Still A “Tremendous Amount” Of Price Adjustment
The Telegram reports from Massachusetts. “The market for single-family homes and condominiums is in the midst of a correction that has seen sliding sales and prices. ‘Realtors are not hungry, they’re starving,’ said Vaios Theodorakos, who owns about 400 rental units around Worcester County. ‘The phones aren’t ringing. I see listings getting pulled. You’re not seeing people on waiting lists anymore.’”
“Sandra Katz, president of the Worcester Property Owners Association, said she has seen good units remain vacant for three months or more, like those in a house on Bourne Street in the Greendale section, advertised at $800. The owner eventually rented them at $700 and $650 after three months, she said. ‘The notion that Worcester has turned the corner is mistaken,’ she said.”
“Mr. Theodorakos said that during the housing boom before the start of 2006, many renters purchased properties. Some, he suspects, had insufficient finances who used subprime loans that have low interest rates in the initial years.”
“‘We had some tenant flight to ownership with the A properties,’ he said. ‘There’s too much product out there in C. There are a lot of people bleeding. During the housing boom it became fashionable to own property. We’re getting novice people becoming landlords because they think it’s easy.’”
“‘Worcester is overbuilding,’ he said. ‘There is a glut of apartments going up. Old warehouses are being renovated to condos and apartments. But those people who would rent them are not here any more.’”
The Times Herald Record from New York. “Foxtons’ withdrawal from the mid-Hudson comes at the outset of what many observers see as a year of retrenchment in the local real-estate industry. The Orange County Association of Realtors, for instance, has budgeted for a net loss of members in 2007. CEO Ann Garti can’t recall the last time that happened.”
“And ripples are rolling through related industries, from lenders to building-supply companies and contractors. Country Siding and Windows in Goshen was on the way to its best year ever in 2006. Then the bottom fell out. The company went into the year expecting 20 percent to 30 percent growth and ended up watching sales drop 4 percent to 5 percent.”
“‘To go negative 5, it’s kind of a bummer,’ said General Manager Steven Pawlowski. ‘I really don’t see anything right now that indicates this year will be anything different.’”
“He said more and more customers are looking to the company for financing, perhaps a reflection of the less-favorable interest rates available on home-equity loans these days.”
“About a year ago, second-generation builder Angelo Ferrante co-founded Hudson Valley Remodelers in Goshen. ‘We kind of saw the writing on the wall,’ said Ferrante. ‘We’d been through a couple cycles, and we knew what was coming.’ The new construction market, Ferrante said, looks ’scary.’”
“Still, he hopes to build 10 or 15 houses this year, about half a normal year’s output. He also hopes to finally unload a home he built in Sullivan County in 2005. ‘I can’t give it away at what it cost me,’ he said.”
Newsday from New York. “This is a year when home buyers should continue to enjoy an advantage over sellers. There’s still a year’s worth of homes on the market right now. As a result, expect this year to be a slow one for residential real estate. Inventory is expected to stay high, since many buyers remain on the sidelines, and some home sellers still aren’t pricing their homes low enough, experts say.”
“‘We want to see the sales increase,’ said Joseph Mottola, the CEO of the Long Island Board of Realtors. ‘I am not concerned about the pricing, but when the sales increase it’s better for the economy. Higher sales volume is good for the economy and for Long Island.’”
“Residential housing inventory has risen to 13,313 homes in Suffolk from 9,847 a year ago. In Nassau the number of houses on the market jumped to 9,457 from 6,786. The Island’s economy generated an anemic 1,500 new jobs in the 12 months ending in November, as opposed to 11,000 only three years earlier. The local economy is not expected to generate many more jobs in 2007.”
“The sales of luxury and ultraluxury markets on Long Island, those above $1.5 million, have increased, though in some cases the prices are lower, according to Emmett Laffey, the CEO of Century 21 Laffey Associates in Greenvale.”
“Laffey said it’s still up to sellers to price their homes right, and some are still looking for a price that’s simply too high. There’s still a ‘tremendous amount’ of price adjustments in the market, as sellers find they can’t get the first price they ask for and have to lower it a few times to find the right one. Indeed, only one of every three homes is selling in its current six-month listing period, Laffey added.”
‘The median price of a single-family home in Massachusetts was $364,000 late last year, down 13.5 percent from the June 2005 peak price. Meanwhile, only 4,130 homes were sold in November, the market’s worst November performance in 14 years, according to The Warren Group, a market tracker. Bitner said the housing contraction, in recent months, has been partly caused by potential buyers holding out for lower prices.’
‘The weak housing market put the brakes on the state’s economic growth in November. Alan Clayton-Matthews, the UMass-Boston professor who does the analysis, said slumping home sales and prices are mostly to blame for the slowdown, hurting employment in related sectors, such as construction, as well as consumer spending, which has been supported in recent years by rising home values and equity.’
‘Massachusetts could lose up to 40 percent of their young workers who have Bachelor’s degrees by 2020, according to a study by the Nellie Mae Foundation. Massachusetts has lost 20 percent of its young adults over the past 14 years, tying with Rhode Island. Vermont and New Hampshire lost even more with 27 percent, followed by Maine at 29 percent and Connecticut has lost the highest percentage of young adults at 30 percent. The high cost of housing and an unstable job market have chased the youngsters away, said Schneider.’
Ahh, the brain drain effect. I am sure that many bubble areas are going to see this exact pattern repeated over and over. Frankly, with my job, I can work anywhere, as can many people who are educated/college grads. I can move across the country and have a good job in less then a month.
Middle/Upper middle class people are very mobile. Poor people can’t/won’t leave, and the rich don’t care. It’s the working class, making betwee 40-300K/yr that are going to be the one’s high tailing it out of bubble areas. As well as all recent college grads as the cost of living is just nuts for someone with a freshly minted college degree.
As if FL needs any more brain drain!
