Lower Bids “Tend To Drive Prices Down”
The Hillsdale Daily News reports from Michigan. “Since 1994, sheriff’s foreclosure deeds have been rising steadily. In 2006, 194 sheriff’s deeds were filed and only 14 individual owners redeemed their properties. In the month of January 2007 alone, 25 sheriff’s deeds were filed. Three of the houses to be auctioned Tuesday are located in Hillsdale County.”
“‘We’re seeing just the tip of the iceberg, with the foreclosures (on record),’ said (broker) Don Helton. ‘Those sheriff’s deeds reflect just the foreclosures that are completed. There are a lot more people out there — where the (final) letter could come any day.’”
The Herald Times from Michigan. “According to Lesa Jarski, who serves as secretary/treasurer of the Water Wonderland Board of Realtors MLS Board, the 338 Otsego County homes sold in all of 2006 numbered 53 fewer than the 391 sold in 2005.”
“While the number of homes sold and total sales volumes were down last year, a 13-percent drop from the previous year, Jarski said the fact waterfront home sales were down 33 percent in 2006 indicates home sales of primary residences were not that bad. ‘Secondary homes have taken a hit and the waterfront homes which are selling are the more expensive ones.’”
“Overall sales volume in 2006 was down by approximately $7 million from the previous year, when a home was on the market an average of 164 days. Jarski said the 2006 average, 152 days on the market, can be somewhat deceiving when compared to 2005. ‘This doesn’t take into account the houses that had been listed two or three different times.’”
“‘There always seems to be a lot of peaks and valleys in real estate and while you could look at the 1990s in the county as being a kind of boom in the market, I think we’re holding our own,’ Jarski said.”
The Toledo Blade from Ohio. “Home sale prices dropped 7 percent last year in the Toledo area, twice as much as the decline nationwide, and they are lower than they were three years ago, a new study shows.”
“The local drop seems to run counter to local real estate experts’ statements that the market seldom goes up or down by much.”
“Still, local agents are optimistic. ‘We’re trying to keep consumer confidence and motivation up,’ said Ray Henderson, president of the local Realtors’ group.”
“Selling prices in Ohio dropped 10 percent from the end of 2005 to the end of 2006, to $263,400. They were down in Michigan by 7 percent to $177,600. Both prices were down significantly from 2004. Allen Green, president-elect for the local trade group, said prices sagged last year because more properties on the market as houses waited longer for buyers.”
The Cincinnati Enquirer. “It was not the bursting of a bubble, but the selling price of existing homes did more poorly in the Tristate last year than all but 18 of the nation’s 149 biggest markets. Ohio was a big reason for the drop in the Midwest. Of the 19 worst-performing markets in median home-value changes, seven were in Ohio.”
“‘It’s been a buyers’ market,’ said Don Freels, CEO of the Ohio Association of Realtors. ‘They’re submitting lower bids and, in some cases, they’re getting them. It tends to drive prices down.’”
“Real estate professionals in the region say that record home sales in 2005 and peaking resale prices made it difficult for the industry to shine in 2006. ‘You’re coming off a record year when interest rates were at a 40-year low,’ Freels said. ‘People were bidding with each other for the same home.’”
“Steve and Jenny French learned firsthand how cold Cincinnati’s real estate waters were in 2006. Their two-story, three-bedroom house on trendy Conroy Street in Fairview Heights was on the market most of the year, but they couldn’t find anyone willing to pay their $199,000 asking price.”
“‘We had plenty of window-shoppers and people who said they were serious,’ said Steve French, ‘but in the end, when I followed up with them, they said they wanted to buy a new house and not have to do anything with it.’”
“Conroy Street has several newer homes that were part of the Over-the-Rhine Tour of Homes in 2004. French’s house has a two-car garage, an extra lot and a panoramic view of downtown Cincinnati but still awaits a new owner.”
“‘Existing homes suffered badly in 2006,’ French said. ‘We felt the house was fairly priced based on the square footage and number of bedrooms. We even offered a lease-to-own option.’”
The Pioneer Press from Minnesota. “In an unusual about-face, a Prior Lake woman at the center of an ongoing federal investigation into mortgage fraud will bare her soul in an upcoming issue of Minnesota Realtor magazine.”
