“Sellers Are Reducing Prices” In North Carolina
The Herald Sun reports from North Carolina. “The median sale price of resold houses in Durham dropped from $167,500 in the third quarter to $155,000 in the fourth, according to Market Opportunity Research Enterprises. That amounts to a 7 percent decline and is $15,000 below the median in the fourth quarter of 2005.”
“‘The abruptness of the negative numbers surprised me and the extent to which they’ve become negative surprises me,’ said Bernard Helm, president of MORE. ‘The phenomenon is not unique to Durham County, it is Triangle-wide although not necessarily to the same extent. There is obviously some excess inventory in terms of the number of buyers available.’”
“It seems clear that prices have dropped for existing homes in Durham because there are so many on the market. ‘It means some sellers are reducing prices to move their houses,’ Helm said.”
“Nick Tennyson, executive VP of the Home Builders Association of Durham, Orange and Chatham Counties, likened the drop in existing home prices to a correction. ‘I think there might be people with unrealistic expectations of what their house was worth,’ he said.”
“It appears that the fourth-quarter jump in the median sale price of new homes is linked to an increase in the number of high-end homes sold during the fourth quarter. ‘I suspect in the first quarter that is not going to be as pretty a number as it is now,’ Helm said. ‘As the price difference [between new and resale] gets larger, you get some downward pressure on new home pricing.’”
The News & Observer. “Record numbers of homeowners in the Triangle and North Carolina were threatened with losing their homes through foreclosures last year.”
“Foreclosure proceedings were filed against 6,451 homeowners in Wake, Durham, Orange and Johnston counties last year, up 4.5 percent from 2005. Statewide, foreclosure filings jumped 6.1 percent to a high of 45,512 during that period. And this year’s numbers could be even worse, experts say.”
“‘It’s horrible,’ said Shawn Kornegay, whose Knightdale home was sold at auction in January.”
“Because proceedings can be stopped many ways, statistics aren’t available on how many foreclosure filings result in owners losing their homes. But some housing experts say more than 50 percent end up with owners losing their homes.”
“In Wake County, which had the majority of the Triangle’s foreclosures, at least 40 percent of homeowners in foreclosure are estimated to lose their homes, said Lynne Murray, a former assistant clerk of Superior Court who handled foreclosure cases for 18 years.”
“The number of people who actually lose their homes has risen, Murray said. About 25 percent of foreclosures resulted in people losing their homes in the 1990s, she said. ‘People weren’t borrowing as much money then,’ she said. ‘It was easier to work things out.’”
“The surge in foreclosure filings shows a downside of the housing boom that powered the national economy through the economic downturn at the beginning of the decade.”
“Mark Pearce has seen his share of mortgage fraud. As deputy commissioner of the North Carolina Banking Commission, Pearce has investigated lenders who pad a home buyers’ bank account so they will qualify for a loan, then take it out and charge the person a fee.”
“He has seen other lenders let family members with good credit sign for a relative’s home. And he has seen lenders falsify loan applications, even changing a potential home buyers’ annual income.”
“‘People just get out the Wite-Out or cut-and-paste documents,’ Pearce said.”
“On the face of it, such actions don’t make sense. Why would a lender provide a mortgage to someone who can’t afford it? Because a lender gets paid up front. And in some cases, the original lender will sell the loan to another lender.”
“‘For the past five years, mortgage complaints have taken up about half my time,’ said Joe Smith, the state banking commissioner.”
“Now the banking commission is looking at new rules and regulations to clean up the mortgage industry, and hopefully lower the number of foreclosure filings.”
Once again, a market is strong until it’s overbuilt, and then everyone is ’surprised.’ And these guys apparently don’t know that new home prices don’t include consessions, etc. The builders will keep stealing buyers away from the reslae market until the air comes out of the whole thing, IMO.
BTW, long-time readers will remember that NC has had a mortgage fraud/foreclosure problem since before I started blogging.