We’re seeing this here in Austin where people are moving in droves from California. There is no way a young couple can buy a house in many parts of CA. Even if they could afford the monthly payment where are they going to get 40K to 50K in down payment? Here, $8K gets you a nice starter home on a FHA mortgage. I think the housing bubble effects that economists speak about on tv will last for generations not a few years. Just like the Irish fleeing the potato famine.
From New Jersey:
‘It’s not easy being a real estate agent anymore. In the heady days of the market in 2004 and 2005, houses were selling like hot cakes as prices rocketed up. That’s no longer the case. As home prices showed signs of peaking last year, buyers sensed a change in the market and no longer were willing to pay the asking prices on many properties. At first, homeowners were reluctant to drop their prices. The result? Real estate sales stalled in 2006.’
‘I can’t afford to have non-productive agents in my offices,’ Kotzas said. ‘When you get a qualified buyer, I can’t afford to have somebody that is not going to be able to work with buyers, that is not going to be able to convert buyer leads.’
‘When you get a qualified buyer, I can’t afford to have somebody that is not going to be able to work with buyers, that is not going to be able to convert buyer leads.’
In other words, “if you can’t lie and pressure people until they crack, I don’t want anything to do with you.” What a nice industry.
‘I can’t afford to have non-productive agents in my offices,’ Kotzas said. ‘When you get a qualified buyer, I can’t afford to have somebody that is not going to be able to work with buyers, that is not going to be able to convert buyer leads.’
Wtf does this mean????
Translation- Get that QUALIFIED buyer to the table at all costs. Sure seems like they are looking out for the buyers interests here.
My dad sold cars at a new car dealership back in the 80’s while trying to make ends meet after a divorce. One of the things that used to piss him off is the people that walked on to the lot wanting to negotiate on a vehicle (test drive, pick out options etc) that clearly did not look the part of being able to afford the car. His company required that he jump thru the hoops with the whole 2 hour sales process prior to seeing if they could get approved for the financing(just about every dealership still operates this way). Sure enough they could only be approved for a fraction of the price of the vehicle they wanted if at all. Then the whole process starts over, “Now lets go pick out a car you can actually afford.”
Don’t know why i brought this up maybe one of you guys can tell me what my point is.
“Now lets go pick out a car you can actually afford.”
If realtors would have had this philosphy a big part of this mess could have been avoided. Dare I say Kudos to Car Salesman. I cant beleive it, realtors are now offficialy lower on the sales food chain than car salesman
i think you’re comparing RE agents to used cars salesmen. right on point. i think the used car salesmen are more honorable and ethical these days.
I’ve got a novel solution. Require everyone to tatoo their fico score on their forehead.
I looked into becoming and F and I guy for a dealership a couple years ago. What i discovered is that they dont even want the car salesman to understand how a simple financial calulator works. That’s why the salesman is always talking about the “payment” you can afford vs the price. If a salesman did know how to use the calculator, he could figure out in 2 seconds the price range of the cars the buyer should be looking at. They deliberatly keep finanacing as some big mysterious OZ in the backroom. I understand the philosphy though. They want the buyer to get ants in their pants about driving home that brand new car. Once they have it, they are determined to come home with something, even if its not the car they wanted.
Looks like it time to cull the realtor herd!
Anyone interested in a pre-leased BMW with a matching titanium starbucks coffee travel mug.
“coffee is for CLOSERS!”
Its a darn good thing that all of the young yups moving away are being replaced by illegal immigrants. Otherwise there would be absolutely no market for all of these mcmansions.
Yes, and equally important that these immigrants can get approved by the Nazi HOAs we have in S. FL, as well as afford 500K homes with 20-30K carrying costs (without the morgage costs).
The young yups (of which I am certainly one) are being priced out by these damn illegal immigrants and their liar loans. I don’t know how much money landscapers make, but apparently more then network/storage engineers.
Mike: My brother had a landscaper in houston that brought over all his extended family to work in the business. He paid around $80 a month for them to come in twice, mow the lawn, clean the front of th ehouse, and do some light duty maintenance work. He had close to 200 accounts in that sub, and had 3 different subs. All in all he calculates that he was taking home over 8 to 9K a month free and clear. He paid all his workers less than minimun wage, no fica, no taxes, no SS, no nothing. If one of them quit, he had 3 or 4 more waiting to fill in his position. I can see how a landscaper makes more than any network/storage engineer by exploiting the compadres from the mother land!!!
“Laffey said he expects sales volume across the Island to pick up this year, potentially matching 2005 levels. But, he noted, it’s still up to sellers to price their homes right, and some are still looking for a price that’s simply too high. There’s still a “tremendous amount” of price adjustments in the market, as sellers find they can’t get the first price they ask for and have to lower it a few times to find the right one. Indeed, only one of every three homes is selling in its current six-month listing period, Laffey added”.
My sense is that price declines are only starting on Long Island. I see only modest declines in top rated communities close to Manhattan such at Pt. Washington and Great Neck. While these may drop by only 5%, it is quite likely that this will be followed by five years of flatness - until the next surge.
On the other hand, areas riddled with lots of second homes (Read: INVESTORS) will see declines at the other end of the spectrum. I wouldn’t be surprised to see 25%-30% nominal price deterioration out on the east end.
“While these may drop by only 5%, it is quite likely that this will be followed by five years of flatness - until the next surge.”
Ah, yes, the Long Island is so great that it will barely go down after 100% increases argument that I hear all the time. California, Florida, Vegas, Phoenix, New Jersey, etc. etc will all fall but Long Island will only give back 5%. Keep dreaming!
The “permanently high plateau” prediction rears its head once again…
I don’t think any area will be spared. If houses in some areas of LI decline 30% it will bring down the prices in other areas. Yes homes vary in price depending on location. But i can’t see hosue in one affluent neighborhood being 40% above another.