“Jill M. Lehn, who pleaded guilty to one count of wire fraud and one count of money laundering in December, tells all in a four-page article she wrote for the magazine due out March 1. The article details her misdeeds while working as a closing agent at First Advantage Title Co.’s Burnsville office, which has since closed. ‘It’s a very hard lesson,’ Lehn told the Pioneer Press.”
“Lehn has admitted to preparing fraudulent documents in more than 60 real estate transactions between December 2004 and August 2006 where home values had been inflated. Lehn said she had nothing to do with inflating the home values, but was responsible for dispersing some $3 million in extra money concealed from lenders, by cutting checks to buyers and sellers.”
“According to her plea agreement, the buyers knew in each case that they were signing fraudulent documents she had prepared, in order to get the pay out.”
“”Lehn said she clearly recalls the first instance, about three years ago. A particular loan officer requested a favor, she said, to get a homebuyer extra cash back to improve the property. ‘It’s something I did as a favor to people that has come back to bite me in ways I never imagined,’ Lehn said. ‘I foolishly said yes once and opened up that pathway.’”
“One of Lehn’s clients, Isadore Stewart, a real estate investor who lives in Bloomington, has also pleaded guilty in the scheme. Stewart pleaded guilty to one count of wire fraud in relation to three properties he purchased at inflated prices last year, including one house in St. Paul’s Frogtown neighborhood.”
“Phillip Resnick, the Minneapolis attorney representing Stewart, described described the ongoing probe as wide and ‘pretty extensive.’ ‘[Lehn's] got dozens, if not hundreds more than just him,’ Resnick said. ‘My sense is that it goes beyond just her. That there are people that are higher up than she is.’”
‘Real estate professionals in the region say that record home sales in 2005 and peaking resale prices made it difficult for the industry to shine in 2006. ‘You’re coming off a record year when interest rates were at a 40-year low,’ Freels said. ‘People were bidding with each other for the same home.’
Notice how many of these articles reference some not-too-distant boom? How do Cincinnati bidding wars fit with the ‘no national bubble’ myth?
From Ohio
‘Peoples Community Bancorp Inc.’s problems with bad real estate loans continued in the fourth quarter as the West Chester-based bank incurred a loss for the second straight period largely because of delinquent loans to real estate investors and developers.’
‘Sales of existing single-family houses declined in metro Detroit and in much of the nation during the final three months of 2006, continuing a slump that has lasted more than a year. Mark Zandi, chief economist for Moody’s Economy.com, predicted that home prices in many parts of the country would continue to be under pressure for the rest of this year as the market works through large inventories of unsold homes.’
‘He said the process will be made more difficult with banks raising lending standards because of concerns about rising mortgage default rates. ‘The price declines we are seeing are extraordinarily broad-based and just symbolize how significant a price correction we are in,’ Zandi said.’
Ohio has been hit and hit hard. Even in my decidedly modest neck of the woods, houses are not selling. In my neighborhood, two sales, both at 140K (one was 1600 sf and the other was about 1300 sf, but very nicely kept up with great curb appeal), went through in November, and absolutely nothing has happened since. My next-door neighbor put her small century home (3/2, maybe 1100 square feet) up for sale in October at 140K as well and got zero offers. She pulled it about two weeks ago and decided to just stay put.
Did you see/hear of any bidding wars in the past few years? Why would folks do that in Ohio?
You may have had a construction spike in Ohio (like the Sunbelt) rather than a price spike (like the coasts). While the construction volumes were not great, they were substantial relative to population growth. It may have been enough to depreciate older houses the way new cars depreciate older cars.
Dublin is an upper to upper middle class suburb of Columbus, the town all the rich and their office buildings are fleeing to so their property taxes will not be used for services for the rest.
No, no bidding wars. (I’m in economically depressed Northeast Ohio.) From ‘01 to ‘05, at least, things were selling, not flying off the shelves, but definitely selling. Things slowed in ‘06, and they will remain Molasses-in-January-like in ‘07, IMO.
“Ohio has been hit and hit hard”
My wife and I had dinner with a couple from Ohio the wife is a realtor and I asked how the market was in Ohio and she said “Flat and doing ok. It was making a comeback.”
So is she lying? She is from the Dublin area.
