“The Market Is Being Flooded With Spec Properties”
The Denver Post reports from Colorado. “New-home sales in Colorado fell by 21 percent in 2006 from the previous year, according to a report from the Genesis Group in Englewood. Too many new and existing homes are on the market given the number of available buyers, said Mike Rinner, a senior analyst with Genesis. ‘We have a math problem,’ he said of the Denver market.”
“Denver homebuilders have generally avoided speculative projects, only to be hit by a surge in cancellations, said Jeffrey Willis, executive VP with Berkeley Homes in Aurora. Metro-area buyers canceled 22.5 percent of the new-home contracts they entered last year, mostly because they couldn’t sell their existing homes.”
The Rocky Mountain News from Colorado. “The record number of foreclosures may be playing a role in the higher than expected vacancy rates, said Kathi Williams, director of the Colorado Division of Housing and c-chair of the Colorado Foreclosure Prevention Task Force.”
“‘Although high foreclosure rates may be driving some current homeowners back into the rental market, many first time homebuyers may find themselves looking at a lot of deals offered by homebuilders,’ Williams said. ‘Especially in areas where there is a sizable unsold inventory of single-family homes, builders are competing with landlords for renters who might be considering a purchase.’”
“Jeff Hawks, an owner of Apartment Realty Advisors, said many of the current foreclosed homes on the market are creating a ’shadow’ rental market that is not being tracked.”
“That’s because many of the homes and condos being taken over by lenders or by investors, are being rented, but not are part of the traditional data bases.”
The Review Journal from Nevada. “Las Vegas mirrored the downturn in the national housing market as sales of both new and existing homes fell sharply in January.”
“New home sales fell to 2,052 in January, compared with 2,815 sales in the same month a year ago, Dennis Smith of Home Builders Research reported. It’s the lowest January since 2003. Excluding mid-rise and high-rise units, the number falls to 1,610.”
“In Las Vegas, the resale sector fell 25.6 percent in January to 2,423 recorded transactions, the lowest number for that month since 2001. Median price fell by $5,000, or 1.8 percent, to $280,000.”
“With an inventory of nearly 20,000 homes for sale in Las Vegas and sales declining, home builders are cutting back on new permits for residential construction. Las Vegas-based SalesTraq showed 1,002 new home permits in January, a 54 percent decline from a year ago. From September through January, only 4,422 new homes have been permitted.”
“‘If we continue to see new home permits decline, will that impact the existing home inventory? The answer to that question is how much demand will there be in the second quarter,’ SalesTraq president Larry Murphy said. ‘Watch new-home sales stats very carefully over the next few months to determine how good, or bad, 2007 will be.’”
“SalesTraq reported 2,135 new-home closings in January, down 26.2 percent. Existing-home sales were off 14.3 percent at 2,770.”
“An article on Realtor.org said home sales are sluggish because prices are just too high for many buyers. ‘Buyers are backing off — not because of a poor job market or high interest rates — but because the housing stock is out of their price range,’ the article stated.”
The Deseret News from Utah. “Up, up and away. Utah home prices keep climbing. At 17.55 percent, the state’s house-price appreciation was nearly triple the national rate and was the highest of all states in last year’s fourth quarter compared to the same quarter of 2005, according to a new report by the U.S. Office of Federal Housing Enterprise Oversight.”
“Wyoming ranked No. 2 at 14.29 percent, and Idaho came in third at 13.99 percent.”
“‘I think that the last two years have been very strong in our market after having three relatively flat years,’ said real estate agent Debra Sjoblom. ‘I think we are still in a very stable situation. I think it’s certainly a great appreciation but not so great that we’re running any risk of having it tumble.’”
“Santa Barbara, Calif., was down 4.20 percent in the fourth quarter compared to a year earlier. And the Reno-Sparks, Nev., area showed a nearly 1 percent drop in home prices for the same period. ‘In some sense, what we’ve seen over the last year or two has been unsustainable,’ said Andrew Leventis, an economist with OFHEO. ‘It was just a matter of when the appreciation rates were going to fall.’”
“The house-price index is based on transactions involving conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. The index measures price changes in repeat sales or refinancings on the same properties.”
