Speculators Are In Trouble
The East Valley Tribune reports from Arizona. “Sales of existing Valley homes picked up slightly in May, as tens of thousands of homeowners competed for buyers in a dragging market. Some 5,220 existing homes sold last month, down 24 percent from the same period last year, a study by Arizona State University’s Realty Studies department shows.”
“So far this year, 24,265 existing homes have sold, down from 30,830 in the first five months of 2006 and 46,485 the same period in 2005.”
“The market is…still dealing with a huge overhang of unsold homes, Realty Studies director Jay Butler said. The inventory of existing homes has hit record highs in recent months, soaring to more than 50,000. Many are investment properties, he said.”
“‘(Investors are) in trouble,’ Butler said. ‘They can’t rent them. They’re not making any money. They’re just simply wanting to unload them.’”
“Sellers in Pinal County and the West Valley are struggling to compete with builders offering larger homes, landscaping and other incentives at resale prices, he said.”
The Arizona Republic. “Median prices for homes sold in May throughout the Southeast Valley fell compared to a year earlier. Jay Butler, at ASU, said new home builders are aggressively pursuing homebuyers and competing with sellers of existing homes.”
“Also investors continue to sell and put downward pressure on prices. There are more than 18,000 homes for sale in the Southeast Valley, according to the Arizona Regional MLS, a record.”
“Compared to May 2006, Ahwatukee Foothills saw the biggest decrease in median prices, with a 10 percent decrease, to $346,500. Gilbert had an 8 percent decrease, to $300,000. Tempe’s price fell 6 percent, to $270,780; Mesa declined 5 percent, to $238,000; and Chandler fell 3 percent, to $297,750.”
From Newszap.com. “Real estate experts say a buyer’s market is still in place after more than a year-and-a-half as the number of home listings Valley and nationwide continue to increase.”
“There are more than 60,000 home listings in the Valley compared to 38,000 listings two years ago when a bull market was in place and homes were selling like hotcakes, said Norm Brenna, general sales manager for Ken Meade Realty, Surprise, Arizona.”
“The market has slowed somewhat and buyers believe they can pick and choose what they want as they are in control in today’s housing market.”
“Mr. Brenna described the market as slow simply because buyers may be reluctant buy as prices continue to surge. Some sellers are getting $20,000 to $40,000 less than their original asking prices despite the downward trend of homes sold.”
“Still, sellers believe they can get their original asking price and are looking to broker deals, but are often asking too much. ‘We still have a lot of sellers who believe their home is worth what it was a year-and-a-half ago,’ he said.”
“During the first quarter of 2007, January through March, there was a 15.9 percent decrease in the number of homes sold in Sun City and the average sale price went up .6 percent compared to last year.”
“Homes have also stayed on the market longer this year, a 147.6 percent increase this year versus last.”
“This year’s numbers indicate an 11.8 percent decrease in homes sold in Sun City West and an average sale price decrease of 7.2 percent. Average days on the market for Sun City West homes increased 225 percent, according to Mr. Brenna.”
“‘Sellers are asking too much and believe their homes are still built with heavy-duty nails,’ he said. ‘This news is slowly getting them back to the realization of where the housing market is.’”
“The Recreation Centers of Sun City also tracks homes sold as a $2,500 fee garnered from sold homes goes into the corporation’s Capital Preservation Fund.”
“As of April, the latest statistics available from the RCSC shows 146 new homeowners paid the one-time Capital Preservation Fee, according to Helen Thiel, executive coordinator for the board of directors. Last year, a total of 1,757 homes sold in Sun City.”
“Ms. Thiel said 579 homes have sold this year in Sun City. ‘The housing market is down,’ she said. ‘It’s a nationwide trend.’”
“If sellers are interested in selling their homes now, Mr. Brenna’s advice for them is to wisely position it in the marketplace and be realistic about selling goals. ‘There are a lot of houses for buyers to look at and you want to get the best buy for your dollar,’ he said.”
“Arizona is ranked No. 6 nationwide for foreclosures with 5,918 properties entering foreclosure last month, a nearly 200 percent increase from May 2006, according to RealtyTrac.”
“Analysts worry that the increase in foreclosure activity during the spring when sales are typically strongest could mean even higher rates later in the year.”
“Nevada topped the firm’s list with a 375 percent jump in foreclosure activity. Colorado, California, Florida and Ohio rounded out the top five.”
The Gazette Journal from Nevada. “After a slight reprieve in April, the Washoe County foreclosure rate continued to rise in May, echoing a national trend according to a report released Wednesday.”
“‘Some people, although it’s a minority amount, are in trouble with housing,’ said Thomas Powell, chairman of the Nevada Mortgage Advisory Council. ‘Most people aren’t. Are they going to have to scale back in their lifestyle? You bet. Is that going to have an impact on the economy? Sure.’”
