A Drop Of Half The Value Is Not Unrealistic Right Now
The Destin Log reports from Florida. “A Destin doctor who has had his pulse on the Destin real estate scene for more than 30 years has slashed the asking price of his bayfront home by $1 million. Now, the home that Darlene and Dr. Mike Raim live in carries a listing price of $1.79 million. It was $2.79 million. ‘We’re trying to get someone’s attention, shock value,’ Raim said.”
“When the Raims put the house on the market in August 2004, it was listed at $1.9 million. But with the Destin real estate market at the time red hot, with prices shooting up almost by day and some buyers snapping up homes before the for-sale signs even went up in the front yard, Raim figured the house and land would fetch more.”
“In March 2005, he upped it to $2.2 million. In the summer of 2005, to $2.49 million. In the summer of 2006, he asked $2.79 million. It’s listed on the tax rolls today at $1.5 million, he said.”
“Pat Fisher, an independent broker representing the Raims, said they had offers in 2004 and 2005, ‘but they just didn’t work.’”
“Fisher said that at a meeting about commercial real estate a few weeks ago with three bank presidents, ‘they wanted to let us know they are still lending money but that appraisals are on coming in lower than the contract price.’”
“She cited an example: ‘I had a house listed on the bay, $1.75 million, an excellent house. I got a contract, waited two weeks for the appraisal, and it came in 30 percent low. It killed the deal. In my 10 years in real estate, I’ve never had that happen.’”
“Mary Anne Windes, a veteran broker in Destin, said in an e-mail interview, ‘The trend is that prices are moving to the same level that they were in 2003. As you will recall, 2004 and 2005 saw tremendous and often unrealistic growth. The market has now corrected itself. Many properties doubled in value during that time, so a drop of half the value is not unrealistic right now if a seller needs to sell.’”
The Orlando Sentinel. “A prime site zoned for an office tower and a hotel with residential units in downtown Orlando is back on the market, though the developer says he’s prepared to build the offices.”
“The market for residential condos has…gone cold, and even demand for Orlando office space has cooled in recent months, according to downtown real-estate specialists.”
“‘It’s an open-bid process,’ with no set asking price, It’s an open-bid process,” with no set asking price, Toledano said.”
“The market for office space in the core downtown area has softened, however, in just the past three months, according to specialists in the Orlando office of Cushman & Wakefield of Florida Inc. ‘The faucets have turned off a bit,’ said Rick Solik, senior director of office brokerage services.”
“A survey recently completed by the company estimates that the central business district’s Class A vacancy rate was 14.5 percent during the second quarter, with a ‘negative absorption rate’ during the quarter of 88,345 square feet, meaning that more people were moving out of offices than moving in.”
The Miami Herald. “Flashy Key Biscayne trader John Devaney has temporarily stopped allowing customers to withdraw money from his four Horizon hedge funds, which invest in subprime mortgage securities, in a bid to avoid a fire sale at depressed prices.”
“His firm, United Capital Asset Management, which has assets of about $570 million, took the extraordinary step of suspending redemptions after many Horizon investors in recent days ran for the exits as volatility in the structured debt market spiraled.”
“A spokesman for United Capital said the temporary halt on fund withdrawals is aimed at protecting investors from losses. ‘We didn’t want to be in a situation of being forced sellers in a market that’s very unfavorable,’ the spokesman said. ‘We thought if we dumped, that would be a disservice to everyone in the portfolio.’”
“In January, United Capital Markets was selected as the lead underwriter to develop the $4 billion oceanfront Briny Breezes community in Palm Beach County.”
“Miami-Dade County’s budget-builders will fashion a spending plan this summer that cuts a state-mandated $224 million, but a panel of private experts already has some ideas about where to begin.”
“Among them: Slash the Miami-Dade County Commission’s budget in half. Freeze all county salaries.”
“Those suggestions, gathered from a panel convened by The Miami Herald, are likely to bump up against real-world concerns, like union contracts and politics. And to be sure, County Hall has squandered millions in botched housing deals and flawed contracts, money that could have come in handy during tight budget times.”
“Since 2000, property taxes have risen 118 percent in the county, Former Miami-Dade Commissioner and Miami Mayor Maurice Ferré noted. ‘Where has that money gone?’ he asked.”
From Hernando Today. “The county laid off five employees from its development department Monday and has lost another 40 or so in the past few months through attrition.”
“County Administrator Gary Kuhl, in making the announcement at Tuesday’s county commission meeting, said he and staffers have been exploring ways to reduce costs and this was one result.”
