Buyer/Seller ‘Disconnect’ Results In ‘Pregnant Pause’
The New York Times reports on the buyer/seller face-off. “Along much of the East and West Coasts, home buyers and home sellers are engaged in a stare-down. Many buyers, having heard that the real estate market is a bubble in danger of popping, are refusing to offer the asking price on a house, convinced that it will soon drop. But many sellers are not blinking either, thinking that offers will improve when the weather does and biding their time until then.”
“Sometime soon, probably in the spring, the peak sales season, one side or the other will have to capitulate, many economists and industry executives predict. ‘In my opinion, the jury on housing is still out,’ said Antonio B. Mon, chief executive of a home builder. ‘The period from now until May will tell the tale.’”
“In Manhattan, 42 percent more co-ops and condominiums were available for sale at the end of last month than was the case a year ago, according to Miller Samuel, an appraisal company in New York. More Manhattan apartments were on the market in late February than at any point in at least five years.”
“Builders of new homes have also offered bonuses to buyers. So the builders have been able to continue selling homes without cutting the list prices. But many houses in the Northeast, Florida and California are, in fact, selling for less than they would have six months ago. In parts of the Northeast, the drop has been about 5 percent, estimated Robert I. Toll. Other sellers have cut their price and still not found a buyer.”
“In Buxton, Me., a suburb of Portland, Geof and Cheri Toner put their three-bedroom Cape Cod-style house on the market for $379,900 late last year, shortly before moving to Raleigh, N.C., for Mr. Toner’s job. They have received only one offer, for $350,000, which they rejected, and recently reduced the price to $374,900.”
“Mr. Toner expects that the eventual buyer will be a transplant from elsewhere in New England who is willing to pay significantly more than $350,000. ‘We’re not panicking over it,’ said Mr. Toner. ‘It’s just a matter of sitting it out and seeing what happens.’”
“Many real estate agents argue that people like the Toners are doing the right thing and that the market will not slump as it did a decade ago. The current slowdown is simply a transition, the agents say. ‘All we are seeing is a pregnant pause,’ said Richard A. Smith, ‘a disconnect between sellers and buyers.’”
“But many buyers say they have a sense that the long boom has finally come to an end. In the San Jose, Calif., Sathish Pottavathini said he was taking his time with the search for a new home and trying to find a good deal. ‘I don’t want to rush into things especially in this kind of situation,’ Mr. Pottavathini said, ‘where you hear about a slowing down everywhere.’”
“He and his wife, Madhuri, spend $1,200 a month renting an 800-square-foot two-bedroom apartment. They would like to find a three-bedroom town house with a two-car garage for less than $500,000. Although he does not expect prices to fall significantly, he does not think they will rise either. Now, Mr. Pottavathini said, ‘If I wait, I might get a better place.’”
“Buyers who showed similar patience in the early 1990’s were rewarded. From the summer of 1989 to the summer of 1990, the number of homes for sale rose about 10 percent. At first, many sellers refused to accept lower offers, thinking that they would get their asking price or close to it. But they eventually had to unload their houses, and in the Northeast and California that often meant reducing the price. In the Los Angeles area, the median sale price of existing houses fell 22 percent from 1992 to 1996, before taking inflation into account.”
“If a similar slowdown were to happen again, Mr. Toner said he would consider changing his mind and his asking price. ‘At some point, if this were to become protracted, I would consider lowering the price to attract a buyer,’ he said.”
Thanks to all the readers who sent this in. I don’t think buyers who have ‘paused’ are going to start buying when substantial losses have occurred. The current urge to buy will turn into fear of losing ones shirt.
Exactly–all of the forces, including investor/buyer psychology, which pushed the market higher can work just as easily in the opposite direction as well.
I am amazed to see people pricing their homes like the party is still rolling on here. There is definitely showdown going on here. Over 350000 for courtyard homes around 2000 sq ft. I notice the smaller ones around 250k seem to sell a lot faster. There are 46 homes for sale now in what I would call a segment from the truman show. It is sterile as you can get in here. It seems like the landscapers are desperate to find something to hack on. They absolutely destroyed a couple nice trees I had blocking my view from the main road. I think the hoa camp should have some kind of pruning guidelines
I disagree in one key aspect: There is a REAL floor on prices: the neutral market where it is cheaper to buy than to rent in lost money cost (including tax savings, excluding payments to principle).
Housing can’t get much below that floor (in non-bubbled markets when I run the numbers, its at the floor, was at the floor, and will be at the floor, going up roughly with inflation).
When you are at the floor, almost anyone who’s renting should, if they are’nt going to move for a few years, and who can afford paying principle, sohuld buy the place.
Even with just a 3% annual gain, the person who bought instead of renting comes out ahead after 5 years on appreciation, and spent less money/month to boot. Or if you move in 5 years, keep the old place and rent it out (as now rents have inflated enough that its worth it as a rental).
And for those betting on a 40-50% drop, forgettaboutit. That would, in most cases, drop things below the floor.
you have obviously not run the numbers in San Francisco
I HAVE run the numbers for much in the san francisco area. The new construction condos have to drop 40%+, but most of the other stuff only has to drop 30% or so to be in line with rent.
tell that to the Japanese, Einstein!