OT but here is a reply from the reporter out of Richmond who was quoting DL blaming speculators for the bubble. I pointed out that he was the biggest cheerleader and asked when they would stop quoting him as an expert.
“We won’t stop quoting him until he steps down as chief
economist for the real estate industry’s main association. My
understanding is he does invest in real estate, as one would
in stocks and bonds — only he is not so much into flipping
properties as he is holding them for a period of time and
then making a profit.”
I thought he blamed lenders.
“Speculative investors, who got into the market to make a fast dollar, turned the recent boom into a frenzy, Lereah said. ‘When lenders offered exotic mortgage loans, that was fuel for the fire.’”
MSM at it’s best. When I pointed out that DL might not be an economist here is the reporter’s entire reply:
whether or not he is an economist, his title is chief
economist. there is no disputing that.
CHazard@ timesdispatch.com
Whether or not he is god, well thats his title and lots of people are sticking to it. Its all about plausible deniability!
Josh
“MSM at it’s best.” These people are simply clueless. If I wanted to read a press release, I’d do it. The MSM are mostly stenographers. Pitiful.
“Now the banking commission is looking at new rules and regulations to clean up the mortgage industry, and hopefully lower the number of foreclosure filings.”
what took them so long? idiots
NC =TX
homes below 10 year inflation rate- lots of net migration
and home dropping anytway
Yep, always good to check the ol’ standby…
17 foot U-haul
Miami –> Charlotte: $1620
Charlotte –> Miami: $318
Housing is low and still dropping, which honestly surprises me. If any state could use the tired “everyone wants to live here” and “Buy now because this is where the boomers are going to retire,” it would be North Carolina. Then again, there’s no shortage of land. Retiring boomers + need no job ==> build dream house in podunk for $300K max…why bother with Tract McBox.
But what happens when those mythical retiring boomers find that they can’t afford to stay retired? Where are they going to find the jobs in NC? Or, for that matter, anywhere else?
Last I checked, employers weren’t falling all over themselves to hire older workers.
Right, reports out of NC have always had growth as their anchor. I know a guy who moved to the Triad area in the past year. He does construction work on houses.
The supply of homes added in Charlotte is mind-blowing. They are developing and developing and developing some more. Relocating Yankees and Bank of America are about the only real reasons for any kind of boom in Charlotte. Is that really enough to justify the building that has taken place?
They have also built a ton of rental units. I would guess the price of renting in Charlotte is about 75% of what it was in 2000. The housing boom, along with a glut of rentals, crushed the rental market.
Outside of Highway 485 the growth is explosive. Unfortunately, infrastructure is not keeping pace with development. Check out Providence Road on a Friday afternoon. Good luck getting to your McMansion.
The little guy in the Carolinas has gotten beaten every which way from Sunday. The textile industry priced itself out of the global market. Tobacco farming, once a huge part of the economy, has been killed. It is nowhere near as profitable as it used to be.
North Carolina better enjoy the party. The hangover will be a killer. North Carolina will boom for now. But the prices are not sustained by local incomes.
It’s not that the textile industry priced itself out of the global market - the US taxman, and lawyer tax, and unions ’caused the jobs to go overseas.
From my experiences as an NC triangle resident, this is all paper talk. I know of two realtors who have sold 8 and 12 new constructions respectively in the past month.and we’re not even close to peak season yet. Sure the area is sprawling and infested with relocated Yankees; I know of many that move here without jobs, pay cash for a house and live off previous house equity. The areas real estate market is still booming; prices are increasing steadily and hence have less chance of a bust. Maybe this will be the last hurrah, but talk of a bust in NC is incorrect.
Actually Arizona that isn’t quite true. In 1994 15% of 70 to 74 year old men worked full time; in 2005 it climbed 21% of them working. Estimated increase is 1.2% per year. And it seems employers are seeking them out because they have a great work ethic. They are paving the way for the boomers right behind them.
The rolling bubble seems to be running out of fuel.
What does this predict for other states like Georgia that has been #1 in mortgage fraud the past few years?
…. watch out below!
