed, it is likely that we are near the bottom of this correction.’”
Does anyone want to bet the opposite occurs — inventories initially balloon, prices immediately plummet, and the housing market’s revenue curve begins its steepest descent from the top on the way down to the long wide choppy bottom?
This comment caught my attention as well. Indeed, another case of wishful thinking. Such a prolonged and exagerated spike in housing prices will not be followed by just a minor dip in prices and a return of buyers to the market. Fade to the Carpenters, “We’ve Only Just Begun…”
It’s like watching the stock market crash, only in super-slow motion.
“Fluctuating returns throughout 2006, he said, indicate the market is emerging from the doldrums.
While the Seacoast is certainly affected by national market trends, the quality of life and diversity of housing available always attract buyers”.
I think it’s a bit of wishful thinking that the doldrums are behind us. My guess is that prices in the Portsmouth area will dip to 10% below their 2005 peaks before the market stabilizes.
Longterm, Portsmouth should do very well because the approximate one hour commute to Boston via Amtrak rail has not found its way into Portsmouth housing prices yet. This rail service, only several years old started as almost a novelty. But each year, more and more commuters are starting to wake up to it. The idea of productively riding the train to Boston laptop on lap is a much better alternative to sitting in traffic. Once enough people realize Portsmouth is now a very tolerable commute to Boston, many will sell their digs in Boston and the surrounding towns and save a ton of money moving to Portsmouth.
For those favoring the mountains and ocean beaches over Boston’s great culture, it will represent an upgrade in quality of life.
A neighbor of mine in Boston who’s had his home on the market for over a year just lowered his price for the third time.
Started at 579 in January 06, lowered to 529 in September and is now at 489 (after taking it off the market in December).
He’ll be lucky if he sells it for more than 425. The market here is off 25% from peak, EASILY, already.
And if he had initially priced it right, at say $529,000, he probably would have sold it last January. That is my guess. I don’t know your friend’s house.
My guess is that this gentleman could be a case study in “chasing the market down”.
jag posted:
“A neighbor of mine in Boston who’s had his home on the market for over a year just lowered his price for the third time. Started at 579 in January 06, lowered to 529 in September and is now at 489 (after taking it off the market in December).”
NYCityBoy posted:
“And if he had initially priced it right, at say $529,000, he probably would have sold it last January. That is my guess. I don’t know your friend’s house.”
This is precisely what family of mine is doing right now. While considering my suggestion to price below recent comps, they decided, instead, to listen to the cute 20 something newbie realtors advice, and shoot for the moon. Now, after a hefty price cut, the listing continues to languish. If priced aggressively to begin with, it would have moved. Now, they are truly chasing the market down, with price cuts coming far too late. I don’t feel sorry for them. Had they trusted my advice, they wouldn’t be in this position. They are defensive, as well. When asked why they think the house is not selling, it is just that the market is slow, not that their price is too high. When I point out that correctly priced properties are moving, and that they are chasing the market down, they respond with something like “We don’t think that prices are going to drop much.”
Hey guys, it’s America. They can think whatever they like and act accordingly.
BB - reply with “the market doesn’t give a damn what you think”
“The market here is off 25% from peak, EASILY, already.”
From what people WANT to get, or from what they DO get?
From what they are getting. In 05, at peak, I tracked sales that easily exceeded property tax assessments by 25-50%.
Now sales, at least in my middle class section of Boston, are 5% below to 10% above assessment. There are exceptions but comparing the “median” sale in 05 (at 25% over assessment) to the “median” today (essentially at the 2005 assessment) its hard to see anything that will improve pricing here in the near future.
better hope taxpayers don’t wake up to the cost of Amtrak
ports is only off 10% from peak ?
