Builders Saddled With An Unusually Large Inventory
The York Dispatch reports from Pennsylvania. “The number of foreclosure notices in York County for the first quarter of 2007 increased 54 percent over the same period last year. If those notices amount to actual foreclosures, it could have an ‘ugly effect on the overall community,’ said Leigh Smith, executive director for the Housing Alliance of York.”
“Foreclosure notices increased from 216 in the first three months of 2006 to 334 in the first quarter of this year.”
“‘The problem might be in the financial institutions being too lax in extending credit to homebuyers,’ said Jacob DeRooy, an economist at Penn State Harrisburg.”
“Homeowners across the nation have been defaulting on loans in the subprime market and loans offered to people with less documentation, such as verification of income. ‘We’re perhaps reaping the effects of a too liberal financial environment,’ DeRooy said.”
The Patriot News from Pennsylvania. “Like elsewhere in the country, Dauphin County is seeing an increase in the number of houses and other properties falling into foreclosure. Cumberland County saw a large jump, from 350 to 543, while Lebanon, Perry and York counties also experienced increases.”
“The cases called at the sale last week varied. Many of the properties were in Harrisburg, where the amount owed ranged between $30,000 and $60,000. Some appeared to have been investments, where a single owner had multiple listings that were in default.”
“But several of the properties were in the suburbs, and it appeared their owners had just gotten in over their heads. For example, two houses in Derry and Susquehanna townships sold at the auction. The amount owed to banks was more than $200,000 each.”
“The interest rates on such mortgages taken out at the height of the housing boom are adjusting upward, said economist Ryan Sweet. ‘More often than not, it’s going to be the straw that broke the camel’s back, and you’re going to see delinquencies,’ Sweet said.”
“This month’s sheriff’s sale was packed with lawyers representing the banks. About 65 of the 170 properties posted for sale that day sold. The lawyers did most of the successful bidding.”
The Virginia Pilot. “When Joseph Rinaldi lost his job last May, he and his wife began tapping their personal savings for the monthly mortgage payments of $1,800. After finding full-time work late last year, he tried repeatedly to devise a repayment plan and filled out the required forms.”
“The lender, however, delayed acting and made additional demands, he said. In late February, a friend told Rinaldi that his house ‘was in the newspaper.’”
“A growing number of Hampton Roads homeowners are finding themselves in Rinaldi’s situation. During January and February, 181 of the region’s homeowners were in some stage of foreclosure, almost double the 100 for the comparable two months in 2006, according to RealtyTrac.”
“That jump came on top of increases of 45 percent or more for foreclosures in Virginia Beach, Norfolk and Chesapeake last year.”
“The surge in seriously delinquent home loans shows no sign of subsiding. Norfolk housing counselor John Allen said that during the first quarter of this year he began working with 15 clients who sought to avoid foreclosure. That was more than all of his clients seeking similar help last year.”
“In recent months, dozens of subprime lenders, including a handful that did business in Hampton Roads, have shut down or scaled back their operations because of mounting losses. One that did significant business in Hampton Roads, New Century Financial of Irvine, Calif., sought protection from its creditors in bankruptcy court earlier this month.”
“‘I’ve seen a lot of peaks and valleys in the mortgage business, and I was very surprised to see so many people close their doors so quickly,’ said Keith Robinson, VP at TowneBank Mortgage in Virginia Beach.”
“‘People became a little bit complacent with the seemingly low risk,’ said said Russell E. Lundeberg Jr., chief investment officer at an asset-management firm in Midlothian. ‘The wake-up call came from the subprime lenders that decided to close up shop.’”
The Washington Post. “Even though builders have cut back on the number of new homes they’re starting, they are finding themselves saddled with an unusually large inventory of finished or nearly finished homes. Those empty houses are expensive for builders to carry, thanks to construction loans that won’t be paid off until the home is sold. So builders are getting serious about unloading them.”
“There are 40,409 new, single-family houses on the market in the Maryland and Virginia suburbs, according to Hanley Wood Market Intelligence. That doesn’t include condominiums, which are certainly in flush supply, or even townhouses. And nearly one-third of that unsold inventory sits in just two jurisdictions, Prince George’s and Loudoun counties.”
“‘Builders and developers have more inventory than they’ve had in recent memory, at least in a decade,’ said Charles Browning, publisher of New Homes Guide.”
“Even if the place you would like to sell is a three-bedroom Cape Cod near the Metro in Bethesda or a 1960s ranch house in North Springfield, potential buyers could be lured away by an irresistible deal on a spanking new house in Prince George’s or Loudoun counties.”
“And if you’re trying to sell a two-year-old house in one of the same developments where these builders are trying to unload their inventory, good luck. The only way to compete with that new-home freshness is to lower your price.”
“So what are builders doing to sell their expensive inventory? Some are cutting base prices, some are throwing in free upgrades, and most are advertising their ‘quick delivery’ homes aggressively. And that is where the deals are.”
“Many of these ready-to-own houses represent casualties of the subprime mortgage mess. Local real estate agents say they have been seeing loans, many of them arranged by brokers, fall through after lenders backed out, or went out of business entirely.”
“‘Houses that were under contract and for whatever reason have washed out, typically builders are a little more aggressive with them,’ says Boyd J. Campbell, a broker in Lanham.”
“Some builders, instead of throwing in freebies are lowering their base prices, according to Pamela Jones, an associate broker in Loudoun County. ‘Some are really lowering the base price and getting people emotionally involved. Then they upsell all the bells and whistles,’ said Jones.”
“Some have lowered their base prices for single-family houses to less than $600,000, she said. ‘They’re competing, and they’re winning over some of the resales.’”
