“Mantra For The New Market: I Know It’ll Sell”
The Times Herald Record reports from New York. “During the final three months of the year, the median price of single-family homes sold in Orange County fell to $315,000, down $10,000 from a year ago, according to the Orange County Association of Realtors. The number of homes sold in Orange and Sullivan counties each fell more than 10 percent from a year ago.”
“‘What you really saw was a softening of the market,’ said Ann Garti, CEO of the OCAR, repeating what’s become a mantra of sorts among the real-estate set.”
“The number of homes sold in Orange County has now declined for two years straight. Before 2005, the last drop in sales was logged way back in 1990.”
“Lenny Tarulli and his wife Gladys, moved up from Brooklyn and bought a small cottage in the Mountain Lodge Park area of Blooming Grove. They spent $50,000 turning it into a year-round house. A couple of years ago, when Tarulli’s employer moved from Manhattan to the West Coast, Tartulli put the home up for sale. He figured he’d follow his job.”
“Two years, three agents and more than 100 showings later, the Tarullis are still here. ‘When they see the size of it, and they see what $200,000 will buy them up here, they want more. But that’s all they can afford,’ said Amanda DiVeglio, who’s listing the house. ‘They get up here and they see what’s here, and it’s like a reality check for them.’”
“DiVeglio, who’s lowered the price on the home from $225,000 to $205,500 in about five steps, closes with what’s become another mantra for the new market. ‘I know it’ll sell,’ she said. ‘It’s going to take time.’”
The Hartford Courant from Connecticut. “Sales of single-family houses in Connecticut continued to decline in November, with the Hartford area recording the biggest drop in sales, according to a report released Wednesday.”
“‘There’s the possibility that things are going to get worse before they get better,’ said Steve Lanza, executive editor of the Connecticut Economy at the University of Connecticut.”
“‘Without question, total sales of homes and production of new homes are off, and they are off substantially,’ said Ron Van Winkle, a West Hartford economist. ‘A 15 percent decline in sales is significant. It is a large adjustment.’”
“Hartford County showed the largest decline in sales in November, dropping almost 20 percent. But the median sales price in Hartford County through November was a 2 percent increase from 2005.”
“Van Winkle said (the) median sales prices don’t reflect the concessions that sellers are giving, including making major repairs to houses, and even offering to pay closing costs, which can amount to tens of thousands of dollars.”
“‘We don’t see buyer conditions in these prices,’ he said. ‘You might still be paying $250,000 for a house, but the seller is doing a number of things which, in effect, lower that price. Prices have gone down more than these prices reflect because of those concessions.’”
The Town Crier from Massachusetts. “Home sales in Sudbury fell in 2006…across the state, home sales were down in 2006 from 2005 levels. The good news is that Warren Group statistics show in Sudbury, the drop in sales wasn’t as pronounced as in other towns.”
“Scott Beane, sales manager in Sudbury, said other towns in the area are seeing much greater drops in the number of single family homes sold. He cited MLS numbers that show towns such as Marlboro saw a decrease in sales of more than 55 percent and Stow saw a decrease of more than 33 percent.”
“‘For people relocating, their motivation to sell is high and they will sell to get on with their life,’ (broker) Louis Stephan said, noting that these sellers are more willing to negotiate a price with buyers. For people who are retiring and consider their home as their nest egg, Stephan said this ‘may not be the right time to sell and they might be able to defer two years to maximize their profit.’”
“In fact, the median sales price of homes sold in Sudbury in 2006 was down from the previous year. From January through November, the median home sales price in Sudbury was $625,000, according to the Warren Group. This was down from $682,000 during the same period in 2005.”
“But agents caution that this dip in home prices shouldn’t spell the end of a great housing market because prices are still much higher than they were a few years ago.”
“Unfortunately for sellers, on average, they are waiting a long time to sell their homes and they are facing increased competition. According to Beane, the average house in Sudbury is on the market for 216 days, more than double the amount of time from one year ago. There are also more homes on the market.”