Mortgage fraud will hasten the drop in prices in some places even though prices have not historically risen as high as other cities.
The article states that foreclosure proceedings are up 4.5% in Wake, Durham, Orange and Johnston counties. NOD’s are up 298% in Santa Barbara County and something like 150% in Ventura County, CA, and we haven’t built anywhere near the number of houses that were built in N.C over the last 7 years. The increase in defaults cannot be blamed on overbuilding. The problem is people buying more house than they can afford.
Once again, I revel in the fact that I bought LESS house than I can afford.
The problem is people buying more house than they can afford.
I believe the problem is houses are all so overpriced that almost everyone who buys effectively buys more house than they can afford. The rest of us rent. Thus by logic the problem becomes not people buying more house than they can afford. but people buying houses at all in current markey conditions since more than they can afford is implicit.
So they had 10 NOD last Jan and this Jan they have 19; ergo % of default is about double. By the way whats wrong with renting money to show a large deposit for your purchase of a house???
I don’t know if you’re referring to Santa Barbara County. If you are, your numbers are wrong. In January there were 120 NOD’s published in S.B County, 25 in South County and the rest in North County. There were 201 closed escrows in S.B County in January. The ratio of closed escrows to NOD’s is 1.75 closed escrows to every NOD.
I’m still wondering if buying more than a person can afford will continue with this downturn. I’m seeing that in the Midwest, reasonably-priced homes still sell just fine because people can afford them with conventional mortgages.
But what about the McMansion-type house that is languishing? Soon the prices will be down low enough that they are affordable. I can see a lot of people choosing to own the larger, newer house at the same price point, but not realizing that the energy costs are higher, the property taxes might be higher and that the house may need some costly repairs soon (they DON’T build them like they used to).
Is there going to be a smaller bust consisting of a newer type of unaffordable housing?
Conversions of older warehouses into lofts has been huge out here for years now, and I’m starting to see some reports here and there of loft owners being hit with $60,000 - $100,000 special assessments for building repairs due to corner cutting by the developer. And the only reason these are making the news is because someone noticed the lawsuits on the dockets. I have a friend whose condo building is involved in a huge dispute with the developer and it hasn’t been reported on, despite lawsuits on both sides. So I know for a fact that we have no idea how many owners are discovering that the cost of their already-inflated home has increased by thousands of dollars long after they signed the closing documents.
You make good points, Brian. The hidden costs of being a 21st century McTrump RE entrepreneur.
It appears that nowadays it’s caveat emptor six ways from Sunday.
“‘The abruptness of the negative numbers surprised me and the extent to which they’ve become negative surprises me,’ said Bernard Helm, president of MORE.”
Don’t worry Bernard things should be picking up anytime. Remember the ’super bowl’ and spring selling season that you’ve been telling us about? Oh, maybe you’re worried because you know that all that talk is just ‘RE shilling’. Not to worry, you can sustain yourself on black eyed peas and grits for the next 10 yrs while working as a WalMart greeter.
Hey, I like Mr. Schilling!
TOBACCO ROAD
The Nashville Teens
I was born in a trunk.
Mama died and my daddy got drunk.
Left me here to die alone
in the middle of Tobacco Road.
Growin’ up rusty shack,
all I had was hangin’ on my back.
Only you know how I loathe
this place called Tobacco Road.
But it’s home, the only life I ever known.
Only you know how I loathe Tobacco Road.
Gonna leave, get a job
with the help and the grace from above.
Save some money, get rich and old,
bring it back to Tobacco Road.
But it’s home, the only life I ever known.
Only you know how I loathe Tobacco Road.
Bring that dynamite and a crane,
blow it up, start all over again.
Build a town, be proud to show.
Gives the name Tobacco Road.