Raspberry is the kool aide flavor of the day~
Drink Up
“Some builders, instead of throwing in freebies are lowering their base prices, according to Pamela Jones, an associate broker in Loudoun County. ‘Some are really lowering the base price and getting people emotionally involved. Then they upsell all the bells and whistles,’ said Jones.”
Damn, highest median income in the nation.
http://en.wikipedia.org/wiki/Loudoun_County,_Virginia
That combined with it being nearly the fastest-growing county in the nation makes it McMansion central. Tons around me.
untill uncle sam cuts some homeland / dod bs spending
= BAM
BAM to San Diego as well. A lot of military spending is going on there as well. They should have a satellite Pentagon.
LA even more so then SD
Note to self:
Never move to Loudoun County.
Wow.. That income number is staggering! 100K median income?
Maybe it is different there!
Except that I expect the median home price is probably 1M dollars, still putting it out of reach for the median income household.
There are tons of high paying engineering jobs in this area. We all love building stuff for the military… As long as defense spending is high, this area will be propserous.
“prosperous”
“phosphorus”
40 cents of every US tax dollar goes to military spending. Enjoy.
Misinformation at it’s best:
http://encarta.msn.com/media_461566684/U_S_Government_Spending.html
17% of the base, an additional 3% if you toss in “vetern’s benefits”, and another 7% on interest, which if you want to ascribe all of it to defense brings the total for defense spending to a little over 27%. A far cry from 40%.
And before someone complains that I’ve shown old (2005) data and ‘estimates’ at that, here’s a more recent article I read just last week on the current budget which confirms, 20% on military spending.
http://finance.yahoo.com/taxes/article/102817/How-Your-Tax-Dollars-Are-Spent
What say you about this chart… looks to me like the majority of it goes to the elderly of our country… key quote shown from article below…
“Today the programs that benefit Americans over the age of 65 — Medicare and Social Security — account for more than one-third of all federal spending. Yet Americans over age 65 only account for 12 percent of the U.S. population.”
33% of taxpayer money to 12% of the population… thats our fiscal problem.. not defense…
http://www.msnbc.msn.com/id/16928315/
To paraphrase PJ O’Rourke - “With AARP, we’ve found a special interest group we’re all going to belong to someday”
“40 cents of every US tax dollar goes to military spending. Enjoy.”
I’m one of the first to pull out the pitchfork and march to lynch the Dems for proposing a bailout for foreclosure, but I never understand staunch Repubs that appear to be against federal taxes but support spending more on Defense. The Defense department IS the Federal government.
“Trust Funds (e.g., Social Security), and the expenses of past military spending are not distinguished from nonmilitary spending.”
http://www.warresisters.org/piechart.htm
Some of us will die young (probably stressed from paying too much in taxes)
Past Military,
$461 billion:
Veterans Benefits $85 billion
Interest on national debt $376 billion (80% est. to be created by military spending)
median home price in March 2007 is $447,450, down from $503,500 a year earlier.
http://www.mris.com/reports/stats/
Well, although 450K is still a bit high, it’s FAR more in line with the local income then the 400K median in S. FL (with a 55K median) or 700K in CA (with a 70K median).
Not that the prices won’t drop, they will. I just am amazed at that income number; it’s staggering to see that kind of income as a median!
Incomes are strong…
But how many of them are realtors ™ ?
Great median income… but that doesn’t help an overleveraged market.
Not when new build is competing with resale.
Who on here predicted that first (certainly wasn’t me… Oh, I agree… but I wasn’t the first to predict it.).
Got popcorn?
Neil
big gov
all 35 dems are offering to spend more than the gop spendaholics
why fear terrorists ? we’re spending ourselves to death
If you break it down by detached/attached, things look quite a bit different:
Detached: $ 628,939
Attached: $ 411,737
(average sold price for march 2007)
more Loudoun county stats:
http://www.recharts.com/mris/mris_7.html
If by “different there” you mean Loudon county is down 11% YoY…
“It will be the biggest housing-price decline since the Great Depression,” Heebner, 66, said today in an interview in Boston. Prices may fall by a fifth in some markets, he said.
The National Association of Realtors said Wednesday it expects its measure of home prices to fall 0.7% this year (down from 1.2% last month) for the first time since the group began keeping track nearly 40 years ago.
Kenneth Heebner, manager of the top-performing real-estate fund CGM Realty Fund +20% a year over the past decade, said U.S. home prices may plunge as much as 20 percent because of rising defaults on riskier mortgages.
Subprime loans, made to borrowers with a history of missed payments or untested credit, and “Alt-A” loans, which require little or no documentation, account for about $2.5 trillion of the $10 trillion in outstanding mortgages, according to Moody’s Economy.com. As much as 40 percent of these loans may default, flooding the real estate market, Heebner said.
“It will be the biggest housing-price decline since the Great Depression,” Heebner, 66, said today in an interview in Boston. Prices may fall by a fifth in some markets, he said.
Prices declined by even more in some cities around 1990/1991, and by some measures, housing is even more extended today.
But don’t tell that to the average American. Only one in seven believes the value of their house will decline. In a recent LA Times/Bloomberg poll, 32% of Americans think their house will rise in price in the next six months.
Nearly a third of those polled predicted home values in their neighborhood would increase in the next six months. Only 16% anticipated a decrease. The rest said values would hold steady.
Call it foolish faith or bold optimism, the forecast is at odds with the downward trend of home prices.
The National Assn. of Realtors recently reported that prices fell 2.7% in the last three months of 2006.
Please e-mail your thoughts to Kimberly
Market signs suggest worts is over; sales gaining steam
By Kimberly Blanton, Globe Staff | April 15, 2007
What kind of shape will the Massachusetts housing market be in this year? It depends.
