An Abundance Of Supply
The Clarion Ledger reports from Mississippi. “The national housing market has been cooling for some time, but local firms say the metro market, while it may have some problems, is generally bucking the trend. Only sales of high-end homes priced at $500,000 and up are languishing.”
“‘The high-end homes just aren’t selling as fast,’ said David Smith, VP of the Home Builders Association of Jackson.”
“‘Below the $300,000 price point, where there is a high demand, we’ve got a lot of inventory, but it’s consistent with the number of sales we have,’ said Crye-Leike real estate agent Dan Grimmett. ‘When you get up in the higher price points, the $500,000 and above, we do have an abundance of supply.’”
“That hasn’t stopped builders from focusing on the high-end homes though. There are 29 homes for sale in Madison County with listing prices more than $1 million, according to the MLS. ‘We don’t have 29 buyers,’ Grimmett said.”
“Ten $1 million homes were sold in Madison County during the last year, he said. ‘So we have about a three-year supply of $1 million homes,’ Grimmett said.”
“One of the houses Grimmett has been trying to sell on the lake in Ridgeland’s Bridgewater subdivision, was appraised at more than $1 million but has a $995,000 listing price. ‘We’re keeping it out of that $1 million-plus market,’ he said.”
“Smith said, as a contractor, he doesn’t understand why builders continue to focus on high-end homes. ‘The bigger homes are more fun to build,’ Smith said. ‘But the business is being saturated.”‘
“Smith has seen some builders with 10 to 15 $500,000 homes in inventory, he said. ‘That’s a lot of money to have tied up,’ he said. ‘I’m not sure if maybe they just aren’t business-smart or what. I just don’t really understand it.’”
“Smith said some builders have experienced foreclosures as they wait for the houses to be sold, but he did not have specific details. ‘We’re definitely seeing some fallout here,’ he said.”
“Some builders are adjusting to the market’s demands by switching to the $200,000 and below range, Smith said, while others have decided to construct fewer homes. ‘I’ve intentionally slowed down this year,’ Smith said. ‘It would help the market if everyone did that.’”
The Shreveport Times from Louisiana. “When some lenders opened the door to everyone wanting to get a slice of the American dream, a home with a neatly manicured lawn of their own, people stepped through. Bad credit? No problem. Not enough money for a down payment? No problem.”
“‘There are a lot of people who closed on loans who shouldn’t have been approved,’ said Mike Anderson, president of the Louisiana Mortgage Lenders Association.”
“Though other areas in the nation are doing worse, the Shreveport-Bossier City area is no exception to the trend. In Caddo Parish, the number of foreclosures jumped from six in March 2006 to 46 a year later, according to RealtyTrac. That latest figure was only one more than the 45 reported for February.”
“Foreclosures reported for Bossier Parish jumped from one in March 2006 to 17 for March 2007.”
“The substantial jump could be partly attributed to a moratorium on foreclosures for hurricane-ravaged areas that expired in May 2006. However, Darin Domingue, deputy chief examiner for the state’s Office of Financial Institutions couldn’t say what accounted for the jump in foreclosures in the Shreveport-Bossier City area.”
“‘It’s a little bit hard to see the impact Katrina would’ve had on these parishes,’ said Daren Blomquist, for RealtyTrac.”
“Donna Johnson, branch manager for Allied Home Mortgage in Shreveport, believes the same thing that is hitting struggling homeowners nationwide is impacting homeowners locally. The branch is getting calls from customers in need of refinancing because they have waited too long, she said.”
“Higher home prices and rising property taxes also could be part of the problem. ‘The thing about Louisiana is we have not incurred the incredible price increase in housing that other states have,’ said Dave Brennan, president of Brennan Mortgage, adding $100,000 or $150,000 will get buyers a decent house in Louisiana. ‘Then again, our income is not as high as other states.’”
“But, ‘Louisiana just doesn’t have that much of those type products,’ Domingue said of subprime loans. ‘Only 13.9 percent of the Louisiana market was subprime.’”
“However, the industry that experienced a boom is changing. Fears of feds stepping in already have put some lenders on edge. ‘Washington is working on it,’ Anderson said. ‘Credit has already tightened. People who were getting approved for a mortgage three months ago, those same people are being rejected today.’”