As far as I know Ohio never had a real “spike” in prices. What did happen is the same as everywhere else. People who don’t belong in homes were able to purchase homes. Now they have to pay the piper. I don’t think it’s “flat and doing ok” but I also don’t think it’s seeing the huge declines like FL, AZ, CA and NV.
I would have to agree. With the median income being what it is in the Cincinnati region, there is no place for hundreds of 400K-500K houses that people bought during the last few years. Thus, we have a situation where most of the recent buyers have overextended. If there is one area, it has to be this one, where there are no unique selling points. This place is typical mid-west and people don’t come to live in Cincinnati unless they have a reason to be here. If median incomes and home prices don’t match here then there is something clearly wrong.
Andy,
‘You’re coming off a record year when interest rates were at a 40-year low,’ Freels said. ‘People were bidding with each other for the same home.’
Builders are going to respond to that in any market. These RE folks like to pretend overvaluation is a fring concept, but then this Ohio realtor CEO makes a statement like this.
Well Cincinnati did have a tremendous spike in building of larger homes in the suburbs and exurbs (eg, Mason, West Chester, even Northern Kintucky). Growth is basically uncontrolled, and it will only get worse. (I have fond memories of spending a half hour at a trffic signal on Fields-Ertel exit of I-71.)
These newer homes are mostly McMansions (yes, in the $300-$500+ range) and not only contributed to the overbuilding, but drove down existing home prices closer to the city. Like Dublin, many of the businesses are moving to the ‘burbs (Blue Ash and the rest of the I-275 corridor). Consequently, Cincinnati was listed as one of the top sprawl-prone areas in the US.
To compound problems, the manufacturing base is falling out of the market in Cincinnati and with it goes the related infrastructure of administrative jobs: IT, finance & accounting, middle management. Oh, and then there is the uncontrolled crime in the dying downtown, with a successful development of the historical area across the Ohio in KY (which they, I might add, were doing quite successfully).
I sold in 2003, although I really liked living Cincy. Maybe a bit too early to sell, but oddly enough a house Washington state for $100k more is roughly the same mortgage payment, as the taxes in the city of Cincinnati were quite high. But it was still preferable to living in the city than the bland homogenized suburbs.
I live in a northern exurb of Cincy and work in the city itself. I have to agree that we have had a tremendous building spike but not a price spike.
What deferentiates Cincy from other Midwest old cities is that Cincy does not have a large manufacturing base. The 3 biggest private employers are P&G, Krogers, and GE Aircraft (jet engines). GE follows the world aircraft market and its employment is pretty steady. P&G and Krogers produce the most basic consumer goods in the world, so their employment levels are remarkably stable. Basically, the city just plods along. No employment or wage booms or bust. With the employers increasingly moving to the outerbelt, and all the available land beyond it, we’ve experienced a major building boom in the exurbs. Existing houses are hard to sell.
There are a few of us unique house lovers around, but most people are thrilled with generic tract homes. (It took me 2 years of searching to find my Victorian farmhouse on land in a decent school district, but the price was right).
Oh, and during the 2 years I was actively house hunting, I never heard of a single bidding war. It seems that every house priced at $200k or above sells for $10k under (most recent) asking price, and every house priced under $200k sells for $5k under (most recent) asking price
Dublin is a nice Columbus-area suburb, and Columbus is doing better than Cleveland economically. “Flat and doing OK” is probably reasonable. “Making a comeback”–eh, not so much.
Any Columbus-ites (???) want to jump in here?
Here comes the CRASH.
QUESTION: OK, lenders have been booking as profits unrealized gains from option ARMs in past quarters. Which lenders do you think are the most exposed to this “potential” (LIKELY) trap. I think these outfits will have to re-state prior earnings as the defaults turn into foreclosures and they get stuck with sharp losses. Any time earnings get restated stocks seem to get severely punished…
‘Any time earnings get restated stocks seem to get severely punished… ‘
Wrong! Have you been watching this market?? All news is good news! A bomb going off in the white house would surely rally the market by at least 200 Dow points. You obviously don’t know Goldilocks.
I’ll take my chances on a 6mo PUT on the company most exposed to OptionARMs. The NegAm has already been booked as PROFITS for years and with the combination of resets, foreclosures and general price declines the punishment is gonna be brutal - IMO.
don’t you know”it’s just sub-prime” everything else is teflon coated
Do not drink the icy cold ‘contained to subprime’ refreshment. With a credit expansion as big as the one just experienced, there is going to be spillage. Mark my words. Conditions are perfect for tornadoes of foreclosure and insolvencies across the country. Look at Coast in Florida and Peoples as reported within this thread for example. Grab the women and children and head into the basement.
