Speculators “Dump More Homes On The Market”
The Reno Gazette Journal reports from Nevada. “Clark County had 2,163 homes, one in 277 households, in the foreclosure process in December. ‘Much of the buying in Southern Nevada was by people that were going to not occupy the house, and they fully expected to flip the house (once it was built),’ said Thomas Powell, chairman of the Nevada Mortgage Advisory Council.”
“‘When it came time to actually put the mortgage in there, they had hoped to have the house sold. And that didn’t happen this go-around when it had been happening year after a year for a period of a time,’ he said.”
“Washoe County has many of the same problems, a slowing market along with exotic loans, that are driving up the foreclosure rate across the country. John Bissett, a foreclosure specialist and broker, said the Wednesday home auctions on the steps of the Washoe County Court House have been busier of late.”
“‘I’ve actually bought more at the courthouse in the last 120 days than in the last five years,’ Bissett said. ‘What we are seeing (is) a slight bump in Washoe County, and certainly Vegas has risen quite a bit.’”
“About three years ago, northern Nevada experienced a boom in the housing market which managed to stabilize about six months ago, leaving some homeowners in a difficult financial situation.”
“June Young, president and director of Young & Associates Mortgage Services, describes interest-only loans as a ‘big, dangerous bet.’”
“Young, who has over 15 years of experience at credit unions, sees payments ‘go through the roof all the time’ for people who went through unconventional mortgage companies and signed up for adjustable-rate mortgages. ‘Anyone who has two full years on a job, and two full years of credit history in two different areas can buy a house,’ said Young.”
In Business Las Vegas. “North Las Vegas inserted a clause in its agreement with developer Olympia Group that requires any homes, town homes or condos sold to have deed restrictions preventing owners from renting the property for at least 24 months.”
“Call it a lesson learned from the Aliante master-planned community in North Las Vegas, city officials said. There’s a concern that selling to investors can result in a large number of homes sitting vacant in neighborhoods.”
“‘We had to start somewhere,’ North Las Vegas Councilman William Robinson said. ‘We were getting too many investors. It leads to depreciation. It also creates problems with renters who’ve moved and you have an empty home sitting there for six months.’”
“Terry O’Donnell, sales manager with Coldwell Banker Premier Realty in Las Vegas, said one reason prices for most resale homes aren’t likely to increase much this year is that about 42 percent of the homes currently for sale in the area are vacant.”
“Many were purchased in recent years by speculators who had no plans to hold their properties but instead hoped to sell at a profit soon after they purchased.”
“‘When the tap turned off, they didn’t know what to do,’ O’Donnell said. Many of these homes are still on the market, he said, and ‘if almost half the market is in a so-called ‘dump’ situation, it’s not going to help us increase property values.’”
The Deseret News from Utah. “If you own a home in Utah, chances are it was worth a lot more at the end of 2006 than it was at the end of 2005. But steep sales prices and a glut of new listings have started to put the brakes on Utah’s fiery real estate market.”
“Gary Cannon, president of the Salt Lake Board of Realtors, said the local market slowed in the third and fourth quarters, mainly because investors started to dump more homes on the market. ‘2006 wasn’t as good as it appears because we had a really big slowdown in the latter part of the year,’ Cannon said. ‘It’s the first time in a long while where we are starting to see price reductions and added incentives from new-home builders.’”
“A rising inventory of expensive homes priced from $400,000 to $800,000 are the slowest moving price range. ‘Sellers in this range will need to be more aggressive with their pricing if they want to move their home faster,’ Cannon said. ‘On the south end of the valley, both east and west, this price range is carrying the most inventory, both new and existing.’”
“Drew Larson, a real estate agent in Draper, said home sellers are not very willing to drop prices. ‘That’s what is contributing to extra inventory,’ Larson said. ‘So and so sold their home for ‘X,’ so I should get ‘X’ or ‘X plus one.’ We’re all competing for the same buyers. I noticed that in Phoenix and in Las Vegas you had to get in a lottery in 2005 to buy a home, and by 2006 they were giving away tens of thousands of dollars in incentives.”
“Terry O’Donnell, sales manager with Coldwell Banker Premier Realty in Las Vegas, said one reason prices for most resale homes aren’t likely to increase much this year is that about 42 percent of the homes currently for sale in the area are vacant.”