The Associated Press reports on Texas. “On former grazing land more than 15 miles north of downtown (Fort Worth), workers on bulldozers are carving out pads for upscale apartment buildings that will soon sprout from the prairie.”
“‘Right now, rental housing is extremely cheap compared to for-sale housing,’ said Steve Patterson, chief executive of Florida developer ZOM Holding Inc. ‘The difference can be 40 percent or more,’ even after the tax deduction for mortgage interest.”
“Rentals are also getting a boost from tighter lending standards, which make it harder for people with marginal credit ratings to buy property.”
“Some developers believe the biggest factor is the weak housing market itself. During hot housing markets, like the early 2000s, young people believed that if they didn’t buy immediately, prices would rise so fast that they could never afford a house or condo. That urgency is gone.”
“‘A lot of them are going into rentals, and they will continue to do that until the for-sale market returns or the psychology of buying becomes positive again,’ said Ron Terwilliger, CEO of Trammell Crow Residential, one of the nation’s largest developers of condos and apartments.”
“Apartment vacancy rates remain high in historical terms. According to the Census Bureau, rental housing vacancies were 10.1 percent in the first quarter of this year, down only three-tenths of a point from their high in 2004.”
“Developers say much of that is the lingering effect of overbuilding in the 1990s. They say many of the vacancies are in older properties that aren’t appealing to most renters. That’s why they’re building new ones, and often upscale.”
“‘This year, for the first time in many years, there will be a burst of new apartment construction,’ said Alan Nevin, director of economic research at MarketPointe Realty Advisors.”
“Some of that burst will come from projects that were originally planned as hotels or condominiums. In March, Trammell Crow bought an abandoned condo project in downtown Denver and plans to build about 450 luxury apartments on the land.”
“In San Diego, builder D.R. Horton Inc. recently sold a lot it planned for condos to an apartment developer at a loss of $3 million plus costs.”
‘Retired New Orleans cook Hattie Warren survived Hurricane Katrina. Now she is struggling with the $100,000 subprime mortgage she took out to pay bills and ‘have a few dollars’ five months before Lake Pontchartrain flooded the city.’ ‘The payment on her adjustable-rate loan, about $860 a month, eats up three-quarters of her income from Social Security and the rent daughter Gloria pays to share the two-family Creole cottage.’
‘To trace the turmoil in the subprime mortgage market, come to New Orleans, where borrowers who can’t repay are fueling a surge in delinquencies. Louisiana’s largest city is being slammed again as lenders exit the business, demand late payments and impose tougher standards on new loans.’
‘About 21 percent of the state’s 60,000 subprime mortgages were at least 30 days past due in last year’s fourth quarter, up from 15 percent in 2004, the year before the storm. Only Mississippi and Michigan had higher delinquency rates for home loans to borrowers with weak credit or heavy debt.’
‘ Billed as the ‘Ultimate Hideout,’ for the rich and powerful, the $100 million Lajitas Resort in far West Texas may be headed for the ultimate indignity. According to the public notice posted this week, the property, which is open for business, is set for sale to the highest bidder on the courthouse steps in early June.’
‘Lajitas never has broken even. Land sales in the planned subdivisions have been slow. Signs of financial stress continue to hover over the resort, which for the second consecutive year was late in paying its Brewster County taxes.’
‘Here you will find comfort beyond measure, beauty beyond belief, and rest and renewal beyond imagination,’ promises the resort’s Web site. But the mantra, ‘If you build it, they will come,’ apparently works better in fictional baseball movies than for real-life West Texas resorts.’
Speechless. That worked for Miraval in Arizona but there’s actually something to look at there.
Because when I think about beauty beyond belief, and rest and renewal beyond imagination, West Texas is the first place that pops into my mind!
Right, I know. Who needs the Seychelles when you have the Permian Basin.
Lajitas story… with $1.00 informal rowboadt border crossing.
http://tomzap.com/lajitas7.html
MacAttack…..great link on the Lajitas story. Exactly what a lot of us locals (back then for me) were thinking about the “gentrification” of what should have remained nicely nowhere.
