Speculators ‘Pushing Down Prices’ In Phoenix
Annette Haddad at the LA Times has this report on speculators. “Too much speculative activity from investors hoping to turn a quick profit is perhaps the biggest sign that a market, whether real estate or stocks or any other asset, is in an overpriced ‘bubble’ condition, economists say. Too many speculators drive prices too high, and when they sense that the market is topping, they tend to sell all at once, sending prices into a free fall.”
“Justin Lane is seeing the consequences of other speculators’ efforts in Arizona. After watching prices double in the 16 months since he moved into the newly built Queen Creek neighborhood east of Phoenix, Lane says he can’t afford to sit on the sidelines. So he listed his five-bedroom house for sale in November.”
“Six other neighbors had the same idea, including one absentee owner who priced his house about 10% below the rest. That forced Lane to reduce his asking price from $362,000 to $343,000, still well above the $165,000 he paid. ‘The investors are pushing down prices,’ he complained.”
“As Lane has learned, Arizona is one of the biggest magnets for speculators. Close to 40% of the homes in Maricopa, Pinal and Pima counties, which include Phoenix and Tucson, were bought by absentee owners as investments or second homes last year. For the nine months ended in September, investors snapped up 11,000 homes in the Phoenix area.”
“‘There is no doubt that the investor has been the driving force’ behind Phoenix’s white-hot housing market, said Jay Butler, at Arizona State University. Speculative buyers helped pump up Phoenix’s median home price by a whopping 40% in 2005, the highest growth rate in the nation.”
“Of absentee owners who bought in Phoenix last year, nearly one in four was from California.”
“Phyllis Rockower is one investor who’s done with Southern California for now. Although she had been buying local real estate since 1996, the South Bay resident sensed that prices were peaking last year. So she started to unload her remaining seven properties in April, closing the final sale last month. ‘People aren’t willing to overpay anymore,’ she said.”
“Now there are signs in Phoenix that speculators with less staying power are beginning to sell in larger numbers. Rising inventories and weakening demand typically lead to softening or even declining prices. Since August, the supply of homes for sale in Maricopa and Pinal counties has more than doubled to 38,000 as of Sunday. By contrast, in Los Angeles County, with three times the population, inventories have risen from 20,000 to 30,000 homes in the period.”
“Arizona State’s Butler figures that many Phoenix investors are looking to sell now because they are having trouble finding renters willing to pay enough to cover their mortgages. He expects home appreciation in Phoenix to start declining this year, which could intensify if more owners decide to bail out. ‘It will be a question of whether there’s more panicking,’ he said.”
‘ That forced Lane to reduce his asking price from $362,000 to $343,000, still well above the $165,000 he paid.’
These houses are almost new. Who can say prices won’t fall 50%? What justifies a permanently $150k higher price in Queens Creek”
Increasing the home price over 100% in that short amount of time is so greedy to me .
These people make me sick. Queen Creek is a dump, you can tell from just looking at the pictures and descriptions and seeing who the builders were. I think anyone paying over about 150-175K for anything there will be sorry very soon.
Why would you call a seller “greedy”?
If you owned that house, what would you list it for?
If you would list that house for $190K, your comment is honorable. If you would list it at market price, you’re just spouting off a bunch of nonsense.
The seller is not greedy. The buyers, if any, are idiots.
Example : $500,000. ave house in LA. County increases to 1 million in one year . We would all be screeming G_R_E_E_D_Y, insane , ……..ok ..overreaching …if you want a better word .
Housing Wizard - what would be your list price if you owned that house?
Assuming I WANTED to sell, or that I was being FORCED to sell, I’d list it at $1M (or a little less). Why? Because I’m GREEDY. I’d like to get the most I can for my house. Why are you so concerned with being called greedy?
If I was ALTRUISTIC, I might sell at $550,000.
In reality, I’m both greedy and altruistic (as we all are)…but I don’t think you should get out of shape for being called greedy.
Get in touch with your inner greed…
MTNRUMER 2
Thats a hard question . Without having major population increases or employment opportunity increases/wage increases , more than a 10% or 15% increase from the prior year prices is hard for me to justify . How are the appraisers going to determine price as the market corrects?
All sellers try to get the max. the market will bear of course if thats what your trying to get me to say MITNRUMER 2
His greed is demonstrated in his idiotic comments about the speculators pushing down prices. He doesn’t seem to realize that he is a speculator/flipper himself (by virture of only living in the house for a mere 16 months). There is absolutely no justification for a greater than 100% appreciation in only 16 months which this guy has seen. His shitty 165K house should probably not be worth more than 180K tops…and deep down he knows it. That is why he is greedy! Complaining that he has to lower his price to 343K when he only paid $165K…he should have a shi@ eating grin on his face, price it at $325K, sell while the others sit on the market, and laugh all the way to the bank. It appears he is just to stupid…and yes, GREEDY to realize his good fortune. He will really be complaining when his neighborhood is selling at 250K by the end of the summer!
The seller is greedy, not because he’s listing his house for more than he paid, but because he’s complaining that other speculators are pushing down the prices and eating “his” profits. Having bought the house at $165K, his greed is blinding him to the fact that he could get several $100K in profits even though he added no value. Instead of happily taking this free money, he’s complaining about how much more he could’ve gotten if his competition was not participating according to the rules of a free market. This kind of delusion is the essence of greed.
That being said, any buyer who will actually offer him that kind of money is probably motivated by a bit of greed himself. What else do you call it when the desire to own something prevails over wise financial sense?
Just because a consumer society encourages greed does not mean we all have to fall for the trick.
I would rather rent for the rest of my life than give any of these clowns one penny of profit.