30% off in the 90’s
Well commuter trains come very close to paying for themselves, unlike long distance tourist trains. Now before somebody gets all up in arms about saying that there’s no reason to have any transportation that doesn’t pay for itself, don’t forget that the interstate highway system doesn’t pay for itself, and at some level neither do airlines. (The Air traffic control system is tax supported as is the TSA)
Of course the reason that Amtrak was created was to make sure that in the days before airline deregulation there was some reasonably priced and efficient public transportaiton between cities. Arguably there’s no reason for it to be subsidized to provide long distance trains that are MORE EXPENSIVE than airline tickets.
The ATC is funded through ticket taxes. Due to the fall in ticket prices however, they were short $8 billion last year.
The airlines do not provide direct funding, nor are they allowed input into the operation of the ATC. Operation of the ATC is directed by and all policy decisions are made by a Congressional committe.
“Longterm, Portsmouth should do very well”
I grew up in Portsmouth, NH. During the recessions of the 70s and 80s Pease AFB and the Shipyard kept the economy from taking too hard of a hit. My Dad was a small businessman and he actually did pretty well during those years. I don’t remember cutting back on anything.
Pease is gone, the shipyard is a sliver of its former self, so government spending will not prop things up this time. If the national economy slumps, tourism (a big part of the NH seacoast economy) will feel the hit.
Boston housing prices are contracting. If the jobs are in Boston and not local, I do think Portsmouth housing will take a hit.
FYI, my mother grew up in Rye, NH (1/2 mile from beach) and mother lived on Seacoast her whole life. We lived in Portsmouth since early 70s. Yet, of 6 family members, she is the only one left in Portsmouth. My brother’s double income family couldn’t afford to buy in Portsmouth. Now that his wife is finishing her medical degree, they’re trying to talk Mom into moving south for affordability.
IMHO, if we go into recession, Portsmouth values will be dropping much more than 10%.
Well, whether Portsmouth drops 10% or twice that, once bottom is hit, buying there will pay off big one day. The rush hour traffic congestion on the roads between Boston and Portsmouth is very bad. So it’s only a matter of time before the rail skyrockets the property values there. Rail is a laptop commuter’s best friend. I’ve seen it happen in NY. Places like Cold Spring, a beautiful town on the Hudson about an hour and ten minutes from Manhattan was never considered truly commutable. Well enter laptops and cellphones - and suddenly it’s been overrun by commuters and values are through the roof.
The whole country needs more commuter rail - less traffic, less pollution, less giving money to the mideast and far more productivity thanks to laptops.
Just wanted to thank Ben and the rest of you knuckleads for keeping me angry enough to write a letter to the LA Times Real Estate sectio. Surprisingly they actually printed it today:
“Million-Dollar Babies” is truly a sign that the real estate apocalypse is upon us. Economists are screaming that a massive price correction is in line for much of California, potentially ruining families and destroying local governments, and The Times prints a piece reminiscent of the story of a quaint Portland stock club reaping millions before the tech bubble burst.
Economics professor Robert Schiller, who correctly predicted the tech bubble, is now anticipating a massive correction in housing, particularly in the hot markets (and Los Angeles is red hot). Where’s the story on him?
LA Times has a bias against printing unpleasant news unless it comes out of Africa, Indonesia or Iraq!
most of these major tabloids have so much money coming in from the advertising revenue they are too scared to kill the golden goose with overly negative (although accurate) reporting
The irony is that if prices fell, sales volumes would increase. Realtors would make more money on commissions and have more to spend on advertising. As it stands, the Times’ advertising revenues are chasing the market down, too!
The cover of the LA Times real estate section today: “Bubble’s pop was akin to a slow leak”
It will be a 7-year slow leak.
Did they edit the old lady part to “quaint Portland stock club” or did you…..
I did. My mom’s an old lady and she’s in a stock club (and she’s still a sharp attorney), so I figured there was no reason to cause her or any others any grief.
“Sales of single-family existing homes across Maine were down by more than 12 percent from November 2005 to November 2006, with median sale prices down nearly 4 percent, according to the Maine Association of Realtors.”