“The development department is an enterprise fund, which means its revenues are dependent on fees from permits and construction. With the downturn in the housing market, money became tighter and it became necessary to trim staff, Dupree said.”
“‘We cannot be in a position where our revenues are less than our expenses,’ she said.”
The Sun Sentinel. “Dozens of South Florida senior citizens have lost millions of dollars of their savings because their brokers bet wrong on risky mortgage-backed securities after promising them a stable investment.”
“Coral Springs lawyer Darren Blum said Tuesday that his firm is representing about 25 investors who had invested $20 million with Brookstreet Securities, a California firm that has brokers in at least a half-dozen South Florida offices. Many investors are planning legal action to recover their losses, and for damages and attorney’s fees.”
“‘We’ve had people in their 80s in here in tears,’ Blum said. ‘These people are devastated.’”
“The seniors invested in securities called collateralized mortgage obligations, or CMOs. Some independent brokers working in Brookstreet offices pitched the CMOs to wealthy seniors at dinner seminars and condominium meetings.”
“‘They presented these as very safe, like a bond, paying 7 to 8 percent,’ Blum said. The CMOs the brokers invested in, however, were complex and highly speculative, he said.”
“Brookstreet has said the money was lost in part because of too much securities trading on margin, or borrowed money. The value of the CMOs declined, Brookstreet said, as the so-called subprime mortgage market worsened.”
“The margin losses mean that investors not only lost their funds, but could owe money that was borrowed to trade in their accounts. Blum said he talked with one client Tuesday who has about $12 million in margin losses.”
From Money Central. “For the repo man, business is always good. But lately, it’s been better than good.”
“As the subprime-mortgage collapse blares in the background, ‘recovery service agents’ have been cleaning up the wreckage of another subprime-lending mess: that of the auto industry, which in its own competitive bid for buyers has been extending longer, costlier loans to people unable to keep up with their payments.”
“A survey…said monthly repossessions by subprime lenders increased 15% last year.”
“Repossession agents in areas hit by foreclosures say they’ve been picking up vehicles both from people struggling to keep their homes and from those now left without work: construction workers, pavers, landscapers and real-estate agents.”
“‘It is actually stunning the number of cars we’re taking from people who are supporting the local real-estate market,’ said J. Patrick Altes, the president of a recovery agency with offices throughout Florida. ‘It’s almost the type of thing where we see it and you wonder if anyone else sees it. It’s like they turned off the spigot.’”
I am so sick of the term snapping up, as in buyers snapping up condos. I propose the new post bubble term, snapping down, as in seller snapping down prices. I plan to buy when things are being snapped down.
Do alligators snap down or up?
African or European?
They’re not swallows!
Blue no! Yell…ooo… wwwww.
Got popcorn?
Neil
Down.
“snapped up” is so much like the Madison Avenue crafted expression “homes” that the whole culture of the business makes me cringe.
How many houses were snapped down on the court house steps last month?
Repo article was wonderful. Will help keep government from hiding numbers.
“The shorthand is that for years we’ve lived beyond our means, reflected in record debt levels, and now comes the paying phase,”
“It’s almost the type of thing where we see it and you wonder if anyone else sees it.”
“BenchMark estimates the average loss to subprime lenders at $6,000 a car.
mong prime lenders, 61% of new-auto loans were for at least 60 months, with 17% of those exceeding 72 months, nearly double the 9% in 2005. “With longer negative-equity situations, there’s a greater chance the customer’s going to walk away,” said Walter Cunningham, the president of BenchMark.”
“Owners are required to pay any deficiency — the difference what was fetched at auction and the outstanding loan — as well as fees for repossession, cleaning, transport and resale, which can total about $700.”
“Repossession agents in areas hit by foreclosures say they’ve been picking up vehicles both from people struggling to keep their homes and from those now left without work: construction workers, pavers, landscapers and real-estate agents.”
“‘It is actually stunning the number of cars we’re taking from people who are supporting the local real-estate market,’ said J. Patrick Altes, the president of a recovery agency with offices throughout Florida. ‘It’s almost the type of thing where we see it and you wonder if anyone else sees it. It’s like they turned off the spigot.’”
This guy actually sees the real depth and pain of this real estate boom. These people never really qualified for the autos based upon their ability to repay the loans. When the Fed and the news media give there views - it is from current data and historical data that they come to there conclusions.
- Perhaps the current data is a trailing indicator and the man on the street is the real leading indicator.