There will be blood in the streets of Phoenix. They will change the name to: Bubble City, AZ!
I might have to stop coming to this board. Too many stupid comments. What does it mean, “blood in the streets”? It’s such a gross phrase.
I wish people would be a little more grown-up. Avoid using words like blood bath, greedy sellers. That will elevate this site to its proper level. The articles that Ben posts are informative, well chosen. Then people come here with such stupid comments. Just add something educational, funny, interesting.
I can say whatever I choose! If you dont like it kiss my ass!
bwahahahah lol!
right on, crispy!
People who are trying to obtain prices 100% and more above what they paid merely because they were “early” and who have done nothing to enhance the value of said properties are greedy and trying to exploit the stupidity of later people who might actually want a place to live. If you find that insulting perhaps the SDCIA is more your speed. You want stupid comments in droves, take a look there.
Texaschick57 - what would be your asking price for that house?
Look, I don’t like the price inflation of houses any more than anyone else on this blog.
However, the people who were “early” took a risk with their money. The market could have gone down as well as up. As it is, it went up, and they profitted by their luck and/or skill. They now have a right to list their houses for whatever they think they can get. It’s the buyer’s who have to send them the message. This is known as capitalism.
They can list at whatever they want…but they show their greedy side by publicly complaining that they are only making 100% after 16 months (actually probably more like 1600% since the guy probably only put max 10K down. He is basically complaining that no one is stupid enough to GIVE him what he wants.
Buying a house you and most people can afford is not a risk. If you can afford the mortgage and plan to live there for awhile, whatever prices do is kinda irrelevent. If you don’t plan to live there for awhile, then you shouldn’t be buying it.
Taking out a suicide loan (option ARM) for a $500k house when you earn $50k/year is not risky, but suicidal.
Let’s face it, we’re all human and we all want to get as much money as possible. When was the last time any of us went to our employer and offered a pay cut? Are we being greedy?
If I bought a $150k house 5 years ago in a bubble market, then I’d unload it ASAP. People who are unrealistically pricing their houses are killing themselves with their own greed. So what if your neighbor got $500k for their house last summer, list it for $400k and get it sold. It’s better to get it sold now at a slight discount than to sell at a bigger discount later because you rejected offers and waited for the “right” buyer.
I wouldn’t have bought the junker in the first place. But that said, I’d look at the lowest price they’ve sold at consistently lately and then take another 10-15% off. Why? Cause I’d want OUTTA THERE!
Too bad it is so on target (blood on the streets)! Gross situations warrant vulgar language…
mtnrunner2: it’s hypocricitcal to judge others for being judgmental. Stop coming or STFU.
lol
Blood bath is a metaphor…often used when someone take sa big financial loss on a speculative venture. “Blood Bath” is a description of a bigger/dumber loss than taking a simple “Bath” on a speculative investment. Let the blood flow for all these speculative flippers (metaphorically speaking of course!)
“blood in the streets” is a well worn phrase in financial discussion. As B.C. Forbes related in December, 1929:
“Rothschild was buying stocks right and left when an acquaintance rushed up to him and excitedly asked, “Don’t you know that the streets of Paris are running with blood?” Without stopping his buying operations for a moment, the astute financier quietly replied, “If the streets of Paris were not running with blood, I wouldn’t be able to buy securities at these prices.”
Hence, buy when “blood is running in the streets”. Verbal shorthand from the history of finance.
We’ve seen alot of blame and anger over the past two weeks. I especially liked Toll’s comment on McMansions, very snippy if you ask me. What I’m getting at is that it seems we’re finally making the transition from Denial into Anger (the Kubler-Ross stages of grief). It seems public psychology is beginning to change quite rapidly now. Imagine what its going to be like when we see YOY losses and spikes in foreclosures?
Caveat Emptor!
Grim
Northern NJ Real Estate Bubble
Yeah, that was very becoming of a rich CEO.
He’s the Mark Cuban of the RE bubble. He’ll own a sports franchise before long if he doesn’t already. Major league baseball, football or basketball.
I’ve noticed the shorts-vs-longs attacks in Yahoo Message Boards are getting more personal and pointless and nothing to do whatsoever with fundamentals of the company or technicals of the stock. When one nostagically longs for an (all-caps) “This stock will be $50 before $20, you jerk! (eom)” hit-and-run as cogent analysis, the end (a disastrous spring selling season IMO) is near.
Your first mistake was reading the Yahoo Message Boards at all. You’ll lose one IQ point per half hour of reading, two if you do more than just skim.
Good call on the transition from Denial to Anger.
Toll’s remark could have also been manipulative — spark a bit of McMansion envy to bolster the desire to own one by those among the conspicuous consumer crowd who so far do not…
Can anyone point me to evidence showing a 10yr period in So Cal. where home prices depreciated by at least 15%. A friend who is a RE bull guarantees me that this has never happened in So. Cal except perhaps in the 30’s.
Is that person trying to sell you a piece of real estate ?
I dont know if you are a troll. we have discussed this here so many times. I’ll humor you one time
Existing-home prices in Southern California will drop as much as 3.8%
annually through 1996, or a total of 15% from current levels. Already,
prices have fallen as much as 25% in the hardest-hit areas. With a
shrinking defense industry, total employment statewide won’t recover to
its 1990 peak before 1996, and Los Angeles, Anaheim, and San Jose won’t
have recovered even then. California real estate brokers dispute the
severity of projected price declines. [Wall Street Journal]
With prices plunging, unsold houses glutting the market, and interest
rates at rock-bottom lows, it’s now 30% cheaper to buy a house in
California than it was 3 years ago. Experts recommend that people buy a
house if they can afford it. If real estate appreciates at just the rate
of inflation, then mortgage interest deductions and high leverage will
produce a real yield of about 12% to 15% a year on buyers’ down payments.