I wonder how many of these foreclosures will be on trailers that have cropped up out in the countryside. I remember when the first Hundai automobiles were introduced in America. They had a huge repossesion rate that stemmed entirely from the fact that the vehicle’s absurdly low price point attracted people who had never before imagined owning a new car.
The low interest rates and exotic loans spawned a good number of trailers. In some ways it would make sense for many of these trailer owners to go belly up and move back into small apartments in area’s of greater population density. Currently, the trailer folk tend to have lots of children and place a terrible burden on rural school systems.
Ben, thanks for continuing to do such a great job mining this great country’s media for the greatest fools of all.
Oh! HAHA! John, you crack me up. Do that next bit, you know, the tag line that floors everybody, you know the one I mean…
YES! HAHA! John, yer killin’ me, man!
Now tell ‘em it’s a buyer’s market! Come on, John, do it! You’re hilarious, dude!
You guys are great solo, but if you and Wluka and Liarrhea could just get the band back together, that would be totally awesome.
“You guys are great solo, but if you and Wluka and Liarrhea could just get the band back together, that would be totally awesome.”
LMAO! Let me know where they’re playing, and I’ll bring a mob with rotten tomatoes.
Rhode Island is suffering from the same sales and price slump hitting the rest of New England and the whole country. And this genius says this looks too good?! As in, it looks so freakin’ good, so incredibly wonderful, these crashing sales and plummeting prices, so insanely happy-happy joy-joy, that wow, hmm, I bet there’s something sneaky going on, maybe a dark cloud on the horizon that no one could possibly foresee. Dang, if only I could figure out if there’s a problem in real estate, if only I could discover some kind of omen, some message to take away from these plunging sales and prices. But I can’t, so I guess everything is good! Too good! Yay for downtown condos! Yay for me for being a crackerjack university economist!
Dum Dum Dum another lender bites the dust
https://securedwholesale.com/
is that # 5 in the last 10 days ?
Yaaaay. How big were they?
“Secured Funding is a future-focused mortgage banker committed to leading the home equity revolution in America. Through an emphasis on innovation and technology, the company has grown to become a leader of home equity loans, serving a market often overlooked by traditional firms. Specializing in home equity finance and utilizing an advanced technology platform, Secured Funding Corporation has earned its title as, “The Home Equity Specialist,” by helping homeowners take advantage of their home equity.”
That is from their website. I guess that advanced technology platform wasn’t advanced enough to overcome handing out loans to people that couldn’t possibly pay them back. Microsoft needs to work on that.
The lender more than doubled wholesale production and added 861 brokers to its network in the first quarter of 2006.
complements the 50% growth the retail business experienced in the first quarter of 2006.
“We attribute our rapid growth to our broker network capitalizing on the profitability of home equity products uct options,” said Lorne Lahodny,
at 1901 Alton Parkway in Santa Ana and occupies 35,000 square feet.
20% percent increase in employee growth with the addition of approximately 200 new staff members since the beginning of 2006 and now totals more than 1,000 employees.
something must have gone really really wrong over there at secured. Anyone out there need a 35,000 square foot building or a 1000 paper pushers?
http://www.securedfunding.com/index.asp
even though it’s Sunday try dialing 800 891 2105.
nobody home. not even an answering machine.
Something must have gone very very wrong at secured especially with our economy about to rebound according to larry goldilocks kuntlow.
Gee, bad loans ARE bad business. Who’d have thunk? As for their name, kind of funny since they couldn’t get continued funding and the security probably won’t be worth as much as the loan ballances.
Good new blog - mortgage lender implode-o-meter
http://br.endernet.org/~akrowne/ml-implode.html
Thanks this is a great site!
Hey Ben,
Maybe we could start a “subprime lender dead pool” on this site, similar to the one on F**kedcompany.com during the Bubble.com implosion.