We don’t have basements in FL.
‘My sense is that it goes beyond just her. That there are people that are higher up than she is.’”
Your “sense” is called common sense, and it would be correct, if not severely understated.
how much jail time do you get for this ?
. Stewart pleaded guilty to one count of wire fraud in relation to three properties he purchased at inflated prices last year, including one house in St. Paul’s Frogtown neighborhood.
Minneapolis is generally very liberal so she will likely just get a slap on the wrist as long as she says I’m sorry. However, I do applaud that this type of activity is finally being prosecuted. I wonder how deep they will dig?
“We are one with ourselves
We don’t give a S*** about anyone else
Well it won’t be wrong until our day in the sun is gonna stop
The walls come tumbling down
[Chorus]
We are one
We are free
We are headed for obscurity
We are one
We are weak
We are gonna make ourselves extinct
We are one, you know it’s true
Don’t f*** with us or we’ll f*** with you
It’s a mentality that kills the best, we better stop
The walls come tumbling down
[Chorus]
We are one and it won’t be news
When we hang ourselves with one collective noose
Well, it won’t be wrong until our day in the sun is gonna stop
The walls come tumbling down”
Offspring - We Are One
“Peoples said the delinquent loans ‘were due primarily to the moderate downturn in the local economy and resultant cash flow issues faced by local property investors and developers….’”
Someone needs to send these guys a memo detailing the potential fallout from shrinking housing demand.
cash flow issues faced by local property investors
Thats hysterical. They refer to not being able to refi and suck out more equity as a cash flow issue. The real issue cash flow issue was that they paid 200k for properties that fetch 800 in rent. You cant blame cash flow after the fact, that should be your first calculation.
“The third-quarter provision was initially reported as $2.6 million, but it was increased two weeks later as a result of an internal review and discussions with federal regulators, the bank [Peoples] reported at the time. As a result of the revision, it reported a net loss of $3.9 million, or 82 cents per share, in the third quarter, wiping out profits from the first six months of the year.”
Moderate downturn? Right…
I don’t know about you people but I just want to scream when I see these kinds of reports. This one is from Aldana a SC RE with radio and tv segments:
“If you have been thinking of buying or selling a home, you may want to keep a close eye on the market. I am seeing a lot of activity right now.
One of my buyers this past week was interested in about 3 or 4 properties that we showed them and when I went to do further investigation, they ALL had offers on them and were about to go “Pending Sale”.
Another one of my buyers asked to see some townhouses in a particular area in the $600-700,000. There were 10 properties listed. Out of those 10 properties, 7 of those were already pending and the 2 remaining had offers on them.
I am not making this up, these are real life scenarios. The key and common theme that all these properties had was that they were in the “affordable” price range where most buyers can afford and they were priced right. If you are selling, price it right, make it show nice and make it easy to show.
If you are looking to buy, there are not many “steals” out there. There are some nice properties, but don’t expect to steal a home.
Even though this is a slower market compared to 2005, we still live in one of the hottest markets in the Country (see article to the right) and we outperform the rest of the Country. Remember, real estate is local, not National. Meaning, you can’t compare our area here in Northern California to another part of the Country or even other parts of California like the Central Valley. Remember, think local. Real Estate is a different animal. A share in Apple or IBM is the same whether you buy it here in California or buying it from England. It is the same. But not real estate. A 3 bedroom 1200 sguare foot home in one area is worth more then a 5 bedroom 3000 dquare foot home in another area.
Just my two cents…. ”
He’s as bad as John Sanchez over in Reno and I wait the day when both are taken off the airwaves.
Not that many steals? I don’t know a single seller in my area who wouldn’t entertain ANYTHING and I mean ANYTHING put on paper in front of them. Fact is most keep their homes overpriced because their real estate agent tells them to.
It must be different where you live Ron.
you know I’ve been walking around brooklyn, ny (nyc) periodicly.