“Leventis cautioned that Utah’s double-digit price gains, like those in other states, will only last so long. ‘Unless income growth really picks up in your area, 18 percent is definitely unsustainable over the long term,’ Leventis said. ‘But at the end of the day, Utah house prices relative to income are relatively affordable.’”
“Dan Bodily of Lehi, owner of Blue Ridge Cabinets and a homebuilder, said he is unsure whether Utah’s appreciation rates are sustainable. Bodily said he has more work than he can handle, but most of it is for investors hoping to make money on speculative homes yet to be sold.”
“‘I think the market is being flooded with spec properties at the moment,’ Bodily said. ‘The builders are making good money right now because they get their money up-front. But I wonder what is going to happen with all these investors.’”
“For now, Utah homeowners and builders are riding the housing wave, hoping it will last amid a national slowdown.”
‘The pace of new-home construction locally during the first two months of 2007 is off to its poorest start in years, despite optimism by Colorado Springs builders that the local housing industry is poised for a turnaround. Single-family home building permits in El Paso County — a reliable yardstick to measure the strength of the residential construction industry — plunged by 50 percent in February when compared with the same month a year ago.’
‘Not only do permits reflect the health of the local housing industry, but new-home construction in general is a key component of the local economy. Thousands of people work as carpenters, framers, drywallers, plumbers and electricians. Sales taxes collected on the purchase of building materials account for millions of dollars in revenue the city of Colorado Springs uses to build roads, fill potholes and hire police officers and firefighters.’
‘New-home shoppers can get lucrative deals now, Bamberger said. ‘Builders are offering some great incentives for buyers.’
‘Concerned about Colorado’s dubious title as the nation’s leader in the rate of home foreclosures, lawmakers introduced two measures to crack down on fraud and regulate the industry. Sen. Peter Groff said a new law requiring brokers to register isn’t working because most of the state’s 14,000 mortgage brokers are exempt. Under current law, only 4,500 mortgage brokers have registered. ‘We have to get a handle on the issue of foreclosure in this state,’ Groff said.’
‘Jan Zavislan, deputy attorney general for consumer protection, said another problem is people who conspire to buy properties with inflated values. He said some never intend to live in the homes and are only interested in walking away with the extra money from the loan.’
‘Lou Barnes, a mortgage banker in Boulder, Colo., says a client with a good credit score was turned down this week for a mortgage to buy an investment property with a small down payment and no documentation. That same borrower was approved for a ‘nearly identical’ loan in August and November, he says. Still, Mr. Barnes calls the tightening ‘modest.’ Alt-A lenders are ‘nibbling at the edges,’ he says.’
“Single-family home building permits in El Paso County — a reliable yardstick to measure the strength of the residential construction industry — plunged by 50 percent in February when compared with the same month a year ago.’”
This has to have the Fed worried - this leads to future unemployment etc. Wonder what the fallout will be from issued permits?
Unemployment stats will depend on whether your local workforce is on the books or not, no?
Watch MOM same-store sales for Wal-mart in the Central Valley of CA. One of the ground-zero’s of undocumented workers, and they spend a lot of bucks on Sam’s junk.
“The pace of new-home construction locally during the first two months of 2007 is off to its poorest start in years, despite optimism by Colorado Springs builders that the local housing industry is poised for a turnaround.”
Do these builders really believe this stuff? With all of the information that is available, it’s unimaginable that they can. A turnaround? Things are just getting started. What with the meltdown in the lending industry just getting started, inventories already through the roof, and foreclosures skyrocketing, what in the world are they seeing that I am not? These guys are just delusional.
Bantering,
I think they keep saying this hoping that panic won’t set in. Can you imagine what the markets would do if anyone spoke the truth?
“Can you imagine what the markets would do if anyone spoke the truth?”
Boy would I love to see that. Like all of the industry insiders, and the MSM saying: “You better sell now because prices are going to drop over 50%”.
Intel is closing their Colorado Springs semiconductor fab and laying off or transferring 1000 high paid jobs. Springs RE is looking attractive.
Rex,
I just posted about CS earlier in the thread….a CS realtwhore sez his market is soaring with the eagles! LOL Maybe he doesn’t know about Intel’s plans….