The floor will probably not turn out to be as firm as you think. For one thing, you are assuming that rents will stay the same. But they will drop if demand drops. And demand can drop because when times get really tough people move in with relatives and there are less renters. You are also assuming that renters can buy any time they really feel like the prices are good, which would support prices. This is pretty much true in the current lax lending environment, but will not be true when the sub prime borrowers start defaulting. It will no longer be possible to buy with no down payment, and even if a person has enough income to pay the payments they will not be able to finance without a 20% down payment which many of them will not be able to come up with and so will not be available to give housing prices support as buyers. A 20% downpayment used to be standard so this will merely be a return to the standards. There is no way that this out of balance situation will correct without a severe recession or depression, and unemployment will rise and people will not be able to afford the rent they now pay, and since there is so much overbuilding and not a shortage of housing, you can be sure that rental prices overall will decrease and not increase but it will probably take longer for the rental prices to drop. The rental prices continued to drop into the early 40’s after the Great Depression. Even in what you call the non-bubbled markets the floor will drop due to general economic recession.
Because of these factors I believe that there will be actual price drops of 50-80% in many areas before the market reaches a final bottom. It may not stay at that bottom for long, but I think it will touch for a short time.
Almost anywhere between Boston and DC and 50 miles from saltwater has at least 30% to fall to reach the floor of econimic rental parity. How many people live in this area… 40 million?
I think he’s got a point. Trouble is, in order for the purchase payment on the house I’m renting for $2,400 to drop to that level, it would have to drop down to about $500,000. Which would represent close to a 40% drop.
That’s if the rents don’t drop which is a very real possibility as rental owners don’t like seeing reliable payers leave in a sinking market. 40%-60% before it’s all said & done.
I am certain we’ll see a quick 20% drop and then a gradual decline as keys revert to lenders and the books clearing process takes hold. Same thing happened in LA in 1990-96. This time could be worse as the lending that enabled it is so ridiculous and the construction & RE job losses start kicking in…
“There is a REAL floor on prices: the neutral market where it is cheaper to buy than to rent in lost money cost (including tax savings, excluding payments to principle).”
Yeabut we won’t get down to that REAL floor for at least six years of housing price deflation…
I think you are being too generous with your timeline. By fall people will start to panic. Therefore my opinion is 25-30% repricing by x-mas with the real fun starting in 07′. 80% in some areas by the time this is bottoming in 08. YeeHaw!
Real Floor is a term loosly used by overly optimistic real estate agents. Don’t be fooled if someone tells you 40% to 50% drop is not realistic. If prices can go up 40% to 50% over 2 to 3 years, guess what, they can collapse the same rate over the same time period. My advice, DON’T BUY anything YEAR. It is too risky to place this game. You may loose everything.
My “floor” hypothesis is based on fundimental value. IF there is no deflation in rent (bay area rents were slighly deflationary after the .com collapse, but that played out pretty quickly), it is a floor when buying costs less than renting.
WHEN it will cost less for me to buy in lost money than to rent, AND I know I can assume 3-4 years of positional stability (I’m confident there won’t be serious deflation. Bernake always has his helicopter…), I’ll buy. Hot second.
Also, there is asymettry involved. a 50% runup in prices, followed by a 33% drop, leaves prices where they started.
We aren’t there yet. If its anything like past bubbles, it will be 2-5 years until prices will be reasonable again.
And for those betting on a 40-50% drop, forgettaboutit. That would, in most cases, drop things below the floor.
Sorry for the “me too” post, but I rent a place for a little over $2000 a month, which is market rate for this area. Asking price for identical places in the immediate neighborhood are almost a million bucks. 6-7 years ago, these places were about $300K. This place should go for no more than $450K in the absense of speculation.
What’s to stop it from going down to 250k or lower? Just as stocks can overshoot below the “fair value” due to over selling (too many sellers and too little buyers), why can’t the home prices hit below the so called “reasonable” value?
Or I guess people hate to take loss so they wait until they can’t take the lowering price anymore and then sell out which will trigger another round of lower prices which will trigger more sales? I guess you can’t get a margin call with mortgage (death pledge) so the downward spiral probably won’t accelerate…
Just as stocks can overshoot below the “fair value” due to over selling (too many sellers and too little buyers), why can’t the home prices hit below the so called “reasonable” value?
Exactly. Since when has real estate been a market with perfect valuations?
Margin calls happen in a declining market — To the lenders when they carry too many defaulted properties valued way under the loan amount. Some 1sts will be OK as the 2nds 3rds, HELOCs… all get nothing… but many will pile up and the regulators start pushing buttons.
The whole RE bubble market is a ponzi scheme ready to come completely unravelled… by the end of ‘06 and into ‘07…
50% in the more expensive places in LA would about get you AT the floor…
Also, you might want to take into account psychology and the reptile brain. People still might not buy when it makes sense to because of uncertainty and fear. These are the same reasons people buy when it DOESN’T make sense. That’s why you get these pendulum swing “overshoots” on prices (both ways). On the low end, you get people saying “I’m NEVER going to buy real estate ever again”.
