A Good Decrease That’s Reflecting The Current Market
The Rocky Mountain News reports from Colorado. “Debra Dotson discovered the hard truth Tuesday, that the house she has lived in for 10 years was no longer hers. She joined thousands of others who have seen their adjustable mortgage rates climb, their monthly house payments climb and their hopes of holding onto their houses plummet into foreclosure.”
“Dotson…grabbed what looked like a great refinance opportunity in 2004, then lost her job in November 2005 and is scraping by in 2007. Dotson’s home, which she bought for $117,000 in 1997, was auctioned to World Savings Bank for $159,333. She has to be out of the house in July. ‘I don’t know where to go,’ she said. ‘I feel lost.’”
“Now (it’s) in the hands of the bank that had sold her the adjustable- rate mortgage in 2004 after she converted it from a 30-year loan with a rate fixed at 7.5 percent. It was a mistake, she said.”
“‘I hesitated, but I did it,’ Dotson said, adding that she never sought out the ARM but instead was offered it through the bank.”
“Last year, Denver had more than 5,100 foreclosures, and 2007 was off to a blistering pace when, through February, 1,057 foreclosure notices had been given. Statewide, Colorado was hit by 9,254 foreclosure filings in the first quarter of 2007, putting the state on track to top last year’s record foreclosures by about 25 percent.”
“Last year, 28,453 foreclosures were filed statewide. This year, that number could rise to about 36,000.”
From KOAA TV in Colorado. “News First has learned that complaints are being filed with state regulators against several people involved in a mortgage deal that’s left a young family in a bad situation.”
“Not only are they facing foreclosure, but it appears the Colorado Springs home they paid $284,000 for is crumbling beneath them.”
“It’s the first home for Tim Archer and his wife Alicia. They admit they had no idea what they were getting into when they bought the home last year. ‘Very, very bad. I’d rather rent again. As of right now, I’d rather rent again,’ Tim Archer said.”
“We know the home sold on April 21, 2005 for $200,000. It then appraised on September 15, 2006 for $284,000.”
“The loan application that shows Archer makes $7,500 a month. Archer says he told the mortgage broker he averages around $4,000 a month, and the $7,500 amount is only a high end that he makes a couple of months a year.”
“‘It was our first house. We were excited we were getting approved for a house, no more renting,’ Archer said. So he signed all the papers he was given. But now, his house payments are up to $2,500 a month and rising. ‘We don’t want to lose our home, but we might not have a choice,’ Archer said.”
“Another broker told the Archer family they’re upside down in the loan and can’t refinance out.”
“We tried to track down everyone involved. Several said there’s much more to the story and that the home buyers are at fault. They told us the Archer family wanted to get into a house fast and were warned about all the pitfalls. But no one would agree to an on camera interview.”
The Arizona Republic. “Having trouble selling your house so you can buy that new dream home? No worries. Some builders will let you trade in the old place as part of the deal for a new one.”
“The new programs are driven by a drop in new-home orders and soaring cancellation rates that have left many builders with an excess of unsold homes. Cancellations shot from 1 percent in January 2005, the midst of the housing boom, to nearly 29 percent in March, according to Hanley Wood Market Intelligence.”
“Although some companies are seeing an improvement over last year, cancellations were still running high the first quarter of 2007. At Scottsdale-based Meritage Homes, cancellations stood at 28 percent. At KB Home, it was 31 percent. Pulte Homes lost 25 percent of the sales to cancellations in its Southwest division, which includes Arizona.”
“‘The resale market is slow right now,’ said Dan Tartabini, sales director at KB Home. ‘We want to make sure people who buy from us that have a house to sell get to the finish line.’”
“Upper-end builder T.W. Lewis of Tempe, buys select resale houses from buyers of its built but unsold homes. The resale must appraise below $500,000. The company will consider paying 90 percent of that price.”
“Alfredo and Raquel Matute wanted to buy a new house in the north Valley but were concerned about getting a decent price. They knew resale prices were falling, and they didn’t want to ‘give the house away,’ Alfredo said.”
“Yet they also wanted a new, bigger house so they could start a family. They thought the time was right since builders were overloaded with unsold houses and were offering big inducements to buy.”
“The couple decided to buy in a Maracay Homes project in north Phoenix. They signed up for a referral program that set them up with an agent who priced their house at $409,000 in a neighborhood where similar homes were listing for $420,000 to $435,000.”
