“Realistically, Housing Prices Have Already Dropped”
The Gazette reports from Colorado. “Nancy and Dana Barber realized they had to do more if they hoped to sell their four-bedroom, four-bathroom home. Last year, they installed oak floors, kitchen appliances, bathroom floor tile, a furnace, central air conditioning and window coverings and painted the inside. The tab: $26,300.”
“‘We’re moving,’ Nancy Barber said. ‘We have to sell it. In my opinion, it had to be as perfect as it could be for someone when they walk in the door.’”
“But up to now, few people have. The Barbers have had only three showings and no offers since the home went on the market nearly seven weeks ago. At the start of 2007, nearly 1,000 more homes were listed for sale by area real estate agents than a year earlier in Colorado Springs and the Pikes Peak region — a 25 percent jump in supply that’s given buyers a chance to be picky.”
“Home sales in December were down 24.5 percent from the same month a year earlier, according to the Realtors Association.”
“‘There’s too much inventory,’ said (broker) Joe Clement. ‘It’s common sense that it’s more toward the buyers’ side. It’s not like prices are collapsing and there’s a desperate feeling. But it’s just that there’s so much competition out there, and so the buyer can get a very, very good deal.’”
The Denver Post. “Colorado suffers from a high foreclosure rate today partly because the national lending industry misread the Denver market, an expert told a Denver task force on foreclosures.”
“Lenders engaged in ‘parachute financing’ throughout the West, swooping in, believing there was money to be made in fast-growing states with rising house prices, Tom Clark, a VP of Metro Denver Economic Development Corp., said.”
“Kathi Williams, director of the state Division of Housing, warned that Colorado’s foreclosure epidemic is far from over. ‘We have over 37,000 loans delinquent in Colorado as of today,’ she said, including more than 10 percent of all subprime loans to higher-risk borrowers.”
The Review Journal from Nevada. “For all of 2006, Las Vegas had 36,051 new home sales, down 7 percent from the previous year. The resale market hit the skids in Las Vegas as inventory grew to more than 21,000 and homes sat on the market for six months without getting a bite.”
“The resale median of $285,000 is unchanged from a year ago. ‘It’s so useless to generalize, since the market here is so diverse. We keep hearing about median prices going up, but all it means is that the few houses that sold have more above that median than below. That figure says nothing to the average home seller who keeps dropping his price and has had no offers for six months,’ Kurt Lehman of Realty One Group said.”
“Lehman found 1,454 single-family homes that closed escrow in December. The MLS showed 656 contingent sales, which means they’re in escrow but open for backup offers, usually indicating the buyer must still qualify for the loan or has another house that must be sold first.”
“Jeremy Aguero of a Las Vegas research firm, said he expects existing home prices to go negative in the first and second quarters this year. ‘Realistically, housing prices have already dropped 7.5 percent,’ he said.”
The Reno Gazette Journal from Nevada. “Builders’ tighter budgets caused by the housing slowdown continued to weigh down the Reno-Sparks office market in the fourth quarter, according to two separate reports.”
“In the fourth quarter, Grubb & Ellis reported that 18.8 percent of office space was vacant, while Colliers reported an increase in the vacancy of garden office buildings, common in south Reno, to 16.5 percent.”
“‘I think we are going to see this for awhile,’ said Brian Armon, at Grubb & Ellis. ‘There was a big push when the residential market was growing so rapidly and we had new companies coming in, which were primarily the national home builders. All of those now have significant amounts of sublease space on the market that they acquired when they thought they were going to continue to grow at that pace.’”
“‘The major corporations that are here are real quiet. They are just waiting to see what the (national) economy does in 2007, and it’s 50-50 whether we have a small recession or moderated growth,’ said Tim Ruffin, senior VP of Colliers’ Reno office properties group.”
The Arizona Republic. “Metropolitan Phoenix’s ailing home-building business got a prescription for a return to health Thursday, but some of the medicine may be hard to swallow.”
“Analysts RL Brown and Greg Burger told a crowd of about 1,300 housing and development professionals that Phoenix’s new-home market will get better after this year. But that is expected to happen only if builders get serious about such things as reducing speculative-home inventory and prices.”
“And they decried the threat from ‘financing from Disneyland’ that offers exotic mortgages to underqualified buyers. They also emphasized that the depth of the damage caused by mortgage fraud hasn’t been calculated. ‘The challenge isn’t over yet,’ Brown said.”
“He estimated that as many as 25,000 unsold spec homes are sitting on the market, the result of buyers backing out of deals when they couldn’t sell their existing homes.”
“Here are some items on Brown’s list of the market’s cracks. New home developments too quickly became resale communities as early investors competed with builders. The Valley’s loss of its affordable edge compared with other big cities.”
“More risky mortgages. They have opened the door to allow investors to buy multiple houses and other home buyers to potentially commit fraud and put struggling buyers into more house than they can afford. The collapse of the resale market due to too many overpriced listings.”