WOW………42% of the inventory is vacant……..unbelievable
SD is worse than Vegas. If I recall correctly (as reported on Russ Winter’s blog), 51% of homes sold in December 2006 were vacant. I interpret this as a sign the flippers are throwing in the towel en masse.
to get stucco.
You were right on comparing homes for sale now with what they were year ago as I showed on a previous topic.
they are a lot higher YOY!
This is why the govt uses “seasonal adjustments” in their data — to separate the seasonal component from the trend component.
Next objective ? Next target ? 100% vacancy !!!!
“42% of the inventory is vacant”
There ain’t a lot for early teens to do in Vegas, no parks, etc.
Wait till the “Rock Throwing”, “BB Gun” and “Tagging” parties start on all these vacant windows and walls.
Note to self pick up rocks and purchase BB gun.
One of the first rentals I looked at in Colorado Springs was a vacant flipper-owned house in a nice neighborhood. It had been vandalized by neighborhood teens, probably with the tacit approval of their parents, who were angry at the flipper-owner for letting it go to pot. I was disgusted at the state it was in (overgrown grass, holes in doors, etc), and told the flipper he was delusional to ask the money he was asking ($1500/mo) when there was a huge range of rental properties in much nicer condition. He offered to “negotiate” on the price, and I told him I wouldn’t rent from him under any circumstances after seeing the state of the property. This was before I discovered Ben’s blog, but my contempt for flippers really started with that experience.
Creative destruction of excessive capitalism and overinvestment.
“‘When the tap turned off, they didn’t know what to do,’ O’Donnell said. Many of these homes are still on the market, he said, and ‘if almost half the market is in a so-called ‘dump’ situation, it’s not going to help us increase property values.’”
Was unaware that increasing property values was a broker’s job. WTF is “us” anyway?
42% of homes for sale are vacant!?! There is a large inventory?!? And they are talking about increases of prices?!? They should be debating whether it will go down 10% or 20% this year (and next year too).
“Tips on how to keep afloat in an unstable housing market”
The Fallon Star Press story read like a friggin advertisement for the re-fi companies. Oh wait, it probably is. Not much happens in Fallon.
From the article, this professional piece of ground breaking advice:
“A piece of advice Lopez, Capurro and Young all agree on is that if someone is interested in buying a home, they should make some kind of down payment.”
What a novel idea! The fact that this is now just “advice” tells you how fu@ked up everything is.
Continued by:
“A down payment increases the value of the home by placing more equity and allowing refinancing as a possibility down the road.”
Bullsh#t! They just wanna make sure these last GF’s purchases will hopefully be at “break even” when foreclosed on. Saves a lot of paperwork.
How does the size of a down payment affect the value anyway? It doesn’t!
“The Fallon Star Press story read like a friggin advertisement for the re-fi companies. Oh wait, it probably is. Not much happens in Fallon.”
Half the town’s population is in the article. The other half wrote and printed the paper.
“home sellers are not very willing to drop prices. ‘That’s what is contributing to extra inventory,’ Larson said. ‘So and so sold their home for ‘X,’ so I should get ‘X’ or ‘X plus one.’ We’re all competing for the same buyers.”
——————————————————
buyers, please do not “insult” sellers with low offers. how about, no offers? lol
lol.
This whole “sellers are not willing to drop prices” thing is kinda insane. The market is what it is; as a seller, you can wait forever at a high price, or you can drop it until you see a nibble. Duh?
better to drop you price now than your “drawers” later.
“home sellers are not very willing to drop prices”
Mr. Larson is either a liar or an idiot. I think he’s a liar. It’s not that sellers are not willing to lower prices - THEY CAN’T, without brining a lot of $$$$$$ they don’t almost certainly have to the closing. And even if they have $$$$$ to bring to the closing they would rather keep it and allow the lender to eat the loss.
wow, out of state investors are now bad for home appreciation in the Vegas area. Did local residents buy anything from 2003 on? No way, they were priced out of the market by all those out of state big money investors that they are now trying to run out of town. Now that they are willing to get out of there “investments” at any price. Oops there goes the neighborhood comps. Live by the investor, die….. Geez
By the way, I spoke to someone in SD who had their property triple in 4 to 5 years, and they keep talking about “those foreign investors” that will keep the market up. Haha, yeah right, they’ve moved to orange juice option futures.
My friend in S Fla is still waiting for those Trinidadians with buckets o’ cash to bail him out. Now that one was a howler!