I think it goes even farther than if they could afford it..people have a huge problem with understanding that when you work you need to live within a certain budget..to be able to weather the storm of the high earning years and the low earning years. Too many people like real estate agents, mortgage brokers, flippers thought that this make money all the time would go on forever…never planning for the end…but instead adjusting their cost of living to always being at the very top….what goes up must come down…
Why can’t we all live like Paris Hilton?
Why can’t we all live like Paris Hilton?
In jail? You can.
Woo Hoo! Maybe I can pick up a boat and an H2 along with a McMansion for pennies on the dollar. I’ll be “snapping up” property like Snoop snaps up Hoes.
Can one finance spinner rims?
If you can finance a big mac you can finance anything - go go goldilocks…
Boats already available for pennies on the dollar.
Used RVs and boats dropped farther faster than used cars. Seeing some great deals now.
I know boats have always depreciated faster than cars. Not sure about RVs, but gas prices on the high side of three bucks a gallon certainly diminishes their appeal.
Will be looking for a nice, used PWC and trailer when we go to FL this winter. I just had a hitch installed on the new Santa Fe in anticipation of bringing one back.
Can one finance spinner rims?
Heck, that’s been going on for years in L.A.
Repo Man (1984)
Frustrated punk rocker Otto quits his supermarket job after slugging a co-worker, and is later dumped by his girlfriend at a party. Wandering the streets in frustration, he is recruited in the repossession of a car by a repo agent. After discovering his parents have donated his college fund to a televangelist, he joins the repossession agency (Helping Hand Acceptance Corporation) as an apprentice “repo man.”
http://www.imdb.com/title/tt0087995/plotsummary
More honest reporting…
http://www.bradenton.com/business/story/89855.html
Is housing worse than numbers indicate?
NEW YORK –
By RACHEL BECK
Associated Press
Here’s a scary thought about the housing market: Things may be far worse than what’s already being revealed by the troubling government and industry statistics.
At issue is what goes into sales-price data and what does not. When those numbers are crunched, many of the incentives that sellers are using to lure buyers - including cash rebates - aren’t being included. That suggests prices may be falling faster in many markets than is now being reported.
The same goes for how the mortgage-application indexes don’t account for the implosion of lenders. That could have the effect of masking a slowdown in demand, which is why the housing market could be in for rough sailing much longer than most anyone anticipates.
In nature and economics, when things get out of balance, instability and unpredictability sets in. What has happened over the past few years has definitely put the housing market on slippery ground. Incentives will only hold up as long as builders have the resources to give incentives, but as prices continue to fall and losses mount, I suspect these will become smaller and actual price reductions will take thier place. With lenders tightening credit standards by the day, it is unlikely there will be sufficeint liquidity or buyers to absorb all of the current and future real estate inventory at current prices.
“Dozens of South Florida senior citizens have lost millions of dollars of their savings because their brokers bet wrong on risky mortgage-backed securities after promising them a stable investment.”
“Coral Springs lawyer Darren Blum said Tuesday that his firm is representing about 25 investors who had invested $20 million with Brookstreet Securities, a California firm that has brokers in at least a half-dozen South Florida offices. Many investors are planning legal action to recover their losses, and for damages and attorney’s fees.”
“‘We’ve had people in their 80s in here in tears,’ Blum said. ‘These people are devastated.’”
NOW we see what’s happening on Main Street as a result of these hedge funds and CDOs. However, I have to say, hedge funds are unregulated and people put their money into them at their own risk. People shouldn’t bet their retirement with the casinos known as hedge funds.
“Many investors are planning legal action to recover their losses, and for damages and attorney’s fees.”
There ain’t no money to get!!! Hope those seniors that just lost their nest egg are hiring lawyers on contingency basis.
They took their money out of the 3% CD and put them into somethgn promising 20% return, an they thought it was safe?????
LOL, Darrell, think of how some of the potential heirs feel. “Mom, Dad, you did WHAT!!!???”
It was no risk and high returns. What did you expect them to do?
LOL, jerry! It is sort of sad in a way. Most of these retirees who get fleeced actually had productive careers in business and industry, as opposed to the current Wall Street and Main Street flim-flammers. Many built small businesses and provided employment in their communities. When they settle in these affluent retirement complexes, a lot of their hard-earned wisdom seems to go out the window. For many, when they get fleeced like this, it isn’t even so much the money as the loss of pride. They spent years telling their children to work hard, save and invest, to be careful of salespeople, etc. and then late in life give in to peer pressure and lose their shirts. And they recall the stern lectures they gave their kids about wasting their paper route money on model airplanes and Barbie clothes. I’ve spoken to sons and daughters of some of these retirees over the years and a lot of time they have their hands full with their retired parents.
