Bits Bucket And Craigslist Finds For February 4, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Apologies if someone’s already posted this, but Aaron looks to be onto something big.
“Mortgage Lenders: The three bears come home - Subprime Credit Crunch Could Trigger Collapse”, by Aaron Krowne, iTulip, February 2, 2007.
http://www.itulip.com/forums/showthread.php?t=883
what comparisons do we have to 1991 ?
20% of RE market (oil patch) was already dead by 1986 and the mid west never boomed so it’s tough to compare
–
“The Fed is clearly already trying to stop it, with the accelerated M3 money growth (as was also done in 2000/2001), but it’s already too late. The stock market is obediently being inflated, but that does little to distribute wealth to the suffering masses in debt, who are the source of these rising MBS defaults.”
That has been my point of argument against inflationists: How does Fed get that money to the majority that needs it the most when additional debt can’t be pushed on to them? Housing has been the easiest and the most important mechanism to get money into the hands of irresponsible spenders (that pushes inflation up).
Jas
“Housing has been the easiest and the most important mechanism to get money into the hands of irresponsible spenders (that pushes inflation up).”
The problem is that unbeknownst to the FBs, who were assured that “real estate always goes up,” this money came with strings attached. And the builders and flippers joining the party did not help the FBs much, as the former built enough McMansions so we now have 2.1m vacant homes for sale, and the latter drove prices through the roof, leaving the FBs with deflationary anvil in hand.
“In sum, the entire financial economy looks vulnerable to a rout here, …”
Wrong. Hasn’t he heard that housing’s problems will be quaranteed so the contagion does not affict the rest of the economy? Think of this as modern economic alchemy at work…
quarantined
As of last year, the Fed does not publish M3 anymore. What does that mean? Hiding something?
http://www.federalreserve.gov/releases/h6/discm3.htm
Lots of elephants are hiding under living room rugs these days…
Oh no, no, no. It’s all about cutting back costs, don’t you know. In comparison to everything else, the M3 was just too costly to publish any more. (sarcasm off)
There was soooooo much money to count the expenses grew to large…lol
That was actually the excuse the Fed used — the cost of collecting the data outweighed its analytical value.
“The subprime shakeout is predicated on the deterioration of subprime mortgages and mortgage-backed securities (MBS), which is in turn caused by… rising delinquencies, which is in turn caused by the deteriorating financial position of most Americans.”
I’d have to disagree a little with Aaron here…my belief is that the upswing in delinquencies IS NOT caused by “the deteriorating financial position of most Americans”. It’s caused by loan standards that, for the past three years or so, have allowed people that really couldn’t afford these high home prices, to buy a home. No money down, no closing costs, 100% (or more) financing, low teaser rates, I/O loans, Pay Option loans, and state income programs have allowed people to purchase houses that they really had no way of paying for. Continually rising home prices had masked the effect by giving these strapped homeowners an “out”, but now that prices have stabalized or declined, the true effect is becoming appearant.
In other words, “the economy” ISN’T really the driving factor in forcing people to sell…it’s the NODs and foreclosures that do it. Sometime it’s a horrible economy that casues NODs and foreclosures to skyrocket. However, in some case (like in the current one), you can have skyrocketing NODs and defaults even with a “good economy”.
“It’s caused by loan standards that, for the past three years or so, have allowed people that really couldn’t afford these high home prices, to buy a home.”
Spot on. The root cause was lax lending standards, and the effect is currently deteriorating household financial positions (except for the small minority of households which are now richer than Croesus thanks to the lax lending standards).
it think he is speaking in general term. isn’t depreciating main asset deteriorating financial situation?
“last I heard, US banks still hold well over 50% of their assets in the form of real estate-related securities.”
I wonder how guys and gals at the FDIC are doing…
Got fear?
If that doesn’t scare you, then add FNM and FRE to your worry list…
A couple of weeks ago I posted about an acquaintance of mine who bought a house before selling their old one, tried to rent it out, and then ended up putting it on the market. After doing so his next-door neighbor put his house up for sale for $100,000 less.
I guess he realized he needed to do something so couple of days ago, he cut the price from $599,900 to … wait for it …
$599,500
Yes, you read that right. A whopping $500 off a $600,000 selling price. For those of you bad at math, that a reduction of less than one-tenth of one percent.
He’s serious about selling, but he’s not going to just give it away, you know.
–
“He’s serious about selling, but he’s not going to just give it away, you know.”
If he waits long enough, he wouldn’t have to give it away. The lenders will take it away (assuming that he owes more than $200k) and relieve him of the burden.
It is the times like this that exposes the ignoramuses.
Jas
assuming that he owes more than $200k
Yes, both his old and new mortgages are I/O ARMs in excess of $370,000. He is completely screwed. I just don’t know if he knows it yet.
This question usually gets people, if you dare ask it:
“If there was something at Target you wanted that sold for $59.99 and you were going to wait and buy it when it was on sale, would you jump at the price if went down to $59.95 or would you just laugh at the store’s idea of a sale?
Response: blank look, angry look, speechless, or defensive. Reality checks are tough, but all of these people are going to have to pull their heads out of the sand soon…. either that or the buyers better come out after the superbowl.
I don’t talk to him or his wife anymore. She, in particular, lords it over people that they have so much money^H^H^H^H^Hdebt. We still see them since our kids go to the same school. I am watching closely for signs of changes in their personality as this draws out. Not to gloat, but merely as a study in psychology.
“^H^H^H^H^H”
Hee hee, obviously a an “old school” computer or tech guy/gal…
I got it too, glad to see some subtle humor like that around here.
I’ll see your price cut of $500 and raise you the following..
Market history…
Oct 2005 - listed at $730K
Nov 2005 - reduced to $699k
Dec 2005 - reduced to $679k
Jan 2006 - delisted
Jan 2006 - relisted for $670k
April2006 - reduced to $650k
July 2006 - reduced to $609k
Aug 2006 - reduced to $599k
Oct 2006 - delisted
Oct 2006 - relisted for $599k
Nov 3 2006 - reduced to $570k
Nov 6 2006 - increased to $599k
Jan 25 2007 - reduced to $570k
Jan 29 2007 - increased to $599k
Jan 30 2007 - Under Contract - looking for additional offers
“Yes, you read that right. A whopping $500 off a $600,000 selling price. For those of you bad at math, that a reduction of less than one-tenth of one percent.”