“Nevada had the nation’s highest rate, one in every 166 households, for the fifth consecutive month. But that is largely because of Las Vegas, which has the fourth-highest rate of any metro area in the country.”
“Washoe County, despite doubling the national rate, continues to fare better than many of its neighbors. In fact, California cities Stockton, Merced, Modesto, Riverside-San Bernardino, Vallejo-Fairfield and Sacramento joined Las Vegas to make up the metro areas with the seven highest foreclosure rates, according to the report.”
The Denver Post from Colorado. “Buying a home continues to be an iffy proposition for many Coloradans. The state is on track to log more than 37,000 foreclosures this year, a 30 percent increase over last year, according to the Colorado Division of Housing.”
“Rachel Basye, spokeswoman for the Colorado Housing and Finance Authority, is among the real estate experts who say the zeal for home ownership caused too many buyers to opt for houses they couldn’t afford.”
“Pair that with risky financing packages that allowed many people to qualify for more extravagant houses than they should have, and the scene was set for Colorado’s record high foreclosure rates.”
“‘The market is being flooded with houses that…people can now afford,’ says Basye.”
‘Nevada ranked eighth in the nation in foreclosure listings in May, a 27 percent increase from the previous month, reports Bargain Network of Santa Barbara, Calif. The Silver State had 5,876 listings or one for every 148 households.’
‘The Silver State also had the third largest month-to-month increase in foreclosures, trailing only Hawaii and Vermont.’
“Washoe County, despite doubling the national rate, continues to fare better than many of its neighbors. In fact, California cities Stockton, Merced, Modesto, Riverside-San Bernardino, Vallejo-Fairfield and Sacramento joined Las Vegas to make up the metro areas with the seven highest foreclosure rates, according to the report.”
What a crack-up! For an economy that relies so much on our neighbor to the West, this dude is awfully quick to sell them out. If Cali falls, NV, especially NNV, falls even harder. No question about it.
“‘Some people, although it’s a minority amount, are in trouble with housing,’ said Thomas Powell, chairman of the Nevada Mortgage Advisory Council.
As long as the percentage of people in foreclosure is lower than 50%, his statement is factually correct. Gotta love those mortgage banksters.
Hahahah GO STOCKTON!!!!! WERE #1, WERE #1.
Ill be getting paid to buy these at 80 times rents before this turd flushes!
This crap went on much longer than I ever thought it could, but the speed of the unraveling is really suprising me.
Are you seeing any movement in Sedona/Flag yet or is it still a seller’s market as that dumbass realtor claims?
maybe taxpayers have to cough up another 120 billion to make it “pop”
I don’t think anybody in the industry is claiming it’s a ’sellers market’ anywhere in Arizona right now. Got a link?
just email from that Remax broker in Sedona. I forwarded it to you last month. I’ll dig it up and send it again.
http://www.sedona-real-estate.com/questionaire2.htm
Thank you.
Real Estate News: We have just redone our website
(www.sedona-real-estate.com). The real estate news is just about the same as the last
newsletter. The Sedona market has slowed from its peak in 2004 – 2005 but
the market is far from dead (and there is no bubble in sight). Sales
of higher priced homes (over $1 million) remain strong here in Sedona as
well as most other areas of Arizona. The best buys continue to be
homes priced under $500,000. Vacant land sales have slowed to a crawl
and most of those lots that have sold were priced at the lower end of the
market. My opinion is that with building costs increasing and with a
large number of homes for sale – people are choosing to buy existing
homes – rather than purchasing home-sites and building.
I feel dumber having read that. Thanks TXChick.
“My opinion is that with building costs increasing and with a
large number of homes for sale – people are choosing to buy existing homes – rather than purchasing home-sites and building.”
HUH?! Building costs are DECREASING. The prices on materials and labor are DOWN. What a joke.
Why do I feel like I am the only person (along w/wife) that hasn’t gone ouot and bought a cool million dollar home? Since when did everyone have the right to own one? I remember (like I am that old, yet) when a million dollar home was just that. WHen you drove by it you were seriously impressed because there were so few and they really stood out.
reading your entry, tx, just makes me feel so poor at times. No sarcasm, honestly. I just fell like I missed something here. However, I realize when these dimwits talk about million dollar homes like they were just part of the landscape, I know we are in trouble.
However, there are times when I just get frustrated by this whole bubble.
Yeah, I think the s the worst part of this bubble. 1 million dollars is the average *lifetime* earnings of a college graduate.
Sure, everyone can afford $500K for a house. Heck, it’s only 20 years worth of work.
Around VT the average “starter” house is now around $200K. I remember having a discussion with my husband emphasizing the fact that a $200K is *not* an affordable house. A $120K has a shot of being one in VT not $80K more. It’s just too easy to get used to looking at these insane numbers.
“It’s just too easy to get used to looking at these insane numbers.”
I think that’s exactly it. In 2000 I remember looking at a 2500 sf house in Portland built in 1923 right next to a nice park that was priced at $215K. It was the first property in the area that went over $200K. No one thought it would sell and it did take awhile….
