Post Local Market Observations Here!
What so you see in your housing market this weekend? Lower prices? “Prices for some swanky pads on Long Island have been reduced recently, and it’s taking longer to sell, signs that the high-end market has started to feel the pinch, same as the regular folks. Agencies’ inventories of expensive homes have gone up, triple in one case.”
“A Centre Island estate where owner Patricia Altschul’s mini horses gambol, has dropped from $19 million last fall to $15.8 million now. Middlesea, singer Billy Joel’s estate on Centre Island, has dropped from last September’s $37.5 million to $32.5 million.”
“‘At the high end, there’s an end to the speculative market, in which people felt they could pay anything and sell and have their property be worth more than whatever they paid for it a year later,’ said Robert Campbell, associate professor of real estate finance at Hofstra University. ‘People are no longer making that assumption.’”
Homebuilder news? “D.R. Horton Inc.’s debt ratings are teetering on the brink of junk territory and further weakness in the housing sector and tighter lending standards may push the largest U.S. home builder’s ratings over the edge.”
“‘The company remains perhaps the most notorious speculative builder in the industry, a strategy that we expect to weigh heavily on margins and increase risk that inventory levels could rise more significantly than currently expected in coming months,’ Barclays Capital said.”
Legal matters? “New York Attorney General Andrew Cuomo’s probe into whether mortgage brokers pressured appraisers to inflate property values as housing prices increased in recent years continues to expand.”
“Mr. Cuomo said that ‘many, many more’ subpoenas have been issued by his office than the four that have been reported publicly so far.”
Or housing bubble reflection? “Alan Greenspan’s regulatory record has received far less scrutiny than his management of the economy. That may be changing. A former colleague says Mr. Greenspan blocked a proposal to increase scrutiny of subprime lenders under the Fed’s broad authority.”
“‘I would have liked the Fed to be a leader’ in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board.”
“‘He was opposed to it, so I didn’t really pursue it,’ says Edward Gramlich, who was Fed governor from 1997 to 2005.”
Old: D.B. Cooper
New: D.R. Horton
“D.R. Horton Inc.’s debt ratings are teetering on the brink of junk territory and further weakness in the housing sector and tighter lending standards may push the largest U.S. home builder’s ratings over the edge.”
“‘The company remains perhaps the most notorious speculative builder in the industry, a strategy that we expect to weigh heavily on margins and increase risk that inventory levels could rise more significantly than currently expected in coming months,’ Barclays Capital said.”
“D.R. Horton Inc.’s debt ratings are teetering on the brink of junk territory”
is this a good thing for housing bears? is this like the 80’s junk bond meltdown. i lived thru it and im ready to live it again.
I’m really not sure, I haven’t been through a downturn. On one hand, we want builders to stay healthy enough keep building (more inventory). On the other hand, it would good to have desperate home builders that were willing to sell at any cost.
Some combination of the two is probably good.
IMO, over-building is harmful to the economy. It uses up capital needed elsewhere and hurts people who didn’t have anything to do with the boom. But, the incentive of half-million dollar houses has already done its damage, as the Las Vegas reports revealed yesterday. If the PTB were smart, they would let prices fall quickly to put a stop to the building where it isn’t needed.
I agree with you, but I’m talking about getting a return back to “normal” pricing. Any event that helps pop the credit bubble will be good long-term for the economy, so we can get back to properly allocating captial, as you suggested.
For a current example of overbuilding & mis-allocation of capital: Look no further than the wreckage in the telecom, semi-conductor & .com industries (I lived through it & witnessed the meltdown 1st hand @ Motorola). Examples Global Crossing (BK), Quest, Lucent, MCI/Worldcom, Ericsson (did a 10-1 reverse split), Motorola (had 100K + employees in ‘99, now 66K), Cisco, JDS Uniphase (was $140/share in ‘99, now $13). One small example of the excesses:
(from Wikipedia) “In the late 1990s through 2000, the fiber optic communication industry became associated with the dot-com bubble. Industry promoters, and research companies such as KMI and RHK predicted vast increases in demand for communications bandwidth due to increased use of the Internet, and commercialization of various bandwidth-intensive consumer services, such as video on demand. Internet protocol data traffic was said to be increasing exponentially, and at a faster rate than integrated circuit complexity had increased under Moore’s Law. From the bust of the dot-com bubble through 2006, however, the main trend in the industry has been consolidation of firms and offshoring of manufacturing to reduce costs.”
http://en.wikipedia.org/wiki/Fiber-optic_communication
More info on the .com boom
http://en.wikipedia.org/wiki/Dot-com_bubble
Had a co-worker confess to me in 2000 (he was in his late 50’s looking to retire) “My portfolio is DOWN 50%” Owww
If the upcoming housing COLLAPSE plays out like the .com implosion, 10 years later the industry will still be crawling out the cellar, bloody, bruised / half dead and forgotten.
Oh. That telecom meltdown was a bit different. We did a hell of a lot of engineering to make high capacity systems. Industry crawled along for about a decade. There were a few nifty technical advances in WDM wave length division multiplexing, that really pumped up the backbone capacity. Also lined up with PCs getting to be really inexpensive and poof people wanted more capacity. Turns out you the backbone needs were really easily met and with far greater excess capacity. The technolgy wasn’t that difficult to large scale produce and everybody jumped in to the buisness.
The link to houses lacked the bandwidth to use up the backbone. So, overcapacity more than speculative mania. Lots of people invested in the industry because they really didn’t understand how much backbone traffic would grow and where it would level off.
Cable modems and DSL give you pretty good bandwidth but not enough to really dent the 8 fiber optic lines in the average cable. The backbone had capacity in the tetrabit range if you wanted it.
The dot com thing was silly though. Unrealistic buisness plans everywhere. PE of 100+.
PE 100+ sounds like Amazon stock price today. Methinks the market is getting a bit frothy again, but who knows how long it can last.
At the height, housing construction was approx. 9% of the US economy, vs. a traditional 4-5% share. We’ve all just witnessed the largest destruction of economics opportunity in history. Instead of putting the billions of dollars spend on housing into investments that will power the future economy, we wasted it on consumption, building millions of housing units for which there are no buyers and will never be before their useful life is gone.
Economists have a term for this, it’s called welfare loss. Turning high value inputs into low value output. Should make for some interesting economic case studies for the next 10-20 years.
“If the PTB were smart, they would let prices fall quickly to put a stop to the building where it isn’t needed.”
Exactly. The lasting legacy of the bubble will be the drag of an excess supply of $500K+-priced homes ($1m+ in coastal bubble zones) whose current owners cannot afford to either own nor maintain them at today’s price levels, especially when the owners are investers with more than one falling knife bearing down on them at the moment. The longer the bubble’s denouement is allowed or even encouraged to drag out, the longer the economy will have to slog along into this deflationary headwind of McMansion overbuilding and sagging McMansion prices.
Are the PTB lacking in intellect or is there some reason that is not immediately apparent for this apparent absence of wisdom?