“His advice to sellers to help close a deal on their homes is to be realistic about the selling price and pay attention to the condition of their house as it goes on the market. ‘People aren’t feeling desperation yet, but they are more willing to invest money to fix up their homes, increasing the curb appeal,’ said Beane.”
‘I know it’ll sell,’ she said. ‘It’s going to take time.’”
Hell, yeah, Amanda, it’ll sell. The price it will sell at is what is in question.
‘All that demand helped home prices here double in just five years. Now, when buyers look in Orange County, they aren’t finding bargains. Two years, three agents and more than 100 showings later, the Tarullis are still here. He’s working as a security guard at a local warehouse, and he’s still trying to sell the house.’
So he loses his original job, apparently, and puts his life on hold for two years?
Did you look at the pic? The place looks like a dump.
But “it’s cheap here” txchick…… Welcome to NY.
Who is going to buy if everyone has already bought and maxed out his consumer spending with the house ATM ? Are the numbers on consumer credit that crazy? It must be the same thing in the UK. Answer: NOBODY. It’s not two years. His life will be suspended at least for another 10 years. That’s a minimum.
“Stephen Church at Piscataqua of Research could use some too, as I gather from reading his report “The Consumer Crunch: December, 2006 Update.” He agrees that “The slowdown in household mortgage debt flow SHOULD lead to a recession - BUT the Federal Reserve is determined to prevent one.”
He goes on to say that things are worse than just a lousy $300 billion gone missing, as “The latest economic statistics show that consumers depended on new debt for 90% of their cash flow during 2006. In 2005, 88% of new consumer cash flow came from debt.” (Mogambo Guru)
“The slowdown in household mortgage debt flow SHOULD lead to a recession - BUT the Federal Reserve is determined to prevent one.”
It’s getting so I have an opportunity to trot this one out daily.
http://xroads.virginia.edu/~hyper/Allen/ch13.html
‘[T]he Harvard Economic Society … on October 19th [1929], after having explained that business was “facing another period of readjustment,” it predicted that “if recession should threaten serious consequences for business (as is not indicated at present) there is little doubt that Reserve System would take steps to ease the money market so check the movement.”‘
Treasuries Fall After Bank of England’s Surprise Rate Increase
By Elizabeth Stanton and Deborah Finestone
Jan. 11 (Bloomberg) — Treasuries fell after the Bank of England unexpectedly raised its benchmark interest rate, pushing yields higher on European bonds and cooling speculation that the U.S. Federal Reserve will lower borrowing costs this year.
The U.K. decision may indicate a greater likelihood of increases by other central banks, including the European Central Bank, aimed at quelling inflation risks. British policy makers said inflation risks “now appear more to the upside.” Fed Governor Donald Kohn on Jan. 8 said it’s “still too early” for the central bank to relax its guard on inflation.
“This was a signal to investors that they should focus on the fact that the world is still growing and inflation is still a worldwide headache,” said Ajay Rajadhyaksha, co-head of U.S. fixed-income strategy at Barclays Capital Inc. in New York, one of the 22 primary U.S. government securities dealers that trade with the Fed. “Interest rates will continue to move higher.”
Mean mean very mean-while Amanda waits, she will have to pay all theses nasty nasty costs attached with her tons of bricks. Oh it’s not just the USA that is entering this nasty cycle of long term generalized real estate stagnation or even price crashes. It’s the whole anglo-saxon world and a good part of western Europe. Amanda will have her price but if you factor the sunk costs while waiting for it, she is a looser big time. Mean mean mean. That’s what is called reversion to the mean.
These sellers who cannot figure out how to price their homes at a level the market will bear should consider starting a cargo cult, as their faith that a buyer will soon materialize closely resembles indigenous Pacific islanders’ belief that more cargo will soon drop out of the sky…
Wrong GetStucco. It’s the FED cult.
Or the Helicopter Ben cult.
why not use the internet ? invented a while back
‘They get up here and they see what’s here, and it’s like a reality check for them.’”
Better still, use the internet and subtract 3% (1/2 the Realtor’s commission rate) off the most recent Realtor-sold comp. You will be astonished how quickly your home gets “snapped up.”
‘There’s the possibility that things are going to get worse before they get better,’ said Steve Lanza, executive editor of the Connecticut Economy at the University of Connecticut.”