Now the norm is $350-$400K without batting an eye.
“Why do I feel like I am the only person (along w/wife) that hasn’t gone ouot and bought a cool million dollar home??”
OCDan, it’s because you ARE the only person who hasn’t gone out and bought a cool million dollar home. I feel the same way when I’m on the highway looking at everyone else driving new SUVs.
I think this topic you’re discussing is one of the most profound considerations of this bubble. Normal, non-insane people went from thinking that 150k was a reasonable home price to thinking that 400k was a reasonable home price in the space of a few short years, truly without batting an eyelash. Adjust the magnitude of the numbers depending on your bubbletown of choice, but the magnitude of the multiplier is uniformly shocking. And people think it isn’t shocking, they think that this new number somehow makes sense. The few that didn’t think this change was just business as usual have been reading these housing blogs for the last couple of years.
so what’s critial mass 1% ? 2 ?
Depends on the shape and composition.
Astrology and housing bubble
http://stariq.com/Main/Articles/P0007889.HTM
Based on past history, we can expect the downtrend in housing to turn around when the North Node reaches the constellation opposite Cancer, where it usually is when prices rise. That constellation is Capricorn and the North Node is due to enter it in August 2009, 20 years after the last low in 1989.
But don’t rush headlong into the real estate market in 2009 without being aware of two major reasons the RE cycle may again be distorted and its downside extended.
1. Astrologically, Uranus and Pluto will be within orb of a square, with Pluto opposite the US natal cluster of Venus, Jupiter and Sun in Cancer. And Saturn will be moving through Virgo, coming conjunct the US Neptune, which is square the US Mars—a combination that has coincided with stock market crashes historically. Also, in 2009 Pluto and the North Node will conjoin in Capricorn. The combined effect of these astrological patterns bodes ill for the overall economy, of which the housing industry is a major part.
2. Because the recent housing price bubble was extended and taken to new record highs, its deflation may be extended. We may experience a crash of the dollar and a subsequent spike in inflation, causing the Fed to raise interest rates dramatically. Also waiting in the wings is the weather-related effects of global warming, expected to bring catastrophic storms, Hurricane Katrina being a hint.
I’m an water sign and my husband is earth. Together we make mud
“The only function of economic forecasting is to make astrology look respectable”
John Kenneth Galbraith
geez, even the astrologers know there’s a housing bubble - wonder about Nostradomus? He’s dead, and he prob. knows more about it than the current administration…
Anybody feel lucky?
http://dallas.craigslist.org/apa/352114614.html
Looks like somebody stepped on themselves. I sould not imagine anything in the 9th ward right now worthy of 140 a month in rent. Especially when they are still finding bodies and haven’t completely fixed the levee or cleaned up the mess in entirety from the last hurricane with news of more coming on the horizon.
sould=could 140=1450 sheesh
“Analysts worry that the increase in foreclosure activity during the spring when sales are typically strongest could mean even higher rates later in the year.”
There will be a lot of keys mailed in to banks come September when sellers realize they won’t be able to sell their way out of their over-mortgaged home.
No question about it!
The much predicted (for years on this blog) “race to the
bottom” as ever increasing defaults that create a self
sustaining feedback loop, is finally becoming reality.
The cost of money has only one way to go… UP and UP some
more.
To who is Wall Steet going to sell new MBS and CDO issues to ?
The space people?
lot of keys mailed in to banks ??
Why pay for the stamp…Leave-em on the counter…Better yet, rent it and collect rent until the bank comes and gets the keys…I have seen all this happen before…
“…rent it and collect rent until the bank comes and gets the keys…”
That used to be par for the course out here…
Oily rags in the garage I believe will be a popular mistake this hot summer….careful those can catch on fire people!
Dashing out of town
On what’s left of your pay
Over to the bank the keys go
41 Cents will get em’ there, ok
Keys on bob-tail ring
Making for a long night
What fun it was to have ridden this thing
A housing song tonight
Jingle Mail, Jingle Mail
Jingle all the way!
O what fun it was to ride
The housing bubble’s sleigh…
Why mail in the keys, when you can live rent free for a year by demanding the bank show you the signed documents. :>)
“There will be a lot of keys mailed in to banks come September when sellers realize they won’t be able to sell their way out of their over-mortgaged home.”
And after they turn in their keys they will move. This will be a fun year for school districts as some will be really short enrollments and others will no be ready for the onslaught of students they hadn’t planned on.
“Pair that with risky financing packages that allowed many people to qualify for more extravagant houses than they should have, and the scene was set for Colorado’s record high foreclosure rates.”
Funny - I thought all the problems were with the low end development homes - those typically purchased by struggling subprime buyers. Am I wrong? Could the typical “move up” 4 bedroom - 3 bath house also be in jeopardy??