Not to put on the tin foil hat, but given the fact that the PTB are not letting prices fall quickly, what can be gained by such a long drawn out bleeding such as this and by whom?
We have talked about this before, but if our overall economy tanks and J6P’s investments go south and layoffs increase that applies downward pressure on wages. Now what if this is a very slow process? Would that keep the hordes from revolting while keeping our overseas investors from dumping USD? Is it possible that this downturn is being “managed” for the benefit of the strong hands?
Ok, that was totally a tin foil hat comment so I’ll put mine on now, but what if? Who stands to benefit and who will lose?
Are the PTB lacking in intellect or is there some reason that is not immediately apparent for this apparent absence of wisdom?
Ever read “Dilbert”? TPTB are heavily invested in the status quo and overly concerned with CYA. Corporate politics writ large.
There is also a status quo bias, according to psychological economists…
http://en.wikipedia.org/wiki/Status_quo_bias
They need to keep the passengers in the ballroom while the crew gets into the lifeboats.
Right on Ben…
Try to get a decent and fair quote on an individual residential construction project when all the small scale builders think they’ve become “big boys”.
I got my last house built in a very small window back in ‘98.
6 months later, my builder said he wouldn’t even entertain putting in a bid, because my 2500SF deal didn’t pay enough.
He said he would have doubled the cost just to get rid of me.
Think of the suckers who would have said go ahead, and now find themselves in lost equity doo-doo simply ’cause they gotta have it NOW!
Greenspan with his 1% money f*cked it all up royaly.
Why is it good to keep building when there are already record levels of inventory, with much more about to hit the market in the form of foreclosed houses? There is a glut of housing and EZ credit has just been shut off for a very large portion of the US population.
Its too expensive to shut down, who would they sell their machinery and equipment to? Doesn’t make sense for them to shut down, but it does make sense to let other(larger) builders to buy you out.
“Its too expensive to shut down, who would they sell their machinery and equipment to?”
There’s always a market for construction equipment. If not here it can be sold overseas. The bigger question is who will they sell these houses to? The EZ credit is gone, and unlike a bulldozer you can’t export a house.
I’ve read that the main reason a larger builder would buy a smaller is if they need more land. At the present, builders are up to their eyeballs in land and are walking away from options to buy land. They are not selling land because the market for undeveloped land has crashed. The only way that they can get rid of land is to build on it and to try to sell the houses.
The smaller profits that can still be made off of the homesales probably outweigh the costs of halting construction. Remember, these houses (particularly McMansions) cost way cheaper to make than what they sell for, so even if a builder makes LESS profit they’re still in the black by finishing and selling, whereas halting construction is probably a major headache.
“The bigger question is who will they sell these houses to? The EZ credit is gone, and unlike a bulldozer you can’t export a house.”
Yes I agree, its not like you can do a 2 for 1 split such as stocks. Home values would have to come down to allow buyers to enter the market.
Bill
I’m comparing builders to printing companies such as Philadelphia Inquirer. Printing companies acknowledge that people are using the internet, blogs and other sources to rely on information. Its too expensive (equipment is unique to their operation) for them to shut down, so they keep operating until someone buys them out or keep the business running until the use of the depreciable assets are close to zero.
The (larger)builder would purchase the smaller builder at a discount.
BW
Yes I agree with BW. thanks for clearing it up.
Has anybody stopped @ a housebuilding site and asked the construction guys their opinions?
“…and unlike a bulldozer you can’t export a house.”
However, there is no reason you cannot bulldoze a house.
http://en.wikipedia.org/wiki/Rachel_Corrie
It’s good if it helps prices come back to “normal” levels (more supply, less demand = falling prices). This will help burst the credit bubble, which in my non-expert opinion is a good thing long-term.
I would agree with you if credit was really that tight. The spigot still seems to be on, from my vantage point (Lenders are still offering 100% to FICOs >660). Maybe rising rates will be the deathknell.
Here in Chandler, AZ I see a lot of vacant homes that aren’t for sale. I also see for-sale signs all over the place, and I am starting to see people take their houses off the market (the same thing happened last year). No doubt, RE gurus waiting for the spring bounce next year…
I just can’t buy into this market until these people capitulate.
This is what is going on in Naples. Here we have two units which are basically identical, yet one “owner” thinks their’s is worth 72K more than the other!
http://homes.realtor.com/search/listingdetail.aspx?zp=34113&ml=3&typ=2&sid=93d46b4e8e334ae2ab7103f0fd4bd521&lid=1072546395&lsn=8&srcnt=526#Detail
http://homes.realtor.com/search/listingdetail.aspx?zp=34113&ml=3&mnp=23&mxp=22&typ=2&sid=394a61bff9084bceb726374059a76968&sdir=0&sby=2&pg=2&lid=1069043184&lsn=13&srcnt=47#Detail
My father died back in 2000 and my mom decided she didn’t want to snowbird alone. She sold a Lely condo for $90K in 2001. Even the lower priced one is overpriced given the junk construction.
I am currently renting a Lely Condo, they are built like absolute garbage.
When you walk into the condo something looks wrong, you can’t tell if the walls are crooked or the tile was laid incorrect. the tile is four inches smaller against the wall going out 15 feet!
When it thunders you feel like the roof is going to collapse.
You can’t paint the walls and ceilings (vaulted) anything but white because the seems wave so much.
Condo auction in Hoboken NJ creating a “buzz”…
http://www.nj.com/columns/jjournal/renshaw/index.ssf?/base/columns-0/1181110667214470.xml&coll=3
and check out the price list here…
http://www.velocityhoboken.com/table.html
$350/sq.ft. reserve price in a high-crime area sounds like a pretty crummy deal to me.
Inventory in South Florida continues to swell. People are no longer in denial about the market downturn, just in denial about how long it’ll take to correct.
I havent seen the decline at retail stores like others on this board have reported. Chain sit down restaurants and big box retailers like Target continue to pack in the crowds. The dry storage marina I use has been insanely quiet, the guys there say they’re putting about half as many boats in the water as they did this time last year. I’m also seeing fewer temp tags on cars (at the peak it seemed like a quarter of the cars on the road were brand new here). Wasteful luxuries like marine fuel and BMWs should be the first to go when the ecoonomy sours, the canary in the coal mine.
Once people realize that the state gov can’t bail out the insurance and property tax systems in a politically palatable way, things will really start to fall apart. In addition, thousands of new condos will be coming on the market in undesirable areas of Miami and Fort Lauderdale in the next 6 to 12 months which should add fuel to the meltdown fire.
hey 7% tax reduction will save us;-) our marina is quieter too. there is now a house right off the intercoastal that went from 1.1m to 650… no bites
Just saw my first local torching. The lawn appears to have been unmowed for months. Adding 2+2 I’d say that a distressed FB tried the arson way out.
did you have your camera with you?
No, but I plan to take a pic tomorrow.
““New York Attorney General Andrew Cuomo’s probe into whether mortgage brokers pressured appraisers to inflate property values as housing prices increased in recent years continues to expand.”