“The house sold in three weeks for $400,000. The couple originally paid $220,000 for the house 3 1/2 years ago, so they could afford to be flexible on the price. ‘We were kind of aggressive,’ Alfredo said. ‘We knew we were taking a high risk, but I told my wife: ‘This is the best time to sell this house. The (resale) prices are going down.’”
“Some analysts see these programs as a sign that builders are in trouble and doing anything it takes to lock in sales. ‘These trade-ins signal the real trouble some Phoenix builders are experiencing now,’ said Jim Belfiore of Phoenix-based Belfiore Real Estate Consulting ‘We thought in December home-building was starting to make a real turnaround. But this move signals real desperation by some.’”
“John Burns, a California-based analyst said he has noticed another sales tactic recently: Builders putting mortgage experts into their sales offices. That means builders are trying to eliminate cancellations before they happen.”
“‘They don’t even want to go into contract with people who can’t close,’ Burns said.”
The Arizona Daily Star. “Home builders are deeply lowering prices to sell houses quickly, according to market research from Bright Future Business Consultants. The median new home sold for $241,020 in April, down 9.5 percent from $266,265 a year ago, ‘the largest decrease in any price on a monthly basis in recent history,’ said analyst John Strobeck.”
“‘But it’s a good decrease,’ he added. ‘That’s reflecting the current market much better and it’ll help move the product that’s out there.’”
“Prices likely will continue to decrease because they are inflated, Strobeck said. There are around 10,000 homes in the resale market now, about twice the normal number, he added.”
‘ Laguna Villas Apartments in Ocotillo has sold for $38.5 million. The 272-unit apartment complex had been slated to be converted to condominiums, but it will stay apartments, according to the buyer.’
‘The couple originally paid $220,000 for the house 3 1/2 years ago, so they could afford to be flexible on the price. They also wanted a new, bigger house so they could start a family. They thought the time was right since builders were overloaded with unsold houses and were offering big inducements to buy.’
I wish the reporter had included more info about the home they bought, as they may lose that windfall after all. But $220k to $400k shows how much air is still in the Phoenix area pricing.
My thoughts exactly. A near 100% increase in three years? From prices that were high already? About 50% decline in real terms over the next couple years is my bet.
Latest figures in Phoenix show a ratio of median income to median home price of around 6. The historical figure is 3.
50% decline is about right.
That sounds just like the Sacramento area- 100% appreciation and homes 6x or better then the median income.
Something to think about. My apologies if this has been posted already.
“May 22, 2007 (EIRNS)—A real estate investment and analysis firm, John Burns Real Estate Consulting, said on May 21 that it is “going public with our concerns” that the national sales information for both new and existing homes, is misleading and covering up a deep plunge of the housing sector. “The housing market has softened much more than is being reported” by the Fed, and the National Association of Realtors (NAR), says JBREC.
“The firm reports that having purchased and compiled actual home sale closing data for 55% of the country, it finds existing-home sales down, not 9% as NAR reports, but: 22% in May 2006-April 2007, compared to May 2005-April 2006; and much more than that on a simple year-to-year comparison of the past couple of months. It found that existing-home sales have fallen every bit as much as the new-home sales of the biggest homebuilders D.R. Horton and Lennar, which are down 37% and 27%. It found that home brokerage transactions by Realogy Corp., the nation’s biggest realtor company which owns Century 21, Coldwell Banker, and ERA, fell 18% from 2005 to 2006. And that mortgage applications for home purchase have fallen 18%, even though many buyers now have to fill out several applications in order to get a mortgage.”
Here is the link.
http://www.larouchepub.com/pr/2007/070522warn_bernanke.html
“And that mortgage applications for home purchase have fallen 18%, even though many buyers now have to fill out several applications in order to get a mortgage.”
I hadn’t thought about that, that is a great point.
Yeah, 81% gain in 3.5 years is still extremely strong.
I’ve asked before - where are the actual late 2006/2007 sales in AZ that are equal or lower than sales in 2005, 2004, 2003 on the same property? I’m just not seeing it. Maybe this will just take a very long time in terms of letting inflation eat away at the “flat price”. So a $500k house is a $500k house for the next 7 years?
‘where are the actual late 2006/2007 sales in AZ that are equal or lower than sales in 2005, 2004, 2003 on the same property? ‘
I guess you haven’t noticed the soaring short sales/foreclosures? If those houses weren’t underwater, do you think they’d be REO?