You are not wrong, more like absolutely right. Colorado is in trouble across many lines. We feed off each other here, big time.
Wow! Ahwatukee median price drops 10% over one year in May. Not fun for homeowners there, but lots of fun for renters there, such as myself! Rental prices must be dropping too.
Exodus from Florida
U-Haul rates one way for 6/29/07:
from 27712 (Durham, NC) to 33137 (Miami, FL) $374.- (24′ truck)
from 33137 to 27712 is goes for $1270.-, same type truck, same day.
I wouldn’t want to park that truck overnight in Durham or Miami.
Geez, watcher, your short but pithy comments are cracking me up today.
Didn’t check what full coverage was. Both places have some rough spots.
So if I rent the truck in Durham, drive it down to Miami, I could ’sublet’ it myself for $1200 to someone who wants to go to Durham and have them pay the gas, etc. and come out $800 or so ahead. What am I missing?
You forgot about 100 gallons of fuel and your time for the 900 mile trip to get it to Miami. They might also have a problem with the additional mileage since you rented it one-way. I guess it could be done but it’s not a get rich quick scheme.
Mike,
Just had to compare Miami the the OC, but my #’s are for July 31st. (we all love to leave AZ in the summer)
Phoenix to Anaheim Hills, $ 305
Anaheim Hills to Phoenix, only $827.
Wow, things must suck in Miami.
Irvine Co. names new chief executive
http://tinyurl.com/26l2sn
Simply a title change. The Irvine Company is one of the land developers I would not worry about going out of business. These guys are very shrewd politically and financially. Plus, they have had the land they build on so long that they can afford to sell/rent the properties they are continuing to build. (And I thought I read somewhere that they sell the houses in these communities, not the land.)
Quite right, PBR. I did post-grad work at UC Irvine in 1970 and my wife and I rented a small townhouse in Irvine. The houses were sold, but the land they were on was leased for (I think) 99 years from the Irvine Co.
Is that on every house that’s sold?
Damn, I should have read the contract details
Yeah, that’s what I figured…just thought it was interesting because I don’t see too many articles about them.
And yes, very very schrewd operation. See the land holdings they have?
From what I understand, they do a combo of sell/rent like you said. The land is sold as well, but if you buy in one of their communities that they control, does it really matter?
The Irvine Company is the ultimate example of timing the market just right. In the 1860s, a one-two punch of a flood which inundated virtually all of Orange County, followed the next two years by droughts not matched until this year, wiped out the local cattle industry. The original Mexican land grantees wound up deeply in debt, and the Irvines — a bunch of small-scale sheep ranchers who happened to show up with cash in their pocket — bought pretty much all of OC south of Santa Ana and north of Mission Viejo. It was a *big* chunk of land — like, close to the size of Rhode Island — and they’ve been methodically developing chunks of it ever since. Unlike the other developers, they never have to take charges for writing off raw land purchase options — they’ve owned their territory outright for more than a century.
“Nevada topped the firm’s list with a 375 percent jump in foreclosure activity.”
Nevada; number one with a bullet.
“Real estate experts say a buyer’s market is still in place after more than a year-and-a-half as the number of home listings Valley and nationwide continue to increase.”
Does a buyer’s market normally offer homes whose prices are falling?
“Mr. Brenna described the market as slow simply because buyers may be reluctant buy as prices continue to surge. Some sellers are getting $20,000 to $40,000 less than their original asking prices despite the downward trend of homes sold…
‘Surge Down’! not surge ‘up’.
According to realtors it’s always a good time to buy. Never get financial advice from a realtor or stock broker.They will get you broke quick. There’s a buyers market somewhere
A little OT,
“The U.S. Department of Housing and Urban Development (HUD) has provided its 2007 area median income (AMI) estimates. Because of a change in the way the estimates are calculated, many of the 2007 incomes are lower than the 2006 incomes. On June 26, Freddie Mac will update Loan Prospector to reflect the 2007 area median incomes.”
I believe this means that there will be new incentives to low to moderate income borrowers for low to moderate housing.
This is just the start in AZ. Two homes on my small street (that I know of) are vacant. The speculators still haven’t capitulated. I expect to see another surge in inventory next spring as the RE “gurus” relist again, similar to this year. I think next year will be the start of the capitulation.
Fall ‘07 will be the start. Once the kids are back in school it will finally sink in. That will be the beginning of the panic. My money is on October.
Just down the street from me is a house that had been owner-occupied when I moved into the Arizona Slim Ranch in ‘04. It’s now a rental. Still owned by the same family, however.
I’ll bet that family wishes they didn’t own the place, because it appears to be a real money pit. I’ve seen a steady stream of tradespeople going in and out of there. Either the tenants have a real talent for breaking things, or the place has a lot of deferred maintenance issues that those lucky tenants have discovered.
I’d say that there’s an effed landlord, because those tradespeople aren’t cheap.