Breaking News Alerts If you’re selling a home, it’s not great, but not awful, either. Expect a still-slowish market for a time, though not as dreadful as 2006, which posted the fewest home sales in a decade, and a nearly 6 percent drop in prices. Don’t expect prices to bounce back much this year, though one silver lining is they probably won’t fall anymore, either.
But if you’re shopping for a house, 2007 looks pretty good — so far. You have many houses to choose from, and the upper hand in negotiations. One risk: other buyers are also more active, so moving too slowly may mean missing out on good opportunities.
“There is no question that it is a buyer’s market,” said Zur Attias of Barrett & Co. Real Estate in Concord.
But buyers, don’t get too comfortable.
For one thing, the pace of sales is picking up: Homes sales through the first two months of 2007 were 3.4 higher than the same time last year, according to Warren Group, a real estate data and publishing firm.
And “prices will eventually follow,” said Timothy Warren, the company’s chief executive. He predicted prices will begin to trend higher by mid year, but it will not necessarily be a steady increase.
Kimberly Blanton can be reached at blanton@globe.com
You need to watch the Globe and Kim Blanton carefully. They get real squirrelly. Blanton does occasionally write stories with a negative tone, particularly about subprime, and these appear in the business section. Then five seconds later you turn around, and there’s a pumped up fluff piece like this in the real estate section.
The Globe talks out of both sides of its mouth, seemingly warning investors in the business section but at the same time fluffing FB’s egos in the real estate section.
Also, this article was based on a forecast by a one “Larissa Duzhansky” who, according to her Friendster page, is 25 years old and whose ambitions include “meeting a real eskimo”.
I’m not kidding, you can’t make this crap up.
Here’s the Globe article in its entirety, including the credit to “economist” Larissa Duzhansky:
http://tinyurl.com/2m7roq
Here is Larissa’s Friendster page:
http://www.friendster.com/1583682
25 years old, wants to meet an Eskimo. Would you take serious financial advice from this person? She isn’t even old enough to remember the last real estate downturn.
Is this the best the Globe can come up with in their pathetic puff pieces?
At least they aren’t interviewing econ grad students from George Mason, you know, the one who’s tuition was paid for by NAR.
not sure about the Eskimo meetin’ gal on the friendster page…..but that Salma friend there could write whatever she likes about housing
J
Well, me, I wanna meet Casey Serin. A real live Eskimo is second on my list.
I did just email Blanton, pointing her to the Credit Suisse chart, and telling her that if she has seen it before, I believe she is lying on behalf of real-estate salesmen.
Yesterday there was an article at the end of the YKYAFB thread that linked to the Sun Chronicle. I live in a town that is served by this newspaper, so I e-mailed the reporter, and wrote this to him. It is by far not perfect, but I pointed him here and other places….
Good Morning: I was reading your article in the Sun Chronicle, and I wanted
to present another point of view from the buying side of the equation. You
interviewed a couple who had bought a condo for around 250K. They
unfortunately did not read the fine print, and found out later that they
really could not afford the condo they purchased, yet they are acting as
victims, as if the mortgage broker had held them at gun point in order for
them to get the mortgage. I think that this kind of customer should have
never bought a house in the first place! They should have saved up enough
money to put a sizeable down payment, and acquired a 30 year fixed rate
mortgage. No other way is really acceptable. All these “hybrid” and
“Exotic” loans simply stretched the availability of a very expensive
commodity to those that could less afford it. These loans have always been
geared towards savvy investors that need to manage cash flow. They where
never intended for the average joe who works at the corner market and makes
10.00 per hour stocking shelves, yet those are the people who got the most
exotic loans with initial teaser rates of 2 and 3% and high pre-payment
penalties when they should have stayed renting, and improved their life
outlook either by studying or getting a better job.
Another perspective is that in the last couple of years, housing prices in
Bristol County have become insane. From a first time buyer’s perspective, I
am not going to purchase a house in the next 2 to 3 years. The reason is
quite simple. Using traditional metrics, i.e, prebubble loan standards,
banks would not lend more than 2.5 to 3 times your annual household income.
This also could not be more than 33% of your take home pay. This metric
worked for generations of homeowners. Now, lets take the North Attleboro
Median income. It is $65,633.00 per year. Taking the normal multiplier of
2.5 times income, the median home in North Attleboro should be: $164,082.50
and if it is 3.0 times in bubble times then it could be $196,899.00. Guess
what the median house price is? Twice as much as the 2.5 multiplier!!!!!
It is $346,071.00!!!
It would be interesting to know how prices got so high in the first place,
and I will point you in the direction of those you interviewed. Telling the
public that they would be priced out if they did not buy right away created
a frenzy that benefited both real estate agents, and Mortgage brokers. Now
that the music has stopped, I am wondering how many people are going to be
left holding the bag, and have a rapidly depreciating asset, with no ways of
selling, or paying for the inflated price? You will see many more stories
like the couple you interviewed, but people like myself who have been
patient, have saved, and are not in a hurry to purchase a house, will not
pay in taxes, or in interests, the lack of financial acumen of those who
inflated prices away in the first place. We are against any bailout of
either the banks that loaned the money, and the homedebtors that got way
over their heads in the first place.
You can do well by visiting blogs on the internet that talk about this
absurd bubble, and get a better understanding of what really transpired in
the last 4 or 5 years. The amount of negligence, fraud, and downright
dishonesty will make a great story, much better than the sob stories of
people who thought that they had won the lottery by buying a house, but
ended up in a nightmare.
Just go to google.com and type in housing bubble.