[McClatchy News Service]
Bay Area economists say the California Association of Realtors’ 1993 fore-
cast is overly optimistic and extremely naive. The forecast says existing
home sales will increase 1.9% if the GDP rises 2.3%, while interest rates
will drop. But the GDP not influence California housing sales because the
state’s economy is still going down the tubes and there is no relief in
sight. The state has not seen the end of job losses, and there is nothing
to attract new businesses; in fact, more and more people are leaving
California. Some see no growth in real estate until 1995. [Times Tribune]
Based on a predicted economic rebound, the California Association of
Realtors said the state’s resale housing market will begin to recover in
1993 after 4 years of decline. The Realtors forecasted sales of 421,000,
up 2% from this year but down 25% from the 1988 cyclical peak. Assuming
improved employment and mortgage rates below 9%, the association predicted
another median price decline, from $196,600 in 1992 to $194,600 in 1993.
The group erroneously forecast a state housing recovery in 1992, but says
the forecast for next year would prove correct.
[San Jose Mercury News]
The California Association of Realtors said the state’s housing market
would recover in 1993. Sales will increase 1.9% after 4 straight years of
decline. The statewide median price will fall to $194,600 next year, a 3%
decline from 1991. The group had previously predicted a recovery this
year. Last year’s forecast of 4% growth this year has been revised to a
2.6% decline. The Realtors’ own figures have shown recently that prices
are falling again. If buyers believe that trend will continue, it could
negate effects of low rates and an improving economy. [Associated Press]
now you should as your friend to prove it otherwise. He must have access to MLS. ask him to get sales data for period between 1989 and 1993. you can figure it out the truth yourself
precisely because that data is hoarded by the Realtors(TM), we the general public have to struggle to get it, they claim all sorts of things. dont fall for it. ask him to bring the data and sit down with himand analyze. truth will be obvious.
Would you be so kind as to post the link to the blog or website where the complete list of stories/excerpts on the last CA crash from the late 80s/early 90s can be found? I know someone had it up on here in the past, but unfortunately, I didn’t save it. It’d be helpful for some research I’m doing. Thanks!
mike
I search google groups. california real estate 1993
something like that.
Pay attention to the resumes of real estate people looking for jobs at that time too! makes very interesting reading
Wow, great articles. I can just mentally substitute the year 2006, and imagine this is what we’ll be reading later this year.
Shows you how full of *hit CAR is!
If you’re going to think of homes as an investment then you can’t just look at the difference between the purchase and selling price. Remember that you’ve got taxes to pay, maintenance costs, and of course the mortgage. Even if your RE bull friend were right a 15% depreciation across 10 years is a huge loss when you factor the carrying costs in.
Try to find some data on 1930-1940. D’oh!
My friend is not trying to sell me RE. He is considering buying a house in San Diego. Now, when the market is at the top. We go back a long time so I’m trying to convince him that buying now would be the biggest financial mistake he could ever make. He is stubborn and won’t listen. But he is convinced that aside from the 30’s (which in his opinion could never happen again - there are to many safeguards in the system (lol) ) there has never been a 10 yr drop of 15% in RE prices in Cali.
Many of you will get a kick out of this - When he was trying to convince me that buying a house now was a good long term idea he said “I’ll be very conserative and estimate that the house only increases in value by 15% in the next 5 years.”
Buy when everyone is selling; sell when everyone is buying.
J P Morgan
He said this with respect to the stock market; to apply it to CA real estate, you need to be patient, as the peak of a boom normally leads to a six-year or more period of 10% YOY declines. Show your friend this report:
http://www.realestateclubla.com/pdf/Cagan_FireBurn_1104.pdf
Unfortunately, it does not extend south to SD, but I believe the results would be similar across all of SoCal, as the price dynamics have a high level of spatial correlation, with a time lag away from the coast…
best advice i can give you is to go to the library and flip thru the newspapers of 93/94/95. The sob stories, desperation. Price doesn’t give everything. When u see the writings about absolutely dead markets, homes on market 12-18 months, 1 walkthu in 6 or 12 months, walk aways…. You get a fresh perspective. There have been many comments on the issue of median price as an overall indicator. It is these kinds of stories that show where things were really at. PAIN, lotsa PAIN.
No aerospace crash this time, but perhaps things that make it far worse—tightening credit availability, higher rates (cause it’s hard to go down meaningfully from here), suicide loans.
He probably hates what you’re saying now, but maybe he’ll thank you down stream. Good luck
asuwest2 - substitute Aerospace/Defense Industry with RE industry (e.g. Construction, RE agents, Financial Banking) this time around as the industry that takes a lot of job losses. I’ve read 1 out of 3 dollars generatated in the local PHX economy comes from that industry. It’s going to be “ouch” time.
man - do we need a preview button to catch these spelling errors or what…
For San Diego send him to the bubble primer at:
http://piggington.com/bubble
It is all right there. If he reads that you have done your friendship due diligence and let him get slaughtered.
Lots of declines in S. California. Two bubbles burst since 1970, and this one is higher than the others. The graphs look like a rollercoaster, and this current bubble is higher than the other 2.
Check out the graphs at http://www.piggington.com, in the Bubble Primer section, upper right link. Fabulous data!!!
Is he looking for 15% PER YEAR price decreases for 10 years, or 15% over 10 years? If you want historic increases/decreases going back to the mid 70’s take a look here:
http://www.ofheo.gov/HPIMSA.asp
Take the data and graph it in Microsoft Excel (or a similar spread sheet program).