When I see statements like this, which are becoming as common as beer commercials during a football game, I wish the article would tell us the amounts of the offers the sellers haughtily refused, and then (later) tell us what the properties eventually sell for. I bet the final sale price will be much, much lower than the “giveaway” prices they refused. These bozos will cry all the way to the courthouse steps wishing they had “given away” the properties to those first offers, which will end up being the highest offers they’re ever going to see.
What an unintended thing of beauty performed by a pair of utter jackasses.
‘Values have fallen, in some cases, to what would have to be described as bargain levels,’ said John Rice, chairman of the Seacoast Board of Realtors. ‘While values should continue to slightly decline through 2007 as inventory is absorbed, it is likely that we are near the bottom of this correction.’”
Yeah right! Houses are still overpriced for the average Mainer. It makes sense to rent until mortgage prices are in line.
I have been watching the Maine real estate market intently, for the past 8 months. As for the price reductions at the most I see 4 percent less after 6 months on the MLS. Sellers are refusing to lower prices with double gains in the past three years while it sits market empty for 6 months or longer. I am seeing funny realtor games like alot of relistings with another new listing and price increase of 10% by another agent. I also am seeing empty homes pulled off the market to be relisted in the Spring.
Unfortunately this stubborn buyer is not playing this game. I truly believe that once the subprime mortgage market is gone with 100% financing and no doc stated income that house prices will drop another 20% for lack of a good buyer.
I’d say it depends where you are. Will any of the affluent towns around Portland drop 20%? Highly doubtful - there are just too many people “from away” who prop up the prices. Many are corporate transfers with big jobs, entrepreneurs, teleworkers and retirees who don’t depend on Maine’s economy. They think Portland’s prices are a bargain.
If you are talking a town with tremndous numbers of second homes, 20% could happen indeed. I think you’ll see 30% declines - or more - in the Sunday River condos.
I think some of the big tracts of land out in the boonies could also fall, but I’m not as sure on this one.
“Will any of the affluent towns around Portland drop 20%? Highly doubtful”
Based on what? Not the same market metrics that Portland faced in the 90’s when it corrected by 45% in real dollars by year 2000? Why would Portland be “different this time?” And the retiree and the corporate transfer argument is nothing more than a variation of Floridas “the boomers are coming” or Glenda’s “9/11 drove the market up”.
This sounds like wishful thinking more than anything. How many people “from away” are moving to Maine once you factor out the Somali refugees? I suspect that they account for a much larger portion of the population increase than supposedly wealthy transplants who come to Maine for whatever reason you think that people would want to come there. One of the big draws of Maine is the generous welfare relative to other states, and that doesn’t really support your hypothesis of a population increas coming from wealthy transplants. Also, Maine tax rates are quite high - why would “teleworkers” who can work from anywhere want to move there? Sorry, I don’t think your property value is as secure as you think.
“Sales of single-family existing homes across Maine were down by more than 12 percent from November 2005 to November 2006, with median sale prices down nearly 4 percent, according to the Maine Association of Realtors.”
4%? TIME TO BUY!! Hell, gimme two o’ them condos and a SFH thingy! I’ll be rich this time next year!!!!! Sorry, the heat here in Ecuador is getting to me.
Every month these people continue to perpetuate the lie of “RE is a great long term investment” is another month I get to stash 2-3K more in a CD and ladder my way to a baragin basement home price 2-3 years into the future.
“…the lie of “RE is a great long term investment”
Well, if you buy at a good price it is a great long term investment. I think most people on this blog wouldn’t be on this blog if they didn’t think this. It’s just that we don’t think it’s a good investment at current prices.
‘Values have fallen, in some cases, to what would have to be described as bargain levels,’ said John Rice
Okay, stupid questin here: why do realtors call prices values?
And to answer my own question, because it sounds so much better when prices err, VALUES are going up. I guess its a reflex and he doesn’t realize how bad it sound when they’re going down doobie do down down.