When EVERYONE is saying not to buy as well as sell all that you’ve got and they predict that the future will get worse and realtors are quiting en masse, then it just may be the time to start buying.
Otherwise you may have hit a temporary patch or even the so called “dead cat bounce” — Japan took 14+ years to hit bottom and the current rise in home prices might be a temp. bounce….
I think Japan real estate is pretty much doomed in the long run…”they aren’t makeing any more people”, the opposite of the “they aren’t makeing any more land” argument…plus, teh culture has changed where 20 -somethings and 30-somethings still live at home with their parents, so that they don’t have to pay rent and can use their income for ‘toys’…
makeing = making…oh, I give up on korrekting mei spelllling..
The market over-reached on the way up and will over-correct on the way down. When it’s cheaper to buy than rent is when the bottomfisherman starts lowballing.
40% would come close to hitting ‘the floor’ in Ann Arbor MI; it’s gotta be a ways down to the floor from 40% in some of them asylum markets surely…
1989: Prices are very expensive; affordability an
issue. Sales slow and prices drop. Mention of risky
loan types.
Housing Prices in State Climb 3% in February
Furlong, Tom; Los Angeles Times; Mar 29, 1989;
Vol. 108, Iss. 116; 4; pg. 1
Stock of Unsold Homes Drops Dramatically
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Apr 2, 1989; pg. 9
How First-Time Buyers CAn Get Their Piece of the
Dream
Myers, David W; Los Angeles Times; May 21, 1989;
pg. VIII1
State’s Home Sales Drop 14% Median Price Tops
$200,000 for First Time
Crouch, Gregory; Los Angeles Times; May 25, 1989;
pg. IV1
Sales of Existing Homes in State Fall During May
Furlong, Tom; Los Angeles Times; Jun 23, 1989;
Vol. 108, Iss. 202; 4; pg. 1
Orange County Home Sales Drop by 22% in May
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jun 23, 1989; pg. 1
———We are here I think—————————
Realtors Tackle New Topic: How to Handle Slow
Housing Market
Myers, David W; Los Angeles Times; Oct 1, 1989;
pg. VIII1
Prices Drop, Sales Slow in State’s Housing Market
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 29, 1989; pg. 1
Housing Affordability Rises Outside L.A., Orange
County
Kristof, Kathy M.; Los Angeles Times; Dec 06,
1989; Vol. 109, Iss. 3; D; pg. 1
Survey Cites Four California Banks With Possibly
Risky Realty Loans
JAMES BATES; Los Angeles Times (pre-1997
Fulltext); Dec 30, 1989; pg. 1
1990: Prices take a serious plunge. One article claims
that housing booms are a bad thing and we should hope
prices stay low. Increasing mortgage rates are blamed
for the bust. The word “recession” is mentioned. Gloom
and doom.
Home Sales in Southland Plunge in ‘89
Samuels, Alisa; Los Angeles Times; Feb 8, 1990;
pg. D2
The Number of Homes for Sale Sets a Record Real
Estate: San Diego becomes buyer’s market, with 4,000
existing homes listed in January.
GREG JOHNSON; Los Angeles Times (pre-1997
Fulltext); Feb 13, 1990; pg. 2.A
Pray That the Housing Boom Stays Dead
Jones, Robert A; Los Angeles Times; Apr 24, 1990;
pg. A3
Climbing Mortgage Rates Hurt Existing Home Sales
Samuels, Alisa; Los Angeles Times; Apr 26, 1990;
Vol. 109, Iss. 144; D; pg. 3
California Is Nearing the Edge of Recession, UCLA
Forecast Warns
Anderson, Harry; Los Angeles Times; Jun 29, 1990;
Vol. 109, Iss. 208; D; pg. 1
California Real Estate Market Continues to Cool
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jul 26, 1990; pg. 1
Home Sales in July at Slowest Pace in 4 1/2 Years
Furlong, Tom; Los Angeles Times; Aug 28, 1990;
Vol. 109, Iss. 268; D; pg. 2
Realtors Hear Gloomy Price, Sales Forecasts
Myers, David W; Los Angeles Times; Oct 7, 1990;
pg. K1
O.C. Home Resales, Prices Fall Sharply Housing:
Realtors group attributes slump in county and state
figures to fears of recession.
MICHAEL FLAGG; Los Angeles Times (pre-1997
Fulltext); Oct 26, 1990; pg. 5
Housing Slump in California Seen Worsening
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 21, 1990; pg. 1
“The shares crash, hopes are dashed - people forget; forget they’re hiding”
The Who
Good call on your comparison. I agree, we are on the precipice of severely falling prices. My prediction for this happening is this summer, when the resets start hitting and the realization comes that spring did not bail sellers out.
“Along much of the East and West Coasts, home buyers and home sellers are engaged in a stare-down. Many buyers, having heard that the real estate market is a bubble in danger of popping, are refusing to offer the asking price on a house, convinced that it will soon drop. But many sellers are not blinking either, thinking that offers will improve when the weather does and biding their time until then.”
Buyers (= priced-out renters) will win this waiting game. We can wait indefinitely, while many sellers will need to either unload or watch the value of their property drop by 40%.