NPR had a piece today that mentioned timing the market was useless, you should buy thinking of the long term. Then, within 30 seconds, the guy mentioned that within 6 months the buyer market will probably end. hmmm.. that makes no sense.
Think of the long term, but buy now or be priced out forever?
Zip Realty has the Chicago metro inventory at just over 90,000.
http://www.ziprealty.com/buy_a_home/search/form/city.jsp?usage=dynamic&cKey=4nbkfnx6&districtId=3&metro=chicago
That a 17% increase from two months ago today. At the current pace of growth Chicago inventory would hit the 100,000 mark on May 9th.
excellent quote from m lewis on bloomberg:
Moving is never pleasant or cheap, but that is the main
cost to the subprime defaulter: He hands back the house, whose value has presumably plummeted, to the people who lent the money to buy it, and walks away. He rents. (Shrewdly!) In effect he bought a very cheap call option on the U.S. housing market.
While he waited to see if his call option made him richer, he lived in a much nicer house than he could otherwise afford and probably wondered why rich people had become so recklessly open- handed. His behavior was irresponsible, but the markets let him do it and so it’s hard to blame him for taking a flier.
Am I the only one who wonders how a person who borrows money he can’t repay, buys a house he can’t afford, and then stiffs his creditors, is allowed to play the victim?
A more convincing victim, I would have thought, is the
person with weak credit but strong resolve who stood to benefit from a subprime loan — and who now can’t get one because the market is scared of his shadow.
how true- no way to the bailout!
Another (phony) victim would be your colleague az_lender, if she had not had the foresight to raise LTV requirements to 70%. If she gets stiffed anyway, she has nobody to blame but herself. Nobody in default right now.
Raise LTV requirements to 70%??
Shouldn’t that be ‘raise equity/downpayment requirements to 30%?
You forgot to account for the psychological distress they have to go through when they now have to entertain in an apartment as opposed to a McMansion. How would that make you feel, or are you a cold cold person with no empathy?
Oh well, not to worry, thay can at least still use the expensive china they bought with their HELOC.
Homes sales through the first two months of 2007 were 3.4 higher than the same time last year, according to Warren Group, a real estate data and publishing firm
What did sell 3 homes instead of 2.
I noticed the pick up in sales in DC suburbs in the first 2 months of 07, but it looks like it is slowing again.
Northern VA inventory numbers:
May 1 2005: 9983
May 1 2006: 22553
April 15 2007: 20247
http://www.virginiamls.com/charts/
still have 15 days to go…to watch inventory rise
the same NoVa inventory data in charts:
http://www.recharts.com/nova/nova.html
no way Ghost 3 over 2 would be an eyepopping knee rattlin’ shivver me timbers they’re baaaaccckkkkk 50% jump and be plastered all over the news as the the comeback kid feel-good git grandma outta bed for this one, story of the year urging everyone to jump on that bandwagon before being left behind………… more like 34 instead of 33 last year
Possibly they’ll do 2 next year and 3 after that, then we can see the headlines…….
J
j
I knew the percentage was way off, but the point is it doesn’t take much to show a positive gain if sales are really low. The way the NAR figures one month they could have sold 1 house and the next month 1 house with an apartment attached. The spin is still the same.
agreed. wasnt challenging your math, just lampooning what RE would do with your point
I expect this year will be almost identical to last year.
Last year it was “oh crap, looks like prices aren’t going up any more, and may come down - think I’ll hold off to buy”
This year it’s “well they’ve come down some now - wonder if they’ll come down some more?”.
This is going to be a loooonnnng slow process. The only thing that will prevent this from being a 10-year slump (or maybe even 15) is if the Fed raises rates significantly to fight inflation, which may well happen. Then the slump will be quicker. It would be deeper in actual $$ terms as well, though not in real (inflation-adjusted) dollars. A 5-year slump with 30% price reductions would about equal a 10-year slump with 10% price reductions, in real dollars.
Of course most current buyers think it was a 1-year slump, and we’re coming out already.
I think it means they’re going to wonder how far down the prices are going to go and do they want to buy and then be a seller with a depreciating asset. If anyone is reading anything it’s going to be a long time before people aren’t afraid to go into the water.
Like most change, this can be either incremental or radical. Of course, radical change can only occur when you have (to misphrase “punctuated”) punctured disequilibrium. I think we are close to a puncture or rupture in the complacency levels which sustain any mania. I say this based upon the spreading financial contagion, upon the increasing inventories with brokers, and the increasing inventories with builders and REO departments.
It’s a classic standoff. In fact, it’s a huge standoff. Think Tarantino’s “True Romance” standoff or some other classic where everyone has a loaded gun (the ability to lower their prices and hurt the others) aimed at each other but everyone is afraid of the consequences, and of getting hurt, so nobody wants to shoot. Meanwhile, arms are getting tired, stress is building, something’s gotta give. Builders might lower prices. REO might lower prices. Private sellers appear to be trying to lower prices, but their loans prevent them from going as low as they want. Lower prices precipitate disaster, however. As soon as one trigger is pulled, the others all go off and it’s a free-for-all.
Maybe my analogies leave a bit to be desired, but what do you expect on four hours of sleep?
Hellova movie, True Romance…
Good analogy~
“Some have lowered their base prices for single-family houses to less than $600,000, she said. ‘They’re competing, and they’re winning over some of the resales.’”
Wow! They are actually selling $300,000 homes for as low as $600,000. That should should start a buying frenzy.
Ryan homes has a community in Loudoun where they have been selling SF homes and townhomes for a few years now. In spring of 2005, one style of townhome was selling for 515k — SF homes WELL over 600k.