It’s this type of news that has to hit the front pages - everyday…and people like my brother-in-law would finally have it sink into his mellon instead of dropping $300k two months ago on a townhome and the cracker really took a shine with his high paying job in construction!…My constant harping to hold-off was met with ignorance / denial / or plain brainwashing that the mass media has orchestrated. The blame starts from the top done…”what the public doesn’t know won’t hurt them”.
For people who are retiring and consider their home as their nest egg, Stephan said this ‘may not be the right time to sell and they might be able to defer two years to maximize their profit.’”
And here folks is the tipping point. The shear number of 40 and 50 somethings at my work who are scared that they won’t be able to sell their home to “cash out” for retirement amazes me. But why should it. Look at the fraction of their incomes that went into their homes.
When these people see the market declining they will panic sell. Oh, due to the need for retirement income they won’t drop their prices more than 10% below today’s market (in 2007). But these people will flood the market with inventory and some will get smart and realize a 5% price drop today is a lot better than a 20% price drop tomorrow.
Got popcorn?
Neil
popping the popcorn right now. Did you want extra butter with that. BTW who’s bring the drinks?
A round of beer on me!
Drinks are on the house. Thanks, BEN!!
Pass the paper bag that holds the bottle….
Watch the next bubble will be Reverse Mortgages.
Funny you should mention that! Was talking with an elderly neighbor on Tuesday evening. She was, to put it mildly, down on reverse mortgages. Reason: You still have to pay your property taxes and insurance, and those bills can be pretty substantial.
Good call! The scams targeted at retiring boomers will be limtiless and downright inventive. Can anyone think of a single demographic category that will be more desperate and more gulliable than the boomers (most - not all of course) in the coming decade?
Student loans. I have a friend whose wife is a stay at home mom with a teaching degree that cost her $30k in student loans. She worked about 3- 4 years and probably paid off less than $2k of that.
She just never did the math. Now her hubby is paying for her college, diapers and can’t possibly save for the kids’ future.
It’s ridiculous how little teachers get paid for how much they have to spend on their education/degrees… but this is another topic.
Most teachers on Long Island(or at least in my town) quietly make 6 figure salaries. How ’bout them apples.
Danni
My mom’s got her reverse mortgge finalized recently at the high valuation. Who knows how stable the “buyer” is though, or the GSE that “backs” it for that matter…
On a totally unrelated note ;), anyone know if estates can file for bankruptcy?
I’ve got pork rinds and malt liquor.
Neil, This show is going to get X-rated with the ass-pounding and all. You’ll just want to make sure all the kids are out playing or in bed before tuning in. Got to run, the micro-wave just dinged so the popcorn is done!
Why are the 40 or 50 somethings panicking about selling now when they aren’t retiring for 15-20 years?
“My constant harping to hold-off was met with ignorance / denial / or plain brainwashing that the mass media has orchestrated. ”
Ditto!!! Every time I would try convincing a recent homebuyer to just hold off, the responses I often get are:
1) The Completely confused “Huh? What do you mean prices will go down?”
2) “Whaaaaaat!!! You don’t know what you’re talking about!!.
3) You can’t put a price on your home (usually females use this one).
4) Even if prices go down, it’ll only be around 2% so no big deal.
5) What’s a housing bubble?
6) It doesn’t matter if prices go down because I’ll still have the interest deduction and I’m building equity.
I also know a guy who just bought an apartment in Manhattan for double the monthly payment rent would be. When I tried convincing him to hold off, he just looked at me powerlessly and explained that his wife insisted they “Buy” something and he knows he’s commiting financial suicide. Poor bastard.
Brooklyner…you took the words right out of my mouth…my brother-in-law’s EXACT response to #1..(Huh, what do you mean prices will go down)…LOL…(translation) I can’t think past dinner time so spare me these silly details….wonder what he will be thinking in 2 years when $100,000 just evaporated from the value of his home.. And a true kicker to the head … the seller was so motivated that he threw in almost everything (pool table/fridge/stove/washer -dryer / area rugs) if that doesn’t ring any alarem bells - maybe my brother-in-law thought the seller was being a nice guy….(luckily his thinking doesn’t run in the family)
REVERSION TO THE VERY MEAN.
