“An Adjustment For That Exuberance We Went Through”
A report from the Arizona Republic. “Downtown Tempe is in flux. Construction has torn up streets. Building plans are coming in every month. High-rises are popping up where once there was nothing. Construction projects are continually coming in. City estimates project an estimated 5,000 home units, bringing about 10,000 residents to Tempe’s downtown area within the next five years.”
“‘Though it’s really hard to tell how many people it will ultimately be until they start getting occupied and we can see if it’s going to be single people, couples, people with a couple of kids, or ASU students with a roommate or two,’ said Kris Baxter, who works in Tempe’s Economic Development Department.”
“Jonathan Dalton, a Valley real estate agent, said there might be too many in the works.”
“‘There is a glut in townhouses,’ Dalton said. ‘But all these (Tempe) projects were put together when the market was still moving and the momentum is such that you can’t cancel them. I see an oversupply in a lot of the upscale townhouses and condos near the Tempe-Scottsdale border.’”
“A new report shows Valley renters will pay 5.4 percent more this year, to $785 a month. That monthly rent is just about equal to the average weekly paycheck of $794 in Maricopa County.”
“But renting is looking more attractive to people priced out of the housing market. The latest forecast shows one paycheck will cover the rent; you would need at least two paychecks to cover the median monthly mortgage payment of $1,300.”
The East Valley Tribune from Arizona. “Sagging home prices sent foreclosures climbing throughout the Valley in 2006. Some 3,388 East Valley properties entered the foreclosure process in 2006, up 13.8 percent from the year before, a report shows.”
“In the Valley, many of the foreclosures are likely involving investors who hoped to cash in on the boom but bought too late, said Jay Butler, director of Realty Studies at Arizona State University. Even experienced investors got caught because the market turned so quickly, Butler said.”
“John Burpee, owner of Mesa-based Foreclosure Help Group LLC, said he receives 10 calls a day from investors and homeowners in danger of foreclosure. About 30 percent of those are from people who haven’t yet received their notice of trustee’s sale, a document that starts the 90-day foreclosure process, he said.”
“‘There’s going to have to be an adjustment for that exuberance we just went through,’ said Tom Ruff, a partner at real estate data company Information Market.”
The Palm Beach Post reports on Las Vegas. “Before high-rolling Las Vegas lender USA Capital came up $962 million short, it bankrolled grand plans for 719 Executive Center Drive in West Palm Beach. Ultra-high, ultra-chic condo towers would replace the shabby but affordable apartments that had been there for decades.”
“Today, the scrap of land is a patch of empty. The abandoned apartments have been picked clean of stoves and refrigerators. Blinds flap in open windows.”
“‘It is an unbelievably bad, bad situation,’ said Aventura’s Dennis Flier, a member of the bankruptcy court’s committee representing USA investors. In an Internet chat room reserved solely for USA investors, horror stories abound, he said.”
“Even wary investors were sold. ‘I actually took a trip to Las Vegas to their home office because I don’t buy anything sight unseen,’ said a Miami investor who asked that his name not be used. ‘I did not do it haphazardly.’”
“USA said it built security into its loans. For instance, investments would top out at 60 percent of the property’s value. That way, even if the project collapsed, a sale of the property would ensure people got their money back.”
“But USA’s 60 percent solution was a shot in the dark. According to a 2-year-old Securities and Exchange Commission letter to USA, ‘More than half of the loan portfolio was not supported with independent appraisals.’”
“The revelation was alarming. If USA had no solid idea of how much properties were worth, investors could have no solid idea of how much risk they were assuming. There is speculation that at least some investors will get back 75 cents on the dollar, a decent return for assets in a bankruptcy proceeding. But Boynton investor John Ulrich calls that ‘wishful thinking.’”
The Review Journal from Las Vegas. “Mayor Oscar Goodman long has pushed and prodded downtown developers to hurry up with their plans for high-rise condominiums. Now he’s taking out the whip.”
“‘I’m very concerned that the city was being played for a fool by developers coming to us, asking for entitlements … with no expectation of building those plans,’ Goodman said.”