Fast forward to today, their “early delivery” homes are much cheaper. The same exact townhomes are now selling for 395k and their SF homes, I’ve gotten fliers showing one of them as low as 489k including all the bells and whistles.
Ryan homes is also fooling people by taking out all options from their fully loaded house and lowering the price. When you sit down with a sales agent, you easily add upto 120K for upgrades and they offer only
20K free in upgrades. One example is the Martinsburg area in WV, where they are still trying to sell houses for 450K range with all options or 320K plus 120K in options. TOLL Bros. is building 900 houses In Martinsburg. Beazer and Hovnanian are also making hundreds of houses along with local builders like Dan Ryan and Drees etc. I think a lot of builders have lost their mind.
People hardly make any money there and they are targeting people living in N.Va or MD/DC who would commute 80 miles everyday to work. A lot of fools have bought in the last 2 years and are commuting 80 miles one way. I think there should be ethics also in business and it shouldn’t always be about making money by screwing others.
Disagree. If they comply with local laws and deliver the product as specified, the builders have every right to build where they want, and ask what they want. If people are stupid enough to pay these prices, that’s their problem. Nobody forced them to buy.
If buyers got a clue the builders would be selling at 2001 prices, right now.
Most people who bought in Martinsburg area were greedy speculators especially from the DC metro area. Builders are now selling 100k less than what the speculators bought at the peak and still telling buyers that market is picking up. At least they shouldn’t become like David Lehreah and propagate false news when they themselves don’t know.
I hope no one gets a bail out.
And “prices will eventually follow,” said Timothy Warren, the company’s chief executive. He predicted prices will begin to trend higher by mid year
No reason for a bailout now. Prices are going up!!! Yippeee. More Hummers and Plasma TV’s please
In February, a friend told Rinaldi that his house ‘was in the newspaper’.
Holy Toledo, this should have been in yesterday’s YKYAAFB thread. In fact, I think it was (or something very similar).
Some [foreclosures] appeared to have been investments, where a single owner had multiple listings that were in default.”
Either I got drunk and passed out on the grill again, or I’m downwind of a massive flipper fry. I smell fear, and crispy critters.
“Some have lowered their base prices for single-family houses to less than $600,000, she said. ‘They’re competing, and they’re winning over some of the resales.’”
600k @ 7% = $4200 / month. Add in insurance, prop tax etc….
Even with a 100k downpayment
500k @ 7% = $3500 / month. With the other stuff you are looking at 4000 to 4500 / month.
It is still way off the sensibility curve. Anyone buying those for that price are putting their families in a tenuous position. You would need to make 150k+/yr in order to satisfy that payment and still be able to live.
Maybe there are a lot of 15k/yr strawberry pickers there. I hear that they can afford 720k houses easily.
I too found the “under $600K” to be the most remarkable phrase in the post. Whoopee. A house for $590,000. And a couple of years from now one will probably be able to resell it for $400K, or maybe for 590,000 banana-dollars.
7% per year. It would be $42k per year divided by 12.
Monthly would then be 42000/12=3500
These inventory numbers are getting waaaay out of control. How will they clear inventory? Well, could be there’s a new mortgage finance gimmick coming down the line (already in the works in the UK). Mortgages will be based on 6 times annual income as opposed to the old, tried and true, formula of 3 times income. As a way of enticing buyers, 40 and 50 year mortgages will be offered. It wouldn’t surprise me to see 60 year mortgages appear. I’m still not sure if this will fly here or in the UK (where property prices are in cuckoo land).
For instance, let’s be really generous and say that the lender will require no down payment. Very unlikely considering the history of exotic loans in the lasst few years. However, let’s be nice and assume a buyer needs no down payment. Let us further assume that “average” buyers make $50,000 a year. Despite what Bush tells us about our “great economy” the majority DO NOT make $50,000 a year. Let’s be nice and say they do. That means a $50,000 a year buyer can afford a $300,000 property.
As it sidebar, it also means that buyer will be really under pressure and financially stretched and he/she had better hope no financial emergency arrives. So, bottom line where the housing mess is concerned has not changed and will not change (despite the gimmicks) until affordable prices line up with afforable incomes.
IIRC, the last headline I saw about the UK was that they were now saying to was OK to borrow 7 times your income - and this from a country where, until recently, you had to wrestle with angels to get more than 3.5 x income.
I don’t see how this will help. I used Excel’s PMT function to compare a $500,000, 6% loan amortized over 30 vs 60 years.
The payment (P&I) only dropped from 2997 to 2570 (14%). Or for the same 3000 per month it allos the loan to increrase to 580K.
here in Western Canada 40 yr mortgages are the new “normal” for 1st time home buyers.
all these 40,50,60 year mortgages are useless anyway, because the payments will be higher than the
NEGATIVE AMORTISATION loans out now.
The problem is that the prices are so high that FB’s can’t even afford to pay the interest on the loan! Thus, any loan that requires full interest payment PLUS some principal payoff will be out of their reach.
Bingo!
Wow, what I remember of Loudoun County when I worked in DC in the mid-90s was that it had horrendous traffic. I can’t even imagine what it must be like today.
As for wealthiest county in the country? I guess they must have recently taken that title from Collin County Texas (North Dallas suburbs of Plano and Frisco) because I sort of remember that area having such a designation a couple years ago. Of course there’s probably a lot of ways to present those statistics. In any event, if Virginia is building McMansions at the same rate as Collin County then that place is surely screwed.
Traffic is indeed living hell, especially for people who think they’ll be living the “country” life with their McMansion sitting on an acre — or five. Actually, it’s kind of peaceful all week in the neighborhoods, since everyone is gone from pre-dawn till late in the evening, sitting in traffic on 7 or the tollway.