It’s called the rich get richer. Affluent areas are not spared, but since everyone wants to get in, they weather downturns far better than less desirable areas.
Pure myth. High end is already getting clobbered in Jersey and other local areas. Long Island will be no different. The haircut, in percentage terms, will probably be higher in percentage terms this time. The high-end was run up even more in this mania than the low-end because people had the mentality of “the more debt I take on the more money I will make”. That backwards logic will crush those areas that “everyone wants to get in”.
I’m not sure if you’ve ever lived in one of these very desirable areas but if I had to guess, I’d suspect not. Being 20 minutes or so from Manhattan, but just minutes from your own private beach and being able to send your children to some of the top schools in the nation, where they will rub shoulders with other highly intelligent kids (thank you genetics) is very, very important. The type of people who can afford these areas tend to have the means to withstand weak real estate markets and recessions. And those who make great school systems their key criterion tend to be more savvy than those with the same incomes who may not put quite as high an emphasis on education. This greater savvy means they are far less likely to extend themselves. Have you ever been to places like Port Washington, Great Neck or the “Five Towns”. I assure you, houses will not be dumped en masse at fire sale prices.
who wants to hang out with a bunch of snobby jewish kids?
If these homes are so treasured there must never be a sale. If there are no sales then these homes have no value in the first place. You can say they are worth anything you would like. Then your 5% comment becomes even harder to verify.
Billy, sorry, you just don’t understand economics. The prices are set by the marginal buyers. The people who are willing to “pay any price” are not the marginal buyers. I assure you, when the marginal buyers disapear and only the very rich are left, there is no reason why prices will not return to whatever the historically normal price level is.
I don’t mean to rag on you Billy. I really don’t. I just get sick of this “Long Island is different.” “New Jersey is different.” “Williamsburg is different.” Blah blah blah.
Let us see what all of these areas, including the high-end areas have happen, if the financial markets are ever forced to go back to normalcy. I am talking the event that causes the real estate/ bond/ stock meltdown that is long overdue. The fundamentals of economics have been terribly violated the past 20 years. We will see how all of these “wealthy” people fair when she (economics) regains her virtue.
“The prices are set by the marginal buyers”.
Correct. But that does not mean those prices will be high or low.
We never get hit by more than 10% in northern Westchester for the same reason - desirability. We’ve seen people move out of Westchester to less expensive areas of the country and try to buy back in. It’s sad to see people who once lived in a 3,500 sq ft center hall colonial move back into a small cape, particularly when their salaries are likely higher than when they left. But they’d rather do this than buy a bigger house in a mediocre school system.
I don’t think people in places like California understand how good our NY suburban schools are — in the top districts. Where Californians may have to pay top dollar for private schools because illegal immigration and Prop 13 has destroyed your public schools, we pay very high taxes but our public schools beat most private fancylad institutions. In fact they have more fancylads.
I don’t know about the rest of you, but I’d be scared to death to move anywhere that produced lots of… fancylads. Sounds horrid.
Certainly the typical graduate of a NY State public school is more knowledgeable than the typical graduate of a Calif public school, IMO. I’m not convinced that illegal immigration and Prop 13 are the only causes or even the major causes. I’ve known a number of public school teachers in Calif, and they themselves were tremendously ignorant compared to typical northeastern counterparts. Nothing you could measure by degrees, just an apparent lack of awareness of anything outside of their teaching specialty or above the level of the grade they were teaching. Okay, throw tomatoes…
“I don’t know about the rest of you, but I’d be scared to death to move anywhere that produced lots of… fancylads. Sounds horrid.”
Lionel -
Definition of FANCY LAD from http://www.urbandictionary.com/define.php?term=Fancy+Lad:
An unimpressive rich person OR someone who behaves like one. Usually meets any of the following criteria:
a. they buy and own expensive things they dont really appreciate, simply because thats what other rich people buy (i.e. Ferraris, Harleys, pad in Bali)
b. they are useless to the rest of us.
c. we envy them
American adventurers preparing to raft a river in a foreign country. They are decked out with $10000 worth of titanium paddles, bright little suits, and gear from REI:
“these rapids are super class 9 alpha! maybe you should ride in our certified raft?”
Guide floating away in 20 year old canoe, smoking a cig:
“…fancy lads…”
“They drop last because wealthier people have more money in the bank and better jobs that help them hang on to their property longer. And they recover first because when buyers come out of the woodwork they are going to try and get into the most desirable areas”
Thank you. That is exactly why great areas stay great areas and stay expensive. If you bought in an area just a notch below, you may be kicking yourself as your worth slides and the topnotch area basically just stays flat. Pay the extra to get into the top areas if you can. You won’t regret it. Write it down and thank me one day.
Billy’s right- the best parts of the NY area remain pretty firm and I expect they will reman so. Manhattan has been parked at roughly $1000 per sq ft for a while now and people are still buying. You know why? They can afford it. Go to Manahasset, Rye or Bronxville and you’ll find that a lot of people make over a million bucks a year. And some make a lot more than that. Oh, and I haven’t even gotten to the trust fund crowd yet.
I’m not saying that NY can’t or won’t correct, but it’s hard to see how it implodes like an AZ, FL, NoVA or some sketchy CA area will.
How good were the schools five years ago in the very expensive areas? Have they gotten as much better as the house prices have gone up? If not, that isn’t the reason the prices have gone up so much. Therefore, the prices can go right back down to where they were five years ago without any changes to the schools.
To be sure, this won’t be a problem to those who bought 10 years ago, unless they have refinanced into a much bigger loan. But what about those who bought at the top?
Yes, if they were all ultra-wealthy it wouldn’t matter. But a lot of them aren’t. They’re Wall Street “geniuses” who will be out on the street themselves when the tsunami of mortgage defaults hits. They have no reserves and no way to make $500,000/year when that happens.
the number of wall street people tied to the MBS industry is rather small…maybe 10% of the overall workforce.