The Intel fab closing is old news (January). And the realtors will try to tell you that a big influx of military personnel (around 15,000, including family members) will offset the Intel news. Never mind that most servicemen and women are not the most creditworthy individuals around, as evidenced by all the Payday Loan and pawnshops clustered around the five local bases. A more telling indicator is foreclosures - up sharply YOY and from last month. We’re closing in on the 1988 numbers, though percentage-wise it’s not as bad - yet.
http://put.elpasoco.com/NR/rdonlyres/3BE6A35A-85BE-441F-9D01-EB8DCED68F2F/0/ptstatistics.htm
Looks like in Utah it’s a perfect time to sell and rent for a year or two.
IMO, the OFHEO numbers are flawed, so the peak may be past. But it sounds like the builder is aware of a problem coming.
BTW, shouldn’t January be a big month for Vegas?
how much demand will there be in the second quarter,’ SalesTraq president Larry Murphy said. ‘Watch new-home sales stats very carefully over the next few months to determine how good, or bad, 2007 will be.’”
Hey, Larry, may I suggest the employment figures and wages for the next few months to tell you what the demand for new homes will be. Also, you might want to consider that buyers qualifications and down payments are a whole lot tougher than last year. Now, Larry, you overpaid pinhead..Which way do you think sales will be if unemployment creeps up, and loans dry up?
First in, first out. Last in, last out. Places like Salt Lake and Seattle came to the party late, and they’ll be the last to leave. Utah, like some other areas of the nation, were the last gasp for speculators with a last chance at easy money with loose financing, and equity locusts looking to profit the most from their gains. It’s almost like you can follow the flood of money that began in ‘01 and see it’s trail of destruction, starting on the coasts and spreading it’s disease inward.
What’s with the ‘ex-’?
Must of missed my post on the previous thread. I mailed in my license…had enough, no mas…….adios muchacho!
To be fair, I’ll still carry my “agent” status, but I’m done with the brokerage. My intent is to walk completely, though. I’ve been setting myself up to get out foe the last few years when I realized that the biz was soured for good. The only reason I’ll stay an agent is to help friends and past clients keep from getting screwed. I’ve put away enough acorns over the last 12 years in the biz to sit back and contemplate another direction, so we’ll see what happens. In the mean time, I’ll stay active in exposing BS by participating in efforts like this and others.
Damn NNV. I hope there is some happiness out there for you. I suppose being in the business these days would give you PTSS like symptoms.
“ex-nnvmtgbrkr”
“I mailed in my license…had enough, no mas…….adios muchacho!”
LOL!
nnvmtgbrkr — time to get started on a book!! By the time you finish the market will be tanking and ‘tell all’ books will be bought by publishers.
“In the mean time, I’ll stay active in exposing BS by participating in efforts like this and others.”
Perhaps you could write an industry expose OR do a documentary or something…
ex-NNV: best of luck to you! You are one of the all-time greatest posters. The world needs people who will lend money, and its too bad this bubble has tainted (annihilated?) the field forever. It is truly amazing that so many mouth breathers were allowed to participate.
“Our energy would simply prevail. There was no point in fighting — on our side or theirs. We had all the momentum; we were riding the crest of a high and beautiful wave… So now, less than five years later, you can go up on a steep hill in Las Vegas and look West, and with the right kind of eyes you can almost see the high-water mark — that place where the wave finally broke and rolled back.” –Hunter S. Thompson
Seems strangely apropos today.
I’m hoping that since appreciation didn’t skyrocket until much later in the game that prices will fall faster than they will in other areas now that subprime is imploding. My theory is that since there has been less time since prices have skyrocketed there has been a fewer number of people that have bought over priced houses and fewer that have withdrawn all there equity. That means there are more must sell houses where the owner has room to come down in price once the funny money is gone. Anyone else have another theory?
It seems the money is not only funny, but Clowniforian. Once the clowns are gone, the circus is over.
Last month I convinced my mom and a friend not to buy here here in Utah. All the numbers and the rhetoric coming from the RE agents and Mortgage brokers is eerily similar to what we heard this time last year from FL, AZ, CO and Southern CA. Check out this brokers blog to see what I mean.
http://slcrealestate.blogspot.com/
FYI - The guy censors his blog so any comment that makes too much sense is just deleted unless he can come up with some sort of comeback.
“Last month I convinced my mom and a friend not to buy here here in Utah.”