Why 10 years? Is he thinking of selling in 10 years? And why 15%? Is he OK with LOSING 5% over those ten years? Take a look at 1990 through 1997 for the Los Angeles area.
Also, what he should look for (IMHO), is not 10 years of loses; what he should be looking for is “are there 10 year spans where I could lose money buy buying a house”? In other words, historicly, have there been times where dips followed by appreciation still doesn’t get you out from “under water”.
But I wouldn’t worry too much. Just stop arguing with him. One of you will be proven right. As I tell my children, there is nothing wrong with making mistakes, as long as you tried your best, AND YOU LEARN FROM IT. Mistakes can be your best teacher.
So leave him alone.
Is your RE bull willing to make you a personal guarantee, backed up with his own cash…he should if he is slinging that bull around making “guarantees”. He is also manipulating figures by using a 10 year time span. The ten year figure allows enough time to mask a bigger drop in a shorter period by stretching the time frame to allow prices to recover (that is why the 10 year average return is so popular with mutual fund performance, it masks the occasional drastic downturn years and presents a positive return when averaged over the long term, factually correct info but not indicitive of short to medium range performance, which is why they are legally also required to also show the 1 yr and 5 yr performance trends and you must recieve the prospectus…no such requirement for Realtors to put out factual information on housing trends). Your RE bull is probably correct that over 10 years the prices won’t be 15% lower, but that doesn’t help the person whose house drops 25% a couple years after they buy if they get into a hard spot, or if they need to sell after a short period due to a job transfer, divorice, etc. That is why the pre-bubble fundamental factor of staying in home for at least five years was a major consideration when considering buy vs rent. That is also why large coorporations have reimbursement programs to take care of the real estate loss when an executive is suddenly transfered out of his home…because typically you will be losing unless you sit for an extended period of time. I don’t think newbie RE agents even understand these basic priniciples. I personally bought my house in San Diego in early 1999 for 20% less than what the original owner paid in 1992 and it was in primo shape, with numerous upgrades, on a golf course. I KNOW RE can go down. Like I started with, your entering argument from your RE bull is decieving and I’m not sure what the point of a statement like that is.
There is an interesting fallacy implicit in your friend’s claim. Namely, that the dollar has been a constant unit of value during any ten year period since the 1930’s. In reality, we have seen significant inflation in every ten year period since the 1930’s. The longer the time frame used, and/or the higher the inflation rate, the more significant this fallacy becomes.
Ask your friend if his claim is true in inflation-adjusted dollars.
ask him about real estate prices in Carthage or Pompeii… yep prices always go up…
oh here’s a thought: lets say you or your friend finds some fantastic “evidence” proving his point. keep that in your safe with your life insurance policy and other docs, and when your house loses 40% in 5 years, and you’re out of work for 6 months and get behind in your mortgage, you can mail it to your lender so they wont foreclose on you.
Try 1990 thru 1993/94. There were areas where the decline was about 40%. I was selling property in SD county at the time (from mid 80’s to early 90’s) and watched the boom/bust cycle unfold. Piece of cake compared to what’s going on now.
First, in Arizona where are the buyers going to come from ?The greater fool is holding now .
Second ,where is the price adjustment down of at least 5% regarding the 1% increase in interest rate since last year .
Third, since investors can’t ride it out by renting out the investment because of over inventory , how can the prices not go down at least 25% or more ? I still don’t know where all the buyers are going to come from. The excess inventory is extreme . If the 2005 40% increase was mainly investor driven it could go down by 40%.
Agree! They pool of buyers is GONE! I check the PHX inventory every morning and it goes up every day by a couple of hundred units. There are no great fools left, the only fools are the ones trying to sell.
Wouldn’t they be greater fools if they waited to sell in 2 or 3 years?
The article states that 40% of purchases were by investors, not that they caused a 40% increase in prices.
Nonetheless, you make a good point. Investors bailing out will add even more to the inventory, and excess supply decreases prices.
I said 40% because the paper said Arizona had a 39% average price increase last year ,( which was one of the top in the Nation ).
Foreign baby boomers will save us all!
All hail the permanently high plateau!
I asked myself this questions many times
and no local resident will even think of buing now.
People who living in AZ for more then 4 years
know very well how much housing in this
low wage state cost.
Well this tells us the locals arent going to be buying this big old inventory in AZ. Last hope is the ….. BABY BOOMER”S
I mean BOOMERS
Ben, do you ever sleep?
sleep is for wimps
Let’s call it the “Denanger” stage.
I am new hear in the Phoenix area and yesterday my husband went out and bought the paper and I found something I have never heard of before that I believe is a sign of what an extreme bubble RE is in this area. The newspaper has a Friday listing of all the houses sold for the week by zip code! It goes like this:
85044/Ahwatukee
Number of sales
This week: 13
Previous four weeks: 53
Same weeks last year: 75
Median price
This week: $301,000
Last four weeks: $301,000
Same weeks last year: $208,000
14468 S. 43rd St. $275000
etc, with the address and selling price of each house.
Of course they do not tell you the inventory for this year and last year, which would probably be pretty alarming for some people, nor do they give the original asking price or tell how long the house was on the market.
Some areas show an increase in both sales and median price, but quite a few areas show a dramatic decrease in sales such as Mesa 85212 which went from 130 sales to 35 for the 4 week period. Most show a more moderate drop in sales. A few show dramatic increases, but the drops outnumber the increases.
Does anyone from around here know if this newspaper listing of sales here is a new thing with this bubble or is it just something they have done around here for years even before the bubble?
The Republic has had recent house sales/prices listed for at least a decade. It used to be in Saturdays edition though…
So far, the median prices in the Republic’s report haven’t shown much of a downward trend. Sales volume appears to be roughly half of what it was about a year ago. The number of houses on the market has skyrocketed though.
