The Housing Market Has Disappeared
The Indystar reports from Indiana. “A downward trend in Indianapolis’ home-building market is fueling scores of job cuts and discounts that, in some cases, risk devaluing entire neighborhoods. The half-dozen or more national tract builders in the market, plus local players, are trying to hang on by cutting overhead and turning to price-cutting and promotions to lure the smaller pool of increasingly picky buyers.”
“Some builders have even cut their prices below what comparable homes in the same subdivision sold for in the past year. Patty Torr, a VP for F.C. Tucker Realtors, said one builder this spring knocked $100,000 off the price of a Northside home it couldn’t peddle.”
“‘That’s just crazy,’ she said. ‘That devalues the whole neighborhood.’”
“‘Anybody looking to sell land, it’s virtually impossible,’ said Corby Thompson, president of Thompson Land Co. in Fishers. ‘We’re going through a cleansing,’ he said. ‘I think it was overdue. Land prices were getting frothy. It was just unstable.’”
The Star Press from Indiana. “Two years ago, Laurel Meadows was in the Parade of Homes, the showcase for the newest and nicest local houses. This summer, the housing development south of Yorktown is on the foreclosure auction block.”
“The subdivision’s developer says the bottom fell out of the local housing market, leaving him owing more than $500,000 to a Michigan bank. Terry Moore’s company, M&M Construction, was the developer of Laurel Meadows, a 52-lot subdivision.”
“‘It’s a struggle right now to survive,’ Moore said. ‘The housing market has disappeared.’”
“Moore, who said he has built and sold as many as 100 houses locally at a rate of eight to 10 each year, said Laurel Meadows floundered because of the downturn in the sale of new homes. ‘I could never dream that the economy would turn off that quick,’ Moore said. ‘We went from selling 10 houses a year to selling nothing.’”
“The house on Kepner Drive was home to Charles Minton, his wife and four kids, until a series of events caused him to fall behind on payments, prompting Huntington National Bank to foreclose on the house.”
“Minton said he made some bad decisions, including not having private mortgage insurance. ‘I didn’t have the greatest credit in the world, and I bought out of my means, when all is said and done,’ he said.”
“Home foreclosures in Delaware County increased an average of 20 percent a year between 2000 and 2006, and this year’s numbers are likely to equal or top those for last year.”
“Local real estate agent Cindy Welch agreed that there’s no immediate change to the foreclosure problem on the horizon. ‘I think the market is going to be like this for a couple more years.’”
The Journal Sentinel from Wisconsin. “The latest statistics indicate that foreclosure filings in Wisconsin have risen 21% so far this year over last year, to 7,697.”
“Homeowners are trapped not just by life’s reversals, but by increases in adjustable-rate mortgages, more restrictive refinancing standards and a housing market too soft to allow a quick house sale, theorized Robert A. Jansen, president of the Milwaukee-based property listing service.”
“‘In addition, the slowdown in (price) appreciation has taken away many homeowners’ safety nets,’ Jansen said.”
“The hardest-hit areas: Milwaukee County, with 1,932 foreclosure filings this year as of May 31; Waukesha County, 326 cases; Dane County, 322; Brown County, 328 cases; Racine County, 294 cases; and Kenosha County, 305.”
The Star Tribune from Minnesota. “Jack Capman needed cash to pay some bills and to repair his house in Anoka County last year, so he refinanced his fixed-rate mortgage into an adjustable loan that dropped his $1,500 payment to $600.”
“Three months ago, he got a letter informing him that his payment was going to increase. That’s when he and his wife started thinking about selling the house, which was appraised at $271,000 last May and has a $223,000 mortgage.”
“But their real estate agent said that they’d be lucky to get $204,900. And the difference between the home’s value and what Capman owes could get worse every month because Capman got his big break on the monthly payment by taking a negative-amortizing mortgage.”
“‘This is not a position to be in at age 72,’ he said, contemplating the possibility that he could lose the house he’s owned for nearly 20 years. ‘And I shouldn’t have been here, and that’s why this hurts so much.’”
“‘The subprime bust was the tip of the iceberg for the foreclosure problems. You also have a group of people that were refinancing every two years to pay off credit card debt, and with housing prices declining, they cannot refinance,’ said Steve Sherwood, owner of RMG in Minnetonka.”
The Pioneer Press from Minnesota. “Forget what you’ve heard about the condo glut. It’s a great time to buy, if you’re shopping for foreclosures.”