Yep, and PITI will eat the flippers alive.
PITI has no pity.
The Sorrow and the PITI
Very PITHY remark about PITI…
Apparently you can fit 70 people into an LA Bungalow …
http://www.breitbart.com/news/2006/03/03/D8G4AH687.html
Can you imagine the stinch in there?
Even scarier is that place in Willowbrook (fancy name for Watts) is probably “worth” 400k. lol.
This is the ONLY way to puchase a home at today’s prices and get it to CF….
You got that right.
“In parts of the Northeast, the drop has been about 5 percent, estimated Robert I. Toll.”
Hum — if the drop in sales was only 5 percent, how come Toll’s stock price has fallen by 50%? Does Wall Street know something Mr. Toll would not care to discuss?
Toll is also like a homebuyer: heavily leveraged. This amplifies the downside as well as the upside. Wall Street knows this.
Nationwide it has been a unusually warm winter, spring has already arrived in San Jose. Where are the buyers ?
Good point. It’s been an extremely warm winter. Denver I think saw 80 degrees last week? If as articles says “we will know by May”, not much time left.
Well, some of the buyers that the sellers are looking for in the Spring are the folks with kids. School is out in May/June which makes this time, and summer, the best times to move. But even with that, we know that these folks (DIWK…double income with kids) will also rethink their *need* to buy or sell in this market.
BayQT~
Robert Cote’s “Silent Spring”
4 more Fed rate increases +
10-year bond, 10-year bond, 10-year bond
Inventory in Northern VA
March 1 05 - 2,545
March 1 06 - 11,818 (and growing)
Breathtaking inventory. Any idea on the absorbtion time?
It gets worse. Up to 50K more condos to hit the market in the next 36 months as reported in the Washington Post.
Bring ‘em on!
Scouts Weigh Selling Valuable Real Estate
OT -
This is from Bloomberg
http://www.bloomberg.com/apps/news?pid=10000087&sid=aF75aDHe6_BM&refer=top_world_news
“A gauge of financial companies fell 1.3 percent this week for the biggest drop among 10 industry groups in the S&P 500. Higher rates reduce the value of bonds owned by banks, brokers and insurers, and also crimp demand for mortgages and loans.
Wachovia, the No. 4 U.S. bank, fell 4.3 percent to $55.19. Washington Mutual Inc., the biggest U.S. savings and loan, declined 3.5 percent to $42.25. ”
I am currently short XLF (financial sector) - not sure if it’ll work out of course.
Sellers are already blinking - reduced/motivated/negotiable listings on newyork craigslist are there for anyone to see. You still see a lot of price stubbornness in some areas, though, which I expect will get a lot less stubborn in the coming months. This waiting game is one many sellers cannot afford to play. It’s fun to watch now as new construction homes in the boros go from 800s to 600s
Yes. I’m watching Riverdale in the Bronx. I’m seeing reductions,
negotiable tec. Also there are 8 or 9 in various stages of completion. I think the coming glut will further weaken this condo, coop and SFH market here.
I’ve been following market in Riverdale in the Bronx. Craig’s list definitely is showing a lot more offerings, many negotiable or reduced. And there are 8-9 new condos in all phases of construction. They’re asking more than a million for some of the 3 or 4 bedrooms now, but give them 6 more months and we’ll see what they ask. There is going to be quite a glut here.
Jodie -
If you’re not tied into Westchester for family or work reasone I would suggest taking a look at Forest Hills QNS as an alternative. Just a suggestion.
I’m watching Inwood and Washington Heights in Manhattan on Craigslist. Prices seem to be slipping a little bit, for both sales and rentals (though I’ll admit I’m not keeping notes or statistics).
The NYC housing market is very frustrating b/c there is no unified MLS and many realtors ignore it entirely. Of course, limiting the public’s information suits the realtors just fine.
The number reduced on greater SD ziprealty inventory has swollen to 5110; this is up to 29.3% of the overall inventory of 17,419 currently shown. (It is getting hard to keep up with these numbers, as they are go up substantially on a daily basis…)
Is this really what happened? Watching the markets myself it seemed like affordability started hitting incredible lows right as things sputtered out. It seems possible that even with out of control credit this thing burned itself out and now everyone is just gaping in shock and awe. This is essentially the same thing, but a bit of a different take on the trigger and the psychology.
When a record 70% of the population has already bought, and sometimes multiple homes, virtually everyone who was going buy has already done so. Just like a pyramid scheme- Once everyone is in, the whole things collapses.
everyone is ’same side’ on the trade….
“In Buxton, Me., a suburb of Portland, Geof and Cheri Toner put their three-bedroom Cape Cod-style house on the market for $379,900 late last year, shortly before moving to Raleigh, N.C., for Mr. Toner’s job. They have received only one offer, for $350,000, which they rejected, and recently reduced the price to $374,900.”
I suspect before long Mr Toner will regret not taking the 350K.
I don’t know how long of a “pause” they are expecting here but the pregnant part isn’t going to be particulary surprising after the screwing the sellers can expect to begin shortly. How does a 220K sales price grab you Mr Toner?