As for this:
if Virginia is building McMansions at the same rate as
Collin County then that place is surely screwed.
Yep, screwed! And they keep building. Prices are down 10% from the peak, so you almost feel sorry for anyone who bought to just flip and move on. I know some , and they ain’t flippin’ and they ain’t movin’ on. They’re are well and truly stuck, and not too happy about it at all when the builder lowballs the prices. Oh well, that’s the market!
It’s a little bit skewed by the fact that Loudoun County still has a small population and large rural areas. There really aren’t any slums in the entire county, unless there are some seedy areas in Leesburg that I don’t know about. There’s very little actual employment in Loudoun, apart from some hi-tech spillover from Fairfax on the very eastern edge of Loudoun around Dulles airport.
Of course, the lack of housing diversity and local employment means that Loudoun will take one of the worst poundings in the country when all is said and done.
“There’s very little actual employment in Loudoun…”
Don’t forget the dog handlers, horse groomers, and other staff for the fox hunts. Of course, not in the McMansion areas.
“Foreclosure notices increased from 216 in the first three months of 2006 to 334 in the first quarter of this year.”
“‘The problem might be in the financial institutions being too lax in extending credit to homebuyers,’ said Jacob DeRooy, an economist at Penn State Harrisburg.”
Wow Jake….Ya THINK !!!
Sheesh…a Penn State economist and he thinks it MIGHT BE a Funny money credit problem ….WAY to GO Jake and Welcome Back to the Real World. Your COMA must have been a long deep One !
All these people from Jacob to the REIC have KNOWN what the problem is for years and they now act like the mysterious Common Sense Elf just LIT the Candle in their dark vacant ATTICS.
Spare me from these MSM Lame Excuses and Investor Sob Stories from the Pumpkin Truck Gang.
Does anyone know what is the average commission a relator is being paid these days?
I need to put a condo up for sale this month
in Florida. Any feedback would be great.
good luck with that one beachgirl
do you have any ice to sell an eskimoe as well?
just kidding- price it agressively
cut the 5% and make a deal
realtors are kinda obsolete since Al invented the internet
I disagree.
Realtors are superfluous in a hot market, where you can just list a house and wait for the offers to roll in.
However, in a slow market, how to differentiate your home?
First way is price, so price agressively.
Second way is to bribe the buyer’s agents.
Offer the traditional commission (which is usually 6% that is shared between buyer and seller’s agent), and then IN ADDITION offer an extra commission to the buyer’s agent who brings the offer.
The reason:
There is a SEA of houses/condos out there. you need to drive business to your particular one.
Realtors have tons of conflicts of interest. Offer them enough money, and they will all steer their clients to your particular house.
of course, you also have to price aggressively (most important).
this IMO is the biggest reason why the “ethics” of realtors is laughable at best. If you offer up a high enough reward for the buyers agent, they’ll all be scrambling to bring whatever buyers the do have to your place.
it’s pathetic, but it’s how ya play the game.
And no, I am NOT a realtor nor am I involved in RE in any way except for owning my own house.
I am an agent and it is not unethical at all. The home must be the most attractive to the buyers or they won’t buy it. Offering the selling agent more money will assure showings, and believe me that is worth and extra few grand. Look at all the crybaby stories about “nobody has looked at our home in 7 weeks”.
It is paramount at this point for sellers to “GET THE HELL OUT!!!!”. Anything you can do to sell is worth it. The decision falls onto the buyers, if your home is not the best deal for the buyers no ammount you offer their agent will sell the home. It must be the best deal and be seen by real buyers.
The buyers don’t care how much I make as long as I can secure them the best deal. The seller pays the commision (no matter how you look at it) and must position themselves to sell today! Offering more money in commissions and pricing correctly gets the POS outta their lives on terms that the buyers are agreeable with will save huge money in the upcoming collapse.
BTW I am selling nothing to buyers for over a year now, can’t bring myself to screw people that bad. Keeping this in mind, I see no ethical problem with paying more to sell your home. This is exactly why all those that espoused the cut rate brokers taking over are wrong. In an up market the homes sell themselves and agents are seen as expensive and unneeded. In a down market an agent that can sell your depreciating POS in a sea of inventory is worth big$$$. Is it not worth a 10% commission to sell today vs. paying 4% in three years while your POS has been falling 8%/year… Yes!!
Again, the buyer is making the judgement based on what they have seen and the price. The buyer has little concern for what the seller pays in commission.
BTW, I allways tell buyers that the sellers seem desperate because that are offering my a higher commission than ususal. I can let a buyer know about my extra finincial interest and make it something good for them.
Hell, I have had buyers tell me to write in extra commission for me because many other sellers were offering it! Now that is some shit that really pisses off listing agents=). They fricking scream, but know my buyers wanted it because it is on the front page of the contract.
I have had buyers state 4% commission to buyers agent (me) on the front of the contract and got the offers accepted!!!! That means that the listing agent has to take a hit on commission to my beneffit or ask the seller for more money which the seller won’t agree to.
Real buyers are going to become a rare and valuable commodity very soon. The sellers will be lucky if they even take the time to look at their POS home. With 300 competing properties the sellers are screwed, the real buyers will never look at even 50 while their agent will have seen them all. Most buyers look at far less than 20 homes before making offers. This is where the buyers agent become gold, they clarify the process and choices for the buyers to an extent impossible on their own.
With only 20 homes in the buyers range and half of them being sold in front of the buyers the choice for buyers is easy. In a sea of 300+ with all varying degrees of seller desperation the choice becomes much harder.