Now that’s love…
I gave up having the “conversation” about the housing bubble 6 months ago. Prices would never drop in Manhattan. I personally would have to pay 2x my rent a month in a mortgate to get the same deal, but I sometimes wonder if thats because my rent hasn’t gone up by much ( $2250 for 850 sqft, walkup but very nice). The “manhattan is different” belief is pervasive. However, every corner I look there is a building going up. Three just in my neighborhood (UES). This supply has to lead to lower prices. On the other hand,Urban digs (realtor blog) says that showings and traffic have really picked up in Manhattan after Jan 1st. So, I still wonder if I am wrong. Anyway, I rather not buy and not have the responsibility of a whopper mortgage around my neck. So I am saving my money and I let go the idea of owning. More freedom this way.
Sam, Manhattan native here. You are NOT wrong. I have seen, in the face and in the flesh, periods of time when you could not GIVE AWAY real estate in Manhattan. In fact, during the ’70’s, in parts of NYC (including areas of Manhattan) they used to just set it on fire to get rid of it.
In the early/mid 90’s your rent vs. mortgage payment ratio was the opposite - cheaper to buy than to pay rent. How can that be? Simple - EVERYONE knew and agreed that buying real estate was the stupidest thing in the world. Ha ha.
Be patient my friend.
Sam — DC_too speaks the truth. We bought a 950 sf coop in your neck of the woods back in 1995 for $150,000 — the same price paid for it by the sellers 10 years earlier. And everyone at the time advised us NOT to buy, since real estate never went up! We only went ahead and bought because, as DC said, the cost of ownership was way cheaper than the cost of renting, especially considering the tax benefits.
Suffice it to say we made out like bandits when we sold the place in 2001, but only because we bought at the right time. Had we bought it in 1989, we would have lost money!
Thanks guys. Good to hear other people with experience living here have the same view. I am patient.
3) You can’t put a price on your home (usually females use this one).
You can’t put a price on your home…WTF? What is your friendly neighborhood realtor doing? What are comps all about? How did your folks acquire the home where you grew up?
Oh wait, I get it…we’re now re-entering the realm of “Quantum Finance”…
Comment by 45north
2007-01-10 18:41:21
http://www.marketoracle.co.uk/Article204.html
Quantum Finance - as complex as theoretical physics,…
new mantra - everyone’s more screwed than us
said other towns in the area are seeing much greater drops in the number of single family homes sold. He cited MLS numbers that show towns such as Marlboro saw a decrease in sales of more than 55 percent and Stow saw a decrease of more than 33 percent.”
So this guy can’t sell his house after two years and three agents, and it’s the buyers who are getting the reality check? How does that work?
LOL.
Lenny, $273.00/sqft? you’re in the wrong O.C.!
Good reading re this Mexican standoff we have going
http://www.itulip.com/forums/showthread.php?t=813
I found his 15 yr reversion to the mean interesting.The way things are unfolding with foreclosures has many of his A-G steps taking place at once which should be fascinating to watch.
http://www.itulip.com/forums/showthread.php?t=813
The current instance of a veritable collapse in housing permits issuance is without precedent; … it’s surprising that mainstream economists haven’t arrived at a consensus forecast for recession more in line with Case’s and Wheaton’s position.
“Surprising” that “MSM economists” (translation: industry cheerleaders) aren’t more forthcoming with what they know to be true? Hmmm…
“It is difficult to get a man to understand something when his salary depends upon his NOT understanding it.”
–Upton Sinclair
“DiVeglio, who’s lowered the price on the home from $225,000 to $205,500 in about five steps, closes with what’s become another mantra for the new market. ‘I know it’ll sell,’ she said. ‘It’s going to take time.’”
By the looks of things on my way through Middletown, NY (Orange County) this morning, I have to agree…… It’s gonna take some time for Lenny and Gladys to get their fantasy price….. like another 10 years.