They are going to be owing you a big Xmas present come the end of the year!
All the feel good RE stories are coming from industry insiders.
SoUtah is overbuilt and sales numbers are at 2003 levels. The SLC realtor’s site talks about the Hispanic market coming from Ca buying homes in Salt Lake. He doesn’t say if they are legal or not. The illegals have overrun St George in the last two years. The local builders need their “slave labor”.
Until about two years ago we had no “real” crime here. An illegal raped a woman last week. One shot a man execution style a month ago. One was caught in a neighbors home in Jan with their 4 year old daughter and his pants were down around his ankles. He claimed that he entered the house just to use the bathroom. One got drunk and stabbed his buddies three weeks ago. A hispanic minor, tortured, murdered and raped, in that order, a 15 year old girl in a playground in Jan. Police will not say if he is illegal. However, a good source told me that he is. An illegal driver crashed his car in the middle of the road and left the scene 2 months ago. A good samaritan stopped to help. She was hit and killed by a passing car. Another stabbed his wife to death in front of their kids in Dec.
I am sorry for the rant. My wife works with the father of the man that was executed. His family is not coping well with it. These illegal ba$tards wouldn’t be here in St George if the housing bubble hadn’t happen. They work almost 100% in local construction industry.
Sad comments like yours are becoming all too common and with the gov.’s inaction on deportation the one hope is the decline in the home building market will force unemployment to drive many back across the border.
Nigel’s blog….I have a hard time believing anything from someone who encourages Casey Serin. He’s a dufus…..
Ya, if you can sell. The market in St George is flooded and they just keep building. Condos at $200,000 and 1500 SF homes at $300,000, avr wage $20,000. All the money is comming from out of state. I rent a 2 year old 1700 sf home for $900, neighbor has a fsbo for $318,000. I laugh and keep waiting and building a bigger down payment.
Metro-area buyers canceled 22.5 percent of the new-home contracts they entered last year, mostly because they couldn’t sell their existing homes.”
Gee, you mean that cannibalizing the first-time buyers market the last five years or so (so that anyone who even had an inkling of purchasing a home has done so) is actually going to hurt the move-up market? Well, I never would have thought that could happen. But then again, I can’t tell my a$$ from a hole in the ground. But at least I have my realtor’s license.
At least they weren’t speculating. They assured us that on CNBC every quarter. It was different this time. The builders controlled the market. A new paradigm!
The builders are making good money right now because they get their money up-front. But I wonder what is going to happen with all these investors.’
Uh, look out for that freight train!
“Dan Bodily of Lehi, owner of Blue Ridge Cabinets and a homebuilder, said he is unsure whether Utah’s appreciation rates are sustainable. Bodily said he has more work than he can handle, but most of it is for investors hoping to make money on speculative homes yet to be sold.”
Hey Dan - be sure to collect at least 90% of the job total before you install those cabinets!
Yeah, Dan could be the owner of Blue Ridge Lien Holders soon.
Checking my blog stats - the RTC is snooping around these blogs.
I wonder if they are preparing for RTC2
CC: Who exactly do you mean? (ie website)
the RTC went out of business several years ago. Staff and equipment were absorbed by the FDIC.
gate-v.fdic.gov (Resolution Trust Corporation)
_______________________________________
That is what showed up on my list of hits? Maybe they didn’t shut down??
or they’re still using an old Pentium from the 1990’s as a web server, and no one updated the name.
lol
gate-v.fdic.gov (Resolution Trust Corporation)
_______________________________________
That is what showed up on my list of hits. Maybe they didn’t shut down??
One need only look at the listings on http://www.realtor.com and take note that about half of the RE listings in the Phoenix area have no furniture.
Half of the listings have no furniture? Sounds like a great opportunity for the home stagers!
“One need only look at the listings on http://www.realtor.com and take note that about half of the RE listings in the Phoenix area have no furniture. ”
I almost got relocated to Phoenix in 2001. Brand new construction was everywhere and prices were in the $130’s on up. I was just there last August (I like the heat, what can I say) and those same homes were running in the $260’s. Still a bargain compared to my stomping grounds, but crazy! It’s no wonder they are sitting vacant. All bagholder investors.
