“A Little Flooded With Houses” In Washington
The Register Guard reports from Oregon. “The Register-Guard’s Board of Economists predicts that 2007 will be a year of continued, albeit slow, growth in Lane County. Board member Bill Conerly sounded a note of caution, however, saying he is telling his business clients they need to plan for a worsening scenario.”
“A year ago Conerly, an economics consultant based in Portland, put the chance of a nationwide recession at one in 10. Now, he is putting it at between one in 10 and one in five. Conerly cites a housing market that he says is overbuilt nationally and the volatility of the economy locally as the causes for his concerns this year.”
“(Economist) Ed Whitelaw in Eugene, said he, too, was concerned about the housing market, particularly the growing percentage of people’s wealth, or savings, that is in their homes. Foreclosures in Oregon are increasing, Whitelaw said, which he found troubling.”
“Brian Rooney, regional economist with the state Employment Department, said he expects construction in Lane County to slow down in 2007, ‘but I don’t expect it to drop off the face of the Earth.’”
“Financial services, Rooney predicted, ‘will be flat as a pancake’ in terms of hiring, because of a slower residential market.”
The Daily World from Washington. “Home prices in Grays Harbor County rose again in 2006, but the total number of homes sold dropped. The beach and East County markets, which had been booming, saw the biggest decline. Real estate agents are now describing those areas as ‘buyer’s markets’ for the first time in several years.”
“The trend toward more expensive homes began in 2004, when county-wide prices started to rise at a faster-than-usual clip. Prices at the beaches and in East County rose far faster than in Aberdeen and Hoquiam, buoyed by second home buyers and overflow from Thurston County.”
“Russ Hutchinson, an agent in Ocean Shores, said the market ‘is definitely trending toward a buyer’s market. We’re a little flooded with houses, so there’s a big supply and not that high of a demand.’”
“‘People are listing their homes on last year’s market, and things have changed,’ said Don Cheli, an agent in Elma. ‘It’s hard for us to sell those properties at the prices people want to sell them.’”
“Cheli said what’s happening here is happening everywhere. ‘It’s definitely a trend right now, so it could change. But people will have to start lowering their asking prices if they want to sell.’”
“‘The new building that’s going on has hurt us,’ he said. New home building doesn’t appear to have slowed down like the existing home market. Grays Harbor County issued 177 permits for new homes in 2006, compared to the 179 it issued in 2005, which nearly doubled the 2004 number.”
‘The pending closure of a small sawmill near Lebanon, announced by Weyerhaeuser Co. this week, is the most recent symptom of short-term troubles for an Oregon timber industry slowed by depressed lumber prices. A housing slowdown nationally has led to lower lumber prices and translated to fewer jobs at Oregon mills in recent months.’
‘The industry has just recently started to feel the effects of a slowdown in housing,’ said Art Ayre, a state employment economist.’
Yes,
this may be one of the last straws on the Pacific Northwest forest industry. Faster growing pine plantations in the South and overseas have put the pinch on the industry the last few years. Douglas fir is a particularly good wood for structural timber, so the housing boom kept the wolf from the door for a time.
Timber towns like Lebanon have been depressed since the early 1990s, and never seemed to be front and center on the boom (equity locust don’t seem to have infested the small, conservative timber towns of NW Oregon-they are everywhere in SW and Coastal Oregon). It will be interesting to see if this bubble collapse could make things worse. Incidentally, the small timber towns of the PNW often have beautiful old homes for affordable prices, but they are saddled with entrenched rural poverty, meth, child abuse,etc.
“Incidentally, the small timber towns of the PNW often have beautiful old homes for affordable prices, but they are saddled with entrenched rural poverty, meth, child abuse,etc.”
The days of affordable old homes in the PNW are gone. I watched them disappear. I guess “affordable” is subjective, but the housing prices in Lebanon and elsewhere far exceed what locals, or median wages can pay. You’re dead on regarding the poverty, meth, and child abuse though. While looking for rural acreage, I drove through some areas which were just destroyed by it. Ugly and sad to see. Needless to say, I scratched those areas off my list.
I would certainly agree that affordability is relative. But I have noticed that many of the smaller, noncoastal towns in NW Oregon have had nowhere near the runup of locust targets. A fellow I worked with was trying to sell his home in Brownsville (40 mi. NE of Eugene} and I was amazed at how much cheaper it was than Ashland. He was too and he could never bring himself to sell his old 1860 farmhouse to buy a shack in Ashland. None if this is to say such areas are affordable, just less insane than other equity targets.