One house on my street is bank-owned. Another house on my street is in preforeclosure. Two other homes on my street are for sale. At least for other people on my street have mortgages in excess of $400,000. And all this is really just getting started.
I am not looking forward to 2008.
Pair that with risky financing packages that allowed many people to qualify for more extravagant houses than they should have, and the scene was set for Colorado’s record high foreclosure rates.”
“‘The market is being flooded with houses that…people can now afford,’ says Basye.”
- ‘Can now afford?’ Did wages suddenly double and I missed it?
“‘The market is being flooded with houses that…people can now afford,’ says Basye.”
I had to use a magnifying glass to make sure I was reading that right.
That’s got to be a mistranscription — Basye really said “cannot afford” but was quoted as “can now afford”.
Spin the MSM, round she goes, where she stops, nobody knows… except the heavy advertising REIC and its shills, who in fact determine exactly what is printed much of the time, facts be damned…
What would be the most desirable area in Arizona to go looking for bargains when prices finally come down to earth ? I’m leaning towards Sedona climate wise but are there better alternatives with fairly easy access ?
Prescott? That looks like a nice place and not as expensive.
I hate to write this, but look at Prescott in the fall.
I’m talkin’ to some very panic-stricken brokers.
One bankrupt-and-being-investigated-developer is suing the county assessor (and vice versa) cause things didn’t work out like they thought they would while they were in bed together. The deals between those two looked like the Sopranos on crack.
There are an awful lot of very nice homes on the market here.
Lots.
I like Flagstaff. Sedona is a beautiful place but it’s still hot in the summer. Flagstaff is in the 70s and 80s for the high temperature in the summer, has skiing in the winter, NAU has a good pool for master’s swimming, and there is good mountain biking in the region. A good place to stay in shape.
I didn’t know Flagstaff has such cool temps in the summer…sounds like a nice place to live…
gotta have the lap pool
…has skiing in the winter
Not for the last few years. A lack of snow has crushed the winter tourism industry in Flagstaff. Time will tell if this is a short-term situation or a permanent change.
Sedona is the hottest place I’ve ever been in my life other than downtown Phoenix. I used to hike down the canyons there. I love it there, wish it wasn’t so expensive.
I’d look anywhere on the Mogollon Rim: Show Low, Heber, Snowflake, Pinetop-Lakeside, etc. There are some beautiful areas nestled in dense Ponderosa Pine forests. A lot of those areas were hit by the Rodeo-Chediski fire a few years ago, but there is still a lot of nice property up there. Also, many people I know bought second homes up there and will be ready to dump them for a song as the Great Unraveling takes place.
Agree with some of that. However, it’s drier than a popcorn fart all over the Rim. Bill Williams mountain just closed yesterday, and Prescott National Forest isn’t far behind. Payson, Pine, Strawberry…jeez…it’s cracklin’ dry there. I’ve never seen this level of dry. I’d hate to have a nice little cabin up in Heber get torched. Every firefighter in the state is nervous as hell…whenever a big fire hits in one of those areas (and it will), there’s no stopping it this time. It’ll make Rodeo fire look like a Girl Scout campout.
Doh! Sounds like the San Bernardino Mtn range after the bark beetle hit and then a fire started..poof! They cleared some of the trees up there but it’s still super-dry…
Yep. Those forests have been hit hard by the bark beetle. It is getting better though. Perhaps my memory is not up to snuff, but the forest seemed much greener my last trip up there a few months ago than it was in 2005.
It might have grown in some by now. The wifey and I were up there last summer and you could still see some big burnt areas.
Oh there’s no doubt that the Arizona is in a serious drought (and has been for a decade). You certainly have to consider the risks inherent in buying a place that may go up in smoke. Still, the Mogollon Rim is the most beautiful area in Arizona, IMO, and as people begin to understand they never really could afford that vacation home in the mountains, there will be some screaming deals to be had.
Just make sure you have good insurance!
I am looking to buy after it all burns up;) when no one wants it. That way, I won’t be worrying about any fire danger.
i live in kingman az 86409. homes here are very reasonable. look up on realtor.com. 86409,86401,86413. new homes under 200,000. only down fall is low pay if yoy have to work. lots of jobs but right to work state. i moved here from so cali. 2 years ago and its the best place i have ever lived in my 67 years.
Tucson home sales down, but, hey lookie! The median’s STILL going up!
http://www.azstarnet.com/business/187440
Did you see where our Governor just signed into law a bill which restricts HOA’s from prohibiting homowners from putting For Sale signs outside their homes. That should solve the sales “problemo”.Just looking out for the folks.
Neither she nor our legislature was anywhere to be heard the past few years with all the rampant fraud including Pima County classifying SFH as Condos so they could all but build on top of each other and golf courses putting in lakes while the drought worsens giving them all waivers on using recylced water.
I fear a high price is going to be paid by us folks for their actions
Desertfox
Desertfox
She and the legislature were nowhere to be seen with
“‘The market is being flooded with houses that…people can now afford,’ says Basye.”