Beachgirl,
For your sake “PRICE IT BE THE NEXT TO SELL”, “PRICE IT TO SELL TODAY!!!!”.
If you reach at all you will be under cut by more realistic and motivated sellers before your place is ever even seen by a buyer!
I have no doubt that there are (or soon will be) listings out their that adjust their prices to be the lowest price on a daily basis. You will have sellers instruct the agent to “keep it the lowest price and just sell it, I don’t care–JUST SELL IT!”.
Do not screw around, if your not priced to sell today you may well find yourself hoping to sell far into the future for much less than seems appropriate today.
Your comment of “need to put a condo up for sale” is troublesome to me. Do you need to put it up for sale or sell it? Two very different mindsets. Put the for sale crap outta your mind!!! Sell it now, don’t wait–all the new condos coming on line won’t wait.
Average is 5-7% if you can even get a realtor to list it with the flooded market. Better price it below any others in your area, or you won’t even get showings.
“Builders Saddled With An Unusually Large Inventory”
Just got back from Las Vegas (part of our Grand Canyon motorhome trip), and they are *still* building out there like crazy…getting ready for the 2007/2008/2009/2010-2020 bounce I guess.
A waitress at a high priced restaurant in Vegas was chatting with us about real estate; she and her husband own two ‘investment properties’ (ie houses, when you want people to think that they might be appartment buildings) and a big, expensive ‘primary’ that they just bought near a golf course. Her husband is an RE agent, and she said that she’s not too worried about the downturn, as her husband speciallizes in over $600K houses, and that the market for these is really strong, and that everyone is paying cash $$$.
Yeah, right, I looked up the development she was talking about, and half of the houses were still owned by the developer, and the half that had sold (most in 2005) all had trust deeds attached to them (ie mortgages). The houses ranged from $700,000 to over a million, and were near Lake Las Vegas.
I’ve found most of the $300-800k houses are mortgaged to the hilt or the owner has tapped his primary for to buy. When you go in these houses there’s practically NO furniture. If you have the money to pay cash, you have the money to buy furniture.
I wonder if RE Agents are trained to say “evrybody’s paying cash” right now as a way to keep up the hype? They say it up here all the time too. And it does sound impressive, you know?
If everybody were really paying cash then it would mean these houses are cheap, or at least reasonably priced.
But if everybody’s paying cash, then why are there so many lousy loans out there?
Is there a way to force the NAR to quit lying? Or to make Americans understand that they are liars so nobody listens anymore?
Where is that Public Service Announcement that we so desperately need?
Why aren’t the groups that are calling for foreclosure moratorium, like La Raza and such, instead educating people about the fraudulent NAR and Lenders?
Looks like the RE Agent in Las Vegas is b.s his wife as well as wanna-be buyers. I have a friend who is “in” with real estate agents in Las Vegas and he is being told Las Vegas is a high speed train coming into the junction and the brakes have failed. In fact, he told me his RE Agent friend in Las Vegas (who owns several properties) has started taking prozac. A tip for the RE agent’s wife in Las Vegas: “Save you tips, honey. Stash them away where your old man cannot find them because my guess is you’re gonna need a cash back-up when hubby joins the “Century 21/Re-Max Prozac Teams.”
I check lasvegashomes.com occasionally.
Inventory is increasing, and price reductions are taking place, VERY rapidly at ALL levels of the market.
“Looks like the RE Agent in Las Vegas is b.s his wife”
That was my impression. She was looking forward to quiting her job (she was tired of dealing with people face-to-face), and helping her husband out with RE full time.
Uh-oh.
That’s another obvious point. If he’s doing so well, why does she have to work? If she were a doctor or business owner maybe she gets some sort of fuzzy altruistic self-actualization from her job, but it hard to envision a waitress working for this reason.
Her husband is an RE agent, and she said that she’s not too worried about the downturn, as her husband speciallizes in over $600K houses, and that the market for these is really strong, and that everyone is paying cash $$$.
There are a number of ways in which one can attack this statement, but the most obvious is that the vast majority of people who have this much cash lying around are not stupid with money.
arroyo, Vegas is toast. My cousin from Vegas visited me over the Easter break. I’m fascinated by the bubble and annoy everyone I know with questions about where they live. My cousin insisted his $775K house was safe from any drop, despite the fact that he has made his money from renting out trucks for construction and has nearly stopped doing so as lower-priced immigrant labor has all but priced him out. I insistently asked him about the labor market there: what keeps Vegas going outside of gambling and hooking? Honestly, what props that place up? I assume it’s housing money, money that will dry up in an instant and crash the entire economy there. He deflected the question by repeating stats about 9 new people move to Vegas every minute, or second, because of all the job growth. Again, what jobs? I just can’t see Vegas surviving. The breadth of the delusion in that town can be measured by this same cousin’s considering buying a friend’s property for 2.4 million. He told me it was a deal as it was really worth 3.2 mill. Quite friendly ideed, to offer someone a 800K discount. Sorry for the ramble, but both my cousin and Vegas fascinate me. Perhaps because it might be the one place more doomed than LA.
“Vegas fascinate me”
Me too. Vegas currently seems to be positioning itself as America’s next great city, and as an ultra-hip millionaire’s paradise. The hotels and casinos are steering away from being “every man’s paradise” with exciting shows in front of the casinos as you walked the strip, into “every pretender and millionaire wannabe’s paradise”, with glitz, galmour, and “exclusivity” being the buzzword. The whole place is now taking itself much too seriously, and people there are starting to believe their own hype. Everything is exclusive, yet anyone stupid enough to pay the $$$ can get in. It’s a well oiled publicity and marketing machine now, selling the concept that “even *you* can act like a high rolling millionaire, don’t worry about draining your bank account, you deserve it”.
some people there even think that a recession will only HELP LV, as “people will want to come here to drown their sorrows”.