“And here’s what Brown believes needs to happen for the market to come back. Home builders have to get rid of their excess inventory, all the spec homes sitting empty and unsold. Reposition edge subdivisions to give buyers more value or, in my words, cut home prices on houses far from jobs.”
“Builders pulled more than 60,000 permits for new homes in both 2004 and 2005, but this year’s slowdown cut the number drastically.”
“The analysts expect permits to total 41,000 this year and 44,000 in 2008. They expect the market to hit 47,000 permits in 2009 and 50,000 in both 2010 and 2011 as the market recovers.”
‘After three years of spectacular growth and soaring car values, last week’s collector-car auctions overall showed a leveling off and even a softening of prices in some parts of the overheated market. Many sellers of popular American muscle cars were disappointed that their auction items did not rise in value over last year.’
‘In the more-moderate end of the market, where many varieties of high-performance American cars have doubled and tripled in value over the past few years, this year’s bidding failed to reach the heights of last year’s numbers.’
‘Many new buyers jumped into the fray over the past few years, driving up prices to stunning levels for even the most common originals and built-up replicas of rare models. Long-time observers of collector-car auctions have pointed at the booming muscle-car market as a bubble that was bound to burst. Some compare it with the housing market, which roared with rising home values and burgeoning sales for a time, then settled into a period of stagnation, like a hangover on the morning after.’
‘The heady days of ever-higher bidding appear to be over. ‘The prices have reached healthy levels, and people are realizing these are the values,’ Craig Jackson, owner and of Scottsdale’s Barrett-Jackson, said. ‘People have called this a bubble for four years. What it is, is baby boomers buying what they want. I don’t see these cars taking a slide because there’s such a big demand for them.’
‘There was no bubble that burst, he added, just a normal settling of prices. ‘I’d say it was a soft landing,’ Lombard said. ‘Nothing fell completely on its face.’
I remember this exact same thing during the tech boom. Newly found money often ends up in collectable and vanity items. And the value of these crashes hard when times get tough.
“And the value of these crashes hard when times get tough.”
Is this true even when everyone “knows” there will be a soft landing?
Thanks to all those who responded and let me know the details on the buyer of the $5,000,000 Shleby Corba.
Ron Pratt - REIC member. Big surprise!
The tech boom is the best analogy. They bid up the price of certain cars (e.g., Testarosa’s) to levels that haven’t been seen since.
Every down market sees collector car values plunge.
Got popcorn?
Neil
Neil, thanks for the co relocate info yesterday. Marked your site.
You’re welcome.
I’m half expecting some big news in April/May timeframe. However, if its anounced while on my honeymoon, obviously I won’t be blogging it!
Moves usually commence during school breaks. The last big fortune 500 move we had announcements in February and were required to move by September (or take the “seperation package”). That was an unusually “gentle move.” I expect we’ll hear from Raytheon, Lockheed, Boeing, and Northrop before summer. Yes, all of the big aerospace companies in the South bay.
How many? Actually, not a lot. Maybe another 6,000 or so in total. Let’s see how my guess goes. 
Considering that is less than one month’s home sales for LA county… it alone shouldn’t impact the market. But if the market is already weak…
Got popcorn?
Neil
Crispy:
It is hard for the IRS, collectors etc. to find a Cobra in a storage facility located some where. Many drug dealers in the 70-80s used cars and gold bars to hide their money. Also, when you get out of jail you just dust off your investment and dirve it away.
Oh give me a break. A car is a good place to hide hot money? Something which can get torched, stolen, seized? Or just go out of fashion? Which has to be licensed and insured if you’re going to use it? Which is highly illiquid?
Nothing beats the old briefcase of cash, or precious metals. If some drug dealers were buying collectors cars, it was just out of ego, not economic common sense.
I love the comments from Craig Jackson. Of course he will say that values will not go down, blah blah blah - HE STARTED THE DAMN COMPANY. As with any “collector” item, values fluctuate, and this uptrend was bubblicious. Hmmm, anyone else remember when they were touting the 1989 Anniversary Lamborghini Countach as the next million dollar supercar? They were trading at $400K to $500K in 1990, then, in 1991, kerplunk. They’ve struggled in the $90K to $125K range ever since, and go for less in Europe. Might as well drive and enjoy, even if the service each 10 or 15K miles costs more than a new Nissan Altima.
Since i’ve only been here and following housing for the past few months, i’ve read over and over again about the “soft landing”… although in just the limited research i’ve done, there never seems to be an overnight “bust”, but rather things fall over time… has there ever been a national “bubble burst” where over a short-time things have fallen dramatically?
My plans are to sit tight, see how things go from spring to summer and am thinking things need to settle back to 2003-2004 prices before we’re officially done… is that dumb thinking?
There are few “sudden bursts”. Read up on the history of the stock market crash of 1929, and you’ll learn that it was a few years before our classic images of the depression (widespread joblessness and business failres) took hold.
The Savings and Loan mess in the 1980s and Defense cutbacks in the early 90s were kind of like that too. It takes time for a “change in the breeze” to become reality on the ground.