I grew up in the coastal Washington timber town of Hoquiam near where the article is written. Their is nothing that can depress that area more than it already is, the bubble burst there with the spotted owl 20 years ago!
Someone linked an article on this blog a few weeks ago about how pellets for pellet stoves were getting harder to come by because of lumber mills slowing down. At the time I asked the guy at the feed store and he said they weren’t having any problems getting pellets in. Then two weeks later I went back to the same store and there was a sign up that said there was a 12 bag limit on pellets per customer.
Yesterday a friend of mine told me she could not get the kind of wood shavings she likes for her horse barn because of a slowdown in the mills. She had to buy an alternative brand that was more costly and she felt was inferior. This friend also told me that she is going to lower the price on a couple of horses she has for sale because they are not selling and a friend of hers is having the same problem and has already begun to lower prices.
“poverty, meth, child abuse,etc.”
You mean as opposed to the rest of the country.
Funny but true. I saw more press, billboards, etc. on the met problem in the Ozarks and rest of Appalachia in my summer travels than the rest of the US, the Pac NW included. Not to say it doesn’t exist there, but it seems to be common in many, if not all parts, of rural America.
And poverty and child abuse - well that goes without saying. Rural America is shamefully poor.
“‘People are listing their homes on last year’s market, and things have changed,’ said Don Cheli, an agent in Elma. ‘It’s hard for us to sell those properties at the prices people want to sell them.’”
Another agent who has moved beyond the ‘denial’ phase. Very interesting.
OT, from the NYTimes:
Young Buyers, Prepared and Fearless
“While many buyers under 30 are getting financial help from their families, they are also turning to aggressive financing. Data collected by the National Association of Realtors show that nearly 65 percent of first-time home buyers finance more than 95 percent of the cost. A first-time buyer is also far more likely to have a mortgage that begins with an attractive interest rate and adjusts periodically.
“Because co-ops in New York often require deposits of 20 percent, younger buyers tend to look at condominiums that require only about 10 percent and allow for creative types of mortgages.
“In the most extreme cases, Joseph Gallagher, a Corcoran Group broker in Brooklyn, has had clients with high credit scores finance everything, even their closing costs. He finds that some developers are willing to take down payments as low as 5 percent to fill their apartments.
“In the wake of the recent record Wall Street bonus season, brokers say that buyers who have made enough money to put down 20 percent are choosing to keep their money in their pockets.
“Younger buyers want to retain their cash,” Mr. Gallagher said. “They don’t want to empty their bank accounts for a deposit. They want to finance 100 percent if possible.”[...]
“My parents freaked out when I said I was doing a seven-year, interest-only ARM,” she said. “They’ve always bought properties that they’ve owned for life.”
“In the end, they agreed with her that it was smarter to own than to rent — they even paid for the crown moldings. Since she moved in December, Ms. Lewis has painted her walls a creamy Edgecomb gray and has framed watercolors she painted as a child. She’s feeling more comfortable with her decision every day.
“I really think that real estate will not go down,” she said. “At the very least, it will stay the same. In the meantime, I need a place to live. So the worst-case scenario still isn’t that bad.”
why do they always assume like every new yorker works on wall street and gets a bonus … all those people have a house already paid in full… (exaguration but you get it) Not all of those whom work on wall street get a bonus over 100k thats probably like 5% of the people IF that… and most of those people have houses summer houses winter houses and apartments…
“all those people have a house already paid in full”
Same with 60% of Los Angeles. Caught in Prop 13.
That’s why I don’t think the FB’s will get the “free ride”. The majority (older and VOTING) won’t stand for it.
OT, from the NYTimes:
Young Buyers, Prepared and Fearless
“While many buyers under 30 are getting financial help from their families, they are also turning to aggressive financing. Data collected by the National Association of Realtors show that nearly 65 percent of first-time home buyers finance more than 95 percent of the cost. A first-time buyer is also far more likely to have a mortgage that begins with an attractive interest rate and adjusts periodically.
“Because co-ops in New York often require deposits of 20 percent, younger buyers tend to look at condominiums that require only about 10 percent and allow for creative types of mortgages.
“In the most extreme cases, Joseph Gallagher, a Corcoran Group broker in Brooklyn, has had clients with high credit scores finance everything, even their closing costs. He finds that some developers are willing to take down payments as low as 5 percent to fill their apartments.
“In the wake of the recent record Wall Street bonus season, brokers say that buyers who have made enough money to put down 20 percent are choosing to keep their money in their pockets.