Translation - please buy a house, please!
I haven’t seen this flooded market that she speaks of. Anyone else in Denver seen it?
Vacant house haunts Newport Beach mayor
http://tinyurl.com/2xsmn7
How much is that house worth? I was under the impression you can’t get a SFH for less than a mil in Newport Beach.
Is O.C. housing’s cheaper end really to blame?
The conventional wisdom around town is that a slower-selling lower end of the real estate market is, among other things, keeping the median selling price artificially high. Then one quickly gets to speculation about lack of subprime lending, smallish salaries, etc. Well, here’s how the first five months of 2007 look, via DataQuick data, when O.C. closed deals (involving all residences) are sliced by the selling price given in county records. Weakness seems across all price ranges:
Price Sales Change
Less than $500,000 3,093 -29%
$500,001-$600,000 2,104 -25%
$600,001-$700,000 2,142 -24%
$700,000 and up 4,269 -29%
OCKurt, we’ve mentioned this before, but it should be reiterated. This county, overall, is toast. Dammit, salaries here do not justify the 750K it takes to buy in RSM or Foothill Ranch. Some jackhole has a house up here for 849K asking in Foothill Ranch. Since when did this place become a millionaires haven. At most, at most I repeat, these homes should go for 300-350K!
This county is so in for a big enema it isn’t funny. Every weekend the number of open house and garage sale signs grows geometrically. I see anywhere from 35-50 of these on a weekend now and that is within 10 miles of where I live.
What’s up Dan!
Yeah, South County doesn’t have the jobs to support those kind of prices. Still lots of sellers on the crack pipe.
Here’s some examples: My neighbor listed his condo (Irvine) a couple of weeks ago $25k over what a similar one in the neighborhood was going for. I even called him since I know the guy, and told him to drop the price. Two weeks later, he drops it by $5k…oh boy. Still no takers.
My other neighbor has a smaller one that’s been on the market for 6 mos. She came by asking for some tradespeople’s #’s so she could get some work done. She starts asking me why her place won’t sell…simple, drop it by $20k and you might get some more activity. Oh, and get the damn water heater fixed! And she’s forced to rent it out to her little sister for only $900/month (mom made her—mortgage is like $1700 w/taxes)
lol
Kurt,
I was over at Irvine bubble or something like that this morning. Anyway, some goofball bought a nice 3/2 condo in Irvine in that new Highpoint or whatever that new Hoity Toity place is. Anyway, he bought at 749K. After going waaaay underwater and swimming away, the bank wants 599K. Ouch, that’s gonna hurt a lot of comps. Been on the market 4 days w/Redfin. If they want that to go in 1 day like last year, go to 400-450K. It’s a friggin cond w/HOAs and taxes. Sellers still don’t get it.
It’s the money, stupid. I don’t care about granite countertops. Makes no difference to me or the missus.
Yeah, I saw that one the Irvine Bubble Blog. They lost their ass…
Even in that hood, the bank will too. No one left to purchase with nothing down requirements. Heck, if I could buy that w/no down and had the documentation, I wouldn’t be living there. Try a lot closer to the beach.
Slim loves yard sales. Oh, how I do!
I’ve been selling real estate the past 7 years and have been quite successful, that is until last June. I primarily marketed a northern suburb of Minneapolis which has experienced tremendous growth in the past 10 years.
Frankly, it’s over. The housing market has officially crashed. Here are some recent sold statistics for the area I market:
March thru June 15
(2004) Sold 172 units
(2005) Sold 216 units
(2006) Sold 168 units
(2007) Sold 53 units (350 active listings)
During this same timeframe only 17 new construction listings have been sold. Of these, 6 of them were bank owned. Currently, there are approx. 130 active new construction listings.
Ok, so the housing bubble has popped; what does that mean for the average person? First, we are losing the largest manufacturing industry in the U.S. You will begin to see unemployment tick up, but many of these jobs were under the table. Meaning, the skilled workers were being paid cash. These individuals will not be able to file for unemployment. The loss of these jobs will bubble up over the next 1-2 years and will surface on the bottom lines of retailers like Home Depot and Lowes.
Second, as prices fall, home equity loans will be a thing of the past. Falling home prices are the single leading factor in the bubble burst. Prices started falling well before foreclosures were an issue. My estimation is prices began to fall in early 2005. Homes prices have now retreated to 2003-04 levels. Meaning a home that sold in 2005 for $250,000 is now selling for $220,000 (as long as it’s in perfect condition). Homeowners’ getting over their heads financially is nothing new; however; the difference now is they can’t just sell their house, because they owe more than it’s worth. I turned away 20+ listings this year due to homeowners being upside down on their mortgages. As a result, they are walking away and letting the banks foreclose on them. As more and more foreclosures (up 90% from last year) hit the market home prices will continue to be pressured downward. Before it’s over (if things don’t spin totally out of control) we will see price levels equal to the year 2000…Approximately, a 20% decrease in prices.