Billy, speaking from experience, if what you mean is their prices drop last and recover first, I guess you are right. They drop last because wealthier people have more money in the bank and better jobs that help them hang on to their property longer. And they recover first because when buyers come out of the woodwork they are going to try and get into the most desirable areas, that’s natural. But that doesn’t mean they are not going to take a hit.
“They drop last because wealthier people have more money in the bank and better jobs that help them hang on to their property longer. And they recover first because when buyers come out of the woodwork they are going to try and get into the most desirable areas, that’s natural”.
Yup. The hit comes, but it’s smaller and since relatively few people sell, it is not relevant. If a tree falls in the forest but nobody is there to hear it, does it really matter?
Billy, Pls read, “The Millionaire Next Door”. The people that you percieve to be rich are most likely not. In fact, its just the opposite.
I take plenty of loan application from people that make 250k+/year. The majority are up to debt to their eyeballs like the commercial says. They should have maxed 401k, iras, savings, stocks etc….but, yet they have none of these and often have over 100k in cc debt. Just becasue you are in the top % of earners doesnt make you the top % of wealth. Though i think if you have 10k in the bank that probably puts you in the top 25% of wealth in this country.
There are many people buying in ‘affluent’ areas who are literally getting multi-million dollar mortgages - because they believe that they’ll make much more in appreciation than they’ll spend on interest payments.
It ain’t different there.
Pure myth.
No, pure wishful thinking on the part of whomever thinks the most desirable school districts ever come down much more than that. If you are waiting for prices to drop in order to get into the very top areas, I’d say it’s time to retool your plan with some reality.
If you are waiting to get into a regular area, you will probably have some luck. Nobody knows how much prices will drop, but whatever they drop, it’ll be more than in the truly top places.
I have a 4 bedroom purchased in 2001 mostly for equity appreciation since my wife and I alone don’t need the extra room over a smaller 3 BR house we also looked at. We were careful to buy in the “good school district” area so we could attract “move up” buyers to our 4 BR house.
Of course, if our moveup buyers can’t find a first time buyer to sell to, our strategy may not work… Hopefully there will still be some GF left who will buy a house without selling the old one!
‘Realtors are not hungry, they’re starving,’ said Vaios Theodorakos, who owns about 400 rental units around Worcester County. ‘The phones aren’t ringing. I see listings getting pulled. You’re not seeing people on waiting lists anymore.’
Malthusian reversion seems to be running its course in the Realtor pool.
From the Telegram article:
‘Ms. Carter looked at apartments in Worcester, Holden and Grafton. ‘Some Realtors are not even looking at the properties they were listing. That bothered me, that they didn’t know what they were listing,’ she said. Ms. Carter was also surprised at the lack of cooperation among Realtors in her search for an apartment. ‘They didn’t work together, and a lot didn’t have any good things to say about each other,’ she said.’
Most realtors act like junior high girls beating up one another in the hall bathroom cause they stole each other’s boyfriends.
Mean Girls
http://www.apple.com/trailers/paramount/mean_girls/
I did a closing once where the realtors started screaming at each other in the middle of the closing. I thought they were going to tear each others’ hair out.
i only wish they had! too bad they did not solve their differences with dueling pistols!
“I did a closing once where the realtors started screaming at each other in the middle of the closing. I thought they were going to tear each others’ hair out.”
Brings to mind a classic movie (must see if you want to find out what the Realtor profession has to look forward to over the next five years):
http://www.imdb.com/title/tt0104348/
It is noteworthy that this movie was released in 1992 — smack dab in the middle of the last real estate bust!
GS, I remember thinking it was an outstanding movie when I saw it years ago. Interestingly enough, in LA we are going to be able to see the play soon. I want to go…
What were they screaming about, pls share…
Too much back story to go into detail. But, it was a high-end residential closing on Chicago’s Gold Coast, and there were many over-inflated egos involved, including the realtors with their helmet hair and Chanel suits.
Ha ha we Gold Coasters can be like that. Well, not those of us who are still renting 1BRs for under $1000/mo, but most of the rest.
I’ve looked at several of those “C” apartments in Worcester, MA. Most of the “C” buildings in Worcester (pronounced “WIR-stir”) could use a bulldozer. Only a small percentage of them are decent. The City of Worcester and all those slumlords should be ashamed for letting those buildings be neglected so severely. Health code inspectors could start with the more hideous batch of “triple-deckers”. They would know exactly which neighborhoods I’m talking about.
Also, when all the new real estate “investors”/landlords moved into Worcester back between 2000 and 2004, there were a lot of reliable, full-time working tenants living in those “C” apartments who were paying between $450 and $500 per month for one-bedroom apartments; between $550 and $600 per month for two-bedroom apartments; and between $650 and $700 per month for three-bedroom apartments. As soon as the new landlords bought those “C” apartment buildings, they immediately doubled those rents — never giving a thought to what their tenants’ hourly wages were. That’s because those “investors” were counting on nasty rental subsidies to pay for them. I’m not a Republican, nor am I a Democrat, but I’m thankful to the Republican Party for cutting back a lot of the rental subsidy dole. Rental subsidies artificially inflated rents in Massachusetts and other “blue states” — ultimately hurting working renters who didn’t want to be relegated to subsidies. Also, a lot of Massachusetts landlords quit their “day jobs” and started to live entirely off of the rental subsidy money — without making any improvements to their properties. As far as many of us are concerned, those landlords are “welfare queens”.
Had Russ Whitney, Carleton Sheets, Robert Kiyosaki, et al informed those “investors”/landlords that the first step before buying rental properties should be to research their “market” (i.e. their good-quality “C” tenant base), they would have found out that the majority of those excellent tenants (who previously had always taken good care of the properties and had always paid their rents on time) were making full-time salaries of less than $25,000 per year.