You have to dig into the data. A realtor in San Diego, Bob Casagrand (check his site on RealtyTimes), gave me this very important information: The under-$400K buyer is squeezed out by rising interest rates, and this skews the distribution curve. The bottom of the chain is broken (i.e. the first-time homebuyer is squeezed out, affecting the ability of the first-time-move-up buyer to move up). In a few months, we’ll see the effect cascade up, as these houses also lower in pricing. He told me each individual house is selling for less than it would have before.
Another realtor told me that only houses priced at 5%-10% below comps, are selling.
Another piece of data from Bob is the offer price/list price ratio. This used to be around 98%, and often it was over 100%. Well, in January 2006 it was 95%, and in February it was 93%.
This data is for San Diego. But the trend is probably something that will play out similarly in all regions.
The skewing caused by pricing out the low end will show up as increasing median prices…so while this happens, the median data will indicate that prices are still going up!
Here on the Cali central coast, the ratio of sale price to original asking price for houses is in the $600K price range is around 90% (at least in my town).
Interesting last name for a realtor. We have one in Reno whose last name is Greathouse…!
If you’re checking out that market, homesalenews.com has a newsletter for each zip. Has detail sales data for resale & new. Interesting to take the resale & divide into ziprealty # for that zipcode. Ouch.
Maybe we’re even moving towards acceptance. Consensus is building across the country..I’ve been a bubble believer for a couple of years and we just resigned our lease. This week, I’ve had 5 random people from around the country, unprompted, tell me that it was smart that we are waiting to buy and continuing to rent as prices are likely to fall. One in LA, three in Ct, one in mass, and one in NYC. Those same conversations would not have happened last spring. I am seeing houses now selling after sitting all winter but I think the urgency is gone and what is moving is typically priced at the low end of comps for quality/size. Just as many have predicted on this blog, the median may not fall at first, but people who are buying are buying the highest quality house in their price range available and not resorting to overpaying for the junk. Sellers who want to sell are pricing aggressively and not expecting outlandish returns.
yup. Had a guy this week at work tell me he’s lookin at cashing out as well. Riverside county. Very much non-speculative kinda guy. It’s beginning to sink in for some.
This is a similar trend as to what happened during the bubble in the last San Diego market in the 90’s. People were priced out, or at least not willing to pay the inflated asking prices and more people turned to renting. Ultimately, it became hard to find a decent rental (executive level home) and the market changed. My landlord wanted to move back into his home and I needed a home (one small child and wife pregnant with my second), though I would have preferred to rent, it was actually easier to find a nice home to buy. Of course you needed your 20% down which did not make this an option for everyone.
For sale signs everywhere here in Queen Creek prices are starting to drop.
Once these investors bail en masse the freefall will begin.
The summer heat can’t come fast enough to keep more useful idiots from entering the market. Until then it will go something like this. Buyer: Gee I really like the house but don’t you think prices will fall further? Realtor: Hogs get slaughtered. Right now is the best time to buy before others come back into the market. You aren’t looking at it right; these people have already lowered their price $60,000 dollars, that’s $60,000 dollars below the market or $60,000 of equity as soon as you move in and the buyers return to the market.Buyer: oookay, let’s do it!
Again we know that prices went up on massive speculation. Now the mindset is “my home is worth it so I won’t lower the price” syndrome. Sellers are greedy and nasty about their bubble home. Well let’s just sit on the sidelines and watch the dominos fall.
a couple of tucson investors are sweating it out on the sd investors forum. they can’t sell their properties. too much competition.
violins please……
Must be getting harder to unload in SD as well; ziprealty inventory is poised to smash through the 18,000 this weekend. (Don’t expect to see this on their site until Monday; I think they are strategically delaying their updates in order to do as little damage as possible to Sunday open house attendance!)
Folks, there is stupidity existing on both sides of the RE bull and bear argument. I, contrary to some opinions, am neither. I have expected this current cycle to end for a few years now. I believe in owning rental property as a long-term wealth building strategy.
In my opinion, it is foolish to be on either extreme. Gambling on flipping new construction is the same as day trading. Renting because one doesn’t want to pay the seller a profit (Txchick57) is just plain stupid. If the numbers make sense, they make sense. What the seller made or lost is not part of any rational equation.
Txchick57 will rent forever before allowing some a$$ole to make a cent from her. Talk about cutting off your nose to spite your face. We all now know that Txchick made one offer in the past 13 years and that offer was made at the absolute peak of the market in the most overpriced city in the country (Naples,FL). A city which, by the way, she claims is inhabited by “rich a$$holes. Why she would even want to be there is a question only matched by her timing.
Does this tell us anything about some of the most frequent posters on this site? My advice, for what it is worth, is to buy a home if you can reasonably afford it. Buy investment property if you plan to keep it and the numbers work. If you are able to take the time and effort, buy under-market. In 25 years, I don’t think I have ever paid “retail”.
I am not an agent. I am a Former RE lawyer. I truly enjoy buying and selling and fixing-up and all aspects of real estate. It gives me pleasure - almost as much as collecting arrow heads.
Anger management classes????
My comments are angry? Blood in the streets and “greedy sellers” are not (?). I fail to see that I have offered anything but reasonable insight and commentary. Txchick 57 - if the shoe fits, just wear it and quit striking out blindly at those you disagree with.
A former lawyer explains your combative demeanor.
>Does this tell us anything about some of the most
>frequent posters on this site?
Who cares? Take the information that is useful to you, and ignore the remarks you find childish…like the one above.
If you’re cashflow positive on your many fixed-rate properties, you can afford to mellow out, man. No worries to you if the market goes up (rent pressures should increase), or the market goes down (buying opportunity).