Now, you may say, “great, I can’t sell my house for what I owe on it. I will just stay and wait for the market to turn. I have a good job and can get use to the idea of staying in my home a little longer. This problem doesn’t really affect me.” Wrong, as more and more homeowners are unable to tap into their homes equity they will no longer be buying cars, 4 wheelers, big screen t.v.’s, computers, lawn tractors, updating kitchens, roofs or siding etc. Millions and millions of homeowners will be putting off discretionary spending out of necessity. This will result in a tremendous fallout in the retail sector of our economy, which in turn, will have a direct effect on the transportation and manufacturing industries. Many jobs will be lost and many more homes foreclosed.
Finally, as the housing market crashes, so does the tax roll of state, county and local governments. These institutions have built their budgets on the back of the housing surge during the past ten years. It will not be unheard of to see local governments going bankrupt, schools shutting down, police departments with skeleton crews and social programs slashed. You will quite literally see ghost towns, large developments with empty Mcmansions, because it made more sense to walk away than pay the exorbitant property tax.
Sounds depressing doesn’t it. Well, history shows that it will be depressing. This is exactly what happened before the stock market crash that lead to the Great Depression.
Eric-Get a life.
PG,
Whay get on Eric. At this point in the game we all know the bubble is leaking. We can argue over causes, play the blame game, etc.
NOW, and I mean NOW, is the time to get ready for the post bubble. Eric reiterates some good points. Zee is also right about everything else is icing.
At this point I think we should start focusing on how to weather this storm. As we have already seen, despite the fed doing nothing, as usual it seems, the 10-yr. note is climbing. Obviously, the cost of money is going to cost everyone of us, inc. us here on this blog, in the future. At this point, first, you want to be debt free. Second, have some savings man. If you need a new car (used, new, that is), you better have a hefty down. Even w/great credit (750+) range and no debt, you still may be looking at 10% rates. Third, diversify. Bill in Phoenix preaches this ad naseum (just kidding), but he is right. Better to take a hit here or there than lose the whole thing. Fourth, get the word out to those who will listen because once the ‘hood finds out you are the only guy in town with cash in the bank/mattress, you are gonna be asked for dough since we all know what the savings rate is and a HELOC will be unavailable. Fifth, have cash on hand. I remember about a year ago a guy on this very board talking about how all the major banks have already set up how they will handle any kind of financial problems. I, for one, don’t want to wait for an FDIC check, nor do I want to be told by a teller I can’t get a grand out of the bank. I realize that we are limited by ATMs, but when the teller tells me no cash today, I don’t want to be in that position.
Okay, I realize the bulls all argue that nothing has come about yet and that even a stopped clock is right twice a day. However, this is the mother of all bubbles: we know the economy is running on the consumer and the consumer is laden w/debt and no savings.
DON’T BE CAUGHT OFF GUARD. Remember, I live in the OC. We went bankrupt once. It can and will happen again. All it is going to take is some yahoo 20-something who thinks he knows it all to pull the wrong move or some oldster who wants his money and then the run begins.
I nominate OCDan for the OC Board of Supervisors!
I don’t understand why Eric should get a life - sounds like he has one - nice synopsis, IMHO
I agree. Thanks Eric for posting.
PG that comment about Eric was not necessary. Sounded very mean spirited to me. I think Eric’s view of things is right on target. THANKS ERIC for your insight.
Pretty much correct. The collapse of the debt bubble will be much, much more calamitous than most people can imagine. As a well know money manager has said, “like the 1930s, only worse”.
I agree with the overall commentary, but the ‘ghost town’ reference doesn’t quite stick. So if a family mails in the keys they still need shelter, so the net population numbers stay the same. We will see migration from well-do-to-neighbourhoods to not-too-well-to-do-neighbourhoods, but then you’ll also see people buying up these million dollar houses for 50% discounts from the banks.
I do agree that tough times are a coming, but other that food, clothing and shelter the rest is just icing anyways and i think in the long run we might get rid of the ‘entitlement’ mentality that’s so prevelant!
got cash?
The ghost town reference sticks:
Lancaster/Palmdale, Moreno Valley, Indio, Santa Clarita, All previous L.A. County ghost towns that have been re-populated Santa Clarita is the only one I don’t see that happening at but I could be wrong there.
The number of empty houses could be pretty high. The number of people living per household has trended down over a long time. If that reverses due to higher unenmployment, affordability (20% down required) and societal issues (ie kids living with parents longer and multi family households) and at the same time immigration is reduced a LOT of buyers are taken out of the market. There are about 2,000,000 available houses now. If home ownership goes from 69% to 65% the number available will be unreal (try 5-6 million). I’m not predicting that that will happen but I’m not able to say that it won’t
When co-workers ask my prediction, I simply point out “the worst recession of my life” is on its way.