Sorry but that is a reduction of $400.00 not $500.00.
SKB
For those of you bad at math…
Talk about irony!
Hey, close enough…..
I see his problem now.
Had he reduced it by $500 rather than $400, the buyers would be flocking to it.
test
in not so sunny south florida this weekend has been open house central, some of the realtors placed ads for the superbowl visitors to come buy their slice of paradise, blech..
On my street, the second Notice of Trustee’s Sale in a month. The first went to auction. I expect this one to as well.
My neighborhood is completely screwed.
Too bad Ben doesn’t have a forum
http://www.nytimes.com/2007/02/04/realestate/04cov.html?_r=1&ref=realestate&oref=slogin
Good decision making process, bad decision. 20 years ago people would have relied on their realtor and that’s it. Today we are getting access to more and more information.
I liked it how they did some research on what they were buying, but i think they are crazy for spending so much money and taking the adjustable loan risk. back around 1988 not too many people would have believed the fed would raise rates all the way to 10% by 1990.
it’s like they teach algebra and calculus in many european countries and some US schools. The most important thing is to show the work step by step and for the teacher to see how you did the problem, not that you get the right answer. If you can see where you made a mistake then you can fix it later.
“The most important thing is to show the work step by step and for the teacher to see how you did the problem, not that you get the right answer.”
Sadly, this is a true story. I have a friend in the City that is going through an MBA program. I think it’s mostly online but for some of it they actually go to a building. I won’t comment on all of this online education that everybody is getting. That’s another rant.
A couple of weeks ago he was telling me how great the program is because it is so practical. Apparently the teacher (do they call them professors?) put a large problem on the board. He pointed to it and said something like, “this is a very hard problem to work out. But you don’t have to worry about it. You will have computers that will do all of this for you. You just need to know how to get the answer.”
I almost cried.
I remember when the nuns at my grammar school, wanted both..the correct answer and how we got to it..and we didn’t get to use a calculator (believe it or not, we had those 30 years ago).
Those nuns were tough, but I am better for it now.
“I won’t comment on all of this online education that everybody is getting.”
I will briefly comment. Unless the online education industry somehow deals with the perception that an online diploma is a bad signal, online education will never act as a close substitute to traditional face-to-face education. Also note the close parallel to no doc and traditional doc lending.
dba,
I have to disagree. I read that article, and it’s impossible to believe the claim of “research”. All the examples mention apt. prices and I/O, ARM and Bank of Mom and Dad financing. Nowhere is maintenance mentioned, which can add 800-1200 a month to your costs (being conservative with this estimate) and property taxes–which in NYC are not terrible. The first couple need a minimun of 8K a month to carry that place–a fixer-upper since they’re adding a floor. 2007 will see @30K new condos on the market in NYC-many with views and gyms. If they need to rent it out if things go south, they’re going to compete with new condos, and from the desciption, they’re in a midtown cave–if they had views or light, it would be mentioned, because it adds another 50-100K to the price. The woman photog has a place on the “outskirts of Williamsburg”–where, in Bushwick??–yeah, that’ll hold it’s value. Another who confuses renting from the bank with an I/O with “owning”–just that she’s also liable for maintenance, insurance and prop. taxes. Glad she researched that move-can you imagine if she didn’t?
My fave thou is the couple with the “loft” on 117th-in Spanish Harlem. Great neighborhood-crumbling tenements, drug dealers on every corner, gangs, graffiti, high grime/crime. Neighborhood shopping-off track betting and grungy bodegas.Yeah, that’s worth a half million.
All these folks are swinging for the fences at the top of a stalled market.Want to do some real research?? Check the Times archives circa 1990-93–they ran a hundred articles on “investors” who couldn’t find renters to cover half their carrying costs. It just wasn’t that long ago.
“It just wasn’t that long ago.”
but it’s different this time, because it is a new paradigm, and they aren’t making anymore land and baby boomers want to live in the city, urban lifestyle is the new replacement for the suburban lifestyle, because gas in expensive, blah, blah, blah, yadda, yadda, yadda,
The last straw for when I knew there was a massive Housing Bubble, and that it would collapse miserably, came in Fall 2005. We had been looking at places online. My wife & I saw that new lofts were being created in Harlem. I think they were 800 - 1000 square feet. The website pictures looked nice (artist’s rendering). We called the listed “real estate professional”. She called back and told us the lofts would be ready in April or May of 2006. The prices started at a mere $800,000. I swallowed my tongue and cell phone, thanked her and never called on another apartment, condo, loft, doghouse or bird cage.
Same deal here in SFO. We ended up renting a new loft in the Mission. Nice place for the city. When they first went on sale back in 2003, they were going for between $350-450K depending. About a month ago, we watched one go into escrow for what was a $1.1M sale price. Most are going for around $850K. It’s just mind boggling, really. 100% appreciation in 3 years? No bubble here…
It came for me in summer 2005. My wife and I were thinking of buying a bigger place and drove around the developments in Tucson. It was sheer insanity- high prices and literally nothing available to buy. “Leave a number and we’ll call you if we open some more lots”. I had $500,000 to spend and nothing really available? In Tucson - a town dominated by call centers?
When interest rates shoot up to stop inflation Wall Street will grind to a halt and I-bankers will be canned in job lots. Advertising photography positions will disappear when InStyle goes back to 300 pages. These kids are absolutely, irrevocably screwed.
“Great neighborhood-crumbling tenements, drug dealers on every corner, gangs, graffiti, high grime/crime. ”
The risk priemium for housing near crime-ridden areas will come back. In DC, I was amazed at the prices people were paying for houses located in bad neighborhoods - like U street. Imagine paying $700,000 dollars for a townhouse near an intersection that frequently is the scene of violent gang activity?