It would be great if any of it were true. If you were knocking it down the way you claim, you’d be on the Riveria, not bullshitting on a message board. Again, I say, give it a rest or go write fairy tales for a living. You are good at that.
Not planning on the Riviera (sp?). already have other plans. Just waiting for my High School Junior to head off to college. This blog helps pass my time and, I believe, needs my balanced input.
Why do I suspect you are trying to unload some investments on whatever fools are left out there?
Nope. Not a seller or a buyer right now.
I enjoy reading blogs from both va investor and txchick, mainly for the different perspectives and styles. A little arguing can is also fun, but it would be painful to see two people I admire slug it out.
Ben, I’ve been reading this blog for quite a while. Either your blog or the NYT are the first thing I open in them morning. Keep up the great work.
“My advice, for what it is worth, is to buy a home if you can reasonably afford it.”
I would add that you should only buy if the price makes sense or you can afford to lose money on it and owning a house is worth the money to you if the price is illogically high.
Va Investor. Maybe being a attorney and an investor and all insulates you from certain realities.
Unless you were lucky enough to buy before this nightmare, you have little choices. One is to get in so much debt you are working just to pay the mortgage the other is to rent.
I may not make anything out of renting, but I am saving loads for the time being.
What I pay for renting wouldn’t buy me a 1 bedroom condo in my area.
Osmosis (definition from Dictionary.com):Diffusion of fluid through a semipermeable membrane from a solution with a low solute concentration to a solution with a higher solute concentration until there is an equal concentration of fluid on both sides of the membrane.
To some extent isn’t this what happens between markets like LA and Phoenix, i.e., one market gets too costly and homeowners go to the lower cost market until an equilibrium is reached - one that is based on affordability, which is a function of both prices and the amount of money people have?
We see this happening between Portland, ME and areas to the south, mainly NY, NJ, Ct and Mass. And amazingly quite a few Californians. Things must be getting tough in California to trade their weather for ours! On the other hand, one move from an expenive California home to an inexpensive Maine home and you can almost retire. Californians coming to Maine are like those from Krypton coming to Earth, i.e., they end up with powers and abilities far beyond those of mortal Mainers.
As inventory skyrockets in the NY and Boston suburbs, inventory in Maine shrinks. I have to believe there’s a connection.
Maine– your declining inventory may have to do with the expiration of the CA people. Bring equity, move in, enjoy the trees, go for a walk in shorts & a hawaiian shirt in Jan, missing till the spring thaw. Couple a years to sort the estate & put back on market. Meantime, another equity refugee moves up there. uh, what’s that white stuff falling from the sky? (In So Cal, it’s ash from the forest fires).
Our weather is obviously terrible compared to California’s. We often think that the winter will keep the masses from moving here. It’s been true until now, but it may be changing. Southern Maines’ winters are only marginally colder/longer than those in the NY suburbs north and west of NYC.
For Californians coming here, it’s got to be the aforementioned “Krypton effect”. I suppose there are tradeoffs too. While you kiss the California weather goodbye reluctantly, it’s probably gratifying to be in a place with no traffic on the roads that is not turning into the third world due to illegal immigration. The lucky ones buy a cheap condo or mobil home in Florida and escape winter each year for at least a few weeks. That’s the best of both worlds, particularly if you like to experience at least some of the winter for skiing.
Don’t worry, I don’t think to many real Californians will want to move to Maine. You are probably basing your comments on just a few who have moved there (I sure there are a few folks from Maine who have relocated to CA, but that’s not news). Remember, that a LOT of people who live in California have come from other places (my Parents from Michigan and Pennsylvania, my wife’s from Ohio). Lot of these people cashing out may be returning to their original states (with pockets full of cash). However, a true Californian would never want to live in Maine (just spend a couple years in SoCal and you will understand why…it’s too difficult to explain in a blog).
My mother was from New Jersey, and my father was from Canada. Moved to California in the ’50s and never, ever mentioned moving back to the colder climes.
portland is on my list of possible places to retire. but that’s down the road a ways. cold doesn’t bother me.
‘Southern California’s high housing costs have become a big turnoff to investors like McKee, who have fled for more affordable pastures.
Many analysts say that’s a good thing. Although the falloff of speculative activity probably means Southland home prices won’t surge soon, it also could keep home values from tumbling — and lead to a much more desirable “soft landing,” or flattening of prices.’
Let’s review what has happened:
1) Speculators drove SoCal prices to record low levels of affordability.
2) Speculators have cleverly used home equity gains on their SoCal residential RE investments to purchase newly built spec homes in the middle of the desert, because it is now too price to speculate in SoCal.
Doesn’t the fact that speculators are pulling up the stakes and moving to greener (browner?) pastures mean that there is a greater chance of a hard landing in LA, as one source of transient demand has left town? I guess I should have studied more journalism and less economics, because I just never quite grasp some of the journalistic arguments…
I have a friend who did just that! They did not get a single offer on their SD home last summer, and had reduced it twice. She told me her husband refused to “eat all that equity”, so they took out a HELOC and bought an investment property in Fountain Hills (suburb of Phoenix). They’re going to rent out the SD home this spring, and live in the FH home, fix it up, and sell it. I gave her the data on the housing bubble, and she now avoids me. We used to talk often, since our kids go to school together, but now she walks away, looks the other way, etc. She’s uncomfortable with me, since I sold my house in December 2005 to cash out. She doesn’t want to face reality. Her husband sold his business, and now wants to make a living flipping/fixing up real estate. They’ve read all the Rich Dad Poor Dad books, and played the game. They’re seriously into it, but I don’t know her response to the author’s recent announcement to avoid RE purchases. They can still sell all those houses, get out of RE, but then what will the husband do for a living? He wants to make a living in RE, so he’s determined to do it, even though the market is horrible now. Maybe their strategy would work in Texas?