I am a believer in a slow and steady decline - maybe 3-5 years with several false rallies. UNLESS the MBS market accelerates its current meltdown and the foreclosure market continues its 100+% increases month after month…
Exactly correct. This is how I’m thinking as well. Others on this board will probably tell you wait until 1999 prices and I don’t think that is going to happen, unless interest rates shoot up to 8%. We cannot underestimate the impact of interest rates and the strength/weakness of the dollar. Stronger dollar equals lower home prices which would signal higher rates. There is still a lot of liquidity out there and home prices returning to 2003-2004 levels will be happen because of a normal return to demand/supply, factoring out the excess from the speculators. If a recession does happen, then all bets are off the table and we could see 2000 price levels return in some areas, especially then a high foreclosure rate will have an impact on pricing.
“If a recession does happen, then all bets are off the table and we could see 2000 price levels return in some areas, especially then a high foreclosure rate will have an impact on pricing.”
You’ve answered your own question. Recession not only will hapeen, it IS happening. Though current numbers do not show it, we are in a recession. High rate of foreclosure? The numbers already tell this story, and it’s only just begun. The only thing that is possibly avoidable is a full blown depression, but I fear that card has already been dealt as well.
As far as where prices will go, stick with the old “reversion to mean”.
@nnvmtgbrkr
Next week GDP comes out, let’s see. The market is worried that GDP is still strong and the FED won’t cut rates. How is it that we are in a recession? Housing recession is what you meant? Then yes, we are in a housing recession. I believe that housing can bring down the economy into a full recession but that won’t be on the radar at least until this summer. The Wall Street spin machine is still running on all cylinders.
I think nnvmtgbrkr is working under the assumption that the numbers we are currently getting from the government are bull$hit. I think a lot of people on this blog, including me, would agree with him.
There are many industries that are quickly slowing down yet the government numbers are still in la-la-land. My northern New Jersey electrician friend tells of a market where work was non-stop to highly competitive overnight. I don’t see that reflected in the numbers. Ask the tradesmen if we are in a recession and they will have a story that does not gibe with the government reports. The big “R” is here.
“I think nnvmtgbrkr is working under the assumption that the numbers we are currently getting from the government are bull$hit. I think a lot of people on this blog, including me, would agree with him. ”
As would I. For example, look at the conflict in payroll #’s at ADP vs. Gubmint stats. Oh, and what is the absorption rate? I can’t remember for sure, but I know that even the inflated # reported was nowhere close. Not to mention all of the housing layoffs we have already seen. . .
There’s no question about it, the government numbers are BS, and housing is only part of the problem.
“unless interest rates shoot up to 8%.”
I was just thinking…early 2000s, that was a normal interest rate.
“unless interest rates shoot up to 8%”
I do not disagree with you,it is just rather interesting that a slightly under 35 year average interest rate could tumble this house of cards.
@OCBear
“slightly under 35 year average interest rate ”
Not really, if you adjust home prices with salaries, the 8% rate is more or less equivalent to 15% when compared to the last 35 years. (I don’t know the exact number, but 15 sounds like a good guess.) You should take a look at Shiller’s chart on home prices and you’ll see that 8% can make a huge difference. http://www.rgemonitor.com/blog/roubini/143855
“Others on this board will probably tell you wait until 1999 prices and I don’t think that is going to happen, unless interest rates shoot up to 8%.”
You don’t understand the role of fraud and subprime lending in supporting recent prices. It has little to do with interest rates shooting up to 8%. 1999 prices are in the bag, provided you mean real (inflation adjusted), not nominal prices.
Reality will strike the first weekend after Superbowl, when the spring bounce produces nothing. A spike in listings, and very limited qualified buyers. That week end might scare the long term listings to “cut and run”.
I am as bearish as anybody, but a few houses have sold in our neighborhood in the past couple weeks (central Phoenix). Don’t know the prices yet. I think there is going to be a bounce in activity, but I still expect the sales bounce to be a lot smaller than the inventory bounce.
i know of a house in an upscale part of Phx.(arcadia) that a 20’s something paid $850000 for only to do a complete demo on starting today. i know another person who has bought a property in a gang infested area of town on the basis of looking on mls and seeing comps almost a year old for small 3br’s that sold for close to $200.000 and i could not get him to look at the local paper detailing the rampant cash back loan fraud that has been going on here in the valley. what really bothers me though the local dept. of housing will pay a landlord $1100/month for a 3br if u section 8 your property. i love knowing that my hard earned tax $ are going to such a scam. the market here still has a long way to go tons of inventory,specs sitting empty, all the loans for liars coming due and adjusting up. so we will see how slow it all deflates.
“He estimated that as many as 25,000 unsold spec homes are sitting on the market, the result of buyers backing out of deals when they couldn’t sell their existing homes.”
So you have 25,000 empty houses for sale along with another potential 25,000 people who want to sell and these clowns think it would be a good idea to add another 41,000 houses ? and another 47,000 ebvery year after ? Totally Unsustainable.