Depression? Ok, things are bad… really bad. But I think enough of the “circuit breakers” will keep us from going to a national depression. Detroit and Florida… different answer.
Got popcorn?
Neil
Good post.
Too bad some of your fellow realtors are too dumb or too greedy (Many vacant houses and lots I see are realtor owned) to admit to the above truths. Thanks for posting.
“tremendous fallout in the retail sector of our economy, which in turn, will have a direct effect on the transportation and manufacturing industries.”
- manufacturing, what’s that? Do we have manufacturing? So some Chinese might work less overtime, big deal.
- retail. They are minimum wage jobs anyway, no big loss.
- transportation. Good we save some fuel, gas prices might come down a bit.
“the housing market crashes, so does the tax roll of state, county and local governments”
The tax rolls will sure crash. A bunch of tax & spend politicians will be left high & dry. Which sucks for everybody of course, especially government employees. These clowns should have used the extra tax revenue for a rainy day fund…but what do you expect from a politician.
All in all the housing crash is a good thing, look at the upside. Fiscally responsible individuals will be able to afford housing again. 20% down and 30 year fixed rate, so bond investors don’t have to sweat about their principal (see Bear Stearns disaster). Professional landlords will actually turn a profit again ‘cos right now the rent barely covers taxes and insurance here in Miami. Hopefully that will help renters as well, but with all the empty housing it should work in their favor.
Lot’s of specuvestors will lose a fortune and with it (hopefully) the means to screw up other peoples lives. Things will get back to the way they used to be before the bubble, back to the way they should be.
Good post and insight. Not sure why the “get a life” comment. I really appreciate anecdotal stories backed up by well thought out cause and effect theories.
Surprisingly, Chandler seems to be holding up pretty well (a smaller YOY decline in the median than more centrally located Tempe). I guess I’d attribute that to the fact that there are lots of good jobs in Chandler, particularly in high tech (Intel, Microchip, Freescale, and man other smaller companies). Still, I’m surprised Chandler is not getting hit harder. Homes that are selling here are selling for about 25% less than they did in 2005.
On a personal note, the dude I know trying to sell his golf-course lot in SE Gilbert for just under a million is still out of luck. Two months without a sniff or a budge in the price. Also, some other people I know have two houses, each with an I/O ARM and a HELOC, and have been trying to sell their old house for about 6 months for just under $600,000. No luck. Now they are now trying to rent it out for just under $3000/month. Any takers?
A million bucks in gilbert? Give me a break here. Your friend is in deep sh@t.I see tons of places for rent from 995-1500. The market is flodded w/ rentals right now from all the real estate tycoons going broke.
Not a friend, just an acquaintance. His home is in the Seville community just a few miles away from Queen Creek. Flipper Hell.
Ben,
A little OT, but you’ve got to post a thread dedicated to our resident OC village idiot; Gary Watts who is providing his much awaited mid-year “economic forecast” - the one where he says the OC market is in neutral and just waiting to accelerate back to life.
Another poster correctly identified that Gary conveniently left out 2006/2007 data from his statistical fabrications and of course made no mention of the now famous “it’s in the bag” or “it’s an inverted year” predictions.
http://www.impactre.com/Forecast.html
I was wondering what happened to that tool…I like this quote:
“Since Gary speaks only to the real estate industry, his information is presented in a format that real estate agents can use to inform their clients.”
Yeah, bullshit delivered to even more bullshitters!
Smiles everyone SMILES!!
Hmmm…my post didn’t appear..hopefully this doesn’t appear twice..
I was wondering what happened to Gary the Tool. I like this quote from his musings:
“Since Gary speaks only to the real estate industry, his information is presented in a format that real estate agents can use to inform their clients”
that is, b.s. to b.s.’ers
My favorite Glen Watts referrence is, “He is never wrong.” That one always makes me tingle.
“So far this year, 24,265 existing homes have sold, down from 30,830 in the first five months of 2006 and 46,485 the same period in 2005.”
Ouch. Down 50% in 2 years…
And the market continues to slow. Its going to bounce around a bit… until the fall. Then it really gets interesting. It won’t hit bottom for a long time… but it will be interesting.
Got popcorn?
Neil
Regarding jobs in Phoenix area, a large electronics manufacturer, Sanmina announced it is closing. This will put about 1,000 high paid workers out on the street. I have traveled to Phoenix for work for years but most of it has dried up particularily Motorola, who used to be the largest employer now only a few thousand and shrinking. Will always have a soft spot for the AZ, got my only hole in one @ The Lakes at Awatukee (140 yds/7 wood!1)…..
did you win a free house (hear they’re giving them away there)?
Does anyone know what’s going on in the Tempe market? I bought a condo there, near ASU, in 2003 as a rental. As long as it is rented out I just about break even. I bought it as a long term investment (cash flow for my retirement years), but I am curious about how the condo market is doing there.