“The risk priemium for housing near crime-ridden areas will come back.”
It will come back along with the crime.
The Times continues to con readers with fake flattery on behalf of its RE advertisers. Remember when they tried to guilt us into buying in Summer 2005 — then, in late 2006 or so, they spewed on about how women were asserting their independence and control by purchasing condos - now of course, they can’t guilt or flatter the older folk into doing their masters’ bidding, so they have to gush to the young people about how great it is to buy so young -not mentioning they’ll be yoked to their debt 4-eva. The only thing that’s fun about this is anticipating how low they’ll go next (the mentally disabled, maybe –now is the perfect time for them to buy…)
“Experience keeps a dear school, but fools will learn in no other.” B. Franklin
“The most important thing is to show the work step by step and for the teacher to see how you did the problem, not that you get the right answer.”
dba — Excellent insight there! Are you an educator?
This is why I distrust computer-assisted learning. The computer favors problems which can be easily worked out in your head, over the more important kind which need to be written out step-by-step and pondered. I have to personally supplement my kids’ math education to make up this deficiency.
My realtor admitted yesterday that things are really slow. She said all that’s selling is new stuff in the $300s. (3000 sq footers on multiple acres–although some are overpriced townhomes) I’ll have to go to public records to see how the sales prices held up.
“I’ll have to go to public records to see how the sales prices held up.”
Also look up how this stuff is financed (also in the public records)…that’s going to be my project for the week.
Super Bowl Sunday!!!
Isn’t this the supposed kickoff for the Spring Market?
Let the games begin.
Has there actually ever been a kickoff that was blocked before?
I think the REIC will go 3-and-out with their first possession and then punt. But first they will have 3 false starts, 2 holdings, an illegal use of propaganda and burn all of their timeouts.
LOL
I’m laughing at the blocked kickoff analogy.
Its the realtors ™ vs. the inventory. In this case the inventory is playing a 15 man squad and everyone, including the refs, thinks that is normal and ok.
Interesting… the buyers (stands) just really aren’t there (ticket prices for the “spring bounce bowl” are just too high. Most are home watching the spectacle on TV.
With…
Got popcorn?
Neil
“In this case the inventory is playing a 15 man squad and everyone, including the refs, thinks that is normal and ok.”
The inventory squad also outweighs the realtor squad by a 10-to-1 factor.
Here in Phoenix, inventory is running a 51,000 man squad, with 25,000 more rookies ready to go.
The MSM refs are on the sidelines taking bribes from the Realtors’ team. Learah, Watts, and co. look great in their cheerleader uniforms (a hint guys: shaving isn’t just for women).
Oh look, during the national anthem there’s a helicopter flyover, and they’re dropping money, yay!!!
That’s a great idea for getting money where it’s needed in the economy — helicopter drops into the football stadium during the Souper Bowl halftime show!
51,000 units. Are you sure the realtors still don’t have them outnumbered?
LOL
Hey HD74,
If you are out there..question for you…(not an attack)..
A while back, you replied to a question from me, regarding the outlook for the North Shore market. While you felt properties were expensive and over-priced, I didn’t see much in your comments that indicated that values would be dropping all that much. (please correct me if I am wrong)
More recently, last week sometime, you were much less sanguine..in some of your comments. For example, you felt that people buying now, would be likely to lose equity in the six figures. Is that to say that a $500k - $600k house would be dropping by $100k or more?
Did something in your outlook change or did I get one of the views wrong?
I truly appreciate your opinions, because it appears that you have a realistic view of the market.
Thanks.
Pen
The Housing Bubble Blog wisdom trickles down to the National Association of Realtors and the National Association of Home Builders… If you price it right, it will sell. (And the MSM is not to blame if you cannot sell your overpriced POS!)
Interesting and possibly irrelevant footnote: Pennsylvania is Toll Brothers’ home state…
————————————————————————————————–
Prices, not the press, help move sales
By Alan J. Heavens
THE PHILADELPHIA INQUIRER
February 4, 2007
PHILADELPHIA – Though some real estate industry executives blame the media for the downturn in the housing market, a new study shows that press reports are not a deciding factor in whether people buy a home.
“While the majority of the households we polled indicated that they found the media a reliable source of information on the housing market, what they read in the newspaper, saw on television, or heard on the radio was no substitute for actually going out and shopping the market,” said Thomas Riehle, a partner in RT Strategies, which conducted the research for the National Association of Home Builders.
The things that matter far more for potential home buyers, Riehle said, are price, mortgage interest rates, and their housing needs.
Fixed mortgage rates remain historically low at under 6.25 percent, and have, in the last nine months, been falling more than they have been rising, according to data supplied by Freddie Mac, which tracks the rates weekly.
Median prices have been declining over the last year for both new and existing houses, which David Lereah, chief economist of the National Association of Realtors, has called a necessary “correction.”
Reduced affordability is one of the major reasons for the drop in home sales nationally over the last year, Lereah said.
http://www.signonsandiego.com/uniontrib/20070204/news_1h04media.html
Another from today’s UnionTribune on divorce and the inability to sell:
http://www.signonsandiego.com/uniontrib/20070204/news_1h04divorce.html
From the article:
“When it comes to the house, divorcing spouses should tell their real estate agents the same thing they tell their lawyers: I need to dump that loser.”
The average sale time for a home in my price range is 1,065 days,” says Cooper, who must sell the home as part of his divorce settlement. ”
Almost 3 years?….that’s gotta have a “till death do us part” edge to it….and that’s the historical time frame based on the past (before the sh*t really hits the fan.)
SE Michigan is toast, from what I hear (reading between the lines) from my old high school classmates (those who chose to stay - I dropped out of U of Mich/Ann Arbor, left MI and never looked back). That 1,065 days average sale time is for a $340k house in what (once was?) a pretty nice area.
This bust will probably make for some real ‘War of the Roses’ moments.