There are 6 empty condos in my neighborhood small ones with 6 to 18 units in each. 95% empty. For the past 6-9 months. Last time I looked at them was before my uncle left they pretend to sell two or three units to drum up demand but night time comes no lights in windows… also now those pretend units are empty again. with for sales plasted on em. (I am not even going to go into speaking about all of brooklyn or that every block at least 1 or 2 houses are “for sale”)
going to mention this as well the one that is with 6 units one block from my house has a house behind it that is for sale. I am willing to bet the house is cheaper than 2 condos… They priced em at 389 when we asked which is insane. They sit on a 60 by 100 lot.
Wonder how much the title reps fraud raised the prices in the areas were the appraisals were inflated . First you had to have a appraiser that approved the inflated purchase ,than you had to have a underwriter approve that much of a increase ,than you had to have a escrow officer and a title rep. that closed their eyes to the pay-outs. I have never seen it were so many check and balance systems went haywire .
Jail time isn’t enough for these crooks . They should pay back the money they got away with . Right now there should not be any areas that the appraisals come in higher than 2004 or 2005 prices . The second a lender see a higher purchase price they should suspect fraud right away .
The problem now is that because of not only fraud but the sub-prime lenders inflating values because of investors and unqualified buyers ,the market isn’t stable . Is it fair for people to get their property taxes raised based on fraud and unqualied buyer/investor demand . This is really a serious bad situation that requires major correction .
When the public finally finds out what caused the real estate market to inflate to the degree it did ,they will be shocked . Looks like all pay-outs will need to be checked by many parties to weed out bad title reps .I’m sure RE Brokers can tell when one of their agents sell for to high a price also .
So this agent handled over $3 million in “extra money” (read “fraud”)over sixty transactions and the investigation is nowhere near complete.
Now tell me that this hasn’t happened a thousand times across the fifty states or through our population of about 300 million over the last three years. Because if you can, you can maintain with a straight face that losses might be only $1 billion. Otherwise, buckle up because the losses are going to be staggering, and home values are going to sink like a stone.
Now tell me that this hasn’t happened a thousand times across the fifty states or through our population of about 300 million over the last three years.
Ok: this hasn’t happened a thousand times over the last several years –it’s happened tens of thousands of times.
And when is the first lawsuit coming that questions a property tax re-valuation based on fradulent purchase prices? The rot of these frauds are endless - and the fallout may be incredible. I’m waiting for a 60 Minutes expose on this to really get the phones ringing.
I believe that housing is going down hard quite soon. What I fear though, is that because it is an issue which affects a majority of Americans, the leadership in Washington will attempt to pass legislation which will make quicksand of the situation. By quicksand I mean that Congress in its attempt to placate the masses will introduce legislation which causes greater harm than good. They will introduce legislation that can’t get passed or pass bills that will relieve the taxpayers of their hard earned money with promises of more debt to follow.
What is needed is competence and a reorganization of the economy as a whole. The fed has done enough to put us all in this position. I would like to see the Fed disbanded and have the Treasury take over. For those who say that the economy is robust, I cannot believe that unless you show me how much greenbacks are currently in circulation. I am no economist but I know enough to know that you can’t run an economy the way their running it.
What makes you think that any economy can be “run” by a central government?
I “think” that an economy run with the health, interests, rights, and needs of each citizen being met is what providence calls for. I “think” a federal system such as ours relies on its citizens to regulate themselves against the predatory economy that we currently have. I am not for a controlled economy like the USSR was. I believe that a government of, for, and by the people can say “look, we don’t have to prey on each other to all get what we need. We are not animals.” What we need is to invest in the things which will drive our economy and show some benefit in the long run. A short list to begin with would be power generation, transportation systems, and water project infrastructure to secure our populations welfare. From there our employment base expands and we then could secure the health aspect that would be required for an expanding population that would arise.
“…“It was not the bursting of a bubble, but the selling price of existing homes did more poorly in the Tristate last year…”
Why do these people always need to add the “it was not the bursting of the bubble” qualifier before proceeding to tell us how much prices have dropped? A little paranoid?
PS - I went to UC, good to hear some stories about Cincinnati on here.
I just read in USA Today that 1 out of 5 home sales in Sacramento is a short sell. That is just about the same number as Santa Barbara County as best as I can tell.
“Real estate professionals in the region say that….”
Were used car salesmen ever thought of as “used car professionals”, once upon a time? Just asking.