It will be, ummm, interesting to see what happens in the next 5 years. Niel, pass the popcorn.
Our five or six “great cities” were in place by the 1920s. You don’t become one by throwing up a bunch of condos, or by having a one-trick economy.
“Vegas currently seems to be positioning itself as America’s next great city”
Yeah, and so is:
-Phoenix
-San Diego
-Bend Oregon
-Portland
-Seattle
-Salt Lake City
-Dallas
-Houston
-San Antonio
-Austin
-Atlanta
-Miami
-Ft. Lauderdale
-Naples
-Tampa Bay
-Charlotte
-Madison
-Minneapolis/St. Paul
-Albequerque
-Philly
-And about 500 other cities.
No kidding!
My favorite is Money magazines best places to live list. They seem to almost always list Ft. Collins, CO as one of those “Best places” even though the local economy is weak and generates little more than your typical low paying McJob. There’s a reason why the real estate bubble passed us over and houses still sell for 2001 prices out here.
That said, it is a nice place to live. Too bad we all can’t sleep at night worrying about the next round of layoffs at Agilent/HP/Avago/Advanced Energy/Intel/AMD/etc. But they are building a new mall in town!
John Carpenter needs to make the next “Escape from” movie in Las Vegas.
Will the inmates…uh residents…get the choice of being terminated in order to avoid serving their mortgage…I mean.. sentence?
In Lehigh & Northampton counties in PA foreclosures rose over 30% in the first quarter of 2007. Our prices are falling and the Morning CALL (SUPPOSED TO BE A PAPER) doesn’t even report on it. They act like prices are rising and this is normal.
Look at it this way, if prices around the Lehigh Valley were to stay at this level being the average “local family” only makes combined under 70k around here, this area would have to be boarded up. They are pumping these homes towards commuters but only 7% of the population rose in 5 years. That’s nothing. If our area doesn’t go back to 2002 prices, you won’t have anyone living here, it would look like a ghost town.
Common sense will drive prices back to reality, that and all those foreclosures from Joisey fools (who must have some bad credit)
Posted this on the next article, but better here.
Arn’t they still building like 500k more homes than houshold starts now?
I was amazed when they built 2.2mil on 1.3mil houshold formations a couple years ago.
Just based on the excess vacant inventory (around 2mill) and the 1/2mill now being built coupled with falling demand to purchase, the REIC is hosed for years. If they drop building by half a mill (to 750k) it will take about 6 years to burn off all this existing inventory.
These rough numbers assume that every new household formed buys a home!!!! It is insane to think that a majority of new households are capable of performing on a new mortgage, unless housing prices drop by like 70% and credit availability remains abundant. Also, how long will it take builders to move from 1.5 builds to 750k (my guess is 2-5 years).
All told an (eduguestimate) optimistic outlook would suggest a bear housing outlook for 8-11 years.
It makes me sick watching MSM talk about the RE bottom!!!! Shit the ride just started, to drivel on about a bottom at this point is infantile!
Forget about all the inventory (multiplemillions?) about to hit the market in the form of foreclosures and REOs!!!
Sheesh guys, this is SOOO much worse than the housing crash in the early 90s. Here in norcal that lasted from about 89′ (top) to 96′97′(bottom).
In 89′ we hit around 23 times rents at the top, in the late 90s we were bellow 10 times rents (at the bottom, 10 times rents was the standard rule of thumb for value). Today we are well above 30 times rents (450k home rents for $15,000/yr)!!! When these fall back to 10 times rents we will see that 450k home fall to
$150k+any rent increases!!!
Ment to say 1/2 million extra (over household formations) being built.
From yesterday’s Lancaster (PA) Sunday News: “Though Lancaster County home sales continue their slump, LCAR president Rich Heslin remains optimistic. ‘I’m not concerned at all,’ said Heslin. The stabilizing numbers ‘bode well’ for the strength of the local residential market, he said. Heslin said the national subprime lending crisis should have little effect on the county market because few banks here issued such loans.”
I plan to write a letter to the editor to point out some of Heslin’s (Lancasster’s local Lereah!) inconsistencies. For example, 1st qtr ‘06 sales were 1,202, while 1st qtr ‘07 sales were 1,164; how’s that stabilizing? Also, just because the local banks may not issue subprime loans, doesn’t mean they aren’t here. According to LoanPerformance’s estimate for 2006, 9% of the mortgages in Lancaster County were subprime! Any other suggestions for the letter?
“DeRooy said “without a doubt,” an increase in foreclosures would weaken the economy.
“This liberal financial market is going to weaken the financial positions of a lot of very good households,” he said. “And clearly, their ability to buy goods and services outside the housing sector will then lessen, and local businesses will start to see missing sales.”
But the ripple effect he described is more of a “road bump in the path of prosperity” for the county, rather than a disaster, DeRooy said. York is lucky in that regard, as other areas will likely suffer worse and not rebound as easily, he added.
“I’m confident in the York area,” he said. “You can’t take a diversified economy with a low unemployment rate and see it all destroyed from something like this.”
54% increase just a bump move along nothing to see here folks.
“A survey by the employment agency, Manpower, found that 39 percent of York County employers planned to hire more employees in the second quarter of the year. ”
Manpower is the biggest employor in the county wonder how many Mcmansions you can sell with those wages?? Seems they forgot about all the school tax increases, I know eveyone from Maryland and DC wants to live here Oh forgott they already do. Now what!
Wait “its different here” isnt that what he’s saying??