I’ve noticed them, but I want to see actual closing prices lower than 2004-2005, like in CA, MA, etc, ie the house that sold for 500K in 2005 and 300K in 2007.
The foreclosures/short sales could mostly be against idiots who HELOCed their house once or twice and then couldn’t pay the bills. I know a woman who bought in Queen Creek (shudder) for 170 in late 2004, refied to 240 in late 05, then got foreclosed in March this year. When the bank sells that house, will it actually go for less than 170? That’s what I’m not seeing. All the intermediate Heloc funny money is inconsequential to me (but not to the bank). I’m looking for actual purchase price declines for the property.
I can’t stand people like that. I could easily live for nearly 3 years off of $70k-with no job. She just spent the money like she was some bigshot, then walked away from her repayment obligation.
So could I. Easily.
The only price to watch Case-Shiller. Forget medians, etc. Notice how the REIC never mentions Case-Shiller?
Maricopa County Arizona NTS April
Jan 05 1297
Feb 05 940
Mar 05 1040
Apr 05 766
May 05 759
Jun 05 767
Jul 05 748
Aug 05 795
Sep 05 669
Oct 05 728
Nov 05 704
Dec 05 749
Jan 06 726
Feb 06 687
Mar 06 790
Apr 06 638
May 06 764
Jun 06 797
Jul 06 851
Aug 06 1019
Sep 06 1114
Oct 06 1238
Nov 06 1493
Dec 06 1407
Jan 07 1624
Feb 07 1577
Mar 07 1720
Apr 07 1709
Pardon my ignorance, but what does NTS stand for?
Notice of trustee’s sale
I dunno how AZ is doing, but in my area (Norfolk/Virginia Beach/Hampton Roads) much of the new housing that has been built has been much more expensive and high end than the older homes. This may play into things a bit, of course, these homes will be the hardest of them all to move — as they are probably occupied by people who have been making money from the RE business (not all of course).
I know the huge condo building going up in Norfolk has been delayed several times. When the newspaper did articles about it, half of the people interviewed seemed to be in the Mortgage business. Ooops.
City gave them $20mil kickback to get their condo building underway. We will see if they break ground.
AZ_owner: about the question if there are actual properties that are selling at 2004 pricing - here’s my opinion:
i have been tracking a few properties that are REOs, usually these would be the ones that can go lower. what i’m seeing is that the bank is listing them at almost to what is owed on them, i.e if they were bought last year , ~ 2006 or late 2005 time frame, then the bank is happy with getting their money back. but none of these have sold yet. I think this is wishful thinking on the banks’ part , usually they expect to loose about 40K or so on an REO, so i’m being patient and monitoring these houses to see when the bank wisen up and bit the bullet. I think we still have about 6 mo. before “RE investments’ becomes a 4 letter word, sortta like the ’stock market’ was in 2002 (no more water cooler conversations about it).
Maybe we should have a forum for each geographic area, sorta place where we can share local market info.
got cash?
I’m not sure you’ll see this, but I understand what you’re saying - the banks want to get out clean and they won’t.
BTW, in 2002 when the stock market was stinky was when I was buying. Haven’t bought anything this year at all. Buy low, sell high, right? My friend who works at Vanguard says people are in a frenzy selling out of bond and MM funds and going all out into the S&P.
“”They also wanted a new, bigger house so they could start a family.”
Does a new bigger house make you more Fertile or something ? What was wrong with the older house that made it impossible to have a family ? I can’t figure out why you’d want to double your housing costs and have children at the same time.
These are the same sort of people who rush out and buy a Hummer, then can’t afford the gas-or the payments.
Yeah - like 1 child = must have SUV, as regular cars aren’t ’safe’.
We were fine growing up without seatbelts!!! Were my parents negligent? Most DEFINITELY according to today’s “standards”
Sheeple have all gone off the deep end in what children “MUST” have…. They should scale back - smartly - and stop being neurotic! Their kids notice, believe me!
Sheeple have all gone off the deep end in what children “MUST” have
When I was a kid I use to think I’d found the Mother Lode when I’d find an a couple of returnable empty Coke bottles in the underbrush.
6 cents for penny candy.
Life was good.
“Most DEFINITELY according to today’s “standards””
Fear sells.
When I was a kid I use to think I’d found the Mother Lode when I’d find an a couple of returnable empty Coke bottles in the underbrush.