This story is precisely why everyone should consider future price movements. It is NOT okay to buy a house because you can “hold onto it” for 5 years and break even (not likely). The house must have the potential for cap gains from the start, IMHO.
One never knows when they will need to sell. Best to buy at or near the bottom (preferably, once it starts moving up), so you don’t find yourself in this type of situation (can’t sell when you need to).
Always ask, “who will buy this house from me at a higher price?” If the list is short, don’t buy.
story @ Bakersfield.com also on the front page of the newspaper- foreclosure tragedy.
Sorry local reporter, I emailed you two years ago and asked you to write about the coming tsunami of foreclosures, instead you ran stories about the “real estate moguls” every other weekend.
Let the FB’s burn in their own stupidit - No government bailouts!!!
*stupidity
http://www.bakersfield.com/102/story/97914.html
“I’ll be 83 years old in May and they want to throw me out in the street,” she said during a recent interview at her well-kept home in the 2600 block of Tangerine Street.
One look at the picture and I’m sure she ain’t no flipper. She got porked by the loan officer. Sad , really sad. In 2002 I worked as a loan officer for a friend of mine. I was amazed at how many older people were refinancing just to keep up with taxes and the cost of living (especially health care) . Many had there house paid in full prior.
Taxes on old people is why Prop. 13 is a good idea.
Yeah, it’s great as long as you don’t mind all your employable young people moving somewhere else.
As the older people die, either their employable kids move into it or rent it…or they sell it for the money. Either way, young people are NOT chased out of the market.
I’m certainly not going anywhere because of Prop 13. I think it’s one of the best things that has happened to CA.
“Statewide, foreclosures jumped almost 600 percent, DataQuick figures show.
In raw numbers, that meant nearly 6,080 foreclosures in California during the last quarter of 2006 compared to about 875 during 2005’s final quarter.”
Wow!
Journalists like the bubble and the stories that come with it. Most knew this was coming. Lift your head up, look at your neighbors at the local grocery store and ask yourself how these people can afford housing.
Stories like this with a picture of a grandmother and her two dogs are softening the attitudes of the American people and paving the way for a tax funded bailout.
Freedom demands personal responsibility. Suck it up.
” paving the way for a tax funded bailout.
Freedom demands personal responsibility”
I can see it coming. UGH!
As of Friday evening, the Dunaways hadn’t yet heard from Gutierrez. They aren’t sure what will happen next. They wonder if an eviction notice is on the way.
Mary Dunaway fretted over costs on a recent evening before the sale.
“I’m using my burial funds to pay for this,” she said.
–
“No government bailouts!!! ”
You must be kidding. This is America. We can’t have 10,000,000+ people lose their homes over a short period of 2-3 years, can we? Never.
Bankrupters and Fraudsters know this about American People — they wouldn’t let stupid people suffer too much (some is allowed to make the system look fair and just). So, the financial system will be bailed out by the largest group of suckers on the planet — hardworking and honest taxpayers (mostly, the future taxpayers) of America.
Jas
I was wondering if anyone in this forum is in the process of buying? I would like to know what your thoughts are about the current market in your area and what your headaches are. So far I have been looking for the past year and see some real dogs for sale at asking prices that are unbelievable for the area. I have seen several relistings with price increases in this area. The houses that have sold very quickly in the past year are under the price per sq foot for comparable comps than what the average of comparable sales are asking. I have made several reasonable low ball offers 10% off list price and find that I am dissappointing the sellers. Yet when I look at the comps list price vs the sold price is often more than 5% reduction off the list price. The house buying process is like searching for a needle in haystack for the right price . Yet I know in a couple of years the risk that I take by buying close to the list price now will be that value of the house will be 10% less as there is a lot of overbuilding in the area with vacant homes. It is a time consuming process to buy a home in this market to weed out the sellers with their wishing prices and the people that actually want to sell their home. I see listing after listing within the past year withhuge price disconnects with what a house is listed for and what it is actually sold for. For example one house was originally listed at $675K then finally reduced to $579k than sold at $565K. It took over 5 months for the seller to see the light. I expect to see alot of this in the Spring with prices correcting in the fall.
I own 2 investment properties in Portland. You couldn’t pay me to buy anything now. I bought before the run up but I’m sure things will be very tight finding good tenants as the market falls apart. I’m expecting things to go back down to 2000 price levels anyway up there within 2-4 years. Maybe then I’ll think about it.
Anyway, if your interested in Portland at all, go to the city website and check out what houses sold for on any street you want. I’ve been stunned at some of the percent increases I’ve seen - and assummed they were purchased with toxic loans. I drive by houses, looking at all the ones I know will soon be in foreclosure. Ugh.
http://www.portlandassessors.com/
We can speculate all we want on the direction of prices, no one really knows what will happen.
That being said…
If you are intent on buying now, then get yourself a Buyer’s Broker and make sure the broker presents your offer directly to the seller. Have a pre-approval letter ready to go, but only agree to show it once your offer is accepted.
If you have a house to sell, that needs to be a contingency (a signed P&S on yours and financing, not just an acepted offer). The seller probably won’t go for it, but you don’t want to be stuck with two homes, unless you are willing to fire-sale your current property.
Place the offer in the late evening and have it expire early the next morning. You don’t want to give the listing broker a chance to try and get his/her customers to setp up.
“We can speculate all we want on the direction of prices, no one really knows what will happen.”
Absent massive government intervention, what do you see replacing the collapsing subprime bid?
And what form of intervention could the government use which would avoid the appearance of stealing from taxpayers who had nothing to do with the subprime implosion?
We know the direction of prices. Anyone buying in 2007 has their head in the sand.
Work this year to increase your down payment (”keep your powder dry”). As GS noted, without something replacing the sub-prime lenders, prices will start dropping faster.
In my area, prices have dropped 7% by list, plus another 3% by who is paying the closing costs. Guess what HSBC is predicting 2007 to be far worse than 2006 and 2008 to have slightly more price erosion than 2007. USB bank is predicting on similar lines. Heck, read the fine print and all of the big banks are warning that home prices are going down.