“Too many new and existing homes are on the market given the number of available buyers, said Mike Rinner, a senior analyst with Genesis. ‘We have a math problem,’ he said of the Denver market.”
Finally someone stating the obvious. There is only one solution the the math problem. Lower prices. And waaaaay lower at that.
Denver never really had reason to join the bubble party…but they did…and fast. I think they could see discounts ala FL.
Who knows, this might be one of those problems with no solution (or an infinite number).
It’s a shame Denver is experiencing all the bad news. A realtwhore on a message board said his market, Colorado Springs, is soaring with the eagles.! LOL Nope, no bubble there…move along.
“I think it’s certainly a great appreciation but not so great that we’re running any risk of having it tumble.’”
(To be said ala Jerry Lewis):
We need to check back in with this lady next year. Ouch, it’s gonna’ hurt nice lady! The thing, there.
I rented a car for the weekend and this afternoon went over to Target for some stuff. The local Target is in the flipper part of downtown (South Loop of Chicago). Didn’t think to much of it, though I got slightly annoyed at some of the people looking down at me for using coupons.
Then I noticed the woman in front of me in the checkout line. Clearly a trophy wife (tall, incredibly skinny, large rock, expensive clothing), she was choking back the tears as the cashier told her that her credit cards were all declined (tried every single one of them!). Given that I was in flipper-land, all I could think about was this blog.
LMAO! Sounds like 3/4 of Palm Beach County!
Probably a realtor. Was she buying Ramens?
“Probably a realtor. Was she buying Ramens? ”
Dog Chow
Hard to tell, all her stuff was bagged up already.
The cashier was incredibly nice and consoling her. Maybe the cashier is about to be in the same situation with her stated-income I/O loan.
Should have offered to pick up the tab in exchange for . . . .
oops. Damn, I’ve been hanging around guys WAY too long!
LOL!
thats amazing!. I was at the same target (south loop) and the cashier asked the women ahead of me if she wanted a target card. The women asked back “Do they run a credit check for this?”. When the cashier replied in affirmitive, the women said “in that case, no” and also mentioned that she had been rejected before. The woman was also carrying a big red Coach purse.
Wow you really are a businesswoman.
I saw the Chicago photos on the HBB photo album, and I was left speechless. Those are some MASSIVE buildings to be newly created condos. Absolutely nuts! It helped me understand why you call it flipper central.
I’ve seen about half the photos in the HBB album and haven’t seen any photos from the South Loop of Chicago. The ones I’ve seen are in the Loop, and those two buildings are probably the most risky condo projects in the Loop. However, both will probably be ok given their location.
I should try digging up some photos of the South Loop so you can see what it looks like. It will make those two high-rises look like nothing.
Brian, that would be cool. I’ve never been to the windy city (hence my lack of understanding its neighborhoods), but hope to visit one day. However, I’d have to agree with bubbleglum below: the buildings do look rather depressing, decent location or not.
How’d you like to come home every day to one of those. Horrifyingly depressing. The first one looks like it was designed by Boris Karloff.
I was just in Chicago a few weeks ago to visit. Moved away from there in 2001. Was sad to see condos sitting on the site where a downtown golf course used to be (next to the river/LSD).
large rock, expensive clothing)
Large rock or large rack?
I am shocked that you didn’t “bail” her out. Might as well get used to who is going to be paying the bills in the near future.
She may be a trohy wife, but I have the real gem of a wife. She went along with the “crazy” idea of selling the Az McMansion and putting the money in savings. She is able to hold her head up high as a renter and is happy renting for the next few years to see how things turn out at the end of the housing party.
“…is happy renting for the next few years to see how things turn out at the end of the housing party.”
You and her can sit in the front yard of your “lowly” rental and drink beer while laughing at your neighbors as they pack belongings for their pending foreclosure! Paradise!
What happened?…….it’s 6.00am here…….did they run out of green ink?
Guess Txchick is having a great day…….(smile)
http://www.marketwatch.com/?avatar=seen&dist=ctmw
People put from real estate to stock with no fundementals (real ones) to drive the market. It’s bound to catch up sooner or later.
Just thought about it. I need to take a HELOC out at 8.75% with no payments for 120 days and put it in the stock market! I should be able to to exceed that in the current market.