I used to dumpster dive for cans & bottles to get spare change. My mom drove me and a friend to the parks so we could do it.
I also used to have a paper route.
Has anyone noticed that these activities now pay for the living expenses of adults rather than the “penny candy” for children?
Sad commentary on the American economy.
Paul
MM,
Having the intelligence to ask these kinds of questions seperates you from the GF. The last thing we want to do is get into their heads.
LOL!
~MIsstrial!
‘Does a new bigger house make you more Fertile or something ?
- You better be careful with that remark, the Femi-Nazi might come after you.
I wonder this too. Remember when there was that Florida couple who wanted a ridiculously large house with a pool to start a family? I can’t imagine that a house in Arizona that fetched 400k, wouldn’t have at least two bedrooms, which seems to be enough space for child rearing for at least the first year (or two. or twelve.) I still remember the “old days” when a newborn baby didn’t need 1000 square feet all to itself.
400k in AZ should buy a nice 4/2.5 on 1/4 acre with a pool. It does now almost everywhere but Scottsdale, Ocitillo, Awatukee.
I bought a 5/2.5 on a 1/4 acre (albeit without a pool) in 2001 for half that.
I’m with you, Mo. Imagine how happy I was today when my daughter called me this morning and announced that she and her husband (newly wed, less than a year) were NOT going to look to buy next year. (Yippee!!!) She said that 2009 (I’m hoping for 2010) would be fine, and that if a baby comes before that, so what. She recalls that her Dad and I had her while we lived in a 1 bd apartment in Berkeley, and STILL lived there a year before buying. Of course, that was 1979 and the house we bought was $39,000.
But you get my point. 
Dang, my Dad didn’t buy a house until I was 16 and about to graduate from high school! The deal is that people come up with all kinds of rationale to justify buying more house, moving up, etc. Ok, so you can throw in there that folks are looking for the *better* schools, but even that status can be relative.
BayQT~
Buying a house for better schools is the one that gets me. Um… heathens, have you ever heard of renting?
Thank you sfbay. We lived for six years in a 2 bedroom, 1 bath with our babies. It was fun. Babies don’t want privacy - they want company. Maybe the new yuppies need a suite for the live-in nanny.
No flaming reason you need a bigger house to start having kids. These people probably think that making your kids share a room is some kind of child abuse. Bunk beds are perfectly fine…
“Prices likely will continue to decrease because they are inflated, Strobeck said. There are around 10,000 homes in the resale market now, about twice the normal number, he added.”
Sounds like a great opportunity to catch yerself a falling knife…
I posted about these “trade in deals” here like 3 weeks ago. The paper is SOOOOOO slow.
That’s why Ben’s blod is so great, we get the news here weeks, or months before everyone else
Totally. Ben’s blod is great, but his blog is even better…… Sorry, couldn’t stop myself. (”Bad snabs. Bad snabs.”)
Florida watcher probably mean to say “Ben’s bod is great”
The metamorphosis from builder to used car salesman, happened so suddenly…
“Having trouble selling your house so you can buy that new dream home? No worries. Some builders will let you trade in the old place as part of the deal for a new one.”
Yessum. Now all they need to do is figure out how to install a chrome foundation that keeps spinning after you’ve stopped moving.
I have a somewhat disturbing visual of that…
Does that mean they pay off your old loan and tack on the balance to your new loan while hoping you don’t read the loan docs and discover it?
Always Be Closing (except when you run out of qualified people to lend to)
“‘They don’t even want to go into contract with people who can’t close,’ Burns said.”
What’s this nonsense about qualified people? If you’ve got a SS# (fake or not), the ability to state income (fake or not) and a pulse (fake or not), you qualify! So don’t waste my time with obsenities like qualified… or even people.
“‘But it’s a good decrease,’ he added. ‘That’s reflecting the current market much better and it’ll help move the product that’s out there.’”
No comment
It’s all good!
Oh, thanks for clearing that up, Mr. Fudd. I’m glad do know that at least it’s a good decrease. It’s a relief to know that it hasn’t affected my property value.
Some builders will let you trade in the old place as part of the deal for a new one.
That will help the inventory problem…
“That will help the inventory problem…”
The idea of a trade-in program to help builders move new homes was discussed on this blog a year ago. I didn’t think it would fly for precisely that reason. The builders’ problem is excess inventory and under a trade-in program the net change to inventory on their balance sheet would be zero.