I wonder if he will also investigate local governments who willingly went along with increases in appraisals to increase tax revenue?
mortgage brokers pressured appraisers to inflate property values as housing prices increased in recent years continues to expand.”
Fed fookers could have nipped this all in the bud, with a simple law making it a felony for anyone in the finance industry to coerce, extort, or have undue influence on the reporting of a real estate value for a government or GSE
underwritten loan.
Instead the azzholes at the National Appraisal Standards Board made all the appraiser’s take another 6 hours of dipshit continuing education courses
hd74man, you are soooo right. The appraisers were required to take dozens of hours of continuing ed while the lenders/mortgage brokers were free to commit outright fraud. I hope these crooks pay big.
“a simple law making it a felony for anyone in the finance industry to coerce, extort, or have undue influence on the reporting of a real estate value for a government or GSE
underwritten loan.”
How do you enforce it, if it wasn’t in writing?
Appraiser: “You coerced me!”
RE Agent: “No I didn’t.”
How do you enforce it, if it wasn’t in writing?
With a bazillion lawyers in this country I’m sure a way could be found.
Where such a law in effect, I’d simply bug my telephone and take prodigous notes.
You’d be amazed at the stuff the idiot processors and realtors tell you.
Most can hang themselves in the first 2 minutes of conversation.
The enforcement you speak of, that there are a baizllion lawyers available for enforcement, would only relate to civil enforcement via the threat of lawsuits. Only the executive branch in the state governments can enforce a criminal statute. But yes, those are lawyers too so I guess technically you are correct!
Graspeer,
This is a great question.
That’s interesting that Washington hack, Mr. MaGoo Greenspan, blocked attempts to monitor sub-prime lenders. It’s on record that Mr. MaGoo commented some years ago that he thought he could manage the economy, keep it healthy and robust and avoid the usual capitalist “boom and bust” cycles with the inevitable recessions. Looks like his plan revolved around property and debt for the unwashed masses.
Makes you wonder if he had a plan “B” to fallback on because his plan “A” looks like it’s in big trouble.
He’ll probably pick a couple of populist issues to pursue vigorously. That strategy produced a governorship for Elliott Spitzer.
The Lehigh Valley, PA area is getting crushed still. The local paper (MORNING CALL) should just put a dress on a cheerlead all the way too foreclosures. Every week they hint at troubles but then SPIN the article into trying to get people too buy. Houses priced under 200k are sitting on the market for 6 months to 1 year and still not selling. It’s like they are holding onto the belief things will change. The average person around here makes around 32k so that under 65k for a couple. Prices went from right around 100k for a home in 2001 to 235k Peak 212k now. We had people from NJ & NYC commuting here 3-5 hours a day because they were bubbled out of there market. Now since 2005 not many people are willing to drive that much for a home you barely use. They are being foreclosed on left and right and 90% are trying to seel with no chance in hell of getting what they paid. The average local has been priced out since 2003, 2004 but the tables are turning. You should see the driveways around here since the bubble. Even the locals and I have many friends who all bought new cars/trucks, 10k in TV & surround sounds, vacations, you name it. These are the people who don’t want to agree this bubble was insane. Yet these people all agree they couldnt buy anything in this current market (IRONY & KHARMA = TROUBLES).
I think it will be closer to the end of 2008 until the media and locals come back to reality and then it’s too late. Row homes that were selling for 85k in 2001 were selling for 185k in 2006. Now they are priced around 175k and not selling. They need to get back to around 115k and things will move. Until then, houses will sit and realtors and the morning call will continue lying.
I read a great article on how this housing bubble is similar to the dot.com crash and how newspapers & media were saying it will turn around and then at about 2 years into it 75% of people were screwed they just accepted it and moved on. I see that happening with houses. Especially here, we are not a major city and local money is what houses should be based on. You can still rent a nice home or apt for under $850 a month. Now there market is flooded with 1500k-3000k rentals. Who in their right mind would pay that. I think these are pre-foreclosure homes on their last leg, but don’t tell the Morning call that or anyone who bought or refinanced a few times during the bubble years.
and just SE of where you live, this guy is
Sinking Like a Rock
“I am willing to sell at a rediculous dollar figure just to avoid letting these *&%$@ take back my properties!”
hmmm…50-60% off fair market - sounds about right
You mean off prior market…
What it eventually sells for without fraud or collusion IS fair market
Here’s a list of the Ohio Attorney General’s (Mark Dann) lawsuits against mortgage lenders’ appraisal inflation. It was in the Morning Journal in Columbiana County today.
Dann on Thursday asked courts in four Ohio counties for orders blocking the companies from engaging in what he deemed illegal practices in a state that has one of the highest foreclosure rates in the country. He also demanded that lenders pay $25,000 each in civil penalties to reimburse consumers.
Ace Mortgage Funding LLC, Cinncinnati
Apex Mortgage Services LLC, Columbus
First Ohio Banc & Lending, Independence
Island Financial LLC, Twinsburg
Premiere Service Morgage, West Chester
Robert C. Roach, the Valley Morgage Group, Austintown
American Home Brokerage Cor, Garden Grove,CA
Sage Credit Company LLC, Irvine, CA
Wall Street Mortgage Bankers, East Rockaway, NY
All-Line Appraisals, Phoenix
I remember seeing Apex foreclosures a lot in the paper. This is just the beginning. You may see many of these pop up mortgage companies all over the country getting blocked from doing business and sued for damages. Not just from state governments, but also from consumers.
the media went up here by 4%. however, the few houses I’ve looked up have had drastic reductions of at least 10%.
one home has been on the market for literally almost 3 years, it just got pulled off. it’s when from a listing of almost $700,000 to one of around $500,000.
sorry, it’s median not media, must have been a subconcious slip.
No, you’re right. The media is causing housing prices to fall. Well, that and the weather….
and the NBA Playoffs…..
Is that something like the Superbowl rally?
Look for the politico’s to increasingly use real estate as a revenue enhancing whipping post while special ed funding and cop pensions break the bank.
Maine is looking to more than double the level of transfer “fees” (the DEM governor never raises taxes) aka “taxes” on sales as a means to save the Titantic ship of state.
Also the Maine State Revenue Service is increasingly putting pressure on municipalites for constant re-valuations to grub out every last dime in property taxes. Residents of the town of Westbrook are having heart failure as the results of a recent re-assessment (the last being in 1992) which raised the av. fair market value of residential properties from $121,000k to $270k.
Despite a reduction in mil rates, some property owners saw their taxes increased 100%.
Never a better time to be a renter.
Despite a reduction in mil rates, some property owners saw their taxes increased 100%.
Yikes! Hello, CA prop 13 haters? Despite granny next door paying less than you, at least this won’t happen…
If they hadn’t been assessed since 1992, I’d say they’d been given a gift. It is shocking now that reappraisals have brought them current but they haven’t paid current values in 15 years!!! Wish I could have enjoyed that experience. Mine goes up about $15-20k a year.