When my sibs and I went through this with my late father, we had to handle a phone solicitor who was constantly trying to part him from his money. The elder care attorney who was handling my father’s affairs had years of wisdom under his belt and told us that sometimes, after a certain age, you have to treat your parents like irresponsible teenagers if their mental condition warrants it. (Dementia, etc.) Some of these slick salespeople know that the children don’t want to have their parents declared non-compos-mentis and take advantage of it.
“Most of these retirees who get fleeced actually had productive careers in business and industry, as opposed to the current Wall Street and Main Street flim-flammers. Many built small businesses and provided employment in their communities. When they settle in these affluent retirement complexes, a lot of their hard-earned wisdom seems to go out the window.”
And now these oldsters have shown that they have the same greedy - something for nothing mentality - as the Wall Street flim-flammers.
You get what you deserve.
test
Finally the human interest side of the story.
Let me see if I understand how funds work. They print up documents, just like at Kinkos. They call the documents, bond certificates, and sell the worthless documents to investors for millions of dollars. I need to get into the printing business.
I tried to put this comment Thu, a dozen times, taking out key words, and retrying, to see what was being censored. Whats going on?
The auto-censor doesn’t like letters 3 through 5 of the 4th word in the 2nd sentence (and you used it multiple times).
That’s rich, and it does make sense.
Insert the word hedge before the word fund, for the full comment.
Let me see if I understand how these things work. They print up documents, just like at Kinkos. They call the documents, bond certificates, and sell the worthless documents to investors for millions of dollars. I need to get into the printing business.
Let me see if I understand how these things work. They print up documents, just like at Kinkos. They call the documents, whatever, and sell the worthless documents to investors for millions of dollars. I need to get into the printing business.
I like this about the Miami huckster:
“His firm, United Capital Asset Management, which has assets of about $570 million, took the extraordinary step of suspending redemptions after many Horizon investors in recent days ran for the exits as volatility in the structured debt market spiraled.”
When they say “assets,” they mean alleged assets based on imaginary valuations, and money borrowed against them, not on money in the red they actually have. So it should read “570 or so million in phantom assets (a.k.a. debts).”
that should be “money in the black.” Sorry.
Incidentally, there is someone else now posting as “Incredulous” on this blog. What is the correct etiquette in such a situation? I’m the original; the new on is a lady.
May I suggest “Lady Incredulous” for her?
Well, you can always post as “Incredulousie”… Heh, heh, heh…
I used to post here as “happy renter” and another “happy renter” came out with a full-out assault; “Hey asshat…”
I hope y’alls can resolve this amicably with grace and tactfulness …
Got 10% down?
the sad thing is, this is another guy who like chioffi was supposedly a “sophisticate” in this area.
The operative word- G R E E D.
“A spokesman for United Capital said the temporary halt on fund withdrawals is aimed at protecting investors from losses. ‘We didn’t want to be in a situation of being forced sellers in a market that’s very unfavorable,’ the spokesman said. ‘We thought if we dumped, that would be a disservice to everyone in the portfolio.’”
Translation;
“If we have to give all that money back, we would all be stone broke and living out of cardboard boxes under a railroad bridge someplace.”
This story and the Brookstreet story prove that the title of “ultimate bagholder” does not always reside with Joe Sixpack. Joe Sixpack isn’t likely to see 12 million dollars in 10 lifetimes, much less 1.
No…
Correct translation: If we let them take ANY money, we face margina calls, tiggering firesale of the CDOs, our creditors take huge losses and our investors get nothing. By locking the doors we delay margin calls and buy time to…. Pray for a miricale or govt bailout that is needed to keep the entire financial system from collapsing.
“we face margina calls”
You still get those? Mine stopped after college. Lol…
More like “we can’t let you get your money or we won’t be able to loot the cash one more time before going bust.
‘I had a house listed on the bay, $1.75 million, an excellent house. I got a contract, waited two weeks for the appraisal, and it came in 30 percent low. It killed the deal. In my 10 years in real estate, I’ve never had that happen.’”
Oh, PUH-leeze, lady. The appraisal came in 30% just right and you know it. It didn’t have to “kill the deal” either. The sellers could have just dropped to meet the appraisal. Sheesh.