But reading the article it sounds like the builders have an arrangement with a third party to purchase the homes:
“[KB] has an agreement with a realty company that will list the resale home of a KB buyer. If the house doesn’t sell, the realty company buys it. The price is set with a third-party appraisal, and the house typically lists for close to that cost.
So of course the house never shows up on KBH’s balance sheet. I’m sure KBH’s 10Q outlines this. The “third party” appraiser must be in the realty company’s (the company actually buying the home) pocket to come in with a low number otherwise there is no way this would be profitable.
I don’t know how the builders could possibly make this fly without low-balling the appraisals, or, alternatively, high-balling the sales price of the new house they are selling to the owner (i.e. watching the spread). Perhaps it’s like how car salesmen make their money on trade-ins where they really don’t care what the eventual sales price on the new car is or the trade-in price on the old car is, all they care about is the SPREAD between the two.
Unless there are other qualifications built into the contract that we are not seeing, such as a really long waiting period like a year or so before they decide the house isn’t selling.
Think about it. Assume a house that is appraised by the 3rd party at $200 grand. The builder has agreed to buy it for $180 grand if it doesn’t sell. If the house doesn’t sell at close to the appraised value then that value was actually too high and the builder is forced to buy it the appraised value or higher. How are they going to then get rid of it without losing money if it didn’t sell the first time around?
I don’t know how the builders could possibly make this fly without low-balling the appraisals, or, alternatively, high-balling the sales price of the new house they are selling to the owner (i.e. watching the spread). Perhaps it’s like how car salesmen make their money on trade-ins where they really don’t care what the eventual sales price on the new car is or the trade-in price on the old car is, all they care about is the SPREAD between the two.
But the difference here is that the market the dealership is selling the used cars into is extremely liquid. For the vast majority of trade-ins, the dealer has no interest in putting the car on their own lot. They ship it off to the auctions the very next day, and no longer own it within probably 36-48 hours. So when you trade in the car, they are going to guestimate what it will fetch at the auction tomorrow, subtract a few bucks to give them wiggle room, and present that as your trade-in offer. The spread between the prices comes into play when the new car buyer balks at “low” trade-in price. Once the wiggle room goes away, that spread is their profit on the new car.
These home builders can’t send the trade-in to the auctions and be rid of it in a few days. Or, maybe they can. But that would require offering a trade-in value on the old home that comes really close to it’s true market value. But if that’s the case, aren’t they taking a huge risk - eliminating the “equity” that the buyer needed to afford the new house?
My guess is that the buyer of the trade-in home is an LLC set up just for that purpose. When it all blows up, the developer has no exposure.
I’s just another way to hide price declines with incentives — again. They can eat 50K or 60K and not have to reduce “official” prices. The fraudulent appraisal scam continues, the builders are really good at it.
“high-balling the sales price of the new house they are selling to the owner”
Ding, ding, ding…. we have a winner.
You get the choice of $50K woth of upgrades, $50K off the sell price, OR they buy the house.
They are buying the houses, and paying the realty company to hold them out of the market for awhile. Let the builder try to complete thier projects THEN dump all those houses into the market for whatever they can get.
agents are desparate for listings that are prices under (aka. at) market
“[KB] has an agreement with a realty company that will list the resale home of a KB buyer. If the house doesn’t sell, the realty company buys it. The price is set with a third-party appraisal, and the house typically lists for close to that cost.”
And when (notice I didn’t say if) the RE company goes BK, what happens to the builder?
You people and your common sense… you make me ill.
- D. L.
“Not only are they facing foreclosure, but it appears the Colorado Springs home they paid $284,000 for is crumbling beneath them…The loan application that shows Archer makes $7,500 a month. Archer says he told the mortgage broker he averages around $4,000 a month, and the $7,500 amount is only a high end that he makes a couple of months a year.”
And $285k would be a bargain in other bubble areas. People are going to get throttled all over this nation. Most simply don’t make enough money to carry the homes. I’d venture to guess that less than 25% of people can realistically afford a $285k house. Pre-bubble, $285k bought one heck of a house in most areas. Now, it doesn’t buy anything most would even want to live in. Strange days.
Living in the midwest, seeing lower incomes and home prices, I’d say the number (nationwide) is more like 5%. It would take $95K income to support that, and the national median is what, less than half? Does anyone have a distribution graph for household income nationwide?
Just answered my own question.
http://en.wikipedia.org/wiki/Household_income_in_the_United_States
Looks like its roughly 18%. So we’re both wrong!