Hey Ben, how about the Dowjonesindustrialbubbleblog.com?
“‘I think the market is being flooded with spec properties at the moment,’ Bodily said. ‘The builders are making good money right now because they get their money up-front. But I wonder what is going to happen with all these investors.’ For now, Utah homeowners and builders are riding the housing wave, hoping it will last amid a national slowdown.”
I wonder how this is going to turn out (not!)…
“‘I think the market is being flooded with spec properties at the moment,’ Bodily said.”
During a drive around Reno this morning, I couldn’t help but notice two projects, which reek of flipper. Both appear to be suspended indefinitely. One of them is an addition where they tore half of the roof off of an already very large home, and are increasing the square footage. The problem is, with the roof and sidewalls missing for months, sensitive areas have been exposed to the elements. I believe the structure to be degrading. There is obviously a problem with finances. I have seen nobody working on the place in over two months, but vehicles are in the driveway at times. Not sure what to make of it. Another project, appears to be at a standstill as well, with a huge dumpster parked in the driveway, and little activity. A few more projects I have been watching are pressing ahead, looking like they may make it onto the market this spring. Unfortunately, the sales prices were way too high pre-flip, so these flippers are DOA. Hope they have a lot of cash. The market is incredibly bad in this area right now, and sure to get much worse.
BB, speaking of projects pressing ahead in Reno, are you familiar with the Somersett master planned development? There’s some deep pockets behind that, but it would seem delusional or suicidal to completely build-out that monster in the next few years.
SF Bay, I know the development well. I have driven through on several occasions. Personally, I think it’s fairly nice. The problem is, the prices. There are simply not that many rich people around to fill all of those home at their current price points. And the Del Webb 55+ community, more specifically the Pulte homes, is a complete disaster. Too many tiny homes crammed together on zero lot lines, at too high a price. Going to be some serious FB’s there. Already seeing foreclosures and short sales. There are already ghost town neighborhoods, so they need to pull back on building bigtime. Not a lot moving right now. So yes, delusional and suicidal to build out to completion.
“…more specifically the Pulte homes…”
Scratch this. Sierra Canyon by Del Webb is what I am referring to.
I think one of the ugliest new (and doomed) developments has to be The Cottages (which look nothing like cottages) attached homes by Silver Wing homes on the corner of Rock and McCarron. They make the apartments next door look like architectural wonders. Oh, and they have the beautiful view (and smell) of the UNR cows and sheep across the way. From what I can tell none of the ones backing to McCarran are occupied. They are also in the middle of an industrial area with Fed Ex Ground right across the street.
“The problem is, with the roof and sidewalls missing for months, sensitive areas have been exposed to the elements. I believe the structure to be degrading.”
This is an extreme case in point, but I believe millions of other homes across the land are in an analogous plight, which is that they are vacant, and will prove too expensive for non-occupant owners to adequately maintain. The ownership society concept of using pride-of-ownership to help maintain the overall quality of the US housing capital stock only works for owner-occupied housing, not investor-owned or absentee-landlord-owned housing.
I’d like to add on to Stucco’s comment. Near my rental there are a couple hundred Toll Bros. condos that were put up last summer. Since the fall I have not seen one body working on them. Completely exposed OSB sheathing, no sheet rocking, no stucco, surrounded by scaffolding and a chain link fence. WTF??? Tell me that structure is still sound after the hot fall weather and now the rain and cold. I really want to stop at their sales center and ask what is going on, but I just can’t stomach listening to those salespeople.
Like a fine wine, the builder is letting these homes “breathe” before being finished/consumed.
We have a few of those here too . . . just plain stopped, ran out of money . . . someone (a bank most likely) is going to get hosed on these. Small builders can just move on, change their construction company name, start a new project, get more loans. A GF lender will do it.
Spec this one is in Folsom
http://tinyurl.com/23qfn3
I keep checking the prices of the development that I bought in during 2001. They were 190K-250k brand spanking new. During late 2005 - early 2006, they were all well above the 400K range, with 4/3s running over 500K.
There is now one back down in the 270K range. The air is rushing out quickly.
Since the bust hasn’t even hit panic mode yet - prices there are going to revert to the 2002 at least.
Burn, baby, burn!
This house of cards is going down faster than a Tijuana whore….