With the majority of buyers lacking a down payment… the reinstitution of that quaint concept is not in the seller’s favor.
Wait. I don’t see a good buying opportunity before fall of 2008. Note: bottom in prices most likely in 2009. Note again: I place a premium on selection and the utilization value of a house. You need to decide if the lowest price is the best call for you.
Again, Realtor ™ commisions peaked at 0.9% of GNP. They normally peak at 0.6% of GNP and then drop to 0.3% of GNP in the following downturn. No downturn has lasted less than 30 months. None.
Sit back, relax. Keep your mouth shut around friends who made bad decisions (but support them, non-financially, as you can). Realize how few people/couples make $100k a year. How very few make more than $200k a year. Also realize how few qualified buyers are spectators right now.
Got popcorn?
Neil
“Keep your mouth shut around friends who made bad decisions”
I learned this pretty fast last year, particularly around work.
“And what form of intervention could the government use which would avoid the appearance of stealing from taxpayers”
Respectfully, when has this been a problem? If you take money away from 49% of the population and give it to the other 51% of the population, and spin it as “redistributing wealth” or “leveling the playfield”, the 51% (as well as parts of the 49%) will agree.
Bailing out FBs, especially “sub prime” borrowers that can claim “predatory lending practices” make great front page headlines and nightly news footage. It’s all good!
“Respectfully, when has this been a problem?”
Never. I was just interested in hearing peoples’ opinions about how it would be sold as “For the Common Good” this go-round, and what form it would take, not whether it would happen the same way as usual…
I don’t have to sell as I am currently renting, so that is in my favor and I do have a buyer’s agent who is not showing the offer in person, which is why the offers get rejected so quickly. Plus I am not in line with the first to know reasonably priced homes that are not on the MLS. Thanks
for the info.
It may be they can’t sell for 10% less than asking price without a short sale. I would try and find the forclosure listings. The banks don’t want to own them and they can take the loss. I believe now is the absolute worst time to buy.
PS. I thought you were Patiently waiting.
My apartment is stuffed to the gills, small 6X6 Kitchen no yard, noisy and lack of parking. Moving to a new rental has costs as well such as moving expenses and increased rent,but I think I might just rent a storage unit and move some of my stuff and wait this out until the prices adjust. Just started to look to buy last year. Even with my money being tossed away on rent the losses on rent can’t exceed the price drop in a few years on the house. I figure with a least 10% price reduction off the current list will offset some of the loss if it is priced reasonably but I will have some benefits such as parking, kitchen and more space. I expect a 20% price reduction within the next few years.
“Even with my money being tossed away on rent”
Better than throwing twice or thrice as much away on the monthly interest payment on the house (even taking the tax savings into account). Throwing money to the landlord or to the bank…
How about throwing away $100K/year or so on falling prices, for that matter?
Buying a house with cash is like buying a car as soon as you purchase it you realize the value will go down.
Use a Buyer’s Broker?
I have heard the Buyer’s Broker is basically a scam because they dont’ have any inventory. Everyone knows the seller’s agent has the product and is the gatekeeper to the seller.
I don’t think buyers’ brokers are any more of a scam than sellers’ brokers. Why pay the entire commission to somebody who is 100% looking out for the other party’s interest? I used a broker when I bought my house - he was very knowledgeable and spoke up about things like termites and bad remodeling.
“Buyer’s Broker is basically a scam”
Definition:
Buyer’s broker — One who helps the buyer get broker.
LOl……. In my view,after observing salespeople for many years , salespeople in general look to were the least line of resistance is and that directs them on who they end up representing .
My buyers broker wrote the purchase contract with the home warrentee policy and etc. and etc.
As a seller, I’m not in favor of them
San Diego housing has entered a new era, as they have run out of land! Buy a McMansion today, or else face a future of living in a cramped townhouse or high rise condo.
Anyone who drove around the 92127 zip code would have to laugh at the assertion that SD is running out of land, as there is an astonishing amount of undeveloped land just in this one zip code, with a considerable amount on the market right now. And that is not to mention $1.4b+ worth of McMansions currently on the market in North SD County, at least if you trust median wishing (aka list) price by zip code times number of SFRs for sale in each zip code as a reasonable estimate of market value. This estimate is conservative because I only included a partial list of North County zip codes along the SR-56 corridor (92127, 92128, 92129, 92130, 92037 and 92064) and also because the median is insensitive to homes priced so astronomically high they will never sell. (The more correct measure to use would be average wishing price times number of homes on the market, but I only have estimates of the median, which is lower than the average for right-skewed data distributions like the wishing price distribution.).
—————————————————————————————————————————————-
Development changes course
Land squeeze, demographics alter the face of the local housing market
By Roger Showley
STAFF WRITER
February 4, 2007
DAN TREVAN / Union-Tribune
House construction continues apace west of Interstate 15 in 4S Ranch (above) but condo conversions, such as the 262-unit Monarch project in Scripps Ranch (below) and newly built condos, townhomes and row homes, are auguring a new way of living in San Diego.
San Diego County crossed over into a new housing era without much notice last year as the traditional single-family development pattern gave way to multifamily condos, townhouses and high-rise development.
And the trend is expected to continue this year and perhaps forever after.
http://www.signonsandiego.com/uniontrib/20070204/news_mz1h04housin.html
I’ll never buy townhomes or condos again. The pain of dealing with bankrupt HOAs, special assessments, neighbors with termite problems who refuse remedial treatment….the list never ends. Often when an investor buys a cheap condo the exit strategy is to sell a cheap condo.
–
I drove to San Diego three times in the past 12 months, driving south on Interstate 15. Plenty of land that can be built during the coming booms. Route 56 had created lot more new land with easy access to the North SD business areas.
Booms make buildable land!
Jas
“$1.4b+ worth of McMansions currently on the market in North SD County”
More info on these: I am talking about 950 or so properties currently on the market in six zip codes mentioned above with an average list price above $1.4m. (The $1.4m figure is actually a lower bound, as it is based on the median; in other words, the average list price is actually higher than this.)