True, because in fictional movies (and in fact fictional fiction upon which movies are based), the mantra was if “you build it he (not they) will come.” ie, shoeless joe.
So apparently they are looking for disgraced shoeless people to arrive.
Field Of Broken Dreams…
‘Here you will find comfort beyond measure, beauty beyond belief, and rest and renewal beyond imagination,’ promises the resort’s Web site. But the mantra, ‘If you build it, they will come,’ apparently works better in fictional baseball movies than for real-life West Texas resorts.’
Thus ends the dream of the long anticipated “D.B. Cooper Condos”
“In San Diego, builder D.R. Horton Inc. recently sold a lot it planned for condos to an apartment developer at a loss of $3 million plus costs.”
Very funny Ben about the Texas resort
Good ‘Ole Lousianna, the land of the haves and the have nots with most of the entire population falling into the have not category. Very poor state, terrible wages and prospects with little chance of improving ever.
On a side note Louisianna ranks last on the list of states when it comes to health 50 out of 50. Tremendous amount of lung problems for a variety of reasons. Not trying to pick on Louisianna, just telling it like it is.
poor ? they have 120 billion courtesy of the US taxpayers
fck em
Hey, I lived there for 9 years when I was a kid, in New Orleans. It’s a third world country.
I have a whole thought process/theory about what’s really happening and Louisiana/N.O./Katrina dovetails really nicely into it. Some Sunday when we get tired of making fun of idiots in 600K crackerboxes in California, I’ll afix the tinfoil hat firmly to the old noggin and spill the whole thing. Don’t miss it . . . you’ll be glad they still manufacture those “little pills.”
Make sure you give warning before you don the tinfoil hat. This I want too hear…
Give us a little taste txchick! Sundays are for enjoying life, not going all New World Order on each other….
The Truman Show.
My wife would be really happy if God indeed looks like ed harris
Carefully constructed reality which is in fact nothing as it seems. Interesting. I will never get tired of making fun of idiots in 600K crackerboxes, CA or anywhere else for that matter.
It’s even worse than that. You know that group of old rich guys who get naked and run around in the Muir Woods? Chew on that one awhile! LOL
Here it is
http://en.wikipedia.org/wiki/Bohemian_Grove
Well hell! I am still interested to hear the linkage to NO, but guess I will have to tune in on the weekends now. If you are ever passing thru Denver International, check the Freemason Capstone in “The Great Hall.” Bring your hat.
Thanks for the perfectly horrible visual, txchick.
That would explain a lot of how government contracts are awarded to well…. whomever.
A number of years ago @ the Bohemian Grove, A friend that was a friend of a musician (hoi polloi can’t get in w/o talent) that worked there, related this tale…
There’s plenty of hijinks going on, and up on the stage strided somebody with a rubber life-like Henry Kissinger mask on and went on to rip Henry apart and left nothing unsaid, to a gasping audience…
And then the perpetrator of this deed, removed his mask to reveal who he was~
It was Henry Kissinger…
“Higher home prices and rising property taxes also could be part of the problem. ‘The thing about Louisiana is we have not incurred the incredible price increase in housing that other states have,’ said Dave Brennan, president of Brennan Mortgage, adding $100,000 or $150,000 will get buyers a decent house in Louisiana.
This is a joke…..there’s practically NO property taxes in LA.
And to add…if the world were to receive an enema, insertion would take place in New Orleans.
Pfffffffttttttttt…
Louisiana’s got nothin’ on the Socialists Republic of Maine.
At least it has Katrina as an excuse.
Try bein’ poor in the old money Northeast.
No. #1 in overall tax levels and 49th in business growth.
The worst of the worst.
13 disasters
http://www.capitalpress.info/main.asp?SectionID=94&SubSectionID=801&ArticleID=32407&
“‘This year, for the first time in many years, there will be a burst of new apartment construction,’ said Alan Nevin, director of economic research at MarketPointe Realty Advisors.”
Good luck. You’ll had loads of competition from vacant homes. Plus the Mexican construction worker is going back to Mexico.
I knew a person who lost all his (substantial) money building apartments in Texas at the end of the last cycle. History will repeat for others.