“A newly formed group called the Condominium Opportunities Partners in Eden Prairie said it couldn’t resist the opportunities it sees flashing in all those empty new condos dotting the Twin Cities landscape.”
“‘We came to recognize that developers were working very very hard to hide the state of trouble of their projects,’ said Ted Glasrud, a former commercial real estate lender heading the group. ‘We really believe that things are far worse than they seem on the surface.’”
“Foreclosures are rising fast, and developers are competing with a record number of homes for sale in the Twin Cities market. In the first four months of this year alone, 3,605 homes in the seven-county metro area have been sold in foreclosure auctions, according to Pioneer Press records. That puts the area on track to top last year’s record 7,076 foreclosure sales.”
“Altogether, there are a record 34,000-plus houses, condos and town homes on the market across the metro area. That doesn’t include all of the estimated 9,000 single-family homes either currently under construction or finished and sitting vacant.”
“Glasrud said he’s been studying the area’s overbuilding and has seen many poorly designed projects. He estimated that about six ‘good-sized multi-project developers’ in the area are struggling financially, and said he knows of a few condo projects that have gone into foreclosure.”
“Some troubled projects were built with one cookie-cutter floor plan for all the units in the building, he said, and others added too much expensive parking or thousands of square feet of unnecessary amenities.”
“Others were just built in the wrong place, Glasrud said, recalling condos carrying price tags of $300,000 and $400,000 sitting in neighborhood where the homes are valued at about $225,000.”
“‘There are a number of projects that were just bad projects from the get-go,’ Glasrud said.”
“F.C. Tucker Realtors”
Boy, try saying that three times fast…
“‘That’s just crazy,’ she said. ‘That devalues the whole neighborhood.’”
Nope. It values the neighborhood.
“‘That’s just crazy,’ she said. ‘That devalues the whole neighborhood.’”
“Nope. It values the neighborhood.”
This is how strong the proverbial kool-aid has been. People just cannot imagine neighborhoods declining in value. I wonder if next year they’ll still be saying “that’s just crazy.”
I wonder if she was saying the same thing a couple of years as the comps were skyrocketing?!
That should be a “couple of years ago”
Looked at a vacant house that was on the market 100+ days, and said to the realtor, “I guess the price needs to come down.”
The reply: “Oh no, they can’t lower the price too much, it will affect the comps.”
As if the seller is going to bleed himself dry to save comps.
100+ days on the market. Vacant house. Endless new construction all around them.
If the discounted price made Patty so unhappy, why didn’t she buy it at the old (higher) price?
Perhaps it would be more appropriate if people start talking about DEPRICING, not DEVALUING.
‘That deprices the whole neighborhood.’
The value remains essentially the same. The price is what fluctuates; at times above the value, at other times below the value.
Got 10% down?
My sentiments exactly. Since when is it evil for the market to set the price of an asset at below what it was at another time, and for a seller to sell at what the market will bear?
Since all these people conveniently drank the “real estate, never goes down” Stupid-Aid, courtesy of the Realtors™ (and the brokers and bankers, of course) that helped them finance a speculatively valued asset and/or pull out paper equity to spend, spend, spend!
Imagine applying similar logic to the stock market. You can’t sell your stock, it will make the price go down for the rest of us! It’s absurd on its face, this is the nature of supply and demand, yet you never hear the MSM making this obvious comparison, instead they shill for the speculators and commission grubbing Realtors™ with language that leads the unthinking to conclude it’s morally questionable to sell an asset for what the market will bear…
Curt, are you an actuary by chance?
Actuaries are one of the few groups I have known to use “value” in the sense you intended — to establish the fair market value of an asset or a liability. The common man’s use of the term as a noun is more along the lines of “I bought a home I could not afford because I highly value the chance to be a part of the ownership society.”
“to establish the fair market value of an asset or a liability”
Nope, not an actuary…retired propery/causualy general adjuster.
“For sale by owner” web sites can generate higher prices than Realtors
Apologies if this was posted already, guess the FBs think they can still get their top dollar.
Closing the italics.
A few more studies like this one and a few more websites like this one ( redfin.com ) would strike a death blow to the NAR. The upside: Maybe we will not have to live through another housing bubble in most of our lifetimes.
http://www.redfin.com
With or without RealtorsTM, I am sure it will be at least 50 years before we have another housing bubble. This one will linger in the collective memory for several decades, IMO.