You are forgetting that in most households these days, both parents work. So even at median salary of $45k, two of those salaries puts a household in range of a $300k house.
I’d venture to guess that less than 25% of people can realistically afford a $285k house.
I was tremblin’ in my boots when I took out a $150k 30-year 7.25%fixed rate note to do a new residential construction project with $60k down in 1998.
Family income at the time was around $85k.
These people doin’ $500/600k shit with dead incomes simply blow me away.
I’m with you hd. I don’t like signing up for debt. It has to be something special before I take the plunge.
Yup. Almost the same as me. Bought 1st home in ‘98 for $160K, with 20% down and 6.75% 30-yr fixed on yearly income of about $42K. It was really hard for me to go this high, as the same house in the city where I moved from could be had for $80K.
I re-fi’d into a 5.625% 15-yr fixed a couple of years ago and am making a couple of extra payments per year. Should “own” the place in less than 10 years, then will rent from the county for $300+ per month, forever . . .
I am a total idiot according to conventional wisdom, all that equity just sitting there doing nothing. What am I thinking??? There’s a Hummer in my house just waiting to get out! Boy am I stupid.
They don’t even want to go into contract with people who can’t close
Revolutionary!
Keep in mind that anybody could close less than a year ago.
My sister had a closing fall through back in 2004 when the buyer couldn’t get financing!
Someone else came along and bought it not long after that.
Wow, that wannabe buyer must have been the deadest of the deadbeats to not qualify for any mortgage at the peak of the bubble when homeless dudes in Florida were getting 8 mortgages at once.
You forget… even a dead guy was given a mortgage in one of Ben’s posted stories.
“LIES. ALL LIES!!!!”
-Frau Farbissina
Meh. Like we didn’t know this would happen?
http://www.minyanville.com/articles/Housing-Retirement-Debt/index/a/12921
This is really troubling as it pertains to health care. Due to the reprehensible spike in medical costs, one serious illness will wipe out most peoples entire finances. It’s a broken country when we profit off of the sick and the poor.
But never fear. Some people have enough money to pay 73 mil for a painting.
Yeah, we better permanently repeal that “death tax” and breed more Paris Hiltons. After all, wasn’t America founded on the idea of a permanent aristocracy?
You don’t stay rich by acting like an idiot. Paris Hilton is not a future participant in the family business, thus she needs to appear in terrible TV shows and self-promote in her own special way.
History is littered with aristocracy gone bankrupt. Repealing the death tax won’t change the fact.
Aristocracy running out of money? You’ve described my father’s side of the family too a tee!
BTW, my mother and father have done just fine because of their refusal to be part of the Family Fund. They wanted to make it on their own, and by golly, they did. They’ve ended up in a much better place than the relatives who leeched off of the Family Fund. Sad to say, that money is gone now.
The one problem with the “death tax” is that a lot of agricultural families that are land rich/money poor couldn’t afford to be the taxes when the head of household died. Ended up having to sell the family farm to pay for the taxes. It sounds okay if you don’t live in a farming community until you realize that the only skills alot of these people have are in farming.
Most of them DO sell the farm, to a corporate entity, and do other things.
That is a myth. I don’t think you can find a single example in the past 5 years of anyone being forced to sell the family farm to pay inheritance tax.
The other big myth is that farm subsidies help out the little farms when big corporations are by far the biggest recipients of government aid.
I LMAO when Steve Wynn put his elbow through his $139 million Picasso.
The 139M deal fell through. I wonder if Steve-o said to himself, “but at least it was a good decrease.”
Thank you for that link, Tchik. If HBB ever has a convention, you get my vote for Mistress of Ceremonies.
~Misstrial
An HBB convention? Sounds like a smashing idea! Let’s do it! Frugally, of course.
We must invite David Lereah.
Retirees who thought the housing ATM machine would provide eternal bounty and that their fixed pensions would provide long-term income security disproportionately bear the impact of high consumer goods inflation + housing deflation.
Boomers have had more moneymaking opportunities in their lifetime than any generation in history has ever had or will ever have. I don’t feel too sorry for them if they never managed to save a single penny all that time.
As a side note, that Minyanville website has a lot of good articles and if it weren’t so damn annoying I’d visit a lot more often.
Here in southern NM, one builder (an LLC) has formed its own real estate company to sell its homes. They now advertise as “Builder - Broker.”