“Younger buyers want to retain their cash,” Mr. Gallagher said. “They don’t want to empty their bank accounts for a deposit. They want to finance 100 percent if possible.”[...]
“My parents freaked out when I said I was doing a seven-year, interest-only ARM,” she said. “They’ve always bought properties that they’ve owned for life.”
“In the end, they agreed with her that it was smarter to own than to rent — they even paid for the crown moldings. Since she moved in December, Ms. Lewis has painted her walls a creamy Edgecomb gray and has framed watercolors she painted as a child. She’s feeling more comfortable with her decision every day.
“I really think that real estate will not go down,” she said. “At the very least, it will stay the same. In the meantime, I need a place to live. So the worst-case scenario still isn’t that bad.”
Does she have watercolors of elves, unicorns, good witches, and handsome princes framed because the rest of her life sounds like it is based on fantasy ? .
imploder notes editor ran with wrong headline:
“Young Buyers, Prepared and Fearless”
correct headline should read:
“Young Buyers, Lubed and Stupid”
“As Spring Home-Shopping Season Looms, Supply Mounts and Prices Fall in Some Areas; Builders See Slow Recovery”
http://finance.yahoo.com/real-estate/article/102330/Housing_Glut_Gives_Buyers_Upper_Hand
http://finance.yahoo.com/real-estate/article/102330/housing_glut_gives_buyers_upper_hand
http://www.seabrookwa.com/default.asp
Seabrook development activity may account for the large spike in building permits for Grays County. This is near Pacific Beach, WA. Expensive square footage, especially for the area - Seabrook Lot 85 - Manzanita A Cottage 3 Bed, 2 Bath - 1452 sq. ft. $589,000
Developer has also built 2 neighborhoods on central Oregon Coast, Bella Beach and newer Olivia Beach. Very nicely built cottage homes but more expensive per sft than similar sized homes in the area(s).
This place makes no sense. I have seen ads for it in airplane magazines. I guess out of work loggers are getting more money from the government, or Seattleites are looking for second homes where it rains more than their first home? WTF????
where is Eric Estrada when you need him…..
I was in Ocean Shores/Seabrook about four months ago. It’s a 2 1/4 hour drive–at best–from Seattle (on a dry, sunny day with no traffic through Tacoma and Olympia–sarcasm off). You have to drive through the blight and blank downtowns of Hoquiam and Aberdeen, then another 15 minutes to the barrier peninsula. It’s an OK place if you don’t mind being sandblasted by the wind much of the time. There’s no retail to speak of at all, so you have to live as if you’re in a remote area, even though you’re able to look into your neighbor’s bedroom window across your driveway (very few trees in the area).
check out this listing in Ladera Ranch, Orange County, CA. The owner bought it for $1.6 million in 9/2005. Foreclosing since 9/06, on the MLS for $1.2 million since 12/06.
Bubble Markets Inventory Tracking
Zillow has the value of this place as $1.8M. So much for Zillow.
My husband’s job takes him from the Rogue Valley to Eugene, Bend, Klamath Falls, the Oregon coast south from Newport, to Eureka, CA, inland to Redding/Chico, and everywhere in-between. Many clients are builders, most small operations. We’ve wondered which of them will survive this downturn.
Last week he saw a client who, by choice, had not built a single home in ‘06. The guy, 30+ years in residential construction, told my husband he spent the year paying off his home, cars, bills, and has a healthy reserve, as the area is severely overbuilt.
He told of an acquaintance, another builder, who built 7 homes (I believe in the Rogue Valley) last year, has sold one, and is carrying the remaining six at $10k each a month.
Mary Lee that’s an interesting observation. Clearly one builder will survive the downturn .. what percentage of them does your husband think will go under? Which areas does he see as most vulnerable in his travels?
…Oddly, too early to tell, as my husband is auditing primarily gross sales/payroll figures, rarely y-o-y figures which would indicate trends, and so many are only casually mentioning business slowing. We suspect he’ll be hearing more anecdotes as spring progresses.
If that builder would have significantly discounted those homes last year, he would have been better off. He is going to ride those reptiles all the way to BK.
OUCH!
McMansions Sitting Unsold
At the end of 2006, almost 875 new houses were finished and vacant or under construction in several Dallas and Park Cities neighborhoods, according to a survey by Residential Strategies Inc.
Builders closed sales of only about 600 homes in so-called teardown neighborhoods last year. The number of unsold finished homes has more than tripled in the past year.
The volume of homes in the construction pipeline in these areas is “way up,” said Residential Strategies’ Ted Wilson. At the same time, demand for all new homes in the Dallas area has softened.