Cant quite wrap my tiny little brain around that one. They reduce the price 20,000 over two years. That just doesnt have any ring of motivation. Carrying cost over 2 years must be 20k at least plus 20k reduction. Sounds like they should have started at 185 and they might have sold rather quickly.
Carrying costs for holding the property NEVER factor into menatal accounting for these people. If they had sold 2 years before for the 185K, they would have mentally “booked” that as an even larger loss, rather than seeing it (correctly) as an equal loss.
Actually, with inflation, they would have made out BETTER selling for 185k in 2005 dollars. Inflation is yet another thing that never factors into FB’s mental accounting.
“The good news is that Warren Group statistics show in Sudbury, the drop in sales wasn’t as pronounced as in other towns.”
Of course. Sudbury is special. Everybody wants to live in Sudbury and they aren’t making any more land in Sudbury.
Look , the main stream media is not exposing the reason for the run-up in prices in most cities . The reason why it’s a National housing bubble is because the sub-prime lending was Nationwide .
In past lending cycles there was always “hard money ” lending to the high risk sector ,but never at low down ,stated liar loans ,any appraisal goes conditions .
These high risk loans were sold to the secondary market as if they were low risk loans .I think they would scatter these junk notes with the A and B paper notes in alot of cases at first .
If they were going to be making these “f” paper loans they should of been putting some kind of insurance on them or rating them accordingly to the risk .To put pension plans into these pools of junk loans ,when they were based on real estate going up, is where I think the media exposure is needed . Why hasn’t anyone questioned why these loans got funded and by who ?
You just can’t tell me that the secondary market investors were aware of the risk because the additional yield was just not high enough for the real risk .
I saw yesterday a FHA 30 year fixed offered to subprime borrowers at 8%, no prepayment penalties, 97.5 LTV with further downpayment “assistance” of 3% to bring it to 100%.
And you can be unemployed too.
A a lot of new openings today for Irak if you are unemployed.
excuse me …whom not who.
There is nothing but avoidance in the media as to the real problem with the market .
Of course affordability would eventaully cap the market ,but look at what the REIC did as a response going into 2006 . Fraud kickbacks and incentives became the new game along with a attempt to control inventory .2006 should of been a cash and burn year and instead it turned into the year of denial and fraud .
Tx chick 57…If they make sure the person is qualified on that loan and they put PMI insurance on that loan and they rate the risk accordingly ,than I don’t have a problem with it .But here again they want to offer a low down loan to sub-prime ,foreclosure-bound junk borrowers ,that will end up costing some funder at least 50k to foreclose on . 8% is not enough to offset the risk on a party that doesn’t qualify . The only factor that can offset that kind of risk is either insurance or 30% downpayment to cover the foreclosure .
As a tangent, I was going over my 401k holdings a couple of weeks ago. Federated Government Bond Fund… you’d think that was gov bonds, right? Read the prospectus. 100% MBS holdings. Not an actual bond to be seen. (I unloaded if course.)
I suspect that many bond funds have lots of various falvors MBSs in them. I too, beat feet when I realized how much of the bond fund available through my 401 was MBSs.
I have a Fidelity bond fund (FMPXX) that once had a good chunk of Fannie Paper but began dumping it in fall 2004 and is now almost rid of it. I wrote to the fund manager to thank him, since he’s probably gotten some heat for not supporting that communist cesspool of insider perfidy.
I also asked the 401k administrators to let us invest in Fidelity’s Treasury-only fund, since it gets almost as high a yield as FMPXX. I was yawned off, of course.
“You just can’t tell me that the secondary market investors were aware of the risk because the additional yield was just not high enough for the real risk .”
There was no risk, as long as house prices kept going up. No matter what rediculous loan terms they borrower had, if they got in trouble, they would just sell the house at an even higher price and pay off the mortgage. Add to the fact that there is/was so much money (credit) sloshing around, everybody and their brother was throwing money at any investment they could find, hoping for a somewhat decent return. WIth so much competition to loan money out, the risk premiums fell.
Well, things are changing. In sub-prime, there is now a real risk that you’ll lose some of your principal (never mind the interest). That IN THEORY should raise the risk premiums and contract the amount of money/credit being thrown at sub-prime.