Now as values reduce are they stuck with those higher assessments for another 15 years? That would be a point I’d be watching.
Despite a reduction in mil rates, some property owners saw their taxes increased 100%.
Never a better time to be a renter.
I think your assumption may be a bit off. Just because you rent does not mean you are not paying property taxes. You may not be writing the check directly to the treasury, but I can guarantee you that you are most certainly paying them.
I posted an observation that the Minneapolis SW RE market appears seized up (bits n buckets thread). Another observation I found extraordinary was when we (wife and I) went to a place called “Manny’s steak house” mid week with another couple for dinner. The place was packed and doing a brisk business the whole time we were there. The couple we were eating with said this is normal activity for the place. This is a restaurant that serves excellent food at an outrageous price, at least for the midwest IMO($75-$100 per person minimum without drinks). We estimated that the server has to be pulling down close to 6 figures given the tables he was handling and a guesstimate on the average billing/tip per table (who needs college). Still plenty of folks feeling wealthy in the twin cities while the burbs are getting an ass-pounding in the RE market. It’ll be interesting to see how long this dichotomy can exist?
AI~
Any high end restaurant I go into seems to have a majority of really, really grey and white hairs, who are the beneficiaries
of the great FDR entitlement Ponzi’s schemes.
I’ve always remembered the WSJ editorial by a doc in NYC who did an emergency heart job on a 85YO. 6 months intensive care-Bill to Medicaid $500k.
He remembers bein’ in the room looking at charts when the guys wife brought in a bill for new dentures with a $175.00 co-pay, which he said sent put the guy into apoplexy.
Gimme the best health care in the world-but let somebody else pay for it.
Medicaid bankruptcy in 2019.
No escape.
“Medicaid bankruptcy in 2019.
No escape.”
I think you are being a bit too optimistic, IMO.
I thought the Medicaid/Medicare bankruptcy is due in 2012. That’s only 5 years away. You don’t read much of it in the Pollyanish media. Grasshoppers are fiddling.
I think you mean Medicare….
Social Security and Medicare are doomed. Pensions are doomed. Seniors living on their own can not continue forever. Expect to return to the days where your parents moved in with you when they retired.
“It’ll be interesting to see how long this dichotomy can exist?” Good question, I wonder about that too. Still, such dichotomies seem to endure quite well in the world’s banana republics - which we seem to resemble more and more everyday. Gated communities, armored SUVs, and personal bodyguards - might just be some good investment opportunities.
“Prices for some swanky pads on Long Island have been reduced recently, and it’s taking longer to sell,
So it’s finally come to this: trouble in Swanky Padville.
Check out what this REO is doing, or going to do, to the comps:
South San Diego, Chula Vista
REO 2848 Shenandoah Dr, 91914 Asking $1,199,000
2806 Sutter Ridge Dr, 91914 Asking $1,799,900
2809 Shenandoah Dr, 91914 Asking $1,749,999-1,949,999
2812 Sutter Ridge Dr, 91914 Asking $1,749,900-1,849,900
2806 Shenandoah Dr, 91914 Asking $1,700,000-1,800,876
2810 Shenandoah Dr, 91914 Asking $1,499,900
Follow-up:
I wanted to buy one of these places back in Nov of 2004. The first phase was a release of 5 homes for around $750,000. I was not high enough up on the list to get in on phase one but the buider said I would make phase two.
My wife and I arived at the site the day of the release (Dec 27th 2004) and there were hundreds of people. It was gross as people were trying to buy spots on the list and trying to out do each other.
When it was our turn to talk to the sales agent we were informed that the price, in less than 30 days, was now $975,000.
We were so disgusted we just walked out. If the next guy on the list wanted to buy he could have my spot for free as I was not about to sell it to some greedy bas-”turd.”
We’ve all heard and posted about prices going up 2x-3x in 6 years which, in itself, is ludicrous. Here, we have homes going up 2x in 2 years. Un-friggin-believable.
Funny thing is, you did the right thing by getting up and leaving but chances are the agent probably thought to him/herself, “Poor pauper bastards, they can’t afford the opulence we’re selling.”
If you’re still interested you should offer 20% off the Phase 1 price.
Chula Vista? Chula Vista?!?
Popularly known here in the OC as “Chulajuana”
That Greenspan knowingly ignored crime to keep the bubble going says a lot about just how scared the Fed is of deflation.
a debtor nation can’t have deflation- not ever
Sure it can. Debtor nations loose control over their interest rates.
The trick is, how do you create inflation without spooking the bond market?
The great irony which will soon come to light (or perhaps is coming to light as I type) is that by trying to forestall inflation through holding the FFR to negative real levels for a protracted period of time, the Fed planted the seeds of future deflation. This was a consequence of the stimulative effect of a negative FFR on home price inflation. It became optimal for builders to build the largest homes that speculators were willing to buy, and end-users were left on the sidelines feeling priced out forever.
By encouraging builders to create a McMansion glut that now hangs over the U.S. economy like the Sword of Damacles, the Fed brought us the present state of affairs where 2m+ homes sit vacant and most prospective buyers are neither anxious to buy nor even qualified to do so at current pricing. I have yet to see any comments from the Fed governors to acknowledge this overhang of overbuilding at price points that 95% of Americans cannot afford without the crutch of a high rate of home price inflation (which is pretty much history now), not to mention how they expect it to magically go away.
Any news from ST LOUIS??
Taylor-Morley Homes, a homebuilder in based in St. Louis has announced layoffs. The CEO says the worst is over, however, so don’t worry. Nothing to see here.
Funny how they would bother with layoffs with knowledge that the worst is over…
Here’s the link to the story in STLToday:
http://tinyurl.com/2eknxn
I was walking around my neighborhood and saw the local spanish fishwrapper had a burbuja story on the frontpage:
Fraudean con Casas “Cientos de familias hispanas en San Diego se están quedando sin casa porque ya no las pueden pagar.”
(Hundreds of hispanic families made homeless (?) because they can’t pay)
“El pasado mes de abril los cinco miembros de First Latino Group fueron sentenciados a cárcel y pago de fianzas, sin embargo el dinero de las personas no se recuperó pues los sujetos se gastaron todo el dinero de sus víctimas.”
(Five people from the First Latino Group were sentenced to jail last month)
Cover photo: http://www.diariosandiego.com/PortadaImpresa/
Story: http://www.diariosandiego.com/2007/06/07/Comunidad/Fraudean_con_casas/
No se habla enspanol.
ooops, espanol
Try Babelfish.
Partial Translation of article text:
Agents and abusive lenders are the causes of the real estate frauds increment that have left thousands people without house in San Diego.
Hundreds of Hispanic families in San Diego are remaining without house because no longer they can pay them.
Agents and abusive lenders are the causes of the real estate frauds increment that have left to thousands of Hispanic without home.
The embargo of houses has enlarged to national level. Last year a million houses were repossessed by banks, and statistics indicate that this year there will be more than two million properties mortgaged by the lack of payment.