Someone needed to literally do the math. If a renter’s after-tax income from a full-time job is only $1200 to $1300 per month, how is he/she supposed to be able to afford $850 to $950 per month for rent alone?????
“Fair market rent” needs to be re-calculated based on the FULL-TIME SALARIES tenants in a particular neighborhood are earning, and NOT the artificially inflated rents that a small group of corporate landlords in a city decide to extort from tenants.
Gee I wonder why everyone left Worcester?
“He said more and more customers are looking to the company for financing, perhaps a reflection of the less-favorable interest rates available on home-equity loans these days.”
Wimpy: I’ll gladly pay you Tuesday for new siding today.
“This is a year when home buyers should continue to enjoy an advantage over sellers. There’s still a year’s worth of homes on the market right now. As a result, expect this year to be a slow one for residential real estate. Inventory is expected to stay high, since many buyers remain on the sidelines, and some home sellers still aren’t pricing their homes low enough, experts say.”
This is a year when renters should continue to enjoy an advantage over home buyers. Until subprime subsidance fully plays out and prices adjust to reflect this, there is no predicting how low the bottom is. Anyone who buys now is going to try and catch themselves a falling knife.
subsid
aence“‘We want to see the sales increase,’ said Joseph Mottola, the CEO of the Long Island Board of Realtors. ‘I am not concerned about the pricing, but when the sales increase it’s better for the economy. Higher sales volume is good for the economy and for Long Island.’”
If you are not concerned about the pricing, then you better start motivating sellers to reduce their wishing prices to a level the market will bear. Of course, it is easy for Realtors to say they are unconcerned about pricing, as their commission is reduced by a miniscule fraction of the seller’s percentage loss in home equity profit, thanks to the deleterious effect of reverse leverage.
For a simple example, I provide a San Diego real estate fable. Suppose that in summer 2005 a certain model of condo was selling for $650K, but now, sadly, the market value has fallen by 25%, to $487.5K. Now assume the seller bought at the peak with a 20% downpayment (= $130K), and has subsequently made interest-only loan payments in full, so he still owes the bank $650K-$130K = $520K. The optimistic seller is trying find a GF willing to pay $600K, which would provide for the $80K he needs to provide a 10% downpayment on his move-up McMansion in the ranchos, which has a price tag of $800K. Unfortunately, the seller has had no luck finding a GF for six months running. If the Realtor succeeded in getting the seller to drop his wishing price down to a more realistic (but still overpriced) level of $520K, the seller’s home equity loss would be 100%, while the Realtor’s commission would fall by only $80K/$600K X 100% = 13%.
Moral of the story: Leverage can hurt on the way down even more than it helps on the way up.
Live by the sword, die by the sword.
Joseph Mottola, the CEO of the Long Island Board of Realtors. ‘I am not concerned about the pricing, but when the sales increase it’s better for the economy. Higher sales volume is good for the economy and for Long Island.
How shocking that he only cares about SALES VOLUME. Think it might have anything to do with the coincidence that REALTOR ONLY GET A COMISSION WHEN THERE’S A SALE? And if realtors don’t get sales, they just may reconsider paying their dues. It’s a vicious cycle chasing the market down…
“REALTOR ONLY GET A COMISSION WHEN THERE’S A SALE?”
There is a whole range of people who make money off of someone buying or selling a home. Everyone from the Real Estate agent, to the appraisers, to the banks, to the local government getting taxes and fees. All of them pushing the idea of buying and selling and moving. The worst thing for all these people is a stable neighborhood where people pass their homes down to their children since without sales all these real estate people don’t make money. It is also why stable neighborhoods are fairly rare in the US since there is all sorts of interests and pressures to break them up.
Nothing make the Real Estate industry happier then a homeowner who moves every couple of years.
“Everyone from the Real Estate agent, to the appraisers, to the banks, to the local government getting taxes and fees.”
Don’t forget your local hometown paper, whose ad revenues rise and fall with the volume of real estate sales.
Yeah, and a percentage loss hurts you more on the way down than it helps you on the way up. Simple math, but no one seems to be doing it. There are going to be a lot of messed up and angry sellers around. Realtors beware.
“‘We want to see the sales increase,’
and i wanted the Ravens to win, maybe next time i have to want harder to get my desired outcome.
“‘We want to see the sales increase,’ said Joseph Mottola, the CEO of the Long Island Board of Realtors. ‘I am not concerned about the pricing, but when the sales increase it’s better for the economy. Higher sales volume is good for the economy and for Long Island.’” — and, most importantly, for ME! ;>
“There’s still a ‘tremendous amount’ of price adjustments in the market, as sellers find they can’t get the first price they ask for and have to lower it a few times to find the right one. Indeed, only one of every three homes is selling in its current six-month listing period, Laffey added.”
Tentative conclusion: The median time to sell exceeds six months, and the average is likely even higher. Since the time to sell is bounded below by zero, and some sellers set their wishing prices at levels destined to keep their homes on the market for years, the distribution of time to sell is skewed to the infinite end of the time scale, which pulls the average higher than the median.
“Tentative conclusion: The median time to sell exceeds six months, and the average is likely even higher. Since the time to sell is bounded below by zero, and some sellers set their wishing prices at levels destined to keep their homes on the market for years, the distribution of time to sell is skewed to the infinite end of the time scale, which pulls the average higher than the median.”
However, prices run on a scale of zero to boundless. A 100% increase will double the value. A 100% decrease would render you with no value. Thus % price gains in bull markets are invariably higher than % declines.
Read another way - a 30% drop over a few years is much more rare than a 75% increase over a couple years.
It will be interesting to see where bottom is.
Am I the only one that doesn’t understand the point of this post? I am questioning why this post is even out there after that earlier “Long Island might lose 5% post”.