The message is not getting out. Have a co-worker that commutes from the Pheonix area to Seattle for the workweek. He has a bit house on/near a golf-course (with big club fees). He absolutely believes that it will maintain its value because of the extras he put in - especially a pool that drops off to a view (hard to explain, but looks really nice on his screen-saver).
Dont want to argue with him - but he better be willing to live there for the next 5 years to not loose money. Does anyone have a guess on how many larger houses on golf courses there are in the pheonix/scottsdale area
By commute, you mean fly?
Yes - he flys late every Sun night. AmericaWest is direct so it is straight foward and apparently not too expensive.
Great family life. what are people thinking. If I had a dad like that, i’d go beserk
Me too. But this has been happening for years. There was a Denver Post article in October 2003 that told the story of a tech guy that lost his job in Denver and flew to LA for three weeks, then home one week each month. What I thought hilarious then, was the argument made about housing being too expensive to move. The wife didn’t work, btw.
so - still open question. Does anyone have a guess on the # of houses on golfcourses communities in the pheonix area? Just interested - is it 1000 or closer to 10,000?
I know a guy with a pool like that. Really looks ritzy, but you are right, there are not going to be enough people with the money to actually live in places like that at full freight prices once the easy credit dries up.
Heck, half the “view” homes in LA have “infinity pools”. Old news.
What you would need for a stable RE market :
(1) Builder standing inventory sold out .
(2) Flipper/speculator purchases sold out
(3) Unqualified borrower on toxic loans due to re-set sold out .
(4) Vacant houses and condos ,sold out .
Now this is the kicker …
(5)The above purchases sold to end-user buyers who can qualify for the loan on a long term basis ,without fraud or cash back or incentives to make the deal .
Anybody want to make bets ? Neil give me some more popcorn .
One area where I disagree with my blogger bretheren, is that I think subprime and 0% financing will never go away. Because — we’ve always had it, in the form of seller carries, seller financing, local hard money, etc. The key change over the last decade, was how it was institutionalized and risk spreak so far beyond the original loan docs.
At least 30% of the public has no savings, and it’s just too large a market to not be served in some fashion.
I agree, however, I can remember when subprime meant a loan 300-400 bps above the market. That will return, IMO very soon.
During 2003-2005 the subprime rates were on par with the 750+ fico score rates. The market assumed that a 500 fico and 60% DTI was no risk proposition. How could think this was realistic?
Yes, what crispy said.
There are not enough end buyers out there - we all know that the 40% investor purchases mentioned by the NAR is joke. I say it is closer to 50%. That demand will not come back anytime soon and these builers have been building and continue to build (at least where I live) like that deaman will return “in the spring”.
I need some more salt… and a napkin… thanks
I’d say that in phoenix the real number for investor purchase was closer to 60-70% in 2004,2005, and Q1-Q2 of 2006
Even those with ‘owner occupied’ on the loan docs were mostly liars. I looked at homes back then and the realtor said, “this guy must be transferring out” and we get to the house and there is a sleeping bag and a toobrush for when the flipper gets into town he won’t have to stay at the DAYS INN.
Completely shade and fraud!!!
There’s candied popcorn too, when you get tired of the buttered…
Even 50% may be lower than reality. Phoenix’s resale vacancy rate is basically at 50% right now, and I’m sure at least a few flippers are living in their flops.
There is a LOT of pain in our future. mm, salt?
“That demand will not come back anytime soon…”
C&C — I politely beg to differ with you on this point. It will come back very soon — as for-sale inventory…
Housing wizard,
Oh, that will all happen. As to Mazo’s prediction that subprime will stick around, that’s true. But it will get its traditional basis premium. Those 30% will go back to FHA loans for the most part. Sub-prime will shrink back to 3% or so of the market. Yes, it will emerge again some day, but not until well after the bust.
It is time for popcorn munching.
Got popcorn,
Neil
Hey , I’m not saying that low down loans will go away .The borrower will need to qualify for the payment and the loan will need to be insured if its under 20% down .
Sub-prime loans will have their place ,but they will be at a lower loan to value or they won’t be stated income low down loans .
What is the point of buying in a RE market that is riddled with fraud ,sub-prime low down liar loan borrowers headed for foreclosure , locust running up prices , along with excess builder inventory of the likes I have never seen .
Look, I’m a homeowner that gets to just sit back (eat the popcorn ) and see my property values drop day by day .The only plus to my situation is that I wasn’t a investor and I can afford my payments long term ,and I bought to stay long term . I’m a ” end-user” as we like to call it .
And equally importantly, what is the point of lending in such a market? Dumb money either gets smart or disappears.
Stable RE market? You want stable? Then add #6 - a return to a silver or gold backed currency standard (or maybe strictly metals with warehouse receipts) of some kind.
The fact that our dollar loses value all the time because of the expansion of the money supply with no viable constraints forces all that money to seek a home some where so that it doesn’t lose value, like gold/silver now, stocks in the 90’s, real estate in the 5 years prior to 2006.