“But the two developers complained that the Las Vegas high-rise market has gone soft, with investors scared off by high labor costs and construction material shortages.”
“‘I can only tell you the development climate all over the valley is not good right now. Construction prices are driving property values down. Investors are scared to come here,’ Leanord Mussina, spokesman for Club Renaissance, told the City Council.”
“Club Renaissance is a 60-story, 950-unit project at Casino Center Boulevard and Bonneville Avenue. Like dozens of other projects, the lot has sat vacant and untouched while only a handful of projects are under construction. Only one, SoHo Lofts, is completed.”
“‘We’re just a victim of construction costs. Financing has dried up to a large extent for Las Vegas. We’re redesigning, trying to value engineer, to do something affordable,’ Mussina said.”
‘ Metropolitan Phoenix’s slowing housing market has inspired many gimmicks by agents and homeowners trying to sell houses. The downturn in home sales and rise in foreclosures has prompted one Valley resident and keen economic observer to write a song. It’s called De-Faulting and is sung to the tune of Tom Petty’s Free Falling.’
‘A proposal to change the town’s General Plan to encourage people to be able to walk to work, shopping and entertainment drew the unanimous backing of the Prescott Valley Town Council Thursday.’
‘Fain principal Brad Fain said the amendment also adheres to the ‘new urbanism’ concept of ‘”live, work, play in the same area.’
‘KINGMAN - Affordable housing and Planning and Zoning concerns will top the agenda of Monday morning’s Board of Supervisor’s meeting. According to the executive summary of the study, ‘the ability of consumers to purchase affordably priced dwellings is becoming quite strained in the county.’ This is due to the price of housing rising at a substantially higher rate than that of local incomes.’
‘According to the study, the median income rose about 35 percent between 1999 and February 2006. At the same time, the average price of a house rose 212.9 percent in Bullhead, 141 percent in Lake Havasu City, 100 percent in Mohave Valley, 91.3 percent in Kingman and 88.4 percent in Golden Valley.’
“‘Though it’s really hard to tell how many people it will ultimately be until they start getting occupied and we can see if it’s going to be single people, couples, people with a couple of kids, or ASU students with a roommate or two,’ said Kris Baxter, who works in Tempe’s Economic Development Department.”
Yeah. Or ghosts. Don’t forget to account for the ghosts.
Ghosts are great tenants. Except every now and then they start banging stuff around in the middle of the night.
Oh yeah sometimes they turn the spigot on when you least expect it. The pranksters!
AAAAAAAAHHHHHHHHHHHH! ZOMBIES! Yeah, zombies too.
$794 a week average paycheck. Median price SHOULD be 135k. Even with the “Sunshine Tax” and the “New Paradigm”, no more than 150k. Current median 240k. Still room for 40% reduction. 2008 for Phoenix.
Pay in northern Arizona is usually reported in dollars per hour, yet the home prices in many little towns are much higher than in Phoenix.
It’s called the Californication of Arizona. Idiots move there and pay ridiculous prices and end up driving out the local yokels. Then the new residents end up going into foreclosure and the town goes to shiat.
Cali-fornication. Nice.
You can include in the lot a good part of the rest of the world when it comes to real estate. London-forrnication. etc…… It’s Californication of the whole darn place.
Absolutely right, GreaterTucson, are basically $10-$15 @ hour areas everyone cannot work at Raytheon. Yet, yu would be hard pressed to find any new construction in the past two years,which is legion, under $250K . Even more scarry each of these homes( who actually have humans residing) aall seem to have both a new SUd fully loaded pickup parked in the driveway. Even a builder acquaintance told me its going ot get very ugly.
oops should be SUV
People living on borrowed time and money.
Same here in Louisiana……
Median income ranks just above Mississippi…and with all the glam and glitter of Port au Prince. In my old hometown, a bump in the crossroads to nowhere, people are actually paying prices on par with the rest of the country. A good career move is full time at Wal-Mart, the usual home is on wheels, and people are paying six figures for old, crummy shacks. It_is_insane……
Wow — the freaking speculators are starting to infest Louisiana too??? That’s it. I’m going to get something in West Virginia while the gettin’s good — even if that means just a little piece of land on a mountain ridge with a Tumbleweed Tiny House or Katrina cottage added.