I think its this. 100k increases 50% Now its 150K
At 150 it only needs to fall 33% to be back to 100k
People get used to hearing about big percentage gains for a number of years, such as 20%, 20%, 20%. Accustomed to such big numbers they see say a 20% drop and think, “well gee, two more years of 20% drops are likely because that’s how it went up. But their math is faulty.
If $100K goes up by 20% three years in a row, it becomes $173K.
If $173K, then falls back to $100K, it has only dropped 42%. If it were to actually drop by 20% over three years, the $173K would go to $89K.
Also, we are talking NOMINAL figures. If you adjusted for likely inflation, the $89K would be even lower.
If toney towns on Long Island go down by 5%, or perhaps more realistically 10% and then stay flat for three years during inflation of 3% a year, the drop in real prices is rather large. A $100K house becomes a $90K house with said drop. Then after three years of flat nominal prices and 3% annual inflation, that house has dropped about 20% in real dollars.
Yes, so the question becomes as a prospective buyer, do you purchase at the start of the plateau or at the end, not that one can ever determine exactly when these are.
My vote is to purchase at the end of the plateau and save/invest your money elsewhere.
However, people of means invariably tire of waiting, don’t want to put their lives on hold (particularly women pre-having babies) and become homeowners as soon as they can afford to.
My parents are planning on selling their house this year to move to a retirement community. My mom gave her realtor my phone # because the realtor said he could help me find a place (I did NOT ask for her or his help). He will not stop calling me/hounding me. I don’t even want to call him back because this is how the conversation will go:
Me, “Hi. While I appreciate your willingness to help me, I’m really not ready to buy because I believe prices will plummet for a while. I’ll keep you in mind when I’m ready.”
Him, “Prices are at an all-time low now - you better jump in before they start going back up!!!! You’d be a fool not to buy now!!!! Think about interest rates - if they go up you’ll never be able to afford what you can afford now!!!!”
Me, *click*
Problem is, he’s on old friend of my parents so I’m being rude by not calling him back. But I’m just not in the mood for the pressure tactics right now. And I’m tired of being told how crazy I am to believe prices will get any lower so I don’t want to have that conversation yet again.
Maybe I should sic txchick on him
Just him if he’s buying in this market. If it’s so terrific, he surely is buying.
Tell him that you don’t want to alarm you parents, but you are considering joining the Peace Corp/Foreign Legion etc..;-)
Hit the bastard with a brick.
Talk to him… hit him with everything you have on the housing bubble. By the time you’re done with him, he’ll never want to talk to you again.
And if that doesn’t work, hit him with a brick.
I love talking to realtors. After I am done with them they are very depressed.
ask him if he’s interested in learning about terrific opportunities in AMWAY…
Eastcoaster, just wait a while and be polite. In a few months, realtors will be much more realistic and accomodating. I was in a couple of open houses yesterday, and you could smell the fear.
Speaking of which, does anyone else get endless spam from ziprealty agents? It’s been a few weeks since I’ve used it, but I get E-mails from ziprealtors every couple of days.
I’ve never done anything more than search listings and look at individual properties. Thank God I used a fake name; they’d probably look me up if I had used a real one. Also, is there a way to make the pictures of the realtors™ go away? Most of them are ugly.
I had been hopeful they would give up after figuring out my name probably wasn’t Ernest Cash.
Just tell him you’re not ready to buy and leave it at that. You don’t have to tell him it’s because you actually know how to do math.
My mom gave her realtor my phone # because the realtor said he could help me find a place (I did NOT ask for her or his help). He will not stop calling me/hounding me.
What did you do to pi$$ off your mom?
Tell him you think he’s cute
Long Island is a lot like Mass. The population is aging, and parents are whinig their children are moving away because it is too expensive. But they aren’t about to cut the price of THEIR house to something their children can afford.
NYC’s latest population forecast includes an assumptions that families with children will relocate to Long Island in droves? When? The orignial settlers of the suburbs and their immediate successors will have to sell sooner or later, and the price will be affordable, thereby sucking the families out of NYC.
young families are leaving long isalnd in droves. it is very hard for a young family with childer or just one child to survive in li,
with the taxes and the cot of living so high.
i personally find li awful but is still very desirable to many
children - cost of living
And I would bet in the past 5 years it was desirable to many people that needed to take out negative amortization interest only liar loans. It’s no different than Westchester or any of these other “super desirable” areas where leverage is stretched to the limit. To see anybody write that a “good” neighborhood is only going to fall 5% makes me want to hurl.
“To see anybody write that a “good” neighborhood is only going to fall 5% makes me want to hurl”.
Grab the air sickness bag. The most those places typically fall are maybe high single digits. It doesn’t mean you won’t get the much bigger drop you are holding out for in the area you want to move to, assumming you want to purchase a house one day.
Rule # 1: The rich get richer.
Rule # 2: If you think they are not getting richer, reread Rule # 1
NYCBoy - one of the reasons people pay so much money to get into the stratospheric neighborhoods is they are buying insurance in case of wide-markets drops. The insurance is the best places always stay relatively unscathed. It’s like an exclusive country club. You pay a lot of dues to get in. This keeps out the riff raff. The club maintains its elite status.
Whether anybody on this blog wants to address it or not, one of the biggest catalysts for price declines is WHITE FLIGHT. Yes, it’s unfortunate that gets said on MLK Day. But it’s probably as true today as it was 30 years ago.
The neighborhoods that are impenetrable due to a high cost of entry maintain their residents and their prices. Those that are penetrable find that once seedy elements find their way through the cracks, the freeze-thaw cycle makes the cracks bigger. There go the neighbors, there goes the neighborhood, there goes the home values.
Even here in northern Westchester we have communities where the freeze-thaw cycle is “changing” the neighborhoods. Mt. Kisco is a great example. Of course the people living in Mt. Kisco’s mansion district (some of the richest people in all of America) are insulated from this. They have big compounds, long driveways, hemlock planted perimeters, private security and private schools.