What you saw in RE or collectible cars or collectible ANYTHING is not so much consumer price inflation as it is asset inflation, but it is inflation nonetheless. That’s why CPI should be in the range of 8-12%, not the ~3% published. It is left out intentionally. The fact you have a losing currency fuels these boom-bust cycles.
Now, you may say we saw the same thing happening while on the silver standard, which later gave way to the gold standard on the way to the completely fiat regime as of 1971, when Pres. Nixon closed the gold window on international holders of US dollars. That’s true, but you have to realize that the creation of a “bimetallic standard” paved the way for showing people that gold/silver were barbaric relics by way of fixing the gold-silver ratio officially while ignoring the fact that the values of gold with respect to silver shifted depending on population changes and impacts on supply of these metals, like depleted mines, major discoveries, accidents that shut mines down, or technological advances that changed the “ounce per month” production rates relative to the population growth rate. The gold-silver ratio seemed to be a tactic as a nudge toward fiat currency.
When you don’t have a losing currency like this, it makes capital scarce, so people what more closely what happens with their money. Also, it makes spending more restrained, especially at the federal level. You would not have so much money sloshing around from one bust to the next boom.
Stephanie
http://www.deafdrummer.org
I live right near WestWorld/Barrett Jackson auction, and I can tell you that 2007 auction was pimple on the a$$ of 2006 and 2005. I was eerily quite over here. Yes there were people there, but the hype and the hooraa was greatly diminished. Scottsdale in general is much more quiet than 2006, and especially 2005. The bubble is bursting here. We are in full meltdown mode. I used to keep a spreadsheet on inventory, but at this point it is irrelevant…why??? because homes are just expiring unsold or the agents cancel it or go
‘temp off market’… so the inventory numbers are grossly understated.
this thing is ugly. flippers are putting homes on the market constantly, and some are still holding out, trying to rent, but even when they do list the homes, they have no clue where the market is.
They basically waste their time with a sign in the yard. Just another lawn ornament. Flippers are listing their homes for 100k more over what a the Builder is asking in the model home sales office in some cases.
Layoffs are starting and have been since the summer of 2006. The collapse has not even started. Layoffs come from: Homebuilders: supers, laborers, sales hoes; Title agencies: escrow officers etc, Mortgage Companies: LOs, Mtg processors, secretaries; Home depot, Loews, every stinkin Tile/kitchen/bath store in the valley; Furiture stores, not selling; Car dealers, sucking wind with piles of suv’s…they are running out of parking space for all the inventory they have… Was out in old town scottsdale last night, the bars were at half capacity at 11pm. ‘W’ hotel won’t be built until 2008, but who wants to stay there anyhow. Realtors are being slaughtered, sales are down so much, non can make enought to survive; Many subcontractors to the building industry… suppliers, road builders, framers, drywall, masons etc… all laying off and downsizing.
And then you have the appraisers and all the scandals that will follow. The entire boom was fraudulent excess of flipper scum and corruption.
I remember back in March 2005, when a certain condo conversion was 250k, and all of a sudden every one was asking 440k in one week. I asked a realtor and they said, “well we just had a ‘cash’ sale for 400k on unit ABC, so they brings the comps up, and we price our 10% over comps”
Phucking insanity. Phuck the flippers!!!
“Car dealers, sucking wind with piles of suv’s…they are running out of parking space for all the inventory they have…”
Thanks for reminding me of this.
People! When you’re reading the MSM articles and trying to get an idea if a recession is here… Watch the unsold inventory of automobiles. Over 100 days worth is very telling.
DaimlerChrysler is already having major issues with this. At one point late last year, they had 500,000 vehicles on dealer lots and another 100,000 in storage around North America. They were renting old general aviation airports in the Detroit area and using the runways as parking lots.
They are trying desperately to get this under control, and the only way to do it effectively is to either give the cars away or halt factories. They have chosen to halt the factories, and this has an echo effect through the rest of the supply chain and really hurts small suppliers. DC and Ford are in extremely serious trouble, although GM seems to be treading water well enough for the moment.
Maybe Ohprah can help ‘em out?
I would have chosen to lower prices if I were in the driver’s seat (pun). But, really, all of those workers - I’d rather take a pay cut than lose my job entirely.
Slightly off topic: It seems that when there is “free money” to buy everything the auto dealers are right there to cash in one way or another.
The car dealers where flipping apartment rental properties (built on swamps) in the DFW TX metro in the mid 1980’s. It was by invitation only, with all the playahs sitting at a table, and the paperwork was passed along the table, with each signer first buying and then a few minutes later selling for huge profits per sale.
Now here is a car dealer who recently got it in the a$$ from the SEC on an insider trading scam:
http://www.sec.gov/litigation/litreleases/lr19252.htm
Now this idiot car dealer is suing the broker - he wants his 4 million in fines back and claims that he was not business savy enough to understand what was going on - the old “I’m a victim” legal trick.
Check out the Hearld Tribube articles on CFHI mess in Bradenton - some of the bag holders were automobile marketers from the Northeast.