He was a moron to not take the 350K. It’ll be 250K by this time next year.
This must be the house (see link). There are only 2 houses on realtor.com at 374,900K and this one specifically mentions that it is a “custom Cape”.
http://tinyurl.com/n8ml6
BayQT~
From the Washington Post.
http://www.washingtonpost.com/wp-dyn/content/article/2006/03/03/AR2006030300821.html
All They Own For a Darn Deposit
Young Buyers May Have to Sell The Car and Hock the Family’s Jewels To Come Up With the Cash They Need
…
They did not have much to offer in the way of earnest money. In fact, they had only $2,000, scraped together from cash gifts they had received at their wedding in June.
“To us, that was a lot of money,” said Heather Huhman, 22. But it represented just half a percent of the asking price on a Derwood townhouse. “We were definitely concerned. But we didn’t really have other options.”
Of course, it helped that the three-bedroom unit had been on the market for a while. (The seller had moved out.)
And the Huhmans’ offer had other strengths. Both have good credit: They learned that they could buy a home through a zero-down loan for a monthly payment that was not much more than the rent they were paying for a Rockville townhouse.
They also have good jobs: He is an electrical engineer for L-3 Communications Titan Group; she is in public relations.
The seller was willing to work with them. To avoid paying closing costs up front, the couple bid $15,000 above the asking price and the seller in turn paid the closing costs. “We thanked the seller profusely at closing,” said Heather Huhman, who now works for a public relations firm whose clients include Evers, the real estate agent.
More from the same article
I really don’t understand why a 22-year old recent college graduate who is newly married, doesn’t have $2,000 in the bank, and has just moved to a new city, needs to buy real estate. Then again she has “excellent credit”…which I guess means that she hasn’t gone bankrupt since high school.
Exactly - how much excellent credit does she have. I’m glad she paid the Mastercard with the $1000 limit on time for the last couple of years - let’s give her a home loan.
I’m tired of this “excellent credit” nonsense. It’s very easy to have good credit when you have no bills and no financial commitments.
I know a woman who just bought an “investment” property. She’s 40, lives in a studio apt, makes about $20K a year, has about $2K in savings.
She “bought” a SFH out-of-state (in her old hometown) for $230K as an “investment”. This “investment” is cash-flow neg to the tune of about $300/mo. She was able to get a 100% no-money-down loan. The realtor told her to write down $65K as her income to qualify for the liar loan.
I asked her how she was able to get a mortgage given that she had no money and piddling income. She said, “I have good credit.”
Puh-leeze. She has “good” credit because has no money and spends no money. Now that she has a cash-flow neg investment on her hands, let’s see how good her credit is. BTW, she recently had to move out of her $700 1-bedroom and move into a $375/mo studio because she is having “budget problems.”
Her liar loan re-jiggers in a year or so. She better hope rents increase 50% by then.
That’s exactly what I was thinking. I’m 40; my wife is 36; we’ve been married 8 years and we’re still saving for our eventual house purchase. IF I’d been smart (and IF I’d known we were at the bottom of the market), we would have purchased in 1998 or ‘99…but credit card debt and the lack of “easy money” prevented it. Am I worse off for having rented all these years? Who knows? According to some online calculators, I’m better off renting. At least I’m not sweating losing my “unrealized potential gains” and all the toys I might have bought using the house ATM.
Our financial advisor was dubious when I started talking about the bubble last year. He repeatedly admonished us to “get into anything so you can take a tax write-off,” yet it seemed as if he was just saying it because that’s what you’re supposed to say. We’ve always done it this way. I was unwilling to triple our housing expense for less house in a less desireable area, so we stayed put and continue to aggressively pay down debt and build our down. I think I’ve made a believer out of him, but perhaps this speaks to a sort of institutionalized financial mentality.
The point is that I refuse to buy in to the “You MUST buy a house” mindset. When it makes sense to purchase, and we can purchase intelligently, we will. Until then, life is still pretty damn good.
Sounds like you’ve got a hell of a lot more sense than your “financial advisor.”
I’d forget the new house and look for a new advisor.
A single word of advice. NEVER go into a large investment situation if the only justification is “Tax benefits.”
the “tax benefits” song was one of the big mantras I recall from the late 90s when the craziness started here in Ann Arbor. I recall trying to find out *how* (I was younger then!) exactly this works. I swear I thought it was somehow right off the top of your tax owed at first…could I have been that naive? or did the realtors lead me down that misconceptual garden path?…hmmm.
Then I thought it was off the top of your stated income, but somehow you still got the standard deduction. I bet loads and loads of people still don’t get that you gotta itemize now, and so you aren’t any better off for about 10K worth of PITI. I can’t be sure, but I really believe I recall realtors trying to explain this to me by saying things like “oh, so, what are you in the 28% tax bracket? so that’s almost 30% off your payment!”. they implied very strongly that we could thus just consider PITI minus 30% as our ‘real’ housepayment. They’ve backed off this tax benefit thing…though maybe they’re still doing it with very young people these days. I think it was one of the truly scandalous misinformation campaigns of this bubble really. Like the realtors didn’t know what the scoop was and couldn’t explain that to the ‘clients’ they were telling must buy instead of rent–oh, yes, don’t forget that though interest&taxes may be deductible, you can’t get the standard deduction with those fries.jeez.