San Diego is not the exception in this sad episode, only the past month of April there were two thousand 612 statements of embargo or “Foreclosure”, this number trebled compared with the 2006 and is seven times more than in 2005.
According to statistics, the houses were impeded because the owners could not pay, and many of that cases are real estate fraud victims.
“It is very frequent to see that the people that do not understand well the English and the process of the real estate fall in the play of agents or lenders that deceive them to obtain large commissions”, assured Waters.
The most common types of frauds are assignments by lenders and agents because take advantage of the confidence of the client because them do not they give all the information on the products offered.
“They tell that is a loan with certain interest, and at the moment of to sign they change himself him, him do not they explain the documents that sign and they do that the client be hurried to sign with pressures”, he commented Tessa Arminio, expert in real estate and columnist of Daily San Diego.
In San Diego there has been an increase of properties impeded in 103 percent of the 2005 al 2006, the reasons are you vary, but the majority is for lack of payment of mortgages.
In spite of the fact that they have been indicated to the risky loans as the reason of the loss of properties, expert they say that are not the loans but the bad actions of agents.
“There are many agents or lenders that only imports to be carried large commissions, them does not import that the people cannot pay or that put them in loans with high interests that they are going to damage them, until they lie in the incomes”, mentioned Waters.
The lawyer of the district attorney’s office explained that the abuses of the agents go from time to time beyond the simple transaction, therefore they steal the identity of the people, and if worse comes to worst to properties.
“Many people sign roles without knowing what is, there is people that carry them property title change and they are signed with deceits, and then in the office of the County they put its names being remained with the property, or refinancing and removing money that the owners should pay”, said Waters.
HISPANIC, EASY PREY
The lawyer indicated that the Hispanic are the white one of the cheats because generally they have good credit, they are very confident, they do not know the financial processes, do not they speak English and they are intimidated easily.
It fits to indicate that in the District attorney’s Office they have been on the rise the real estate fraud cases, in the 2003 there was 45 cases denounced and for 2006 they increased to 78.
“Here we seek that all the cases are catalogued as the criminals to punish the cheats and to seek that the victims obtain its money”, indicated Waters.
One of the recent cases that the District attorney’s Office of San Diego process was that of First Latin Group that defrauded at more than a hundred Hispanic people with 1.3 million dollars.
Between 2002 and 2003 Mentioning Mounts and Franklin Ontiveros united with other three subjects to deceive the parishioners of a north church of the County.
You mount he took advantage of the faith and confidence of the members of the church where his brother Alberto was the shepherd, he told him that he would help him to buy house with a project of construction.
“The people believed him therefore they saw that Mentioning was members of the church, even the shepherd was investing, they did not know that he himself was being defrauded”, he related Fiona Khalil, public prosecutor of the case.
The families were deceived by this group that the investment of cash asked them, they told them that any quantity was good to buy its house.
The past month of April the five members of First latin american Group were sentenced to jail and payment of bails, nevertheless the money of the people did not recover therefore the subjects were spent all the money of their victims.
Translation courtesy babblefish.com
~Misstrial (who doesn’t necessarily agree with the article translated)
“‘I would have liked the Fed to be a leader’ in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. …Mr. Gramlich broached it to him personally rather than take it to the full board.”
“‘He was opposed to it, so I didn’t really pursue it,’ says Edward Gramlich, who was Fed governor from 1997 to 2005.”
What legal or fiduciary responsibilities do Fed Governors have? Any?
Or can they just sit back, ignore evidence of serious problems, and just collect their pay?
The Fed governors appear to be pretty much above the law, just like the entire executive branch of government and GSEs, for that matter. I am not exactly sure how a country founded on the constitutional principles of checks and balances in government reached this sorry state of affairs.
“I am not exactly sure how a country founded on the constitutional principles of checks and balances in government reached this sorry state of affairs.”
The old-fashioned way: one lie at a time.
“The Gold standard acted as a silent watchdog to prevent unlimited public spending…I can find no evidence to support a hope that our fiat paper money venture will fare better ultimately than such experiments in other lands. Because of our economic strength the paper money disease here may take many years to run its course…but we can be approaching the critical stage. When that day arrives, our political rulers will probably find that foreign war and ruthless regimentation is the cunning alternative to domestic strife.”
-Congressman Howard Buffett
(Warren Buffett’s Father)
I suspect the congressman’s view is correct ” our political rulers will probably find that foreign war and ruthless regimentation is the cunning alternative to domestic strife.” Welcome to the American Taliban State
Wow — devastating observation, Hoz…
I’m in western WA, and made an offer which was accepted on an old fixer farmhouse on acreage. While it’s a good deal in todays market, it is still overpriced IMO. But I have to weigh in opportunity cost and, for me, it makes sense to pull the trigger now (at a price I can afford) rather than wait another year or two. My mortgage broker and realtor are both very candid with me, and the news is not good in the Northwest. Price declines are well under way. Mortgage broker is seeing some appraisals come in at close to $100k below expectations on certain properties. The realtor tells me some homes are already 25% off the peak based on current sales prices. Both expect things to be downright awful come this fall.
I’m sure you did what made sense for you at this time.
I’m thrilled to hear western WA is starting to tank. Out here in eastern WA we are stuck in the stalemate phase. Outrageous asking prices and no sales.
Congratulations! Hope it’s far enough out of town, has a natural water supply and clear fields of fire in every direction…
Mortgage broker is seeing some appraisals come in at close to $100k below expectations on certain properties.
Last bit work those appraiser’s will receive. But not to worry.
There are a sufficient number of appraiser’s out there, thanks to state revenue hungry licensing boards, who will punch the value ticket number in order to eat.
Anyone familiar with Gilbert, AZ? A woman, on another board, is whining about how her house is “$40k under current comps” and won’t sell. Somehow, I doubt it is…..any thoughts?
I’m familiar with Gilbert, AZ. It’s taking huge hits price wise. Prices need to drop down to Q1 2003 prices. Queen Creek AZ is unreal! 2500+ houses on Ziprealty.com! I’ve seen entire blocks on the market, mostly vacant. Maricopa AZ is interesting….The prices there seem to be coming down FAST here’s a 3/2 for 178K: http://tinyurl.com/32jzgo
Thanks….
Here’s the MLS she posted #2763294….says it’s “worth” $449K, but you can steal it today for $399K.
Bought it 6 months ago and now wants to move on……sound familiar? LOL
The aerial views are probably dated, but it appears that her house in a neighborhood with lots of newly poured foundations. She’s probably competing with builders’ prices along with the 9 gazillion other homes on the market that look just liked hers.
Bought last August for $378,000. New quad is included with full price offer. Ouch! Unless their realtor is giving them a discount on her side of the commission, they’re gonna be bringing money to the table to get out of this one.
I’m surprised it hasn’t gone at that price…I lived right up the street from there, and I sold a smaller house for considerably more last spring.
Sorry if repost… didnt go through 1st time (?)