“‘Below the $300,000 price point, where there is a high demand, we’ve got a lot of inventory, but it’s consistent with the number of sales we have,’ said Crye-Leike real estate agent Dan Grimmett. ‘When you get up in the higher price points, the $500,000 and above, we do have an abundance of supply.’”
THis sounds almost exactly like Pullman, WA. All of the developers and builders are going for the high end market and we probably have at least 5 years supply of high end homes on the market (and more going up every day).
The reason for this is quite simple: during the bubble land, materials and labor (subcontracting costs) all shot up nationwide. Rising costs rippled out from California into every little backwater. So at least in this town, it really isn’t possible to build and sell an affordable home. The only option is to slap some granite on a big box and call it a luxury custom home. Unfortunately what makes sense for one individual builder leads to disaster for the building industry as a whole.
Doesn’t Pullman have about 3000 people not counting college students? More than 2 builders or developers in that town is too many. Time for most of them to start selling Amway again.
9000 permanent residents. Over the past 20 years, Pullman has averaged about 15 new homes/year. Last year alone the city approved single family developments with a total of 300 lots. There has been some growth associated with a big engineering firm in town but we still have AT LEAST 10 years supply of lots currently on the market with new developments and “phases” popping up every couple of months. There will be some cheap lots available in the next couple of years as these developers go belly up. I’m guessing that builders will have to start dumping their land pretty soon as well if they can’t sell spec homes and there are no new contracts for custom homes. There are at least 9 major active home builders that I’m aware of, probably more doing a home here or there.
Try not too snicker too much… my relatives in Pullman (and other Pullmanites) have told me on numerous occasions that the building is due to… you guessed it… hordes of retiring Californians who want to get in on the good life of Pullman. Man, there must be an infinite number of Cali retirees- everyplace is expecting a flood.
Oh my… California retirees flocking to Pullman, WA, home of the national lentil festival, one decent restaurant, high dust-laden winds that rip the shingles off your house and endless wet winter cloud cover.
Don’t misunderstand, I love it here. But perhaps the main reason I love it here is that this is the kind of place that doesn’t attract Californians.
300K houses in Mississippi?
You said it exactly. I spent a year in MS on the coast from 2004-2005. The coast is the most wealthy area of that state and 300k houses were only owned by the wealthy. The struggling middle class lived in 125k homes, which would be the equivalent of 350-400k homes in the DC area. Those same homes would probably be 700k in CA.
MS is the poorest state in the U.S, schools are horrid, and incomes are dismal…
As Palmetto would say, “Testifah, brotha.” Colorado, that was the forst thing I though of when I read 300K in MS. Sure, I understand some 500K for the few CEOs or uberwealthy, but 300K for the po’ folk. My goodness, this bubble is worse than any of us couold have imagined. And for this yokel to say the 300K business if alright. Pisha! There is only one way this entire credit buble is going to end/land and it will not be soft or happy!
Dan, There is more money in Ms. than you think ( on the coast )..Chevron, Ingals, Trinity yachts, Northrup-gruman etc…but, yes the avg. Joe has not the income for much over 150k. Bubble has hit ,but stalled like most mkts. that were bubbling a few months back….
Lajitas?
I told you to invest it all in a Fajitas restaraunt!, not some worthless west texas whole…
Shyster said: “‘Below the $300,000 price point, where there is a high demand, we’ve got a lot of inventory, but it’s consistent with the number of sales we have,’ said Crye-Leike real estate agent Dan Grimmett.”
At what point do these reporters call BS? This is the second article that said the exact same thing today. How can you have high inventory if you have this so-called high demand?
said Crye-Leike real estate agent Dan Grimmett
Must be of the renowned Grimmett & Barrett Companies.
“At what point do these reporters call BS?”
Not as long as real estate makes up the vast majority of a newspaper’s ad revenue.
BINGO!!!!
We are getting very heavy rains, but it’s consistent with clear blue skies.
Got 10% down?