Interesting…I live in the triangle area and own a small home. I highly doubt that we’ll be hit more than 5-10%, but definitely see this tiny decline occurring. However, I am certainly not envious of anyone who owns a 500K+ McMansion in Cary (Containment Area of Relocated Yankees). You would be hard pressed to find anyone in the area who believes that housing will go down in the coming years. Raleigh residents will probably be one the most shocked people in the nation, considering that Forbes rated Raleigh the top area in the country for employment just a few days ago, and many assume that allows them to think “bubble shmubble”
” I highly doubt that we’ll be hit more than 5-10%”
Are you sure about that? Have you considered all the facts or are you blinded by your personal financial situation?
The house is located next to I-540 and as such is in close proximity to RTP and RDU airport. The house cost me 120K (not much to go down considering it’s in a golf course community and a single family detached in an established neighborhood: not a McMansion). Them’s the facts. Dues are 40 clams for a free gym, golf privileges after 3pm, and swimming pool. A single wal-mart employee could nearly afford the house if it were 100K, and certainly a dual income wal-mart employee couple could without resorting to padding their income. I didn’t say that Raleigh was bulletproof. Quite the contrary.
Care to rebute with your own facts on the area? Or, are you just thinking along the lines of “when all you have is a hammer, everything looks like a nail”.
I have been here for some time now and have seen lots of people claim everywhere else is screwed except their town. If you are in your home right then you have nothing to worry about, however, if you are HELOC’d up the ying-yang and are flipping/speculating then you might be screwed…
That is more like it. I don’t take badmouthing of Raleigh personally. I expect housing values to drop between 5% and 25%, depending on whether you have something affordable in a desirable and established neighborhood (smaller end) or a McMansion in Cary/Crabtree Valley/N. Raleigh (higher end). The offshoring fad has not touched many of the researching jobs, mostly just the monkey tech work. Backshoring, in fact, has been the norm in RTP more recently, as satisfaction with non-native English speakers is extremely low. Plus, academians abound (NCSU, Duke, and UNC) and there has never been more demand for competent teachers, and property taxes are extremely low. Housing is safe here for the most part, albeit not profitable anymore. Homes are just too cheap on the lower end to be impacted much. Rent is perfectly inline with housing prices. Single’s life is great with lots of 20 and 30 something’s, and climate is good overall (lower utility bills). Sorry that I don’t think so universally, but sometimes you can’t generalize a great crash everywhere in the country.
Will professor salaries support hundreds/thousands of these $300k and up new homes?
Of course they will. My former advisor makes over 100K and gets summers off. His wife is nearly 100K as well in private industry. The mean salary in the triangle is very high and unemployment is very low. Plus, the bennies are great for academians and they get summers off.
You missed my point. Upper end homes (those over $250K) will be more affected by the downturn. Still, a tract home is definitely worth more than $200K down here, regardless of whether rates were 6% or 10%. You cannot apply a crash theory to the triangle area, although you can certainly apply a tiny correction to it. Homes aren’t worth enough to apply these theories.
‘You would be hard pressed to find anyone in the area who believes that housing will go down in the coming years.’
That is actually a very neccesary ingredient of a speculative boom, IMO. I remember that when oil was soaring in the 1980’s, most Texans had convinced themselves that not only would prices hold, but that they would rise to over $100/barrel. And many had arguments worked out that would explain why it would.
As I recall, by 1986-7 prices had dropped under $10/barrel.
The Raleigh area very much has not seen a housing bubble though, at least in terms of price increases, according to the OFHEO. If you look at the numbers in http://www.ofheo.gov/download.asp, any areas in central NC haven’t seen inordinate price increases - generally they’ve been running about 4% per year steadily - just barely above the CPI (depending on who you ask).
Some areas of NC have seen inordinate price increases the last 3 years or so - specifically Wilmington and Asheville, but not central NC - Raleigh, Greensboro, Charlotte. IMO central NC is one area that indeed will not experience significant hit of the bubble downturn - partly because the prices haven’t increased all that much, and partly since they’re starting to get a lot of the influx of people from other bubble areas (e.g. Google is installing a large facility in Lenoir, of all places).