Burbuja que explota: Swindlers defraud latinos… hundreds lose homes in San Diego…
Fraudean con casas
Publicado: 08 junio 2007
América Barceló, Diario San Diego
http://www.diariosandiego.com/2007/06/07/Comunidad/Fraudean_con_casas/
“Cientos de familias hispanas en San Diego se están quedando sin casa porque ya no las pueden pagar.”
“Uno de los recientes casos que la Fiscalía de San Diego proceso fue el de First Latin Group que defraudó a más de cien personas hispanas con 1.3 millones de dólares.”
“Las familias fueron engañadas por este grupo que les pidió la inversión de dinero en efectivo, les decían que cualquier cantidad era buena para comprar su casa.”
“El pasado mes de abril los cinco miembros de First Latino Group fueron sentenciados a cárcel y pago de fianzas, sin embargo el dinero de las personas no se recuperó pues los sujetos se gastaron todo el dinero de sus víctimas.”
Easy translation for those who ‘no habla espanol’:
First Latin Group ripped off hundreds of hispanic persons an aggregate amount of 1.3 million dollars. The people were trying to invest money to buy houses.
In April, 5 members of the FLG were sentenced in the scandal, but there was no recouperation of the money by the victims.
I feel sorry for those of us unforunately ripped off by scams. It’s even worse when it’s your own culture taking advantage of you, and the Latin culture is very trusting and friendly.
i can’t read spanish, but i almost understood that article.
Same here.
Here in south Santa Barbara County, CA the reality of the real estate bust is sinking in. Sales of single family homes have dropped from 97 in March to 86 in April to 75 in May with June sales up to the 6th at a rate that portends a drop to 60 SFR sales this month. SFR sales prices have slipped 15%-20% from their 2005 peak using comps.
Condo sales have increased to 39 sales in May, up from 32 sales in March, but condo prices have plunged 20% from their 2005 peak using comps. However, sales volume for the first week of June shows a drop that portends a 25% drop in sales volume in June compared to May.
I find it interesting that there are people buying properties in a falling market. People who bought homes and condos here in Santa Barbara in March are having properties next door to them sell for 10% less in May. The people buying now, if they waited a year, could have saved 25% on their home purchase. What gives with these home buyers?
“What gives with these home buyers?”
Either they expect high future inflation, they are really rich or they are really terrible at risk assessment.
Based on what I see, I think there are a lot of people who think this may be the “dip” that gives them a chance to get on the escalator. My boss just bought a home that he can’t realistically afford (even at 1.5x median household income), but is swinging it, using a small 5% down payment (he said), and probably ARM financing (I assume). Can’t save people from themselves. Nice guy, but financially incompetent.
I think our blog commenters predicted dead cat bounces for this very reason. People get confused by the noise, but the trend should be quite clear.
‘I think there are a lot of people who think this may be the “dip” that gives them a chance to get on the escalator.’
Too bad the ‘dips’ that think along those lines are priced out by the double whammy of tightening lending standards and burgeoning interest rates.
Here’s my new favorite 1,999,000.00 “income property” listing:
Every so often, an opportunity comes along that really makes sense. Live in your investment, collect rents, and build equity! Then, when you are ready, buy a house and keep the 4-plex as an investment property. Two of the units are spacious 3 bedroom, 2 baths; the two are 2 bedroom, 2 bath. Three of the units have been updated… (blah blah blah)… Great location near Beverly Hills.
Hmmm… @ 20% down 30 yr fixed @ 6.75, payments = $9339 mo
average rents in 90035 (1 block w of La Cienega south of Pico, not great area… not terrible though) = 3br 3200, 2 br 2000. So, live in a 2BR, collect 8400, and pay 1000 a month, assuming you could get that much rent, which, given the location, may not be realistic. Plus pay upkeep, water for the whole place, pay for vacancies etc.
Then, wait for “appreciation”, while you live in a 2 BR apt in a kinda crappy neighborhood. Something tells me the dream scenario in the ad ain’t really gonna happen. It’s gonna be a long wait. mrincomestream? lainvestorgirl? What do you think?
oops… forgot to add the “T&I” to the P&I above, so you’d be paying quite a bit more than 1k to live in your “investment”
Oh… more fun info…
Sold 5/30/01 for 550,000
Sold 7/5/06 for 1,521,818
Someone please give these poor souls 460 k for holding the property for a year!
plysat, I know the area well. $3,200 for 3 bedrooms sounds to me expensive for that area. A couple of weeks ago I had to go to the big pharmacy in Pico and Robertson at night and it was downright scary. Having said that, I guess it is still an overall good area due to proximity to great neighborhoods. And some of those old duplexes are really nice in a run down but classy sort of way. I rent in Westwood and I would not pay that money for a 3 bedroom in that area. I’d rather rent a house in the more so-so part of Mar Vista.
Nope. $2 million for a 4-plex is nutty cukoo time. It’s worth about half of that if it’s been seriously renovated. I also doubt that you could get $3200/mo for a 3/2 apt in that area (for long, anyway), the neighborhood is not that good.
At that price, it’s not income property, it’s outgo property.
I wrote up a chart of 10 years of May numbers for Northern VA. The new ones came out at http://www.mris.com/reports/stats/ yesterday.
Prince William County is the worst with 12 months of inventory. There are as many foreclosures on the market as there were monthly sales in May.
Update on new construction in west suburbs of Chicago. A lot of bs, but we don’t get too much info on the state of the market here.
http://www.pioneerlocal.com/hinsdale/business/415130,do-bzbighomes-060707-s1.article
Let’s talk for a minute about pickup trucks. One of the leading indicators of the bust. I own a Silverado 4×4 that I use for camping and such, purchased from a guy on disability who was a little behind in house payments. I started truck shopping in 2003 right about the time the boom took off, and there was no one willing to ‘wheel and deal’ on the price. Took me almost 3 years of searching to find the right vehicle, and now I see them for sale everywhere.
I’m actually thinking of trading up into a newer model crew-cab, bought from another FB suburbanite. Funny enough, I stopped at the local Chevy dealer to drive a new Silverado, and they called me for weeks begging me to buy a truck. The salesguy admitted they weren’t selling “worth a damn”, but with the sudden glut of used inventory, why buy new?
I’m buying used stuff from FBs. I’m thinking that this is the best time to get deals because they’re dumping belongings to make their house payments and avoid foreclosure. But I wonder if we should wait until next year, when there are even more FBs, and prices will fall even further. Craigslist used cars don’t seem to be selling well, and sellers are slowly lowering their prices (it’s just like houses - takes forever for prices to come down.)
I tried selling a car via Craigslist recently and it wasn’t worth the trouble. What I found interesting, though, is that all of the Craigslist callers were women. Got much better (as in, serious buyers) response from an autotrader ad.
interesting…..I had the opposite experience a year ago, flaky people and dealers trying to lowball me called from the autotrader ad, quickly found a serious buyer who paid cash from Craigslist once I got the price right
Last May (2006) I sold a car on Craigslist in 4 hours. I priced the vehicle properly and my ad generated 10 responses in the first hour. I was amazed. This was in Raleigh, NC
Brother in law just bought a new F-150 for $300 under invoice with 0% financing.