“Moore, who said he has built and sold as many as 100 houses locally at a rate of eight to 10 each year, said Laurel Meadows floundered because of the downturn in the sale of new homes. ‘I could never dream that the economy would turn off that quick,’ Moore said. ‘We went from selling 10 houses a year to selling nothing.’”
In a nutshell, here’s the problem with the little guy builder…
He went from building 8 to 10 houses a year, made some bubble-icious profits, saw the light, and went BIG…
Biting off more than he could chew and the end result is, he’s done financially.
And this is just the little guy builder.
Imagine the cluster-you-know-what going on with the big guys?
“The subdivision’s developer says the bottom fell out of the local housing market, leaving him owing more than $500,000 to a Michigan bank. Terry Moore’s company, M&M Construction, was the developer of Laurel Meadows, a 52-lot subdivision.”
You have to wonder if any of these billion dollar builders had any economists or financial analysts on their payroll. It’s seems like they were caught totally off-guard. Maybe it was a case of too many yes-men surrounding the CEO and nobody having the cajones to warn him of the iceberg ahead.
The Star Press from Indiana. “Two years ago, Laurel Meadows was in the Parade of Homes, the showcase for the newest and nicest local houses. This summer, the housing development south of Yorktown is on the foreclosure auction block.”
“‘It’s a struggle right now to survive,’ Moore said. ‘The housing market has disappeared.’”
- My Dad lives in Yorktown (Delaware County). The fallout from the imploding real estate market is only half the problem. Delaware County has NO JOBS. Only retail like Wally Mart … he says that even the wino’s can’t find anyone to mug.
pretty soon we may have to mug the winos!
“‘This is not a position to be in at age 72,’ he said, contemplating the possibility that he could lose the house he’s owned for nearly 20 years. ‘And I shouldn’t have been here, and that’s why this hurts so much.
Jack, at age 72 you should have known better than to let some A$$hat lie to you about the new voodoo math (lower payment, higher value, fairyland all is good). Guess you will be one of the old wino’s out there. You should have sold for $271K and rented. How did you get to owe $223K on something I am sure you paid $60K or so 20 years ago. It should have been close to paid for. but no, needed the ATM for new car, hummer, vacation to Bora Bora, bail out Johnny when he F’d up, etc.
You’ll see him at Walmart waving to the customers or at McDonald’s asking if you want fries with the Big Mac. At least it keeps the senior citizens productive and paying into the SS/MC system until they die. The bad part is that there will be more of them driving to work and clogging up traffic at 20mph on the highway
“The subdivision’s developer says the bottom fell out of the local housing market, leaving him owing more than $500,000 to a Michigan bank. Terry Moore’s company, M&M Construction, was the developer of Laurel Meadows, a 52-lot subdivision.”
“‘It’s a struggle right now to survive,’ Moore said. ‘The housing market has disappeared.’”
I can see how the owner of a construction company could get confused like this Moore fellow apparently has, but to an objective observer with a dangerous understanding of economics, it is clear that the entire market has not disappeared. Rather, the demand side of the market has vanished without a trace, leaving the supply side twisting in the wind without any price support.
What idiots. Mortgage insurance protects the LENDER from loss you dumb sh-t.
I suspect a large amount of the demand side has returned to reality while the supply side clings to denial. It’s no longer build it and they will come, it’s lower the price and they will come. When expectations and reality meet, reality always wins.
“I suspect a large amount of the demand side has returned to reality while the supply side clings to denial.”
Spot on. The demand side has not literally disappeared. It is just not visible when the demand curve has shifted so violently to the left that the bid-asked price gap is as wide as the Grand Canyon. It will take quite a while for sellers to finally recognize what has happened. Meanwhile, homes will not sell very quickly, and many will never sell.
Oh, most of them will sell eventually, it’s just the bank that’ll be doing the selling rather than the current “owner” in many cases…
Right, the volume is not Zero. The lowest-priced units in each category of size/quality find willing buyers, even if some of that buying is still rooted in speculation.
There is quite a bit less demand, since there aren’t as many speculators buying multiple homes. If 25% of the buyers in years past were speculators, and they were averaging 2-3 houses each, well then that’s more like 50-75% of the demand was from speculation. This is probably too high, I always heard that 25% of homes being sold were to investors, so perhaps more like 8-10% of the buyers buying multiple homes. It’s hard to say, because I think that here in Phoenix that more than 25% of the purchases were investors since people lie about it to avoid extra taxes and such.