I’m sure they’re no dumber than anyone else. They’ll just make him dance the “Lowball Limbo”
Salvation is at hand. I just got a fax from a very sincere-sounding fellow in Nigeria who is a deposed Prince, and had promised to deposit millions of ill-gotten loot in my bank account if I’ll just be so kind as to send him the information he needs to empty, er, fill up, my account. While I myself am not inclined to entangle myself is such “opportunities,” maybe your hapless friend will shortly receive an equally generous lifeline to latch onto from some scam artist, er, benevolent soul, from overseas.
While Reno area foreclosures have not skyrocketed yet, I think they will. It was just reported that over 50% of all wage earners are making less than $13 per hour. With a median price in Reno of over $300k, there is an obvious disconnect. There are already reports of people leaving the area because of these prices. And most of the crazy prices paid were in 2005 and 2006, of which, the loans have yet to adjust. While there has already been a significant drop in the median, it will take several years to get back to even remotely affordable.
Surprised the wages are that low. Casinos must not pay very well at all.
42% of homes for sale in Vegas are vacant, San Diego 51%. Besides flippers, the only other explanation is sellers bought another house and are paying 2 mortgages.
“During the year, there were 28,483 new home listings in Salt Lake County, up 9 percent from 26,186 listings in 2005.”
2005 population estimates (from the Census Bureau):
SL County = 948,172
Entire State of Utah = 2,469,585
http://quickfacts.census.gov/qfd/states/49/49035.html
By contrast, San Diego county population for 2005 is estimated at 2,933,462, and according to ziprealty.com, there are around 17,000 homes on the market.
http://quickfacts.census.gov/qfd/states/06/06073.html
Population / #homes ratios:
SLC 948K/28.4K = 33.4 (one new home for every 33 people)
SDC 2,933K/17K = 173.5 (one existing home for every 173 people)
Now I realize this is comparing apples and oranges, but I am nonetheless guessing that one home for every 33 people in the county is a pretty big number, especially given that Utah has no shortage (last time I checked) of recently constructed existing homes. Any thoughts?
WOW! Talk about overbuilding. Those numbers are mindblowing! Who in their right mind permitted all of that building?
Seeing that Utah is mostly Mormon. It is pretty normal for kids to get married in their young 20’s and start having families. Most of these families look to buy homes fairly early in their lives (when compared to places outside of the state). Historically, Utah has had one of the higher foreclosure rates in the US also (pre-bubble).
My wife is from SLC area mormon family (eight kids). She is the only of the eight kids who moved away from Utah, and the other seven have all bought recently constructed homes over the past two years in the SLC area. I know this is just one family’s story, but seven-out-of-seven is a pretty high percentage of the (small) sample to dismiss it as unrelated to the larger trend, especially since Mormons are notoriously herd-oriented in their group behavior (not that there is anything wrong with that
).
I can also say that from a visit last fall, there were plenty of “for sale” and “for rent” signs everywhere you looked, and my father-in-law had some choice stories about California flippers trying to unload properties at several $100K above what anyone in the hood had ever paid for a comparable home. The long-time residents were thoroughly amused (I imagine a similar dynamic is playing out in other California-flipper-infested locales as I type — TX comes to mind for some reason).
Utah = “bleed the beast”. Now thats a story.
This says it all for thre US Real Estate MAKET iNDUSTRY for the next 4-5 YEARS…
“‘I’ve actually bought more at the courthouse in the last 120 days than in the last five years,’ Bissett said. ‘What we are seeing (is) a slight bump in Washoe County, and certainly Vegas has risen quite a bit.’”
““Drew Larson, a real estate agent in Draper, said home sellers are not very willing to drop prices. ‘That’s what is contributing to extra inventory,’ Larson said.
-‘So and so sold their home for ‘X,’ so I should get ‘X’ or ‘X plus one.’ ”
I think that there was a radio program called ‘X Minus One’.
Of course it was Sci Fi.
I knew Tahoe was in trouble when their one and only brewpub went out of business because they sold their prime lot to a real estate developer. Such a horrible decision!!! Of course, their beer was nothing special, either, so maybe it’s not that great a loss. Still, my dream of quietly brewing beer by the shores of Lake Tahoe is significantly delayed if not shattered.
I feel your pain. As someone growing up in the area, the skyrocketing prices, and disappearing culture have been troubling to witness. I rolled into Truckee recently to find that many of the quaint old businesses which I loved are gone, replaced by real estate brokers, etc. Yuck. This bubble is a joke.