Did this advisor explain the downsides of owning a residential home? The non tax benefit of any loss in the sales? They like to hype the benefits but not the negatives (tax loss). What kind of advise is that?
I thought advisors were suppose to give you the +/- of your potential decisions, not plus and positive.
Heather is the typical demographic. Someone slipped her a roofie, they performed surgury by cutting the top of her head off and emptied her brains and stitched her skull back together. Upon recovery, these surgury patients seem to repeat the same sentences;
“Real Estate only goes up”, “Buy now before I get locked out”, “the economy is doing great”, “democracy and freedom”.
I’m not the only one who believes this country is upside down since 1999. And it’s got nothing to do with 9/11.
lol
“We thanked the seller profusely at closing”
Thank you sir, may I have another?
yes, well stated. I’m really freaked out seeing that story, the story above about the liar loan with the 20K/yr salary *investment* property…that much craziness just can’t get dispelled without pain.
it’s gotta be the stuff of S&L-like scandal when this all comes crashing…
Excellent credit at 22? No wonder the market is overpriced!!!
If a 22 year old can have “excellent credit,” then I would hate to see the standard for “good credit.” Furthermore, they didn’t have the cash for the earnest money!
Let’s see. 22 years old, no money, fresh out of college, first jobs…and they are handed $400,000 loan! That would have never happened when I 22…and I am only in my early 30s.
I think you fail to realize that there is in fact a husband attached to the “22 year old.” This husband is 26, has a high-paying job in plasma physics and also has excellent credit. You may also not be aware that the cost of renting in that area is above the cost of buying a house. It is more beneficial in the long run to buy a house when one plans to live in an area for a significant amount of time.
LMFAO…Buxton, ME for $375k???????? How stupid is this moron. Only jobs supporting this area are dead end service sector crap like waiting tables in the Old Port or emptying bedpans at MaineMED, for $8.00 an hour + tips, if you’re lucky. Great pay in the highest taxed state in the country. Guess the seller is gonna wait for that proverbial uninformed out of state buyer who thinks he’s got a steal. First offer is your best offer. This idiot will rue his decision.
My best friend is trying to sell his deceased mother’s home in Portland. Listed @ $210k. 1 offer @ $180k in 10 weeks. Counter @ $195.00. Buyers walked. Seller’s better wake the f*ck up.
I had the same thought about Buxton. It may be a wonderful place to live, but it’s not one of the names you associate with such high prices. And it’s hardly a suburb of Portland. And a medium drive in the summer can be a hotrrendously long drive during bad winter storms.
The affluent suburbs of Portland where one might expect to see those sorts of prices and higher are Cape Elizabeth, Falmouth, Cumberland, North Yarmouth and Yarmouth. Common to all of these are excellent school systems which of course typically signify well educated and well paid residents. If the folks in BUxton are changing the bedpans at Maine Med, the folks in Falmouth are performing the surgeries.
lol
Oh my God. . hd74man took the words right out of my mouth but they are worth repeating;
375K in Buxton?
I think Mr. Toner needs a refill. I can only imagine he’s a transplant who overpaid by 2-3x from a native seller. Can you say DUMB? To the contrary, he may actually believe the Realt-Whore speak that prices only go up. Either way, I really really really want to know the outcome of this one……. say 6-10 months from now.
The Lingus-You and I would get along very well…
Indeed we would.
And how much is that $15K extra they paid, over the course of their loan?
Forgive me for the double post but this link to the housing piece on NBC News last night is a good one. They’re slowly coming around to our point of view. The NAR had some spear catcher on there saying the market is becoming more “healthy.” Steep markdowns on new houses in Dallas. Funny, I thought healthy markets rose in value. Black is white, good is bad, debt = wealth…
http://video.msn.com/v/us/v.htm?g=7742ca44-5ab0-4cf5-8b43-5b6de4f9543e&f=00
“In Buxton, Me., a suburb of Portland, Geof and Cheri Toner put their three-bedroom Cape Cod-style house on the market for $379,900 late last year, shortly before moving to Raleigh, N.C., for Mr. Toner’s job. They have received only one offer, for $350,000, which they rejected, and recently reduced the price to $374,900.”
In all likelihood, the Toner’s Maine house doubled in value in the last five years. So rather than get while the getting is good, the Toners turned down the $350,000 bird in the hand to chase elusive quarry in the bush. No two ways about it, they are gambling.
This reminds me very much of another Maine couple who were covered in this blog back in December, Dino and Mia DeSanctis. They were badly upside down with two houses and one can only wonder what has happened for them. (”…Owners of a new home in Gorham and their old home in Portland, the couple is among a number of southern Maine homeowners caught in a slowing real estate market. The DeSanctises bought their new house when prices were peaking, and have twice dropped the price on their Portland home, with no buyers in sight. “Without a doubt, it is the most stressful situation we have been in,” said Mia DeSanctis, a stay-at-home mother of one…”)
As for the Portland, ME market, inventory is still not doing much. In fact, based on the following six month track of single family home listings from Portland (04101, 04102 and 04103) as well as the neighboring affluent suburbs of Falmouth, Cumberland and North Yarmouth, inventory was 19% higher the first of the year than it is today.