The Devil right now is LHAO, and sying; Can you here your babies crying?
I’m not sure that it is valid looking at the average (mean) paycheck of an individual and comparing that to the median house price. The median household income would be more directly applicable. Even then, you would want to look at the median of the upper 70% of households (i.e., the 35th percentile), because the bottom 30% doesn’t own and probably never will.
In San Francisco, you have to look at the median of the top 35% or so (roughly 17th percentile) and compare that to the median sale price, because about 65% of San Franciscans rent.
Is that why the Bay Area is #1 in the nation in option ARM loans? Maybe the top 10% of households in SF can afford the median priced home.
From the “new economy” to the “new paradigm”.
Last night, a friend from San Jose told me about a tactic that is prolonging housing bubble in CA, AZ, NV. Let’s say a Silicon Valley couple wants to retire to Phoenix or Las Vegas. Let’s say they have 35-year-old children who want to live in Silicon Valley but can’t afford to buy there. The parents ask the children to BUY a condo or small house in Phoenix or Vegas. Guess who lives where: children in Silicon Valley, parents in Phx or LV. Duh. Sort of a way of making prop. 13 inheritable. Yawn. Also a source of “new buyers” for Phx & LV. This is not a theory, but something that friends of theirs are actually doing.
Interesting idea. The older couples I know in Silicon Valley don’t want to leave their kids though.
Sounds like sound Estate planning to me
Same thing happens in FL. Anything to keep that SOH cap intact. Stupid tax law creates very, very stupid actions to try to get around it.
The other one we see is a few 100K of cash under the table to lower the sale price. The only thing that determines your taxes for the rest of your life (in that home, or the rest of your life in FL if portability passes) is what you PAY for that home, not what it’s worth. Anything you can do to reduce the price as recorded on the books can potentially save you 1000’s for the rest of your life in taxes.
Which is why, anyone taking any incentive in FL is a total, absoulte, f__ng moron. Do you really want to pay property taxes on your Hummer for the rest of your LIFE?!?
I have already seen this on my block in SW FL. 2 homes sold recently on my block. 1 for 80k and 1 for 100k. All other homes in the neighborhood appraised for over 200k.
I’m declaring the spring bounce over.
The REIC promoting a buyers market all fall and winter, stole the FB’s from the spring selling season. The FB’s thought they were getting a good deal before prices went up in the spring.
Nonsense, I have it on good authority that the Super Bowl is over. I’m expecting the market to come roaring back any day now.
Front page of my local newspapers RE section is a story on the coming Super Bowl rally!
I was “watching” the SB online at a sight that used auto-refresh to update the action. I believe realtors were using the same function to relist their houses…..every 60 seconds the house that has been on the market for 6 months is now “newly listed and won’t last long….must see!”
You might be on to something. I did a couple purchase deals this winter where the attitude of the buyers was just as you say. Many agents here have pushed the idea that this is a last chance window before prices take off again. Many still fear being priced out forever. In no way does it save the market, it’s just another way to “wring the towel” one extra twist to insure that every last GF/FB is culled from the market. This tactic only works on certain types, and once they buy into it, they’re sold. What’s interesting is that I tried to be a voice of reason when talking to these clients I mention (yeah, I screw myself out of deals all the time), but they were convinced, like they found religon.
Vmaxer, what you said is so true in my area!
The realtrons convinced the peeps that the market had bottomed! Go effin’ figure.