OT-SORRY-
have not been around lately as i just moved into my new apartment and have been real busy.
well anyway we lost one today my co-worker is on his way to sign a contract to purchase a home in suffolk county ny right now.
i sent him links to this site last year but obviously he had his mind made up from his wife. i wish him the best. he did tell me he put 15% down so it is not a total mess. i personally think that part of ny has a lot further to fall but they are planning to stay long term
oh well i tried
He’ll lose that 15% in taxes over the life of that mortgage. Suffolk County taxes will take care of any down payment. As for the rest, he can be sure he will be upside down with the market heading south for the summer.
As an aside, my neightbor just bought a week ago out here in South OC. Seems he couldn’t wait at LEAST ANOTHER FRIGGIN year. Nuts, I say. Even if has 20% down, who in their right mind would want to put at least 120K down, carry a min. 480K mortgage, be upside, pay HOAs, and overpay for some crackerbox here in CA?
So, you see children, there are some greater fools still running around with some cash or access to it and a whole lotta box of chocolate.
well the 15% is promising; the idea is to PAY OFF the principal, not make it grow larger.
Housing is toast (duh), but a recession (or worse) looms…
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/IgnoringTheLessonsOf1929.aspx
“Theres no place like home”
“Theres no place like home”
“The housing crash is contained”
“The housing crash is contained”
Well, its a good thing they didn’t go to hog wild on sub-prime loans in that part of the country ,(wonder why ). Could it be that really depressed wage people don”t go for these investment schemes or is it that people don’t screw their fellow man in that part of the south . Or could it be that property just doesn’t appreciate there enough to sell a investment scheme idea of flipping or constant refinances for equity cash ?
All of the above…
The fraudsters hadn’t gotten there yet. They were moving from market to market, pumping up prices, then rushing to the next market before the pop. FL, CA, Carolinas, Las Vegas, PHX… They were hitting the Pacific Northwest when the pops finally brought down the lenders.
They would have made it to LA eventually…..
“The fraudsters hadn’t gotten there yet.”
I hope all the New Orleans time share shills have been properly drowned. Pre Katrina I was visiting NO, visited a few time share open houses (for the ‘free gifts’). Talk about giving the tourists a hard sell. I needed a pressure hose to wash the sleaze off me afterwards…
‘ Billed as the ‘Ultimate Hideout,’ for the rich and powerful, the $100 million Lajitas Resort in far West Texas may be headed for the ultimate indignity. According to the public notice posted this week, the property, which is open for business, is set for sale to the highest bidder on the courthouse steps in early June.’
Well no kidding. It is a hideout that’s for sure. People not from Texas often have no concept of how remote that part of Texas is. I looked it up on my DeLorme Street Atlas and this resort is over 450 miles west of San Antonio and 330 miles east of El Paso, which are the two closest cities large enough to have a Costco. About the only places in the continental US that are equally remote are places like the high desert area of southeast Oregon, central Nevada, and regions of northeast Montana.
I think very few people are actually interested in living in places that remote. You want to be able to get into your car and actually make a shopping trip to a place larger than a 7-11 or to a restaurant more sophisticated than a truck stop. And there are plenty of other exclusive getaway locations that are far less isolated. Like the Colorado and New Mexico mountain towns, or island towns like Nantucket or the San Juans.
two hours just to get to Marfa, holy crap
Who knew the la costa too mucha syndicate, was in Texas?
“‘Below the $300,000 price point, where there is a high demand, we’ve got a lot of inventory, but it’s consistent with the number of sales we have,’ said Crye-Leike real estate agent Dan Grimmett.
-For Cryeing out loud! I thought that most of Mississippi was on welfare … how did they get 300k homes?
LOL, my thoughts exactly.
They can’t afford to buy the FEMA trailers they’ve been living in:
“FEMA trailers for sale to occupants”
“Purchase means end of housing aid”
http://www.sunherald.com/212/story/54695.html
“-For Cryeing out loud! I thought that most of Mississippi was on welfare … how did they get 300k homes?”
This has happened everywhere. Home prices have nothing to do with income.
Bantering, agreed. However, to still read about 300K as a norm for a plce like MS, even with all the stereotypes and stats is just bewildering. If you said 300K in TX or FL or even Nevada/AZ, I am with you. But 300K in MS or AR is just plain insanity, which is why I said above that this can only end one way. Anyone for the Big “D” word!