9/6/05 352
9/19/05 394
9/29/05 400
11/3/05 425
12/5/05 406
1/3/06 407
2/2/06 395
2/11/06 352
2/18/06 348
2/24/06 345
3/4/06 343
I’m very surprised inventory has not surged. I’m thinking that it still may be a little early for the Spring market in this cooler climate. But I’m also beginning to think that some sellers who might have normally put their properties on the market are shying away, because they know it may get ugly. It should be good spectating with each passing week
Also, demand in Greater Portland always includes a good amount of equity bandits from NY, Boston, NJ and lately, California. It may be that the bursting bubble in these areas is contributing at above normal levels to overall demand in southern Maine. Of course, eventually, that will run out of steam.
Take the money and run Toners.
Portland Mainer-What your numbers indicate is a dead flat market, indicative of the ME economy as a whole.
The towns you listed are notorious NIMBY anti-development yupsters havens. Your not goin’ to get much turnover.
Question I have for you-If it’s dead flat in your territory, what do you think it’s doin’ in the rest of the state?
Baldacchi’s doin’ nothin’ more than rearranging the deck chairs on the Titantic.
Thank God I’m out……..
“Question I have for you-If it’s dead flat in your territory, what do you think it’s doin’ in the rest of the state?”
hd74man - my guess is that it’s flat throughout most of the state. Some of the interior areas never saw huge price gains, so they may not fall too much either. Lakefront and oceanfront have really skyrocketed and I’m guessing they’ll flatten out. I don’t expect any significant price drops there.
One area where I do envision price drops - and I’m hoping for these - is at the big ski areas in NH & ME, e.g., Sunday River. I think there’s a lot of hidden inventory owned by developers.
to paraphrase Houses “…. have reached what looks like a permanently high plateau.”
Irving Fisher, Professor of Economics, Yale University, October 16, 1929.
The housing market needs first time homebuyers, and not just ANY first time homebuyer. A sustainable market needs the type of first time buyer who will not be just another forclosure in 4-5 years. Sure, we may find that there are enough greater fools to sustain prices for another year, but nobody should be fooled into thinking that prices are sustainable at their current level. Right now, the only people who can afford to buy in San Diego are previous homeowners, and first time buyers who bring at LEAST 100k annual income, and our favorites - the F’d borrowers and greater fools who will be contributing to the next bubble - forclosures.
Would it be possible to create a ‘forclosure’ mutual fund? HAHAHA, I’d invest in a year or two.
“No more bets please, no more bets…” (the wheel is spun and the ball is released…)
If rates don’t continue to rise, and you are a knowledgable buyer, I don’t see why this can’t work out well for everyone.
If you get greedy, and are asking 200k over the value, well …
For the sake of the economy (and buyers), I’m just hoping that a lot of the homes on the market DON’T HAVE to be sold. If you can’t afford it, and have to get out from under, I understand … but if you’re just testing the market, wanting to cash out … you missed the boat.
Sit on the sidelines, stay in your house, keep your job, and enjoy life. In another 10 years, your house will have gone up another 75-100k.
Let’s not let greed get the best of everyone.
GREED KILLED THE PIG…..
up another 100K?? WTF are you smoking over there, chief?
Your 100K prediction is overly optimistic.
The 100k prediction was OVER THE NEXT 10 YEARS.
That’s optimistic?
For ex. - a $400,000 house would have to go up 25% in 10 years. That’s a mere 2.5% a year.
What is so different and interesting about this market is the high percentage of sellers who will walk away either in debt or bankruptcy. This folks will be unloading and going straight to rental housing -or the poorhouse — and many will probably never be able to get out from under their debt burden enough to buy a home again. I wish there were some kind of analysis of how many of these people are there, and what effect their permanent disinfranchisement will have on the housing economy. My hunch is that we may have a drought in the buying pool for a long time to come.
“This folks will be unloading and going straight to rental housing -or the poorhouse — and many will probably never be able to get out from under their debt burden enough to buy a home again.”
Yesterday’s shortage = houses.
Tomorrow’s shortage = buyers.
Although he does not expect prices to fall significantly, he does not think they will rise either. Now, Mr. Pottavathini said, ‘If I wait, I might get a better place.’”
I think this is important. It might be a toss-up whether we see a quick, sharp decline in prices or a gradual fall over a number of years as inflation erodes the real price of housing. But it is very unlikely that prices will actually rise. Given that, the idea of “buy now or get priced out forever” carries no weight, and buyers can simply sit back and watch.
EXACTLY! All we priced-out and disgusted buyers needed to get calm and stop feeding the craziness was the removal of the fear that prices will keep rising, continue to be so out of touch with any fundamental that *fear* could allow the *greed* to continue. Now, we can take a deep breath, mumble a couple choice ones about the Mr. Toners, and wait to be able to afford a house we’d actually be happy to live in. Isn’t that how it used to be, and isn’t that better for everyone? Invest gambling money in emerging technologies, and *save* for a house you are reasonably confident you can afford to live in and be happy in and maybe not make much money from if you gotta move but enjoy while you’re there and maybe decorate with your grandkid’s paintings in your dottage some day?