Now this idiot car dealer is suing the broker - he wants his 4 million in fines back and claims that he was not business savy enough to understand what was going on - the old “I’m a victim” legal trick.
———————
That is an example of an idea called “moral hazard.” In economic theory, the term moral hazard refers to the possibility that the redistribution of risk (such as insurance which transfers risk from the insured to the insurer) changes people’s behaviour (wikipedia). If you can make it safe for people to engage in risky behavior without paying for it, they will do it. There are no real consequences for their actions. That is what that idiot is trying to create for himself with the lawsuit. Sorry I had to state the obvious.
As far as I’m concerned, he has earned one of two fates - exile from the US or going homeless, never having access to credit ever again, something like that.
Stephanie Ellison
http://www.deafdrummer.org
What about hellfire? Have you seen any hellfire?
I don’t know about hellfire but I have seen a lot of damnation.
I saw a couple locusts hanging around a pile of pestilence.
Thanks so much for my sunday sermonette. Love the humor
Trickledown Layoffonomics
“‘There’s too much inventory,’ said (broker) Joe Clement. ‘It’s common sense that it’s more toward the buyers’ side. It’s not like prices are collapsing and there’s a desperate feeling. But it’s just that there’s so much competition out there, and so the buyer can get a very, very good deal.’”
Don’t worry Joe. The desperation will be here soon enough. Especially when people’s ARMs blow up. Joe, get ready for some fireworks, and it won’t enough have to be the 4th of July.
“The resale median of $285,000 is unchanged from a year ago. ‘It’s so useless to generalize, since the market here is so diverse. We keep hearing about median prices going up, but all it means is that the few houses that sold have more above that median than below. That figure says nothing to the average home seller who keeps dropping his price and has had no offers for six months,’ Kurt Lehman of Realty One Group said.”
Enroll in remedial statistics post haste!
Actually, if by “that median” he means the previous median, and if he is talking about the median going up rather than staying the same, then I think he’s right. What class do you take to learn to say something so that people can tell what you mean? I don’t remember too many of my college professors being able to do that.
Although it is a major job requirement nowadays (except for professors).
Here are a couple of posts from April 2005:
‘Dawn McLaren an economist at Arizona State University: ‘The concern that I have is that most of our job growth is in terms of construction.’
‘In Las Vegas, for instance we’re seeing houses prices 40 percent above what they were last year, an incredible boom going on in prices and in a number of houses being built. And we’re going to have to think about retraining some of these people when that huge boom comes to an end.’
‘I do feel that we do have a little bit of a bubble here, certainly in some areas like Las Vegas it will be a little bit worse. There are things that are threatening to it. First of all, over 20 percent of our market here in the Phoenix area is in investment. Investors have come in, they’ve come in from California, and they have been (driving) our market.’
‘It can’t go on forever and there are signs that it is beginning to fizzle.’
”It’s public confidence in the economy, and the feeling that prices are going to escalate, so they better buy now,’ said Judy Lowe, Tucson Association of Realtors president.’
‘Our buyer demand far outstrips the number of available houses out there. It’s kind of scary,’ said Michael Smith.’
‘Our buyer demand far outstrips the number of available houses out there. It’s kind of scary,’ said Michael Smith.’
It is really scary once you grasp how readily investor demand morphs into investor supply when the market turns.
I was just skimming your post and neglected to read the first part about it being retro from 2005. My first reaction was that they must have found Rip Van Winkle under a tree somewhere in Vegas. If there’s any trees there.
Last year, they installed oak floors, kitchen appliances, bathroom floor tile, a furnace, central air conditioning and window coverings and painted the inside. The tab: $26,300. ‘We’re moving,’ Nancy Barber said. ‘We have to sell it. In my opinion, it had to be as perfect as it could be for someone when they walk in the door.’”
There is a great empirical economic question implied here which could be easily addressed by anyone who had the data and knew how to run a regression analysis, which is that of whether Nancy’s opinion is supported by real world experience. My guess is that she (and the mass of other deluded sellers who share her opinion) would be shocked to learn she could have saved money, headaches, and some portion of $26,300 by simply listing her home at $25,000 off the closest recent comp price, burying a statue of St. Joseph in the yard for good luck, and praying for a buyer to show up.
Actually, GS - I would do the same thing in a slow market. Maybe not every upgrade she listed - but things like replacing an old furnace and repainting, are justifiable. When there’s a lot of inventory out there, you need your unit to shine and be a no-excuses purchase for the remaining buyers available.
Actually I was suggesting a research question for anyone with an academic interest in housing economics who cares to take the trouble to gather the data. You are entitled to your opinion (as is Nancy), but the question is, in principle, very easy for an econometrician to provide a more objective answer once they have the data (and it is possible someone has already looked at this, as it seems like a fairly obvious question to raise).