The dealership was very happy to see him.
“Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board.”
Are economists ready yet to throw deregulation into the dustbin of failed ideas?
I’d much prefer to throw the Federal Reserve into the dustbin of failed institutions.
How do you propose to run a modern industrial country w/o a central bank?
“Are economists ready yet to throw deregulation into the dustbin of failed ideas? ”
As one who is into 401ks and IRAs and stocks for investing, I hope not. Regulations and corporate taxes kill the goose that lays the golden egg.
‘goose that lays the golden egg’ = asset price inflation in excess of fundamentals. This phenomenon will prove sufficient to self destruct, regardless of regulatory and corporate tax policy.
Chairman Stirs Up FDIC Pot
Sheila Bair Draws Controversy
In Her First Year — and Gains
Some Unlikely Supporters
By DAMIAN PALETTA
WASHINGTON — One of Washington’s most vocal supporters of strict new bank-lending standards is neither a Democrat nor consumer activist, but a Republican, White House-appointed Capitol Hill veteran.
During Sheila Bair’s first year as chairman of the once-sleepy Federal Deposit Insurance Corp., she has irked some Republicans and many in the banking industry with calls for tougher government regulation. Among other things, she froze efforts by Wal-Mart Stores Inc. and Home Depot Inc. to start up federally insured banks. More recently, she caused a stir by suggesting that some Wall Street investors bear responsibility for causing the blowup in the market for subprime mortgages.
All this comes at a critical time for the banking industry. Its 8,650 federally regulated banks have enjoyed a relatively light regulatory hand for much of the past decade. But control of Congress by Democrats, who support more oversight over bank lending, and rising defaults by subprime borrowers have raised questions about how long that might last.
In breaking with other federal regulators, including the Federal Reserve, Ms. Bair is pushing for changes that would have broad ramifications for millions of homeowners and companies. She has urged the Fed to assert its authority and to extend tougher lending standards over companies that operate without federal oversight, such as the state-licensed mortgage lenders that proliferated during the subprime boom. Such a move could make it harder for high-risk borrowers to obtain a mortgage, but could also drive down foreclosure and delinquency rates.
“I don’t work for banks,” Ms. Bair said in an interview. “I’m a public servant. My job is to make decisions that I think are the right public policy.” Ms. Bair said she embraces an innovative banking system, but added there must be oversight and regulation when markets falter. “I very much believe in the market, but I think you have to set rules for the market — and markets don’t always work the way they should,” she said.
http://online.wsj.com/public/article/SB118151058173730507-Ae1Se5w1w2LFQbkPMkpYxJa4rEA_20070710.html?mod=tff_main_tff_top
Not sure where to put this, but it is a “local market”, albeit outside of the US. It’s a global bubble afterall, might as well watch the whole darn thing explode, worlwide.
http://www.housepricecrash.co.uk has some very interesting RE articles on both the US and UK markets and economics in general.
The following is a thread entitled “Letter from My Landlord”. Landlord’s ARM is adjusting and they are requesting rent increases that are not legal, contract wise:
http://www.housepricecrash.co.uk/forum/index.php?showtopic=48986
It’s an interesting topic and one American renters need to prepare to get a backbone on in the coming months. Presented in an entertaining way here.
According to this article there will be a second real estate bubble. Thier studies predict that there wull always be a second bubble before market participants learn in any given asset class
http://www.nytimes.com/2007/06/10/business/yourmoney/10stra.html
“In an interview, Professor Porter said that one conclusion of this study — as well as other such studies of which he is aware — is that investors become largely immune to bubble-causing behavior only after living through the bursting of two successive bubbles. Because of this, the typical pattern is for a burst bubble to be followed by a somewhat less extreme version of the original — a phenomenon that some call a bubble echo. This pattern has appeared so consistently and so regularly in psychological experiments, Professor Porter said, “that you can almost set your clock according to it.”
Does the decline in the real estate market over the last couple of years count as the echo of the Internet bubble, meaning that we needn’t worry as much about another collapse in the overall stock market? Unfortunately not, Professor Porter said. The immunity appears to apply only when the echo occurs in the same, or in a very similar, asset class. The real estate market, he said, is too different from the stock market to qualify. “
In my awareness, this current bubble is the second real estate bubble. The first one I was aware of popped in the early 1990s in southern California.
Bill, that was my first thought too, but there seem to be so many people around who don’t have any recollection or experience of the nineties bust. On the other hand, the professor’s idea sounds OK, but you need to have ready cash in order to get a second bubble going, and it seems like all the happy-go-lucky investors are too worried trying to unload the properties they alreaddy have.
I understood it to imply that the stock market is in a bubble. Not much of a surprise and the question is when will it burst.
Stocks, in general, could be in a bubble. All I know is historically the large company stocks gain an average 10%. Well the S & P 500 index gained an average just under 9% since 1987. I’m not concerned.
In addition, there will be some awesome stock performers in any down market. Similar to the “location, location, location” theme is this: You have to pick the right stock at the right time. Whew! that was easy to say!
Does Professor Porter mention when the echo bubble of the 1920s took place?
Basing a prediction about what will happen in the real world economy on the outcomes of academic “psychological experiments” is ludicrous.
Old School: mini horses gambol
New School: mini loans gamble
“A Centre Island estate where owner Patricia Altschul’s mini horses gambol, has dropped from $19 million last fall to $15.8 million now. Middlesea, singer Billy Joel’s estate on Centre Island, has dropped from last September’s $37.5 million to $32.5 million.”
If you are in the Tempe (part of Phoenix) area, check out northbound 48th street from near baseline road north through Southern. Yesterday there was a flood of yellow signs, about at least ten, trying to get attention to a house for sale in the area. I forget the details. Just a new indication of desperation. The houses in that area are depressing. This is the first time I saw more than one sign for the same house indicating its for sale. There is even a yellow sign on the street corner of Southern and 48th street. They certainly caught my eye and made me laugh! I’d be desperate to get out from under that black cloud. Been in that situation in 1996.
Luckily San Diego home prices always go up, so area homeowners will always be able to liberate more equity to deal with the pernicious effects of inflation…
‘Inflation is even worse in San Diego.
It has been nine years since San Diego County has been under the Federal Reserve’s 2 percent inflation target range. Since June 1998, the local inflation rate, including food and energy, has averaged 3.7 percent per year. Last year, prices rose 3.4 percent. Even core inflation went up 2.9 percent last year.
“One of the reasons prices are higher in San Diego is that we’re at the end of the line of the supply chain,” said Alan Gin, an economist at the University of San Diego. “We don’t manufacture much locally. Things have to be shipped in here. There are a lot of steps along the way where costs can be added.”
San Diego’s inflation rate is further boosted by the high cost of housing – which remains pricey despite a two-year slowdown – and gasoline. Gin notes that there is limited competition between gasoline distributors in San Diego, which allows prices to go higher.’
http://www.signonsandiego.com/uniontrib/20070610/news_1b10dean.html
“Since June 1998, the local inflation rate, including food and energy, has averaged 3.7 percent per year.”