“LMFAO…Buxton, ME for $375k???????? How stupid is this moron. Only jobs supporting this area are dead end service sector crap like waiting tables in the Old Port or emptying bedpans at MaineMED, for $8.00 an hour + tips, if you’re lucky. Great pay in the highest taxed state in the country.”
I agree jobs in southern maine don’t support much of the price runup of the past 5 years, and Buxton is not exactly a prime location, so dude is bumming… But there are many more jobs here then waiting tables - LL Bean, Unum, Banknorth, Bath Shipyard, Hospitals, numerous tech companies, the fishing industry, more law firms than you can count… And there are many very, very wealthy areas w/ old money . So I get the support up to $300,000.00 and the many houses over 1,000,000.00. I don’t how many houses are priced how many between $350,000.00 and $500,000.00… Other than equity coming in from Boston and NY, there, jobs here don’t support that kind of average house price… Hopefully the slowdown in NY and Boston will affect prices here soon like it did on the way up… Already seeing signs…
adaylate-C’mon come clean on the companies you listed…LL Bean-it’s retail jobs w/ scores of pensioned school teacher clerks makin’ $8.50 for extra pin money. UNUM stock is at an all-time low due to crap underwriting plus they had that recent buy-out. What did that trim for jobs-40%? Those jobs could disappear to the parent company in a heartbeat. Bath Ironworks is runnin on empty w/ employment down 50%. They’ve laid of hundreds. The workers left are petrified GD closes shop and the work moves to low cost Mississippi/Viginia, ’cause Olympia Snowe ain’t got the muscle anymore. BankNorth-Bought out by TD Bank of Canada. You can be your azz, those jobs will eventually go to the Land of LeBat Blue where the government picks up the tab for health insurance. I won’t even get into BofA buyin out MBNA or Brunswick Naval Air Station closing. Hope it can all run on the old money you note-’cause there’s nothin’ else. As I said-Baldacchi’s just rearranging the deck chairs on the Titanic. Mr. Toner better get a brain.
I posted this above if anyone wants to see what that house looks like. I believe it’s the Toner house in the article.
http://tinyurl.com/n8ml6
BayQT~
(Only jobs supporting this area are dead end service sector crap like waiting tables in the Old Port or emptying bedpans at MaineMED, for $8.00 an hour + tips, if you’re lucky. Great pay in the highest taxed state in the country.”)
Sorry Maine, Taint so. Depending on how much the State of Alaska is collecting in oil taxes, one of those two states is #1 in state and local taxes as a share of income in any given year. New York is number one in taxes residents and (non-oil) businesses have to pay.
Maine is number three in state and local taxes as a share of income.
Larry-
I think if you throw the 5% sales tax into the pot along with the income and property taxes, I’m pretty sure the great Socialist Republic of Maine comes out on top. 38th in per capita income/1st in taxation as percentage of income= Appalachia of the North. Re-distributionist liberals have run it all into the ground. Mazzhole tourists buyin’ trinkets is the only thing keepin’ the place afloat…$375K for Buxton?????? LMFAO!!!!!!!!!!!!!!!!!11
RE is kennebec county has slowed, but I have finally noticed a few homes pending is last 2 weeks
maine is a decent state despite the taxes–the state income tax in higher than most, sales tax is standard, RE tax mill rates are nasty, avg about mid 20s per 1000
course the state is huge, has a low population (1.3 mill or so) and everyone still expects to have roads, schools, etc hence the high taxes—–unfortunately its an aging state where economic opps are limited……but recreational ones are good
I’m convinced at this point that VT, ME and NY’s only hope of a sustainable economy is Ag & dairy. NY used to lead the nation in dairy, surpassing WI.
In Buxton, Me., a suburb of Portland, Geof and Cheri Toner put their three-bedroom Cape Cod-style house on the market for $379,900 late last year, shortly before moving to Raleigh, N.C., for Mr. Toner’s job. They have received only one offer, for $350,000, which they rejected, and recently reduced the price to $374,900.”
“Mr. Toner expects that the eventual buyer will be a transplant from elsewhere in New England who is willing to pay significantly more than $350,000. ‘We’re not panicking over it,’ said Mr. Toner. ‘It’s just a matter of sitting it out and seeing what happens.’”
“Many real estate agents argue that people like the Toners are doing the right thing and that the market will not slump as it did a decade ago. The current slowdown is simply a transition, the agents say. ‘All we are seeing is a pregnant pause,’ said Richard A. Smith, ‘a disconnect between sellers and buyers.’”
THE GREATER FOOL IS GOING TO COME TO HIS RESCUE. I SENT THE REALTOR A ‘CANDID CAMERA EMAIL FROM BEN’S BLOG.”
send an appreciation email to the agent
Mr. & Mrs. Pottavathini should RENT a 3 or 4 bedroom townhouse with 2-car garage, at perhaps half the cash flow of owning it, and invest the rest for a more secure future. Maybe someone should start “why you shoud rent” seminars or classes.