Ooooh Ooooh Ooooh I know I know
Depression
From Mississippi. “The national housing market has been cooling for some time, but local firms say the metro market, while it may have some problems, is generally bucking the trend.”
In the Bay Area, we’re also “bucking the trend”, so I’m relieved to hear about Mississippi as well. Wonder how many other markets are trying to calm the sheeple with this mantra.
You must have missed Ben’s Philadelphia article. Seems they have massive inventory and prices are being cut, but this explains all that:
“Houses in the $300,000 to $500,000 range “are flying off the shelves,” Shor said, “especially if they look good.”
“Although sellers in other regions of the country appear to be panicking, agents and brokers said they see no evidence of that here.”
“Today’s sellers are more educated than they were in the 1980s, so they hear these reports of doom on the national media and take them with a grain of salt, because they know this area is different,” said Diane Williams, an agent with Weichert Realtors in Spring House, Montgomery County.”
http://www.philly.com/inquirer/real_estate/7537387.html
Blech!! People have been “educated” that real estate only appreciates. They take the reports “with a grain of salt” because they have short memories.
It’s time for some up-to-date education. School’s back in session soon.
OT - car bubble
OK, this is “DUH” obvious, but a few of the implications just occurred to me. So people have been buying cars with HELOC/MEW money, so what? Car sales go down for a while, and then they go back up when the bubble works itself out, right?
I submit that not only did we have a sales bubble, we also had a automotive “features” bubble, similar to the “McMansions for Everyone” phenomenon.
Let’s say the median household income is ~50k, and home prices return to 3x one way or another. If you figure that total debt service shouldn’t be allowed to require more than 10% more additional income than the max allowed for mortgage debt service, that only gives you about $400 a month to spend on car payment(s) if my math is right, and that’s only if you have no other debt. Any more than that and lots of people can’t make their payments eventually. How much has the median household spent on car payments recently? I see an awful lot of “2 new 30+k vehicle” driveways, but perhaps they are all far above the median household income?
The problem is that now a “middle class” car is a 35k car. That’s not sustainable at 50k of household income. It appears to me that we should be headed back to a “middle class” car being defined as a 20k or less car. That’ll have an interesting effect on people’s expectations, both the buyers AND the carmakers.
I’ve wondered why it seems like a real stretch to buy a “normal” car even with a decent income, and I think I’m seeing why.
And a big-screen TV bubble, a jet-ski bubble, harleys, crotch-rockets, clothes, computers, boats, golf club memberships, etc. Bye, bye bubble.
And a big-screen TV bubble, a jet-ski bubble, harleys, crotch-rockets, clothes, computers, boats, golf club memberships, etc. Bye, bye bubble.
The difference is the brainwashing that auto companies have done to consumers to train ‘em to look at payments instead of total cost. There’s no rational reason a person making $50k would spend $35K on a car - that is a full years’ salary after taxes.
As gas prices rise, Cobalts and the like will become the new fashionable cars. Any car costing less than $15k will sell like hotcakes and those above will languish on the lots. Especially large pickups and SUVs. We’ve had a bigger-is-better mentality for far too long in this country.
Moman, you don’t realize how much of a prophet you are. This car thing is just getting started. Over the last 18 months I have read 2-3 stories about people being upside down on their cars. Trade in the old w/some debt still on it. Then buy the new car w/old debt added on. Great, go buy a 30K car, but now you owe 37K on it. Nice job! Should we just call you Mr. Buffet, now, you economic giant. What is scary is that this will only continue to grow in size.
While I am on the mini rant I would like to add the following…
This market can only go one way, down. We talk a lot about liquidity, but the problem there never really was any to begin with. For me, it has all been about typing numbers into a computer. Forget about banks buying back bad loans. How about if banks actually had to give the 600K to J6P, who then paid the mortgage company. You see, this whole party is a joke. I realize I might be treading in some deep water here. I am no econ whiz, but it seems to me that as long as loan sharks, er, I mean officers, can just punch numbers into a computer, the longer this thing will stave off death.
This thing = the entire credit bubble.
“There’s no rational reason a person making $50k would spend $35K on a car - that is a full years’ salary after taxes.”