But that’s just theory, we’ll have to wait and see what really happens.
But the risk should have been rated in accordance with a long term loan and should of had no bearing on “real estate happens to be going up this year .” I just questions the merits or the fraud in rating a long term loan in terms of ,”real estate always goes up ‘,so you have a safe secure low risk MBS . BS ….The risk should be rated pursuant the risk of default on a sub-prime low down borrower .
For example , are stock values rated on ,”stocks always go up ‘?
>For example , are stock values rated on ,”stocks always go up ‘?
Yes, at certain times:
http://en.wikipedia.org/wiki/Stock_market_bubble
The only kind of ‘rating’ that REALLY matters is in the investor’s mind.
>The risk should be rated pursuant the risk of default on a
>sub-prime low down borrower
Yes it SHOULD. But that doesn’t mean that it IS. Manias (like a credit bubble) have ways of making people act in ways that many would consider irrational, in pursuit of percieved easy profit. Think of this rationalization:
“Housing prices will either keep shooting up as they have, or at the worst , plateau. Since the loan is secured by an ever-increasing asset, or one that at the very least holds its value, there IS NO RISK.”
Or this one:
“People on average refinance or sell every seven years or so anyways, so as long as housing prices are going up in the near term, my investment should be OK”
or even this one:
“I will find some greater fool to unload this POS loan onto, then I can originate and service even more loans”
I agree with everything that you say. I’m sure these notes have not been rated according to true risks and they are junk bonds so they should be treated accordingly rather than considered secure investments for pensions plans etc.
“Stephan said this ‘may not be the right time to sell and they might be able to defer two years to maximize their profit.’”
This got me thinking… I realized that whenever I talk to one of my several friends who either are looking to buy or sell a house right now, or recently bought a house, all I hear from them is about how the downturn is “supposed to be” brief and that the market will go back up in X months or 1-2 years, etc. I wonder how it’s possible that so many people are misinformed. Does everyone get their information from realtors, and if so, do they not all realize that it’s always in the realtors best interest to paint a rosie picture?
“I wonder how it’s possible that so many people are misinformed. Does everyone get their information from realtors”
Yes.
“and if so, do they not all realize that it’s always in the realtors best interest to paint a rosie picture?”
No, for the most part, this never dawns on them. I am not kidding about this.
Oh, don’t you know that the NAR/realtors 40 million dollar ad campaign of “It’s a Good Time To Buy.” is considered main stream news facts . Ads and myths are considers breaking news facts . Realtor cheerleaders are considered ‘experts ‘ worthy of headline news articles quoting their BS.
Why doesn’t the mainstream media just start quoting car salemans to get the news on the car business . I would imagine the car salesman would say that ,”Now is a good time to buy a car and the prices will not go lower .”
“Why doesn’t the mainstream media just start quoting car salemans to get the news on the car business”
Exactly, HW. Those of you who are in the media, please remember this the next time you want to quote a Realtor. The Realtor’s comments should carry *exactly* the same weight as any other commission based salesperson.
“It’s a Good Time To Buy.”
Actually, wasn’t that headline ““It’s a Good Time To Buy or sell.”? Even worse.
That’s the way Adolf Hitler took power. Don’t overestimate the intelligence of crowds. In groups, people are as intelligent as insects or bacteria. Hell! Insects as a group, are more intelligent than humans.
‘I know it’ll sell,’ she said. ‘It’s going to take time.’”
Jumping ship from an imploding bubble is like that first jump in the Matrix. Virtually nobody makes it the first time. Mine was in 2003 when I made 600% on a pump-and-dump China stock and even sold the exact top. Gave it all back fighting the downtrend.
Stow and Sudbury are very nice towns that don’t have a lot of businesses to pay property taxes. Marlboro is more industrial. I guess the article is for locals who already know that as you normally wouldn’t compare Marlboro
with Sudbury and Stow. These areas did prosper greatly from Digital Equipment Corporation (no longer around except as part of HP). There’s
a lot of money in Sudbury and Stow so you’d think that these folks could
hold out or drop their prices if they had to.