P.S. Mozo — your point is taken; I am merely suggesting an item-by-item of the costs and benefits of upgrades to get your home ready to sell. Low hanging fruit like getting rid of clutter and putting a few potted plants on the patio before the open house may result in a net increase in market value of thousands of dollars after subtracting the cost of time or renting the plants. But I am very skeptical that the increase in market value for replacing the furnace will exceed $26,300, whereas I am guessing the alternative of reducing the listing price by that much will both greatly increase the chance of quickly attracting a buyer (old furnace notwithstanding) and also relieve the seller’s exposure to prices which appear to be trending down. For expensive homes, the trend exposure may easily wipe out the value added of any expenses to get the home ready to sell within a matter of a few weeks.
item-by-item evaluation
I agree GetStucco. I had just posted on this (but don’t see that it came through…)
Ugh - this is what my parents are doing (MASSIVE upgrades before listing). I know some on this blog think doing this kind of stuff is mandatory to sell, but I disagree. (Frankly, I’d have done it while I lived there so I could have enjoyed it.)
As long as a house isn’t structurally unsound, isn’t infested with cockroaches or mold or anything else nasty, isn’t so far beyond repair that I can’t see any potential - I wouldn’t be turned away. However, it has to be priced accordingly. Is the extra $26K really worth it to these sellers at the end of the day? Or could they just have reduced the price a bit?
Years ago I bid on a condo in the western `burbs of Chicago. I offered slightly less than asking price (this was around 1999) because it did need work - definitely needed all new carpeting and the rooms were wallpapered up, bathrooms and kitchen were old. I only bid about 5% below his asking price. The owner was some tough-talking a*@hole who told me to take hike. Said he’d “slap some cheap carpeting down himself” and get his price. But that’s kind of the point…cheap carpeting. So many people probably do a less-than-top-quality fix up job on these homes. Wouldn’t you rather pay a little less and be able to upgrade to your standards? Again, I’m not talking about a total fixer-upper.
Need an opinion from anyone interested in giving one. This house listing was sent to me today. I live in an area where the median household income is ~$55K. To me, this is pretty much a starter home. It’s priced at $270K which really blows me away. The newer windows are nice, but not much else seems upgraded. Based on the local salary information I provided, what would anyone think is a reasonable price for this home in this area? http://tinyurl.com/385hrk
“(Frankly, I’d have done it while I lived there so I could have enjoyed it.)”
Bingo — there is the rub! My sister and I had this exact discussion last week. She and her husband currently own two homes and plan to sell one this summer. Meanwhile, they are going to great lengths and incurring high time and pecuniary costs to get the place up to snuff. My sister’s comment about all this was, “It is a shame that the home is going to look the nicest it ever has just before we sell it.”
And the other problem is that people’s tastes differ. I’ve seen lots of kitchens recently redone to something that is NOT my taste. I’ll be damned if I pay for improvements that I don’t like.
That is a great point — the double-coincidence-of-wants problem gets worse when you blow money on upgrades that might exclude your best offer from the demand pool. And there is also the issue my sister faces of continuing to pay interest, taxes, insurance and maintenance on two loans over the time of owning two homes and fixing one up to sell. I am guessing the carrying costs alone would be sufficient to completely offset the value of whatever increase in price they yield for the effort to get the home ready to sell. And then there is the unfriendly trend, and the pecuniary and time costs of carrying out the upgrade plan. I hope they enjoy fixing up their home to sell, because it looks as though it is going to cost them a bundle.
I’ve seen lots of kitchens recently redone to something that is NOT my taste.
You are not kidding! Recently, I saw a home with a kitchen described as having a custom “chocolate mint” decor. It had pistachio mint green walls and dark brown painted cabinets with mint green corian countertops. I’m sure it cost a fortune, but it was seriously bizarre.
PFR has the listing for that house. IMO that home is too expensive even at $1.
Whenever you get ready to “pull the trigger”, please do not contribute one red cent to Larry Flick’s bottom line.
Larry Flick = PFR CEO = major F@cktard
Here’s the man himself, minus Trophy Wife #3…
Larry and his Beyatches
I’m not actually interested in that particular house - just saying it’s a house I think I should be able to afford. Nothing special. Just a nice, little home for my son and I. Not at freakin’ $270K!!!
(But I’ll be sure to stay away from Larry Flick
)
Hey, that looks okay for a $69,900 house. Wait a second! Holy $hit. That thing is listed at $269,900. Somebody grab the Jack Daniels. I’m having a meltdown. This is too much to comprehend.
Eastcoaster, how big is this place? Good grief. But, you are overlooking a fundamental flaw in even your comparison, and one that ALMOST EVERYONE makes. You should be comparing MEDIAN incomes to MEDIAN homeprices. A comparison of a median household income to a “starter” home does not make sense, IMO. But, could this place rent for $2,160 to $2,400 per mo (100 - 125x rent)? I think not. And where is this town? Is it desireable enough to pay more to live there? IMO, this place is 2x + over”valued”.
I can’t figure this out either. If you sell an old car, you don’t rebuild the engine and tranny, repaint it and reupholster the interior before you sell it. You just price it based on it’s current condition, sell it and get on with your life.