But if you are not in the small Chappaqua school district within the Mt. Kisco postal district, you may not like the public schools much. And it’s not that they are bad. It’s the fear they could get worse. And they will.
Not so Chappaqua.
Cheers.
(Whether anybody on this blog wants to address it or not, one of the biggest catalysts for price declines is WHITE FLIGHT. Yes, it’s unfortunate that gets said on MLK Day. But it’s probably as true today as it was 30 years ago.)
It’s less true today in my view. But IMHO the south shore of Long Island is a place where you kind find the same sort of attitudes as 30 years ago, possibly with the same results. Especially in a real estate downturn.
That’s why Long Island really needs the East Side Access project (a direct connection to Grand Central). That will make the towns that grew up around train stations more attractive. But it won’t help the potato fields that got built over in the 1950s and 1960s.
He also hopes to finally unload a home he built in Sullivan County in 2005. ‘I can’t give it away at what it cost me,’ he said.”
Yep, I’m sure “unload” is the correct word. Good luck dumping your load!
‘Realtors are not hungry, they’re starving,’ said Vaios Theodorakos.
Expect to see Sally Strouthers peering mournfully into the camera, patting a bedraggled-looking Suzanne on her matted, sleeping-in-the-rough head and imploring, “Won’t you PLEASE buy an overpriced house this year, and help rescue Suzanne and millions of her NAR sisters and brothers from the horrors of facing the prospect of productive, meaningful work…. PLEASE help reunite her with her beloved Lexus…won’t you please sign a house contract today?”
roflow- it will be LIErah
For just pennies a day… you too can have an teaser ARM
“Sandra Katz, president of the Worcester Property Owners Association, said she has seen good units remain vacant for three months or more, like those in a house on Bourne Street in the Greendale section, advertised at $800. The owner eventually rented them at $700 and $650 after three months, she said. ‘The notion that Worcester has turned the corner is mistaken,’ she said.”
A rent of $650-700 supports a mortgage of no more than $100-120K.
This is presumably on a HOUSE, not a condo, in a decent part of Massachusetts.
Ouch.
passthebubbly,
No — Ms. Katz wasn’t referring to a HOUSE for rent, she was referring to a rental unit — an apartment IN a house on Bourne Street. Trust me, you can’t rent an entire house in Massachusetts for less than $2000 per month. Why anyone who can afford $2000 or more per month would be idiotic enough to pay a landlord’s mortgage instead of their own mortgage on a home in a more affordable state, is just baffling.
I live in one of these “desirable” LI locations. I rent a place that the owner is trying to sell, been sitting on the market for 6 months. Nothing is moving here, even with price drops. The commute may be good, but the weather, people, scenery, traffic….etc sure are not. Living by a beach you can use 3 months of the year is a real privilege. IMHO we have already blown through 5%, waiting for 30.
“IMHO we have already blown through 5%, waiting for 30.”
Newsday, in sundays edition, was printing a graph of median prices on Long Island, until about June. The last I saw it, there already was a 5% drop since January 2006. They mysteriuosly stopped printing the graph.
I personally see many houses that have been on the market for 6 months to a year. One I have interest in started last winter at $799,000. Dropped to 759,000, then 699,000 , then 659,000 a few months ago. It was removed from the market just before Christmas, it shoould be back on by next month.
And it will start again with a price of $799,000. The whole game is a joke.
The relisting game is prevelent on Long Island and skews the day on market statistics greatly.
“I live in one of these “desirable” LI locations. I rent a place that the owner is trying to sell, been sitting on the market for 6 months”.
The owner may be paying off the mortgage with your rent money if he bought awhile ago. He may not care if he doesn’t sell it anytime soon as he knows it’s not as favorable as it will be again one day. People with deep pockets can just keep waiting.
You might have a talk with your owner about your buying a house soon, because “real estate only goes up” and you want to buy when the “interest rates drop again” and you’ve heard that “prices will go up again in the spring”.
‘I can’t afford to have non-productive agents in my offices,’ Kotzas said. ‘When you get a qualified buyer, I can’t afford to have somebody that is not going to be able to work with buyers, that is not going to be able to convert buyer leads.’
——————————————————————————-
“COFFEE’S FOR CLOSERS!!! (from GlenGarryGlenRoss)
dammit you beat me to it!
oh well.
“My WATCH cost more than your CAR!”
Best sales movie ever!
Really , what does the REIC expect when for 3 years or more they had everyone convinced that real estate always goes up and anyone could get a low down loan and get in the action .
The cheerleader chants went unquestioned by the media and the RE industry has never been able to explain why they got such high sales figures for 3 or 4 years ,while the affordabily income index decreased yearly ,(those rich baby boomers are the ones buying,or we are having a population explosion etc. ).
During the run-up did the media ever question how people where able to afford these overpriced POS’s ? Maybe had there been more questioning about how people were able to finance these big RE purchases the house of cards would of been exposed early in the game . You can’t expect the sub-prime lenders and the wonderful RE agents to let the cat out of the bag . If anything ,you only had a few honest people calling the market what it really was .(Guys like Ben ).
I contend that the RE agents knew they were putting unqualifyed people /speculators into homes and they knew the sub-prime scum to go to . I contend that builders knew they were selling to investors and most likely targeted their marketing to such with their special connections with sub-prime lenders .
I contend that the prices should of capped out in 2002 ,(at the latest ), and even contracted and this scam regarding ” anarchy in lending “should not of continued into a full-blow mania . I remember during the mania years it was rare that I saw advertising that wasn’t real estate related . I guess that explains why RE agents were quoted in the press instead of real experts .
Now the public gets exposed to the new PR campaign by the NAR/Realtors that chants “Time2Buy” without a basis . Oh I forgot ,it’s time to buy because there are alot of houses to choose from and interest rate are low .