But other than that, the home sales collapse is being hidden by local realtors and by the local newspaper which has a headline today announcing “____ Growth Seen!”
Not much in price declines either.
~Misstrial
Santa Fe is different!
Santa Fe is in northern NM.
The area she is posting in boggles my mind as far as pricing goes. Nowhere near any major employment center.
Oh - I thought she was Alb/SF area… Whoops!
Boarder patrol in El Paso? Guide at Carlsbad caverns? Ebay power seller dealing in alien technology out of Roswell?
“Here in southern NM, one builder (an LLC) has formed its own real estate company to sell its homes. They now advertise as “Builder - Broker.”
But soon they will be known as The Broker Builder.
I’m just posting this to get a laugh. I pay $1550 rent for an 800sf 2-bedroom crappy old apartment in the South Bay Area, CA. The only saving grace is that my kids are in a good elementary school.
I resisted the nagging of my wife to buy last year with a no-doc, IO loan. Thank God. We’re moving to a cheaper place—the Bay ain’t worth it anymore.
“‘I hesitated, but I did it,’ Dotson said, adding that she never sought out the ARM but instead was offered it through the bank.”
But I guess no wasn’t in her vocabulary…
News from the UK.
Having been a housing bear for a long time, occasional contributor to this site as well as a real estate banker & Chartered Surveyor, my wife and I have finally put our money where our beliefs are, and have sold our house and moved into rented accommodation.
Not a moment too soon, it seems. Comments from our selling agent and others are that where stock was rare just one month ago, now it is piling up. At the same time, many transactions are “dropping out of bed” after going under offer - in our case we out our house under offer three times before it stuck.
Overall, I remain very bearish on the UK market, only now from the smug position of having cashed out.
Needless to say, I will be contributing to Ben.
Regards,
Loafer
And one of my long-time buddies just dropped GBP 1,200,000 on a 4/2 in London N1. That is at least 7x his normal pre-tax earnings. He did well climbing the ladder, but still - this will stretch him.
He often gives me grief for not owning… I think he just bought at the new London peak.
Jon Hunt just sold Foxtons. Did he just bail out of a sputtering airplane?
In my personal opinion, yes.
I work for a major bank, and have access to alot of sources of information, and I have gone long cash. My house sold for GBP1.1m. I bought for c.GBP600k four years ago. That’s nuts.
Regards,
Loafer
You earned the right to loaf…
I have an inherited “flat” in Wimbledon. Is it bubbly there too? Probably should sell it but the PITA involved stops me every time.
Yes.
It’s not the same as the US, insofar as there is not the same over-building, but if you look at the rental yield and therefore the implied capital growth required to hit a comparable rate of return to other investments, prices don’t make sense. It is all about the opportunity cost of capital.
Looking at it another way, what is the price as a normal multiple of earnings for the sort of people who live in that sort of flat?
At the end of the day, you are a pro, so as long as you apply the same judgement to this deals as all the others, you’ll get it right.
Regards,
Loafer
Sorry if this double posts, but yes.
The growth required in capital, given the low level of rental yield, in order to get a decent return says “sell”.
You are a professional - just apply the same principles as you do every day.
Regards,
Loafer
It’s a dump too. Sheesh.
L~
Welcome…a toast to your good timing.
“We know the home sold on April 21, 2005 for $200,000. It then appraised on September 15, 2006 for $284,000.”
I remember times like this only my experience was in January of 2000 and it was a little thing called the NASDAQ. Well then the winds of March come a blowing. Hope you got good kite string.
“Yet they also wanted a new, bigger house so they could start a family. They thought the time was right since builders were overloaded with unsold houses and were offering big inducements to buy.”
“The house sold in three weeks for $400,000. The couple originally paid $220,000 for the house 3 1/2 years ago, so they could afford to be flexible on the price. ‘We were kind of aggressive,’ Alfredo said. ‘We knew we were taking a high risk, but I told my wife: ‘This is the best time to sell this house. The (resale) prices are going down.’”
Apparently this is the best time to sell, and the best time to trade up into an even more expensive house. Good luck smart guy.
Yeah, what a genius–able to understand that prices are dropping, but too slow to understand that x% decline of much more expensive house is greater than x% of cheaper house. Yeesh.
“We know the home sold on April 21, 2005 for $200,000. It then appraised on September 15, 2006 for $284,000.”
Appraisal fraud…sue the appraiser, idiots.