Right, that’s my main point. Sure, cars are going to get hammered for a while just like houses. But in regards to general luxuriousness, I don’t think J6P will be buying the stuff we now think of as “standard” for a LONG time. Electronics will get as cheap as it needs to to sell, but leather and power everything and 300+hp may get as rare as those features were 20 years ago (think granite). I’m not THAT old and original Shelby Cobras have sold on the open market for 7k in my lifetime. I’d expect to see that same number (at least inflation adjusted) for modern equivalents (Vipers, etc.) within ten years, since I expect the next ten years to be at least as bad as the 70s. But just like homes, almost anybody planning to scoop them up at the bottom probably won’t want to spend even that much on them by the time they’re that cheap.
“”
That’s true but most of the cars are on lease. When people can’t make their house payment a lot of those leased cars will go back to the dealer. A neighbor down the street just bought a new 7 series about 6 months ago and I just realized this weekend that it has been missing. Also a local mortgage office used to have several new caddy Esc’s sitting in front of their business with some highly decked out women driving them, but not anymore.Damn it’s getting better by the day. It will be interesting when all the leased cars start hitting the dealerships because owners can’t pay the tab.
How much has the median household spent on car payments recently? I see an awful lot of “2 new 30+k vehicle” driveways, but perhaps they are all far above the median household income?
You must live in Lake Wobegon where everyone is above average…heh!
But I agree entirely. I’m in a middle income Texas suburb and the cars I see in line while dropping my daughter off at school are something to see. My battered Toyota minivan with 100k miles that I bought for cash is constantly dodging new Hummers, Escalades, Expeditions, and monster club cab pickups. And I expect my household income is in the top 5% for this neighborhood.
The astonishing thing is not just that people are spending $35+ grand for vehicles, but also that they are buying such ridiculous, inneficient, and poor quality ones to boot. It would be one thing if they were buying Volvo or Lexus or other similar high quality vehicles. But they are mostly buying glitzy inefficient junk.
Testifah, bro! Here in South OC, it is the same. I am running with the bulls (hit) here in my 159K 4 cylinder ‘98 Saturn. Meanwhile, 2 out of every 3 cars at my son’s school is an aircraft carrier. Brings back vague memories of the gas crisis and my stepdad driving a Chevy Impala. That thing got about 2 miles a gallon, went through catalytic converters like they were going out of style and all he did was complain about it. Once nice feature, you could have landed an F-15 on the roof of that thing.
Heh, heh. Have you guys read Millionaire Next Door? I just re-listenened (book on CD) to it last night. It plays well with this topic.
I’ve never been more proud of driving my ‘98 Cherokee with 250K miles.
I’ll keep driving my ‘99 small Chevy truck until the wheels fall off…it is paid for an is reliable as hell.
I said years ago that people are not going to be able to afford (then) 200K homes and 20K cars/trucks on 10 dollar an hour jobs.
The ecomony is busting as we speak…..all the liquidity is heading for the stock markets and that will not last long either.
Talked to a gas station owner last night and said when it hits 4 bucks a gallon, they are closing….cannot take the guff and drive-off and nastiness anymore from drivers complaining about price.
As other have said, this is the entire “credit bubble”. We’ve been spending more than we can afford for a very long time. This was maintained by
1) not saving
2) running up debt
3) Stock market gains
4) housing gains
Do we trust there will be another bubble that will give people free money?
The U.S. auto makers are doomed. No way they can pay pension and medical to retired workers on low profit cars. They’ll be restructuring to dump retirement beni’s or they’ll simply end.
It has been a heck of a party, but it is over.
Right on again, Darrell.
The Cerberus take-over of Chrysler will force wholesale changes in GM & Ford, too. Personally, I don’t think there’s enough time left for them to turn it around without first going BK, which I expect to happen before the year’s out.
The problem is that now a “middle class” car is a 35k car. That’s not sustainable at 50k of household income.
Just crazy.
Something interesting I have observed where I work. Engineers and techies in general (and yes, there are exceptions) tend to be frugal with their cars. So I know guys that make 100K and drive a 5 year old Saturn.
The fine folks in marketing, on the other hand, always seem to drive those 40K+ cars that I keep telling myself that I can’t afford.