The domestic fallout from the bursting housing bubble is getting ugly already. But economic reality is perversely encouraging some divorced couples to share living space. This article is a great cautionary tale for those who, only two years ago, were claiming that real estate is the “best” investment which “only goes up.”
————————————————————————————————————————————-
Slowdown in market sticks divorcing couples with hard-to-sell homes
By Brian J. O’Connor
THE DETROIT NEWS
February 4, 2007
DETROIT – When it comes to marital woes, the seven-year itch is one problem, but the 30-year mortgage is even worse.
The Detroit area’s overstocked, underpriced housing market means that divorcing couples here are finding that it’s more trouble getting out of their mortgages than getting out of their marriages.
Some divorced couples are ending up as roommates. Others are selling their homes at fire-sale prices, postponing alimony or going from divorce court to bankruptcy court.
Mark Cooper finds himself living paycheck to paycheck as he spends thousands to ready his home for a divorce sale.
“If I lose $50,000 or less I’ll be doing well,” sighs the 54-year-old software trainer. He’s listing his Grosse Pointe home for $340,000, living in it with his daughter since his ex-wife moved. “The average sale time for a home in my price range is 1,065 days,” says Cooper, who must sell the home as part of his divorce settlement.
In the meantime, the house is eating up his income.
“I’m paying the mortgage, I’m paying rent, I’m paying lawyers’ fees,” Cooper says. “Money is just flowing out. The house is costing me 66 percent of my after-tax income. I’m actually in the process of looking for a roommate so I can make ends meet.”
http://www.signonsandiego.com/uniontrib/20070204/news_1h04divorce.html
Editorial suggestion:
“DETROIT – When it comes to marital woes, the seven-year itch is one problem, but the
30-yearinterest-only zero-downpayment payment-option ARM mortgage is even worse.”That article stirred absolutely no feelings of sympathy from me. They mentioned all the people that pulled equity out of their homes. Dip$hits! Equity is to be stored not liberated.
I love the fact that homes in this guy’s price range are on sale for 1,065 days. A price cut does wonders. Idiots all around.
“on sale for 1,065 days”
That is a very shaky statistic. Has a home ever in history been on the market for this long at one price and then sold? I am guessing the answer might be yes if you looked at data from 1996-2005. But to make this statement currently suggests that there are either homes that have sat on the market since 2004 or earlier (when everything sold in under a few months) and finally sold recently, despite the drop in the rest of the market. I doubt this has happened once if at all, as stuff priced in 2004 and kept at that price was either gone by Aug 2005, or is still sitting on the market and will never sell until 2020 or so when prices catch back up.
A more plausible guess is that they simply took the current inventory divided by the rate at which homes are currently selling to get the figure. But again, this does not tell you at what point homes priced at 2006 prices to sell against a market downtrend, which could turn out to be “never” if the sellers are stubborn.
Oh there are houses in Grosse Pointe that have been on the market since 2004. Prices have been dropping since 2003 - sellers that were slow to move down with the market are stuck. I might know which house that is…there is one that was listed forever and now has a FSBO sign with another saying priced under $400,000.
We listed back in late 2004 and sold early 2005, but the house our house was priced on is still for sale…at $125,000 less. One factor is Michigan has its own version of SOH - and these are all “move-up” type houses. No one wants to take the huge jump in property taxes. A new owner could pay twice the taxes as the next-door neighbor that owned their house since the early 90’s. Our buyers are probably paying $5,000 more in taxes than we did. We downsized and are paying about the same - for half the house value. Also, there are some huge mansions (over 10,000 Sq. ft) that sit for years on the market because its a small market for that price range.
Interesting, I know of at least two houses that have no realtor sign, even though they are listed on the MLS. I’m guessing that the realtors are no longer pushing for signs so the market doesn’t look as slow as it is.
http://people.bakersfield.com/home/Blog/Bakersfieldbubble/5493
Already sent my letter to Sen. Dodd…
Thanks for the reminder. His hearing in Feb 7.
*is on
crispy,
Agree with your statement (in link) that the lenders, realtors and builders should bail out the FBs, if anyone has to.
No way the rest of us should have to pay a single penny to bail out the Gomez family who bought a $600K house with a $50K income.
The press has confirmed my prelimary hunch about this story…
———————————————————————————————
Slaying suspect arrested in Ariz.
Realtor was shot in client’s condo
By Alex Roth and James Steinberg
STAFF WRITERS
February 4, 2007
Family members of Pacific Beach real estate agent James Magot say they have no idea why anyone, especially a client, would want to kill him.
“We’re just racking our brains,” Darren Magot said yesterday, two days after his father was shot to death in the Lakeside home of a client who is a suspect in his death.
http://www.signonsandiego.com/uniontrib/20070204/news_1m4fugitive.html
I take back my opinion — the agent was trying to help the client sell the condo; someone else presumably sold it to him. But I would suggest this article should serve as a precautionary tale for realtors working with clients under severe financial pressure. The urge to transfer blame to an innocent third party could be deadly.
Maybe the realtor told him he’d have to lower his price if he wanted to sell. Some peolple can’t handle the truth.
Realtor probably brought a low ball offer that freaked out the suspect.
damn…. I was waiting for this. Knew it would happen soon. When you have nothing you have nothing to lose. Dumb bastard should have shot the realtor that sold him the condo in the first place. But that would be 1st degree murder. This appears to be 2nd degree. Soon realtors will need a vest. Ahhhh there is a God. Next prediction, will soon be drive-bys at their offices.
No one wants to see a huge price drop more than me, but I am trying to separate my wishing price from what is truly realistic.
Not trolling, but…
How are we “potential buyers” supposed to separate our wishing price from what is truly realistic from where we are now?
I’m hardly an expert, just someone who has tried to absorb as much info from everyone else on this board as humanly possible, BUT… it seems as if your purchase price is between 100X - 150X what the property would rent for (per month), you’re in pretty good shape.
When the true cost of ownership (interest+hoa fees+insurance+property taxes+maintenance costs) is within five percent of the rental price then I will buy a house. Presently the gap is way too wide.