>They’ve read all the Rich Dad Poor Dad books,
>and played the game. They’re seriously into it,
So they read the books, but they really didn’t understand them, eh?
And they are playing the “CASHFLOW(tm)” game, and then going out to speculate (flip)? Talk about not getting the point.
Don’t take it personally. I have stopped offering unsolicited advice, because too many people would prefer to live their lives with their heads buried in the sand…
Oh but I love your advice GetStucco. Alot of people benefit from your trigger fast keen insights on human nature and business.
Just wait until your friend spends her first summer in Phoenix. That will be all the reality check she’ll ever need.
“That forced Lane to reduce his asking price from $362,000 to $343,000, still well above the $165,000 he paid.”
The above sentence tells you a lot about the gap between the actual cost of building these houses and the short-term bubble induced prices that briefly prevailed. It also gives you an idea of the intrinsic value of such homes in the Phoenix market. However, with all the overbuilding and the upcoming readjustments to variable interest rate loans, the market will likely overshoot to the down side. We ain’t seen nothin’ yet.
” ‘The investors are pushing down prices,’ he complained.”
Boy, this quote is just precious. First off, they aren’t investors, they’re speculators. Secondly, the main reason the prices vaulted as high as they did was due to all the speculators in the market. In a bubble, the speculator giveth, and the speculator taketh away.
well said
but he didn’t mind when the shoe was on the other foot now, didn’t he?
Can someone point me to where I can find the Toll comment on McMansions? I’ve been away for a few days and I missed it.
Thanks
When you really stand back a few feet from this whole bubble mess you realize that it is one of the stupidest episodes on the history of business, even worse than the dotcom’s.
I used to travel in Phoenix for business 2-3 years ago from LA. I was shocked how cheap AZ homes were compared to Cai. Then all of a sudden when the speculators discovered AZ the prices just took off. And nothing really changed as far as income, demographics etc. So yes this is a pure speculative bubble, driven by hopes for ever lasting appreciation.
Now, what really gets me is the market has clearly stalled in most places, inventories are exploding and prices in many areas are actually starting to go down. But still realtors, builders and lenders are still saying yeah, yeah, healthy market, prices still going up and on and on. I spoke to a seasoned mortgage broker this week that said he thinks Cali. prices will keep going up at a good rate.
Very frustrating!!
That’s why the truth on this board has to be told. It’s human nature to follow the crowd ( one of the greatest psychological discoveries in recent years) that even if all the evidences show that the crowd is wrong, people still follow the crowd to jump off the cliff. Humans are programmed to ignore what they see with their own eyes and only listen to the crowd.
It’s not exactly a “recent” discovery, unless a couple of centuries is considered recent. Read Gustav LeBon’s “The Crowd”, for example.
You’re right that it’s been known for centuries, but only until recently, have they been able to scan people’s brains to verify that when we are making a decision with the crowd we don’t access the part of our brains that stores what we see with our own eyes. We only access the part that stores what we hear from others.
Reminds me of something my father used to say all the time when I was a teenager. I, of course, would say “everybody” is going (to the party, to cut school for a day, etc.) and he would respond ” If everyone was jumping off a cliff would you do that too?”. Kind-of a conversation stopper.
I need some help from every one. I have just been offered a job transfer/promotion from LA to LAS Vegas which I think I will accept. I know RE values in Vegas have exploded in recent years. I think I will rent for the 1st year, what does everybody that is familiar with Vegas think will happen to prices there.
Thanks for the help
When moving to a new town in my book you should always rent first to get to know the town.
If you like it and want to stay then buy in the right neighborhood for you with 20% down and a FRM.
Do you own now, or are you renting? Do you think you will be staying in Vegas for a while? 5 years? 10 years? Retire there?
Vegas is like Phoenix: overvalued. Check craigslist for outrageous desperate ads by speculators who are underwater on their mortgaga.
Vegas is 38% overvalued. Check out:
http://money.cnn.com/2005/12/29/real_estate/buying_selling/handicapping_housing_markets/index.htm
I think renting for a year and then reassessing the real estate market is a great idea! In the meantime, you can really research what neighborhood you w think ant to be in, talk to coworkers about what heighborhoods they like, see which neighborhoods have good schools etc. Figuring that looking for a home and going thru escrow takes a few months anyway, might as well just get a 1-year lease and take your time
Good luck!
this blog is like one big family. we fight and make up and fight and make up, with a bit of disfunction dropped in every now and then. but i love it. it lets me vent, commiserate, learn, ask, listen, disagree and most defintely laugh. heh let’s face it - long or short, bull or bear … we are way out at sea on this one, sharing one little boat … and ain’t nobody swimmin to shore. monday is spring.
Woohoo! All hail the Spring Selling Season!
Some of us are naked???
Bubbles don’t just pop. They are like waves in a ponf after a large rock was thrown in. (The large rock being financial liquidity.)
The California bubble created a secondary bubble in Phoenix, some of the Phoenix sellers that “escaped” with profits, will cause prices to rise in places tertiary like Texas and Missouri as they leave. But each succeeding wave of rising values is less pronunced than the prior one. People in Springfield complaining about $30,000 increases is nothing compared to the $300,000 increases that took place in CA.
I wonder what Homeowner-MA has to say about this. He/she claimed landlords should raise rents to match PITI so speculators can get positive cash flow. Problem is where do you get the tenants? Isn’t it better to get some rents than nothing at all?