I continue to live my dream of noisily downing 40-oz malt liquor bottles on the front porches and curbs of open houses throughout the greater Colorado Springs area.
Great thread. UT is F*CKED. LAS VEGAS is F*CKED. SAN DIEGO is really F*CKED. RENO is the capital of F*CKEDLAND. I was just in Salt Lake. New houses all over the places. Only big ones that locals can’t afford. Now the California F*CKIN’ FLOPPERS can’t come buy and flip em. In SLC, they built a ton of big homes on a mountainside known for having mudslides. I guess the folks buying them didn’t check the soil. Anyone that could think would have figured that out just by looking the mountain. My family told me they have already had a lot of mudslides. And only 2 yrs old. Wait until it really snows/rains and they all come down. Hope they bought good insurance (these homes are in the city of Bluffdale or Draper - southern part of SL Valley).
What good is insurance when you and your family are buried under tons of dirt? The same thing happened to a guy in California two years ago. They had a house on a mountain and his family got buried by a landslide.
I don’t think insurance covers loss of a house by a mudslide either.
If the insurance company is smart, they bury an exclusion somewhere in the fine print of the inner pages of the policy.
Corcoran said that sales are going to take off after the Superbowl this year. “it’s in the bag!”
It was last year too but never happened. Looks like houdini pulled a magic trick on us!
I want my money back.
“North Las Vegas inserted a clause in its agreement with developer Olympia Group that requires any homes, town homes or condos sold to have deed restrictions preventing owners from renting the property for at least 24 months…. There’s a concern that selling to investors can result in a large number of homes sitting vacant in neighborhoods.”
Yes, much better that they be foreclosed upon and sitting vacant than that at least renters be occupying them. Much better for both developer and municipality, hence the very visionary agreement.
I think one thing that has propped the prices in Las Vegas up so far is that the housing costs here were SO low just five years ago. I bought a house as a single mother in 2000 for $100,000 that Zillow says is now worth about $250,000. My step-sister and her husband bought a house in Green Valley at the same time for $145,000 that Zillow says is worth about twice that. They took their money out and bought a $480,000 monstrosity in the sprawl. I think a lot of people are like my sister. They are still propping themselves up with equity from a house they bought cheap. When that money runs out, my step-sister whose husband is in construction will face some hard times I’m afraid. (I sold my house six months before the boom for about what I bought it for. In a way I’m glad, because I was married by then and we would have almost surely gotten ourselves into a bigger more expensive house, and been out more than we could have made on that house.)
We’re moving to Ely in Northern Nevada this summer. I’m scared as hell, because the prices there have seen a huge run up, and I don’t want to be upside down in a mortgage. The houses are still about half what they are in Vegas, so at least we’ll be upside down in an affordable 2.5 times out annual income mortgage. And we’ll be in a place that is likely to be much less scary in the crazy years that are coming.
Another way in which the sub-prime lenders failed in their duty was to give investors these second and third homes without making sure they cash flow . You can’t make loans based on real estate going up . If the property doesn’t cash flow the debt has to be a minus against debt .How many of the sub-prime lenders even did a cash flow analysis . Did the sub-prime lenders even look at the credit report to see if these investors had a personal residence already ?
Yes. They asked the question, and all of the FB’s promptly lied on the applications. They lied about their income, they lied about whether it would be a primary residence, lies, lies, lies. The lenders simply never picked up the telephone to verify whether they were being told the truth. It was willful disregard of the truth on the part of the lenders.
A little color for the Utah market. I bought a nice place new for $153k in 2000, sold for $246k in August of this year and moved (renting) to the VA suburbs of DC. Had I sold in Aug 2005 it would have been more like $200k.
I went back to visit family over the holidays and was stunned by the prices I saw. In the area where my brother lives - incidentally, about 1/4 mi from the infamous Casey Serin’s UT property - rampant speculation has pushed housing prices beyond any sane level. We’re talking roughly equivalent to the still-insane-but-dropping prices out here in NoVA, and I can tell you Utah doesn’t have anywhere close to the number of high paying jobs that the DC area has. Basically, what has happened is that bubble wealth fleeing the deflation in CA, NV, and AZ has created a lagging bubble in UT. I can’t really complain - my buyer was from the Bay Area. Now UT is popping too. None of the 500-800k+ new homes in my brother’s neighborhood are selling any more, and I don’t expect that will pick up at all.
By the way, that house Casey bought? Ugliest thing in the neighborhood, by far.