“They have probably overdone it a little bit,” Mr. Wilson said. “I think they need to wait a little bit in some markets before they start more new homes.”
http://tinyurl.com/2xx6w8
Ben! LOL! Your blog is linked here on a bankruptcy academics’ site. See, “Elsewhere in the Blogosphere” about halfway down the page.
http://www.creditslips.org/creditslips/mortgage_debt_home_equity/index.html
This looks interesting.
Oh, this is interesting too:
http://www.creditslips.org/creditslips/2006/12/who_gets_protec.html#more
how about this for construction quality?
Houses are being blown away by the wind!
http://tinyurl.com/2eehv2
“(Economist) Ed Whitelaw in Eugene, said he, too, was concerned about the housing market, particularly the growing percentage of people’s wealth, or savings, that is in their homes.”
And I am concerned with the growing percentage of people’s wealth, or savings, that is leaving their homes. First it was leaving through home equity ATM cashout financing, and more recently it has left through falling market values.
Excellent point GS and last week we learn Americans are spending more than they earn with zero cash savings. Appears many live in an “economic house of cards” with a cold wind headed their way.
That may be somewhat misleading… the “savings” numbers are apparently post-tax only and do not count such vehicles as 401Ks or other “pre-tax” investments.
Which rather comforts me, actually; I’d prefer that Americans have a little sense.
saving rate refers to money left after paying bills, food etc. which has been negative for 18 months so J6P either borrows from a CC or savings each month to live. Saving rate basically has nothing to do with how many dollars J6P has in a saving account such as 401K etc.
Back in the last bubble I worked for a mutual fund company in Denver. So many people would call in and redeem their 401k and Ira’s to buy toys (4 wheelers, boats, etc). And the really bad thing about this is 4-6 years later most would have nothing to show for the money they lost as all of the toys depreciate and are worth next to nothing when they break down.
Off topic… but blew my mind.
I live near Vancouver BC Canada. I am in a position where I have to rent a house. I looked at a few houses and I came upon a brand new rental. The house has a detached garage. The detached garage has a finished apartment above it. I arranged to meet the landlord, and it turns out that they are renting 3 houses of this type. I was curious as to how many houses they have because she specifically asked me what house number I was at. Across the street there were 3 empty houses, probably more belonging to speculators. Amazing…. 3 large houses waiting to be rented with 3 across the street waiting to be sold. And the building is in full gear, constructions crews working weekends and the whole works. Subdivisions popping up moments after a few small houses are leveled. Ugh!
They’ll have no problem till 2010. Once the olympics are done they’re toast.
I saw a huge new condo development by Squamish, on the way to Whistler. It’s really the middle of nowhere, unless you neither want to ski nor to work a city job.
The Vancouver market peaked in summer ‘06; it’ll be unequivocally in the toilet by ‘09, and the Olympics in ‘10 will ironically serve as a bitter reminder of naive hopes in better times. Cheers!
Housing Bubble: Ponzi Schemes Unwinding
http://www.axisoflogic.com/artman/publish/article_23897.shtml
Just seen on Channel 8 in San Diego: A guy in Lakeside has a condo “in probate.” A La Jolla RE agent comes over to look at it, gives the guy an estimate of what it would sell for, the guy shoots the RE agent dead. The shooter is arrested 1 hour east of Tucson, stopped for a traffic violation. I guess he didn’t like the price. Don’t shoot the messenger!
GS linked this story earlier today.
Wonder if same RE agent sold him said condo?
“A year ago Conerly, an economics consultant based in Portland, put the chance of a nationwide recession at one in 10. Now, he is putting it at between one in 10 and one in five.
————————————————————————–
Brilliant, just brilliant economic research…..and talk about going out on a limb on a prediction!!
they call him the gambler
at one in 10. Now, he is putting it at between one in 10 and one in five.
a man with numerical mental basics might instead say between “1 and 7.5″ if im not mistaken. Apparently this man has a veritable microscope on the economy……
to me he sounds like an idiot
In Australia he would be called a F***wit.
Not sure I agree. The estimate is worthless, of course. But for pundit he is hedging his bets. If recession does not occur, he says he called it as a longshot (1/10). If it does occur, he can say it was a real possibility (1/5). I am sure Lareah is envious.
Connected to real estate gone sour, that one condo was in foreclosure… the owner shot the realtor then fled:
http://www.nbcsandiego.com/news/10922132/detail.html
Wow, I wonder if we will be seeing more “Real Estate Violence” in the future or if this is a fluke. The downturn is just starting so I don’t really want to know the answer.