Not coincidently, San Diego housing prices have more than doubled since 1998. I will go out on a limb and conjecture that home equity cash out financing largely explains San Diego’s inflation rate remaining consistently in excess of the Fed’s comfort zone for the past nine years.
Here in Southern California, Inland Empire, things FINALLY appear to be starting to move in the right direction.
My wife and I sold our house in Jan 2007 for $460,000. Now, six months later, an identical house around the corner is asking $410,000!! A $50,000 difference over six months just in the ASKING price. Who knows what it will sell for! As I see it, by reading this blog and others I have earned a little over $8,000 per month! HA HA!!
Side note, we are currently renting a house for which the landlord paid $625,000 last Sept and we are paying only $2300 per month. So it appears we not only got out in time, but are being handed money to have done it!
“Who knows what it will sell for! As I see it, by reading this blog and others I have earned a little over $8,000 per month!”
Your post brings to mind the all-important Econ 1 concept missing from the mental toolkits of those who never studied economics:
OPPORTUNITY COST
Seen in Orlando, FL - taken on 6-3-07. Please note painted-on windows.
http://tinypic.com/6cxbp0p.jpg
http://tinypic.com/4vqqlp1.jpg
http://tinypic.com/6ffuyjl.jpg
What’s with those windows???!!!! They painted them on the wall??? Does that mean there are no windows in that house?
We just came back from an open house and I have to say I was a bit giddy about what was happening. My wife and I married about 2 years ago and have been wanting to buy. We live in Northeast NJ where prices have been crazy but people have been saying they won’t drop too much because of the high income workers (NYC metro area). This is a house we visited 2 months ago and it was listed at $699,000 in Englewood Cliffs. A 4-bedroom (converted 3-bedroom) that is nothing spectacular at all, in fact 5 years ago I doubt this house would have been more than $300K. I grew up in this area my entire life so I have a pretty good sense about prices. When we visited 2 months ago they had already dropped the price from $725K, today the listing was $600K! A $100K drop in 2 months! Apparantely the owner is a flipper who bought the property over a year ago and spent time and money renovating it. There weren’t any major renovations, mostly vanity things. The open house was going all weekend and I got the sense that there were very few visitors. We were the only ones there today from what I could tell. I hope they drop it another $100K and then I’ll offer $425K to see if they’ll bite. Probably not but it’s good to see prices dropping. The median numbers are misleading, I’ve seen the reports showing just a few percent drop in prices but through our shopping around it looks like much more than that.
I saw a REO listed at $224K and dropped down to $169K. I don’t know about the final selling price. It sat there for a year. It was a nice 5/3 at 2800sf built in 1998. If I had a family I would have been interested.
MShah, your report is encouraging. I’m dying to be able to report that kind of news from LA. Not that we don’t have cracks showing, but what you say sounds like a real meltdown.
Cassiopeia,
When you can report that kind of news from LA, I’ll be buying drinks for all at the expat bar at the Miramar
SMLandlord, I’ll take your word for it!!!! My husband went to that hotel yesterday and he said it was absolutely lovely.
Update on Loudoun, VA: townhouse behind me was bought in early 2006/ late 2005 for $460k. It’s been on the market since 1/07 for $500k. I just saw on yahoo foreclosures that it has a “notice of foreclosure sale”, with a list price of $363k.
Recent comps are in the $360-375k range. 2005 highs were ~$450k.
In the ‘things that piss me off category’ –was out getting our dose of schadenfreud with the wife this a.m. at the Villages of Columbus development in Irvine. Walked thru their 3 models of townhomes (lowest started at $569k). As we’re walking out thru the sales office, a woman comes in with a couple of kids. Asks about whether they have any affordable housing units. ‘yes, but..’ waitlist or some such. While we’re getting into our car, she comes back out and gets into her new-ish Lexus GS. List $52k. ‘Net says lease or buy, $1,200 /month FOR A FRIGGIN CAR PAYMENT.
WTF–And she wants affordable housing?
Very smart woman. She has refrained from buying a house and therefore can afford a Lexus. Pity she might give up the Lexus, it has a better chance of holding its value than a townhouse;-).
Charlotte has been very slow to respond to the bubble burst, if anything we’ve been gathering equity refugees and prices have continued to rise this year.
BUT.
I’m starting to notice something interesting. Although prices are still rising, inventory seems to be rising as well. I’m facing more “pages” to click NEXT through, when reading the MLS. I am also noticing some sloppy flipper/renovations that were on the market last winter, are still for sale.
I have also begun to see “fully renovated” homes for rent on Craig’s list. Which is kind of counter-intuitive, usually a “full renovation” would be sold. Rentals just get cleaned up an re-rented. I get the sense there are overpriced renovations that won’t sell and are being rented.
In general, I think some reality is beginning to creep into things.
I’m renting in Charlotte and started looking at homes for sale about 6 weeks ago. What I’ve found is that houses that are under 200k, in good shape, and priced right sell quickly. I’ve seen quite a few houses go under contract in a week to 10 days.
In the 6 weeks I’ve been looking, the 30 year fixed rate for mortgages has gone up about 50 basis points.
What’s interesting about Charlotte is that the rent vs. buy calculation is near equilibrium, at least for me and my 20% down payment.
That said, I found a house last week that I really liked, and I almost to made an offer. Before I did I checked the county real estate records and found that 2 houses right across the street were sold 2 years ago with 100% financing. One of the houses has an ARM that’s about to adjust to 6.5% over the 6 month LIBOR rate- that’s about 11%. I also noticed that the landscaping on that house looked crappy. Further investigation revealed about 20% of the subdivision sold in 2005. After the first 2 sales from 2005 showed 100% financing, I decided to pass on the deal. My concern is that this particular neighborhood could get a disproportionate number of foreclosures.
Earlier in the week I stopped by a credit union to get prequalified for a mortgage. The loan officer there said that they’re very busy refinancing ARMs into fixed rate loans.
For now, I’ve decided to wait and let the market come to me rather than me going to the market. As the spring buying season ends and winter approaches, I think there will be some really nice deals out there. Even though Charlotte hasn’t had the run up that California, Arizona and Florida had, I still think there are a lot of those 100% financed deals that are going to come back to bite the FB’s.
I think timing housing is like catching a falling knife. You guys should wait till there is a firm bottom and this thing is on its slow way back. Keep putting money in that ING money market each paycheck and get rid of all debt. Plus start pre-paying that mortgage. You won’t build equity anymore by rising housing values. When this thing stablizes in 2008-2011 it will be time to buy in a choice neighborhood but don’t buy garbage of cookie cutter houses thrown up on fields in the outskirts of town. I have my eves set on a two bedroom condo in the Hamptons and maybe a nice “between the wars” colonial in a tony north shore neighborhood, but those will be the last dominos to fall in this slow meltdown so I hae to wait and wait and wait.