“(interest+hoa fees+insurance+property taxes+maintenance costs)”
+ capital losses
I have a simpler metric. When the less educted at work aren’t excited about real estate but the sensible are buying (after long searches). Only then will we be near the bottom.
We’ll undershoot. But by how much?
Got popcorn?
Neil
Median price under 3x median income.
You can get a under market price if the seller is desperate to sell . Right now it looks like there are going to be alot of desperate sellers coming down the pike .
Usually market value is determined not by desperation sales but by both buyer and seller being willing and able . Since the overall market will have a high % of desperate sellers ,those sellers will set the market with time . Right now those desperate sellers I was talking about are holding on for dear life ,so that is why right now is not the time to buy. The “dump market” has not started yet .
A desperate market even has the potential to bring prices way under value as is the case where a builder has to sell below his own cost to even build the home .
Because it is now difficult to determine in any given area how great a market correction there might be (depends on foreclosures ,speculators needing to bail ,stressed households ,excess building or not ,local wages , employment in the area , future demand , affordability ,etc.), it is not a good Time2Buy .
If you can determind the above variables in a area you are interested in , you would than be able to determine how low your area might go . What is hard to determine is what the government might do,what lenderrs might do , and how interest rates might come into play .
For instance, if the government decided to bail out people who were going into foreclosure ,than that would change the market .
I was just practicing on how to de-program a true believer with my above rant .
update on the San Diego RE agent shooting, he had just brought an offer to the condo owner, guess it was too low:
http://www.signonsandiego.com/uniontrib/20070204/news_1m4fugitive.html
Wow. It really does look like he might have been responding to a lowball offer.
Guess Realtors might scoff even more now at presenting bubble-sitters’ lowball offers.
I’ve watched Zip Realty in my zip code go from 460 or so houses about 2 weeks ago to 650 houses now. They are piling on.
And my cul-de-sac is now comprised of 4 bank-owned homes ($700K each), 1 going to auction ($800K), 2 in default and up for sale, and one more up for sale for $120K MORE than the bank-owned home next door (which is larger). We have 10 homes in our cul-de-sac!
A side-note: we have been made to vacate and are moving two doors down because our rental is now one of the bank-owned ones. My family and I are now billing ourselves as “Rental Daredevils.” This POS housing market can’t stop us!
“My family and I are now billing ourselves as “Rental Daredevils.”
Perhaps you should offer your services as house sitters for the bank’s. Instead of paying rent, they pay you to live in the house, to prevent vandalism.
sellnrun - that is truly astonishing!!!
please keep us up to date on these properties. Where generarally are you located?
Murrieta, CA. Riverside County. The whole area’s a stinking mess…
I thought Murrieta was going to get slaughtered in this mess, but didn’t realize it was moving quite so fast.
Thanks for the info, & please let us know what happens.
Agree with Vmaxer. You should offer your services to the bank. Seriously.
“we have been made to vacate and are moving two doors down”
Is it possible to get language added to the lease which blocks banksters from kicking you out?
P.S. Assuming it might be feasible to write a lease to block REO repo men from kicking you out during the term of the lease, here is the way to think about this economically:
Suppose I need to pay slightly higher rent to get my landlord to agree to the language which offers legal protection against forced eviction in the event of an REO situation. The renter should go ahead and pay the higher rent if the anti-eviction insurance premium is lower than the expected pecuniary and nonpecuniary costs of a forced move times the probability of a forced move. If there are many homes for rent in your area, the premium could conceivably be small relative to the risk of having to soon incur costs of a forced move.
I am hoping someone who knows real estate law can weigh in on this, as I am not an attorney.
No. Any lease is null and void once the claim to ownership is changed. You can hire an attorney to try to stretch the time required to vacate, but you really have no legal grounds on which to stand.
Why can’t you customize the lease contract to include a poison pill to get the bank taking possession to compensate the tenant for moving expenses? Don’t tell me our government is so communistic that it stands in the way of private contracts?
The bank isn’t buying the FB landlords contract. It’s evicting the squatter. The renter’s recourse would seemingly be to sue the FB landlord to enforce the new clause in their contract.
Good luck with that.
isn’t this an opportunity for hedge fund?
Leases aren’t necessarily void when ownership changes. A better way to think of it is that the landlord can’t give away more rights than he has.
If the bank can evict the landlord, then the bank can probably evict anybody who leased from the landlord. The primary exception is if the lease was signed and recorded before the mortgage was recorded then the bank’s security interest would be subject to the lease.
By contrast, if the landlord sells to somebody else during the term of the lease the new owner probably has to honor the lease to the same extent as the old owner.
From the MSN Message Board, an opinion of an experienced RE appraiser:
“I have appraised real property for twenty years in the five boroughs of New York City and surrounding suburbs. My thumb sits on the pulse of the market as I live and breath this every day. Was appraising property in the late 1980’s and watched as values dropped 28% from 1988 to 1992 across the entire United States. You may see the middle part of the country take some time to have a decline in values. The east and west coasts will set the standard when all said and done. Majority of money in this country located in those areas. Forget the predictions of economists and financial types. They are not going to paint a picture of gloom and doom. Large portions of their fortunes are dependant on the housing market. It does not make sense for them to say anything negative even if it is the truth. Numbers spun out by the government are at least ninth months behind what is current. They also are great at only divulging what they want the public to hear and see. No one takes the time to READ anything in the US. They want to be told by someone what to do. It is too much work for the average person in the US to take the time to figure it out for him/herself. If you are looking to sell your home drop the price fast. You will look like a genius when the prices drop even more and you have already sold. Good luck to the home seller who thinks prices will go back up or stay stable over the next one to three years. Greed is not a good thing in this type of market and economy. “
“They also are great at only divulging what they want the public to hear and see. ”
Greenspan once commented that it’s not the Fed’s job to tell the public the truth.
The current economy is highly dependent on managing the sheeple.
“Was appraising property in the late 1980’s and watched as values dropped 28% from 1988 to 1992 across the entire United States.”