“‘We’re just a victim of construction costs. Financing has dried up to a large extent for Las Vegas”
Vegas is a disaster waiting to happen. I have been here less than 3 months and I can see it already. I am living in a 12 home cul de sac that is just 2-3 years old(Buffalo and just north of Cheyenne for you Vegas types). Out of the 11 homes besides the one I am renting(4 BR 3BATH , 2300 sf-$1550/month-they are trying to sell these for 400K-bad math or a new paradigm?-lol) 3 are vacant(I think the one next to me was foreclosed on) and 4 have “for sale” signs in front of them. I got home last night and the people accross the street from me were loading up a U-Haul to move-6PM on saturday-reminded me of the Colts leaving Baltimore in the middle of the night. We have all heard of these stories but I for one have never lived in one of these ghost town commumities. There is still a developer sign in front of the complex advertising “Financial Incentives” on the sign. The people that bought these houses do not have the money to afford them. All of these people are immigrants of very “blue collar” types, one of the ones trying to sell is driving a “K” car remember them? it is like a mid 80’s model I think. Now I dont want to be accused of being a bigot or a stereotyper but it is more than obvious that none of these people could come closes to qualifying for a 400K mortgage in normal times.
To summarize-There is not enough money in Vegas to drive 400K average homes, it is a uneducated, blue collar town. Median incomes are low. This is a mania that can not possibly work out!
Nuff said.
That description is pretty much dead on perfect for where I live in Palm Beach. Same exact scenerio, probably same income levels, education levels, etc. Just chanage the location, everything else is identical.
When I walk out my front door, more homes are for sale and for rent then are lived in (that I can see from my front door, about 10 of them).
Scary…
That’s something out of a horror movie.
You’d better put up a “Forget the dog, beware of owner sign.” I’m afraid if your block gets known for being deserted…
This will get ugly,
Got popcorn?
Neil
I know EXACTLY where you are!!! Yes, that area is filled with $300K priced homes that were sold for $100K throughout the 90’s. The one you’re in sounds like the next step up, which could’ve been had for somewhere in the $150K to $200K range not so long ago. Vegas is toast.
I stayed in a “vacation rental” near Buffalo & Sahara for a weekend last month. Of the 8 houses on the cul-de-sac, two were definitely vacant and for sale, not including the vacant-and-for-rent house we were staying in. Only one of the eight was definitely occupied — the neighbor came by to snoop on us, and called in the LV Code Enforcement to take a complaint because apparently the owner is not supposed to rent the place out. This is a neighborhood of $600K - $1+M McMansions that all look alike.
“But the two developers complained that the Las Vegas high-rise market has gone soft, with investors scared off by high labor costs and construction material shortages.”
“‘I can only tell you the development climate all over the valley is not good right now. Construction prices are driving property values down. Investors are scared to come here,’ Leanord Mussina, spokesman for Club Renaissance, told the City Council.”
Help! I can’t wrap my brain around the idea that an increase in construction prices would lead to a decrease in house prices. Someone please explain.
They have run out of GF’s and are looking for excuses. No one actually wanted to live in these hotel rooms, err… condos. They all wanted to gamble and speculate on the real estate market in LV - bottom line the “fake” demand is gone and now the truth is no one wants to live in a $1 million condo on the strip for 2 weeks out of the year. When you can rent a room for a few hundred books a pop!
Those “scared investors” saved themselves from purgatory. I’d hazard to say that the LV tower condo supply already outstrips all real future demand. The only way they’ll ever fill all of them is to practically give them away, otherwise they’ll suffer the same fate as the old casino hotels (3-2-1… boom!).
I know a guy waiting to buy one once they’re being “given away.” He’s smart enough to check insurance, HOA, etc. first.
How much can you sell a place for when the major renters are blackjack dealers?!?
So much for Vegas needing a 2nd airport…
Got popcorn?
Neil
Actually, construction costs should be going down. Lumber, copper and cement prices have dropped sharply since last year. I’m sure labor costs should be down too, with so many construction workers being laid off.
The real reason prices are coming down is that they were way too high even with interest only loans.
This is what I thought as well. This guy is either completely incompetent or a liar (or both). Construction costs have been dropping the last year or so.
“Someone please explain.”