We moved to Wilmington, NC in late 2005. We sold our condo in Boston and have rented down here since. We wanted to get a feel for the market. We planned to buy less house than we can afford. The problem is: stuff that sold for $80,000 in 2004 is now listed at $229,000 and quite a few people are paying it. We refuse! We will probably rent the whole time we are here, move to Raleigh or Charlotte and buy there. That is, of course, if prices do not come down here significantly. There is a lot of stuff on the market at the beaches and downtown, and there are tens of thousands of new tract houses coming on-line in the next two years. We’ll see.
I remember driving through Louisiana in the spring of 1986 and paying about 88 cents a gallon for gasoline. That is the lowest price I can recall paying for gasoline.
Yep, I had my first car in 1986 and can recall gas stations having price wars in Chicago, all the way down to FREE in some cases. That summer I think I filled up at 79 cents per gallon once, which is the lowest nominal price I’ve ever paid.
However I also recall filling up at 99 cents per gallon in LA in 1998. It stayed low for a good year or so - I remember being annoyed when filling up my 4-gallon motorcycle tank cracked the $5 barrier.
Gas was also below $1.00/gallon in LA again for a month or two after September 11, 2001. After accounting for inflation, that’s probably the lowest price I can remember in my adult life. I wonder if we’ll ever see those prices again.
Bubba — I paid 19 cents a gallon during the price wars of the early 1960s. Normal price was 23-25 cents (and this is with full-service), but during the occasional price wars they’d cut it to the bone. It was not unusual at all for kids my age to ask for “a dollar’s worth.”
The key difference between then and now, I’d argue, is the Federal Reserve and secondly the banksters/hedge funds, rather than OPEC.
I asked for 2 cents worth of fuel late at night at a service station once, because it was all I had on me. I was at university and riding a little Honda 50cc bike, which got about 150mpg so at the time this would have been enough to get home and back the next day.
The guy at the service station looked at me in utter disbelief and put 20 cents worth in which half filled the tank. (He seemed even more amazed when I went back the next evening and paid him the money.)
OT but look out LV and Reno your days are numbered (Indian C’s in CA)!
“There will be an impact, no doubt,” said Carlos Tolosa, eastern division president for Harrah’s Entertainment Inc. “The Pennsylvania slots parlors will certainly cause competition. In the past, people just came to Atlantic City. That’s the part that always scares you. Atlantic City relies on high-frequency customers.”
Already, Pennsylvania slots parlors are cutting into Atlantic City’s pie. Figures for January, when Atlantic City went head-to-head with two new Philadelphia-area slots parlors, had New Jersey casino executives reaching for the antacid tablets. Overall revenue at Atlantic City casinos declined 2.9 percent compared with a year ago, but the decline in slots revenue was even sharper 7.2%”
I was asked the other day was there anything that could be done about the glut of ugly second homes on just about every mountain peak in the North Carolina mountains. My answer is just to sit back and watch the house of cards they created come crashing down.
Ben is correct. One “advantage” NC has is that there has been a rolling foreclosure problem since about 2003.
I charted the foreclosure rate for Mecklenburg county out of my own curiosity, and we’ve been running at about 3 foreclosures per 1000 deeds the last few years. Back in 2001 it as more like 1 foreclosure per 1000 deeds.
However, that’s an aggregate view. Charlotte has several small bubble pockets, especially uptown condos and gentrified inner neighborhoods. Next year will be interesting to watch, because we have several large tower projects in the process of construction.
“‘People just get out the Wite-Out or cut-and-paste documents,’ Pearce said.”
Ugh. Reminds me of the day the head of our REIC dept. came sailing into the advertising office, chuckling about one of her realtresses who had been caught whiting out verbiage on a sales contract.
I suggested to her that she apparently had a white collar criminal on her staff, and that the humor she derived from the situation escaped me.
Little did I know.
Wait a minute! This post should be grtis & gravy for Bill in Carolina. He oughta be posting like GetStucco when he’s sober and me when I’m not! Where you at, Bill?
C’mon Bill, tell me this is just a coincidence. Fresh meat and you’ve turned vegetarian on us.
/bait off