The price runup (in real terms), influence of speculation, exotic loans and overbuilding are all far worse this time than in the late 1980s. Which means we should expect a larger than 28% drop this time around to restore prices back to normalcy.
amen to that
The middle of this article has information on Mortgages and how BBB rated has been sold as AAA.
http://www.safehaven.com/article-6830.htm
when he got to the point of predicting the future of technology, i started asking if he was exaggerating with the other topics in his speech, as well.
From a thread yesterday:
imploder notes editor ran with wrong headline:
“Young Buyers, Prepared and Fearless”
correct headline should read:
“Young Buyers, Lubed and Stupid”
Make that: “Young Buyers, Lubed and Stooped”
“Young Buyers,
PreparedUnprepared andFearlessFeckless”I talked to a mortage broker last night he told me that PMI was about $250 in the Reno area. Wow!
This is the first time I’ve seen someone make this point on the blog. I guess it will be yet one more reason the housing market will be harder to get started again. PMI will adjust upwards as risk gets taken into account, and will probably lag there a long time as this debacle works out. Another reason for me to get that 20% down.
PMI will also adjust upward to equilibrate with a sudden dearth of 0% down financing options. It doesn’t look quite as smart to offer speculators 80/20 piggyback and other flavors of 0% downpayment loans when prices are falling as it did back in 2005 and before when prices were increasing 10%+ forever.
Are you saying that as piggybacks disappear then people will be forced to buy PMI (increased demand), which will cause the price of PMI to rise?
I am saying that zero-downpayment loans (which were enabled by the subprime sector which is currently having a few problems) are a close substitute for PMI. When the supply of a close substitute (zero down loans in this case) drops, the primary good (PMI in this case) experiences a price increase (represented by higher premiums if the good is insurance).
Right, exactly as I said. We’re on the same page.
Funny thread over at BO forum. Lenders complaining about realtors. Worth a laugh or two at least.
This quote is gold: Its a miracle that either you or the realtor are getting a pay day at all.
http://forum.brokeroutpost.com/loans/forum/2/90586.htm
Wow. That discussion is a very good read. Shows how the borrower/buyer is a fool to use either Realtors or mortgage brokers. Not how the salivating hyenas are out to rip-off the buyers, BIG TIME!!!
Recommendation to self: get RE license, good RE atty and direct lender who will work w/o YSPs and cap the up-front points.
Imagine how great things could be if we cut out all the middlemen.
Ben, can we have an ongoing separate thread where “Global warming is a hoax” and other assorted discussion can be confined so that the relevant topic threads do not get trashed? Anyone who wants to indulge in these fantasies on the normal threads can then be redirected to this mud-wrestling arena and leave the housing market discussions alone.
IMHO, the Internet is HUGE, there are plenty of places to discuss global warming, bash Bush, and exchange bread recipes*. I don’t think we need any of it around here, be mature and find somewhere else.
*note: exchanging popcorn recipes with Neil is allowed
rotfl
I do agree, while we need to police side discussion a bit… this is a housing blog with a heavy economic base.
Got popcorn?
Neil
no-feeding zone. orando fl
http://www.cbsnews.com/stories/2007/02/03/national/main2429393.shtml
http://sacramento.craigslist.org/apa/271583058.html
If only the owner had gone the full pergraniteel route, he’d probably be able to get $1100/month. Instead, he slapped granite on cabinets that look older than I am and is stuck renting for less than $1000/month. Tragedy!
On the plus side, he might actually have positive cash flow — bought for $116K in 1998. If he hasn’t pulled out equity, he should be golden. Big if though.
One last gasp. If I were a holder of Vornado debt or equity I’m not sure I would like this:
Vornado Offers To Give Equity Office Ppties Hldrs Cash Upfront
DOW JONES NEWSWIRES
February 4, 2007 6:20 p.m.
DOW JONES NEWSWIRES
Vornado Realty Trust (VNO) on Sunday said it proposed to pay the full cash portion of its $56-a-share bid upfront for Equity Office Properties Trust (EOP).
This follows Friday’s announcement that Equity Officer’s board of trustees had unanimously voted to reaffirm its recommendation of a proposed $54-a-share all-cash acquisition by affiliates of the Blackstone Group. Equity Office also noted that it would likely take four to six months to close the Vornado transaction, due to a Vornado shareholder vote requirement and the potential for Securities and Exchange Commission review.
Vornado had offered $31 a share in cash and $25 in stock.
Vornado also said on Sunday that it continues to expect that the acquisition would be accretive to funds from operations beginning in 2008.
Did anyone see the superbowl commercial just now after the end of the first half for March madness? The basketball players were holding up giant bubbles wanting to be part of the “team.” And this voice came out of nowhere and said they should have won more, “home games.” There was a very strong emphasis on “home.” Was this a subtle attack? Or am I imagining things?
I have noticed no REIC ads this year so far.
I recognize that this was likely a comment on bubble teams (who won’t play ball with teams above the mason-dixon line), but there was such weird emphasis on “home.”
I saw that and noticed the bubble comment. LOL
did not see this elsewehere, buyers up to their eyeballs in debt in NYC, but starting to say, “I can always rent it out”
http://www.nytimes.com/2007/02/04/realestate/04cov.html?_r=1&oref=slogin
One of his clients, Charlotte Lewis, a Brooklyn-based photographer, was more conservative than most about financing her condo. She spent six months looking at nearly two dozen apartments in Brooklyn. With her savings and help from her parents, she put down 20 percent for a $340,000 one-bedroom on the outer edges of Williamsburg that she thought was distinctive enough to retain its value, even in an area with many new buildings.
She sought help from a mortgage broker in her rental building to negotiate the best interest rate, and now pays about $1,630 a month. But even with all this thoughtful research, she rattled her family when she told them about the kind of mortgage she had chosen for what she considers a five-year investment.
“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.”
This is the secret to everything in life, isn’t it? The worst case scenario is never that bad as long as you get to pick your worst case scenario in advance.