Yeah, it’s a weird concept called “logic” that we techies have. If then…else. Apologies to all non-techies, but the concept that people should be able to rent their houses for 1 - 1.25% of the purchase price per month (historically) for their abode seems light-years beyond most in mtkg and sales. The only thing that can never change is the purchase price. Economy, interest rates, etc. can fluctuate.
When I bought my condo in NoVa for 125K in June 2003, I might have just been able to hit the 1%. When the lawyer and her student boyfriend bought it from me in for 280K in June 2005 with a 3/1 ARM with 0% down, I felt like a crook. But not enough to walk away, of course. When I rented in DC for a year, I was a social pariah. Now I’m in SF and just befuddled by the rationalization of people here. “It’s different in Noe Valley”. “It’s different in Palo Alto”. Yeaaaaah. Just like “It’s different in the South Pacific” and “It’s different in Holland.”
Got a .300 Win-Mag?
PS: I am drunk and bellicose. So sick of these GFs saying that it’s different here. Listening to “Straight Outta Compton” and reflecting on the C-P-T posts from the other day. Laughable, man. Hah! Rollin’ in the ‘93 Benzo with 140K miles and giggling at the fools driving the Escalades that will be repo’d soon.
“Just cuz I’m from the C-P-T, punk po-lice are afraid of me!”
I’ll be finding out shortly how a relatively new full size P/U with a V8 sells in this economy. I use it for work, but I have totally changed my lifes plan because of the housing bubble (and my resistance to mortgaging my future). The latest surge in gas prices had a hand as well. While I put a large chunk down, and still have ~$10k in equity in the beast, I hope to be able to get it out. I price under blue book, and my vehicles usually sell immediately. Once this puppy is gone, I’m debt free. It was 0% financing, but I don’t like owing anyone a nickel.
“Only sales of high-end homes priced at $500,000 and up are languishing.
‘The high-end homes just aren’t selling as fast,’ said David Smith, VP of the Home Builders Association of Jackson.”
I never imagined that Jackson, Mississippi and San Diego, California had such similar housing markets…
LOL! I almost spit out the coke I was drinking!
“The branch is getting calls from customers in need of refinancing because they have waited too long, she said.”
One should NEVER buy a home with the intention of refinancing, especially in a time of low interest rates. The lack of responsible decision making on the part of these homedebtors is pathetic. Ignorance is not an excuse.
Stupidity at its best!
With all the high inventories, why hasn’t someone really figured out how much inventory overhang there is? I mean, if you built 20% more houses than required for a time period, why continue building and approving lots?
I guess because a lot of these flipper homes were checked as ‘owner occupied’ it might be a little hard.
This is going to be a massive bust. The reality is really setting in. And we haven’t even gotten to the full-blown recession yet. I think many people on this blog are going to be shocked at how bad this is going to get, and most are already expecting a recession.
This time it really is different.
I am certainly the man in the tin-foil hat (at least tonight with the whiskey), for full disclosure. But IMHO, even if there aren’t full on Depression-era soup lines, the inability to purchase the daily double mocha, half-caf, half-soy latte are going to make it feel like a soup line.
Guess what just came on the iTunes? Dylan’s “When the Ship Comes In”. I sh*t you not.
I’m fun at parties!
Another thing that gets me is the number of months of inventory that is quoted by the media. Consider this example:
Inventory: 10,000
Sales Per Month: 1,000
Supply: 10 Months
This is a totally bogus supply number. The only way this supply number of 10 months holds true if no extra inventory is added for 10 months. But considering that the inventory number is getting much bigger, and the sales number is getting much smaller (and is bogus anyway), in reality you have an infinite supply of homes that cannot be sold.
One more reason why I would not touch real estate with a 10′ pole.
Zip is showing ~60,700 for sale right now, and it just keeps growing. I think the entire town of Queencreek is for sale.
Phoenix metro area…
Actually, while Phoenix metro has been stable at ~60,700 for awhile, Maricopa county is up anover 1000 in the last couple weeks. Broke 53,000 today for the first time ever.
The realtors must be refusing to list all those Maricopa and Queen Creek houses. Craiglist is PACKED with people that are behind on payments and begging for help.
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