Simple enough explanation, they are lying or they drank their own snakeoil.
anyone catch the latest “property ladder”. had two twenty year olds buying a rat shack in sacramento for $185k. did 100% financing (owner occupied of course), $40k in improvements on credit cards and got their head handed to them when the “discovered” that there were 77 other homes for sale in a one mile radius, 13,000 in sac. quite a change from all the happy faces on “flip this house” last year.
multiply these knuckleheads by a couple of hundred thousand and you can see how this stuff is gonna bubble up ugly. what’s surprising to me is that these kids did this mid-2006, the sac market was already in the tank. guess it just shows how oblivious the general public is to what’s going on.
Most people I talk to still think that houses are still a good investment. The “real estate only goes up” propaganda was etched into their skulls by the REIC
I would have liked to see that one. Every one I see, whether it’s “Property Ladder” or “Flip This House” in the end the investor seems to make money. Maybe I’m catching all the re-runs when these guys got in early enough in the game to make money?
How can they not make money when they pull crap like painting old tile and sinks for $300 and claim it’s a $3000 “improvement”. You cannot renovate a house in week and have it not fall apart within a few years.
They have started adding follow ups to the “flip this house” show and the ones I’ve seen were shot in early/mid 2005. Of course I have yet to see one where they take out the 5-6% agent’s commission from the flip ‘profit’.
I know this guy who is trying to get me to invest $50k in new construction in Merced. He claims the market there for high end homes is “hot”. He is going to take out a HELOC to buy in his portion and is trying to get a group together to do more deals. He states he will get a 150% return in 6 months. I laughed so hard.
What an IDIOT! I mentioned that I think residential RE is smoked in the valley for a while. He said “I only like to think of positves and I don’t like negative thoughts”. Good luck then. I will rub your nose in your stupidity when you go bust!
BTW - he went bust in 2000. Something about a $hitty internet business and stock margin calls. Some people never learn.
lol…what a moron…
Hmmmm……
Is his wife a knockout? She may be available very soon!
LOL
Can he think negative dollars?
Get the women and children off first…and keep the Band playing !
Scary.
20% down seems like ancient history
http://tinyurl.com/33mo5f
For now, a new house is like buying a new car - the price depreciates the moment it’s driven off the lot.
Dude,
I’d pay a lot to cruise down the 405 in a McMansion for even one day! Hummer this buddy, clear the road!
Got popcorn?
Neil
Generic article…slow news day
HOUSING SCENE
X factors push home prices up or down
http://tinyurl.com/25tvu7
“With vacancy rates projected to fall below 5 percent for the first time in years, renters won’t see many give-backs from their landlords this year, according to real estate brokerage Marcus & Millichap.”
I find it hard to believe that there’ll be 5.4% rent increase across the Board in Phoenix when there are THOUSANDS of vacant TH’s, condos and SFH’s listed for rent on Craigslist. The fact that the study was performed by (or commissioned by) a real estate brokerage adds to my belief that the study is quite heavily skewed or downright false.
Correct. Anybody that claims the rental market in Arizona is tight is talking baloney. And still they continue to build.
My apartment lease was up in December, and where before I had the option of a six month renewal, this time around they wanted at least a nine month lease. This place stays full because it’s quite nice and also close to Intel and Motorola, and not that awful of a commute into downtown, but still it suggests that the management thinks that tenants may be spread a bit thin in the next year or so.
Alma School Road maybe?
A tight rental market in central Phoenix is when they start requiring a $99 security deposit and only give you 1 month’s free rent when you sign the lease.
I can’t speak for Scottsdale or the outlying areas.
I believe that most yahoos don’t even have a clue as to the concept of inventory.
I think Marcus & Millichp is only looking at the large apartment complexes. They usually seem unaware of small apt bldgs, dulpexes, and house rentals. They appear to get their info from the 1000+ unit complexes that are 97+% full and raising rents. When the condo and highrises really start to revert to rental bldgs (not just individual units for rent), then they’ll pick up on what is happening. Anyone else know more about Marcus & Millichap? I wonder if they have a report on Florida cities?
Well that reinforces my opinion that they skewed the report. When you keep your data set artificially small by ignoring SFH’s, TH’s, etc for rent you can skew the data quite nicely if you know that traditional aprtment buildings are at a high level of occupancy.