So lets understand he wasn’t happy with getting the 1.9 wanted 1 million more and now he is having to settle to list for 1.79 and will probably get even less…Well, I would say your greed did you in pretty darn well!..hope you get less than 1 million would serve you right…
It always works out that way. The people who wait for higher and higher offers usually end up selling for lower than any of the other offers they got. Greed gets them everytime and they kick their own butt all the way to the bank.
They think they can find a fool who will pay those exorbant prices. Sad to say two of my neighboors found fools to do just that. One sold at $525k(was worth $425k, now $375k and I estimate 275-300k at bottom) and another for $471k(that seller was dumb, even the realtor said his asking price was absurd. He coulda gotten more if he priced it right at the peak when he put it up for sale)
“In my 10 years in real estate…..”
This explains her amazement right there. It didn’t happen to anyone else in the last 10 years either, Pat.
Lefantome, You called that one correctly. If only Pat had “20″ years in the business, she would have experience in this issue. It happened all the time in 1990-1994. I had to do a “cash in” refi in 1994 to get a lower interest rate. Same lender, but to lower my payments 20%, I had to put $10,000 more into equity, to make the loan 80% LTV. And that was after the lender agreed to “push” the in-house appraisor for another $10,000 in value. I bought the house in 1990 using 25% down. Bottom line: 35% reduction in value over 4 years.
Pat, in 2023 you will not be so suprised when your appraisels come up short, because you will have seen it in 2007! You just needed more experience in the business.
Actually I think that appraisal was high. Prices are gonna drop below what houses today appraise at. Look at the comps and sales history of houses 1998 and earlier which is before the bubble.
“And to be sure, County Hall has squandered millions in botched housing deals and flawed contracts, money that could have come in handy during tight budget times.”
“Since 2000, property taxes have risen 118 percent in the county, Former Miami-Dade Commissioner and Miami Mayor Maurice Ferré noted. ‘Where has that money gone?’ he asked.”
LMAO! The money went up a lot of noses in Miami.
my county spent all the boom money- this year they plan to plant trees
Let’s hope they’re fruit trees.
Where to start, where to start . . . .
I know Darren Blum and that firm. I’m LOL at this whole thing. Check out his law firm’s site and you’ll see what I mean.
and also, am I reading wrong or does it appear that any Briny Breezes folk who took my advice and sold an option against their windfall at a 25% discount in the winter might be sitting pretty now? LOL!~
I was wondering that myself. I remember agreeing with you about selling the option at a discount, although I speculated on how much of a discount they’d have to swallow.
I’d say a hell of a lot less than they would now! And if they wrote it right, they’d get the money and maybe get to keep the property too.
I thought Briny Breezes was bought out for $510m? Has the developer changed his mind and forfieted the disposit because that “land” is worth nowhere near $510m?
It seems like a fine time to avoid investments whose accronyms begin with C and end with O. CMO / CDO / CLO investers = bagholders!
“The seniors invested in securities called collateralized mortgage obligations, or CMOs. Some independent brokers working in Brookstreet offices pitched the CMOs to wealthy seniors at dinner seminars and condominium meetings.”
it’s nice to be wanted and catered to when yer old and grey..
i’d advise any children out there to visit mom and dad a lot more often.
“Flashy Key Biscayne trader John Devaney has temporarily stopped allowing customers to withdraw money from his four Horizon hedge funds, which invest in subprime mortgage securities, in a bid to avoid a fire sale at depressed prices.”
- I think that Johnny’s shine (Flash) has dimmed. Maybe he could hook up with Casey and Crisp in Bakersfield and regain the glow.
or read “Fooled by Randomness.” he might see some of John and Carlos in himself.
“‘ They presented these as very safe, like a bond, paying 7 to 8 percent ,”Blum said . The CMO’S the brokers invested in ,however, were complex and highly speculative he said .”‘
Here come the lawsuits from the bagholders . So the RE industry had seminars getting unqualified buyers to buy real estate ,and the industry had seminars pushing these loan investments from this junk paper, claiming they were safe investments .
So, the whole scheme was commissions for salespeople . This reminds me of the Keating scandal of the 1980’s where they pushed 12% investments in real estate ,but the Savings and Loans implied that they were safe insured investments. Many seniors lost their life savings and some people killed themselves.
Does anybody get the feeling that the seminars were the way that the industry sold their pumped up products . I wonder if the written material from these seminars made any assertions about yield ? Did these investors read the written material about their investments or where they just like the sub-prime loan borrowers who went on these loans without reading the loan documents ?
‘… made any assertions about yield ?’
Who cares about yield, anyway? Don’t you know that real estate always goes up?