>He/she claimed landlords should raise rents to match
>PITI so speculators can get positive cash flow.
If it’s that simple, why not raise rents to double or tripple PITI? Wouldn’t you make even more money? Or is there a hidden flaw in that logic that he/she is not seeing…
I read the article by Ms Haddad, I immediately thought how strange it is that she totaly missed, or purposally ommited all the sales problems the sellers are currently having in Phoenix. The enormous increase in listings. The reporting standards in the LA Times are very weak. I know several people who bought “investment” property in Phoenix last year all single family homes, one guy bought 4 houses and at work mentioned that he felt that he bought them at the peak. I didn’t say anything to him in regards the the explosion in invintory, you know at work you have to keep things polite, and what can I do to help him anyways. If I personally know two individuals in LA that bought sf homes as investments in phoenix then I would agree that their are many others. Many Californians are going to loose money in Arizona.
I can echo that. One of my bosses bought a condo last year in Phoenix. I asked him if he was concerned about inventory, but he dismissed it, saying he had a family member who was an RE investor who had the lay of the land and would let him know. His plan, btw, is to unload 6 months before the super bowl! I wasnt aware the super bowl raised RE prices! He also talked of possibly buying in Texas. This phenomena is pretty wild to see up close.
“Six other neighbors had the same idea, including one absentee owner who priced his house about 10% below the rest. That forced Lane to reduce his asking price from $362,000 to $343,000, still well above the $165,000 he paid. ‘The investors are pushing down prices,’ he complained.”
It’s OK when investors push the price up to unreasonable levels, but then they should wait and let him sell before they put their houses on the market. LOL.
I wonder what % of the Phoenix listings are condo? Or lots for sale? This might explain why homes in Mesa for example haven’t’ fallen much since last summer.
My cousin and his family rent in East Mesa where homes (3-4 bedroom 1500 sq ft.) priced in the $240-275,000 range are still selling as they were last October.
He moved relocated to Mesa last February when homes were still under $210,000 but didn’t buy. Now he and his wife feel they might have made a mistake. Interest rates have risen and so have the home prices. And with the media making noise about the feds putting the brakes on interest rate hikes later in the year he worries if that occurs it’ll be the “better buy now” public mentality all over again.
From the sales reported in the newspaper yesterday there were 805 home sales in Mesa during the last 4 weeks, down from 1140 for the same period last year, almost a 30% drop in sales during a time of increasing inventory. And this includes one zip code that sold 89 this year and 0 last year which must be an area of new homes since last year.
Prices are up from a year ago, but with sales dropping so much I think it will just be a matter of months before prices are dropping, too.
Here is the line of thinking that will lead Phoenix down. A couple years ago, a family renting in San Diego, sees prices going up and feels like they are priced out forever. In the meantime, they find that they can get a SFR in Phoenix for $180K. They will leave their family/friends and have to deal with hotter weather, but it is worth it for the differnce in prcie. NOW, a similar family renting in San Diego hears that prices in San Diego, while high, are starting to drop. They research prices in Phoenix and find that a SFR (similar to the one that was $180K two years ago) is about $400K…not worth it to move away from San Diego for such a small price differential.
You nailed it. Also after the last bubble in the San Diego area there were numerous stories in the Union Tribune about people that cashed out and left SoCal to places like Denver, etc. The stories were about them coming back for the SoCal lifestyle and weather. Of course, once house prices starting dropping back to reaonable levels, it makes it easier.
Humm…that’s strange last week the San Diego Union-Tribune paper ran an article about people leaving Cal. because of housing costs and the photo on the front page showed a family packing up to move to Az.
This happens in every r/e cycle here in SoCal. Someone posted some old LA Times articles here discussing the peak then subsequent bust the last time around. Articles talked about the same stuff…affordability at all time lows, people moving out of CA…yada yada…outofsandiego is right, when things cool off here people move back to the more desirable areas…one reason why the IE takes a dump in downturns…
Yes…that’s now. I’m talking about what will happen later, once prices come back down, there are plenty of people who left SoCal that have suffered through miserable winters or 114 degree summers and will feel a 150 to 200K premium on a home cost is worth it to live in SoCal compared to many other locations. Obviously, not everyone, but some.
Here’s the article I was referring to:
http://www.signonsandiego.com/news/metro/20060316-9999-1n16pop.html
But that assumes the prices in San Diego will crash. A 1500 sq foot home in a decent part of San Diego with good public schools will easily run at least $550,000 or higher. You can still get much better deal for under $300,000 in East Mesa for example.
Sorry pal, but SD inventory already is crashing, with prices soon to follow. Read the handwriting on the wall, and get out while the gettin’s good…
I rent in San Diego (Hillcrest) and house prices in this area simply have not move much at all. Sure, you can say a property listed at $715,000 has been knocked down to $700,000 but so what? What’s 15 grand? The house is still priced at least $350,000 more than I can afford.
Since August, the supply of homes for sale in Maricopa and Pinal counties has more than doubled to 38,000 as of Sunday. By contrast, in Los Angeles County — with three times the population — inventories have risen from 20,000 to 30,000 homes in the period.
can’t help but wonder where they got the inventory numbers from… especially since a certain blog known as Bubble Markets Inventory Tracking started tracking both Phoenix and LA numbers as of August of last year.
There was poster here recently who is in the real estate business who stated that about 7000 of the properties listed in Phx are “land lots” What’s that all about?
Raw land for sale , already subdivided , would be my guess .
Also sounds like builder of a proposed new home track is bailing and selling lots for spec. buyers .
more like 5,500. as for which ones are subdivisions and which ones are raw with no road access, got to look at each individually.
oc, you have great data on your blog. and your extreme flipper updates are way better than any reality tv.