There is are big differences between cars and houses:
1) Your old car is only a small fraction of your household’s gross worth, while your house is probably over 90% unless you are in the top 3% of the wealth distribution.
2) There is a Blue Book which provides reliable information on what cars of different makes, models and vintages are selling for. The automotive industry has apparently figured out something about the marketing advantage of providing trustworthy information to buyers and sellers which the liars over at the NAR don’t understand.
Mr. Liareah, might I suggest you read George Akerlov’s paper* on “The Market for Lemons?” Because your industry’s reputation for deceit is legendary, and hurts your constituents’ ability to make a living by selling homes.
http://en.wikipedia.org/wiki/The_Market_for_Lemons
*Akerlo
vf won the Nobel Prize in Economics for this paper. I am wondering if DL missed it somehow?I agree with GS: I would paint the place and satisfy health and safety violations that might be required for closing ….(oh I forgot appraisers don’t do on site inspections anymore ).
They have alot of programs on T.V. now that are pushing this idea of improvements to sell the property . The advertisers for these shows are home improvement stores and mortgage companies ,real estate shops etc.
I think GS is right that the sellers in this market would be better off just listing at the lower price and let the buyer do the improvements they want . Just think the buyer will have lower property taxes ,a lower loan to qualify for etc etc. , which means the sellers will have more of a buyer pool .
“They have alot of programs on T.V. now that are pushing this idea of improvements to sell the property . The advertisers for these shows are home improvement stores and mortgage companies ,real estate shops etc.”
Wizard — That was exactly my hunch!
Wizard, excellent points!
GetStucco - well, would you expect a Budweiser ad on Lifetime?
This is easy to answer: They never studied Economics and learned about Sunken Costs. The past cost (Sunken Cost) has nothing to do with the Present Price.
Many people have a problem with this concept.
Also another point . Don’t try to over improve for the area . The lenders are going to be hard on the comps now and when they get that way your better off not being the best house on the block by sinking to much money into it .
I know realtors and TV shows might not agree with this advice , but in this market you have to think more about buyers being able to qualify . Also sellers might have to consider taking back second trust deed mortgages (approved by the lender ) in order to sell .
Ok Apologies for being a little “thick” but can you explain what a second trust deed motgage is and how this works?
Oh, I was talking about the sellers of the property taking back a purchase money second trust deed so the lender will be more willing to make a first trust deed loan . In other words the seller plays the lender on the highest risk portion of the total loans made ,so if the loan goes into forclosure the seller is the one taking the risk, not the lender .
Sorry I took so long to answer but I didn’t know a question was pending .
In tight money markets sellers start doing alot of this second trust deed lending because often times lenders cut the loan amounts back .( Needs to have the approval of the first trust deed purchase money Lender ). The lender is entitled to know every obligation that a borrower has to determine the income to debt ratios . The lender is entitled to know the risk they are taking on any loan ,so that’s why its fraud to hide facts ,debts ,obligations ,other loans ,real income ,assets .
I have always looks at it this way . Would I want the local bank where I deposit my money to be making bad loans ? its just better for everybody that the lenders make loans that are paid back and the borrowers qualify . I have seen lenders take a chance on someone ,but at least they had something going for them to justify the loan risk . This recent lending is just handing out money with no requirements .
Last year, they installed oak floors, kitchen appliances, bathroom floor tile, a furnace, central air conditioning and window coverings and painted the inside. The tab: $26,300.
Ugh - this is what my parents are doing. I know some on this blog think doing this kind of stuff is mandatory to sell, but I disagree. (Frankly, I’d have done it while I lived there so I could have enjoyed it.)
As long as a house isn’t structurally unsound, isn’t infested with cockroaches or mold or anything else nasty, isn’t so far beyond repair that I can’t see any potential - I wouldn’t be turned away. However, it has to be priced accordingly. Is the extra $26K really worth it to these sellers at the end of the day? Or could they just have reduced the price a bit?
Years ago I bid on a condo in the western `burbs of Chicago. I offered slightly less than asking price (this was around 1999) because it did need work - definitely needed all new carpeting and the rooms were wallpapered up, bathrooms and kitchen were old. I only bid about 5% below his asking price. The owner was some tough-talking a*@hole who told me to take hike. Said he’d “slap some cheap carpeting down himself” and get his price. But that’s kind of the point…cheap carpeting. So many people probably do a less-than-top-quality fix up job on these homes. Wouldn’t you rather pay a little less and be able to upgrade to your standards? Again, I’m not talking about a total fixer-upper.
Need an opinion from anyone interested in giving one. This house listing was sent to me today. I live in an area where the median household income is ~$55K. To me, this is pretty much a starter home. It’s priced at $270K which really blows me away. The newer windows are nice, but not much else seems upgraded. Based on the local salary information I provided, what would anyone think is a reasonable price for this home in this area? http://tinyurl.com/385hrk
High noon. Miami. January 2008. Buyer to seller: You have two choices. Either sell to me or have the bank do so on your behalf.
Do you feel lucky, Flipper?