I wonder if any of the FB’s cum landlords will follow Marcus and Millichap’s reccomendations and raise the rent on their vacant Phoenix “investments”.
I have talked with several Marcus and Millichap agents on a few occasions. My impression is that the left hand doesn’t know what the right hand is doing in that company. Some of them do pay attention to the small building market where I operate, others specialize in big stuff. A few of them are pretty smart - one told me last year that he had sold his house and was renting until the bubble deflated. Others are typical deluded Realtors. I would expect their HQ to spin the numbers as needed to further their business.
easthawaii: Marcus & Millichap specializes in selling investment properties. They have a lot of their business in multi-unit residential properties, from small to large in size. Hence, i am not surprised one bit to see them putting out a report like this. Good way to sucker clients into buying an apartment complex. Nothing more than propaganda.
I used to work for the top broker in that company. He is an a-hole, but verygood at “closing people”. I did not like his lack of ethics and his personality, so I quit. Those brokers are transaction-driven, and not relationship-driven. Translation, they just want the commission.
My wifes comment this morning after paging through the classifieds (las vegas sunday paper) is that there seems to be “even more” houses for sale than last week. Just anecdotal but interesting.
Came up hwy 95 from Boulder City yesterday afternoon and the sight from the hwy (just south of Tropicana exit) is still amazing. Hundreds and hundreds of units (condos I assume) are being framed on both sides of the highway in that one area.
This area is absolutely toast and I’m a bit nervous even being here (leaving end of April) knowing the level of financial ass-pounding coming to town.
I was told everyone wants to take out a $400K loan to live in a “luxury” apartment.
I visit my mother in Victorville Ca once a month. My favorite thing to do is guess the Section 8 Housing. I look for 3 clues…
1 - The lawn is brown dirt or dead grass
2 - One or two broken down old autos in drive or on lawn
3 - (My favorite) Local supermarket shopping cart / carts in yard
lol — reminds me of my neighborhood in the 80’s in Houston.
The grass is greener in Section 8 in Gainesville… it’s just that kind of city. They employ some dudes to keep the city-owned properties clean. There are private sec 8 places too, and they vary depending on who owns the place; however, the worst places are NOT sec 8, the worst places are the ones who take the people with prior convictions who don’t qualify for sec 8.
I think it’s kind of cool, but some people b*tch about it. A lot of people in Sec 8 here are retirees. They have family members who come over to visit, and some of them have blinged out cars. All that means is cheap credit, but we had morons write into the paper b*tching about people on welfare owning expensive cars. Find me ONE … don’t think so, moron. Grannie on soc. sec. doesn’t have a car … she’s part. disabled and can’t drive anyway. (I should know–she rides my bus.) That’s her grandson who bought a car on credit and wasted $3K on 10x marked up “bling” to impress his useless friends. Pu-lease. If you want to see nice cars, drive over to Lincoln Estates and check out the cars in the driveways at the nicer homes. Bet they own, too, unlike the f@cked buyers in the all-white NW section of G’ville who bought during the 2005 bubble run-up. Fools.
“A new report shows Valley renters will pay 5.4 percent more this year, to $785 a month. That monthly rent is just about equal to the average weekly paycheck of $794 in Maricopa County.”
Not my rent. It went up 1 or 2% only. It’s a luxury apartment in Ahwatukee. Scare tactics by RE shills or are these reports just wishful thinking by the FBs who are upset because we renters are laughing hysterically now?
Rent is 25% of gross income? Ooo, I’m scared.
ROTFL
My fiance and I are getting a bigger place. I’m going to splurge and spend 12% of gross (combined) income.
Ok, I can be a tightwad. But you should see the vacation package we pricelined for our honeymoon! (And… I’m trying to persuade my fiancee to buy a nice luxury car. We think we’ll get some sort of deal in a few months.)
Got popcorn?
Neil
The house I rent in Chandler (3bedroom 2 bath) went up last month from $1025 to $1050.
$25?
No big deal here.