The media should challenge this ad campaign in a big way , but than where would that leave them regarding advertising bucks and they would have to expose that it was a false market .
You just don’t see articles in main stream media exposing the basis for the run up in real estate ,why there are so many forclosures ,why there are so many people /investors needing to sell who can’t even cash flow on the property .
I think if the public in general knew that the sub-prime scum along with unqualifyed buyers/speculators priced them out of the market they would realize that the RE market was based a gambling frenzy that must fall .
sorry ….unqualified not unqualifyed
Really , what does the REIC expect when for 3 years or more they had everyone convinced that real estate always goes up and anyone could get a low down loan and get in the action .
The cheerleader chants went unquestioned by the media and the RE industry has never been able to explain why they got such high sales figures for 3 or 4 years ,while the affordabily income index decreased yearly ,(those rich baby boomers are the ones buying,or we are having a population explosion etc. ).
During the run-up did the media ever question how people where able to afford these overpriced POS’s ? Maybe had there been more questioning about how people were able to finance these big RE purchases the house of cards would of been exposed early in the game . You can’t expect the sub-prime lenders and the wonderful RE agents to let the cat out of the bag . If anything ,you only had a few honest people calling the market what it really was .(Guys like Ben ).
I contend that the RE agents knew they were putting unqualifyed people /speculators into homes and they knew the sub-prime scum to go to . I contend that builders knew they were selling to investors and most likely targeted their marketing to such with their special connections with sub-prime lenders .
I contend that the prices should of capped out in 2002 ,(at the latest ), and even contracted and this scam regarding ” anarchy in lending “should not of continued into a full-blow mania . I remember during the mania years it was rare that I saw advertising that wasn’t real estate related . I guess that explains why RE agents were quoted in the press instead of real experts .
Now the public gets exposed to the new PR campaign by the NAR/Realtors that chants “Time2Buy” without a basis . Oh I forgot ,it’s time to buy because there are alot of houses to choose from and interest rate are low .
The media should challenge this ad campaign in a big way , but than where would that leave them regarding advertising bucks and they would have to expose that it was a false market .
You just don’t see articles in main stream media exposing the basis for the run up in real estate ,why there are so many forclosures /defaults ,why there are so many people /investors needing to sell who can’t even cash flow on the property .
I think if the public in general knew that the sub-prime scum along with unqualifyed buyers/speculators priced them out of the market they would realize that the RE market was based on a gambling frenzy, financed by sub-prime , that is due to fall big .
Sorry double posted Ben ,could you get rid of one of them ?
Don’t think that Manhattan and Westchester are immmune. When the subprime market blows it will damage the banks and wall st. meaning all of those year end bonuses and more importantly, jobs, jobs, jobs. Layoffs by the thousands. Lay that over the overbuilding of condos in the region, and mcmansions in the outlying areas, Fishkill north and Manorville east, and you will see all areas tanking.
Correct
it will be the housing slump’ effect on the market that damages Wall Street and brings down home prices in Manhattan and Westchester.
I really don’t think any area is immuned from this sub-prime fall-out because it became the loan of choice with borrowers for the last 3 years .
I have said it many times , had I known at the time I bought that a high % of demand in the market was based on speculators and sub-prime lending I would not of bought .
I contend that the general public is not aware of why the market climbed the way it did but the realtors were there to offer bogus answers of “we are running out of land” ,”real estate always goes up “, “the rich baby boomers are buying”, “you can always sell or refinance out of that loan you can’t afford “, “you can’t afford not to buy ,”don’t waste your money on rent” ,” real estate will fund your retirement or lifestyle” ,” get money at the close of escrow and own real estate today “,”buy now or be priced out forever “, etc etc. “.
I’ve looked at several of those “C” apartments in Worcester, MA that Vaios Theodorakos was referring to. Most of the “C” buildings in Worcester (pronounced “WIR-stir”) could use a bulldozer. Only a small percentage of them are decent. The City of Worcester and all those slumlords should be ashamed for letting those buildings be neglected so severely. Health code inspectors could start with the more hideous batch of “triple-deckers”. They would know exactly which neighborhoods I’m talking about.
Also, when all the new real estate “investors”/landlords moved into Worcester back between 2000 and 2004, there were a lot of reliable, full-time working tenants living in those “C” apartments who were paying between $450 and $500 per month for one-bedroom apartments; between $550 and $600 per month for two-bedroom apartments; and between $650 and $700 per month for three-bedroom apartments. As soon as the new landlords bought those “C” apartment buildings, they immediately doubled those rents — never giving a thought to what their tenants’ hourly wages were. That’s because those “investors” were counting on nasty rental subsidies to pay for them. I’m not a Republican, nor am I a Democrat, but I’m thankful to the Republican Party for cutting back a lot of the rental subsidy dole. Rental subsidies artificially inflated rents in Massachusetts and other “blue states” — ultimately hurting working renters who didn’t want to be relegated to subsidies. Also, a lot of Massachusetts landlords quit their “day jobs” and started to live entirely off of the rental subsidy money — without making any improvements to their properties. As far as many of us are concerned, those landlords are “welfare queens”.
Had Russ Whitney, Carleton Sheets, Robert Kiyosaki, et al informed those “investors”/landlords that the first step before buying rental properties should be to research their “market” (i.e. their good-quality “C” tenant base), they would have found out that the majority of those excellent tenants (who previously had always taken good care of the properties and had always paid their rents on time) were making full-time salaries of less than $25,000 per year.
Someone needed to literally do the math. If a renter’s after-tax income from a full-time job is only $1200 to $1300 per month, how is he/she supposed to be able to afford $850 to $950 per month for rent alone?????
“Fair market rent” needs to be re-calculated based on the FULL-TIME SALARIES tenants in a particular neighborhood are earning, and NOT the artificially inflated rents that a small group of corporate landlords in a city decide to extort from tenants.
Gee I wonder why everyone left Worcester?