If I remember correctly ,the investors regarding the Keating /S&L scandal of the 1980’s never got their money back in spite of Keating going to jail .
Anyway ,you would think a older person would be smart enough not to invest in anything risky and would know that if the yield is higher the risk is higher .
I know alot of older people who were eating it during the low interest rate period . Greenspans war on savings set the stage for people taking bigger risks on investments .
“I know alot of older people who were eating it during the low interest rate period . Greenspans war on savings set the stage for people taking bigger risks on investments .”
Testify, Housing Wizard, you just nailed it to the wall. My late mother ate it when interest rates cratered. People were punished for being prudent.
“If I remember correctly ,the investors regarding the Keating /S&L scandal of the 1980’s never got their money back in spite of Keating going to jail .”
Keating donated a healthy chunk of his ill-gotten loot to Mother Theresa. When Mother Teresa was informed that the money was essentially stolen, and asked if she’d return it so it could back to its rightful owners, she refused.
“Does anybody get the feeling that the seminars were the way that the industry sold their pumped up products .”
Housing Inspector, after living in Florida since 1979, I’ve seen this over and over. Opened my local fish wrap today and there’s a couple of “seminar” advertisements targeted at the folks in Sun City Center, an affluent retirement community. Anyone who has something to sell to seniors runs these seminars on a fairly regular basis: banks, insurance agents, attorneys, brokerages, mobility equipment, doctors, etc. Sometimes they’ll put on a free breakfast or lunch at a local restaurant. There are seniors who go to these things just for the free food. But if the person who runs the seminar is really slick, he or she can come out of it with a few clients. My late father in law got clipped at one of those back in the eighties, although he did get a partial recovery, seeing as how it was a regulated brokerage involved.
Part of the problem, though, is not necessarily so much even the slick seminar salespeople, but the mutual pressure among the retirees themselves. One or two folks will buy in and pressure their friends not to “miss out on a good thing”, so others go along with their “friends”. Lew Perlman, the former boy-band entrepreneur, recently fleeced some Sun City Center retirees before he fled the country (and subsequently returned).
Oops, sorry, I meant Housing Wizard, not Housing Inspector.
“One or two folks will buy in and pressure their friends not to “miss out on a good thing”, so others go along with their “friends”.”
Should read:
One or two folks will buy in and brag to their friends about the ‘easy’ money they’re making, what brilliant investors they are, etc. Blinded by greed, envy and the implication that they’re stupid for missing out on the ‘free’ money, others go along with their “friends”.
“‘It’s almost the type of thing where we see it and you wonder if anyone else sees it. It’s like they turned off the spigot.’”
Doesn’t that statement just sum up five years of voodoo financing?
A lot of the people who are having their house foreclosed on will not have a car repo, because they paid for the car with equity from the house. So now they can live in their car and not have to walk outside to drive to work in the morning.
Better statistics for real estate prices?
Possibly OT, but, for what it’s worth, one need not choose between the mean, median, and mode. An arguably better measure would be a trimmed mean. A trimmed mean “trims” off extreme values, and calculates the mean for the remaining. SO, if 5 percent of the market has prices in the 10’s of millions, yet those prices have nothing to do with the vast majority of the population’s buying or selling experience, trim off the top 5% and the bottom 5% of sales events and calculate the mean for the remaining.
I admit you are throwing away information, usually not a good thing to do. But, the reason it is useful here is that if you just want one number, the information in those extreme right tail sales is masking what is going on in the rest of the distribution, and if what you want to know concerns the remaining 90% of the market, then that’s what you want to measure. The median attempts to resolve this problem, but it continues to give some weight to the extreme cases. But, we can ask, why give any weight to Bill Gates’ purchase of a real estate in measuring the market experience of the general population? The trim mean gives no weight to such extreme cases, and thus is superior.
I just pulled the sales data from the San Francisco Chronicle for the city of San Francisco for the week ending June 30. There were 101 sales in that week. The median is $2,150,000 (yeah, I was shocked, too). But, the mean is only $1,031,931. But we all know the mean is flawed because it gives undue weight to outliers. However, in this case, it looks as if the median has done an even worse job. What’s the 10% trimmed mean? It is $981,236–throw out that 4.2million dollar extreme value, and the calculation is much more accurate as an indication of what is going on in the market.
I would have preferred to use a more . . . rational market, but I am based in the bay area and thus knew more about where to find the data for SF than for elsewhere. Also, I would prefer to have used data for the whole month of June for this demonstration, but I was unable to find the data in a usable form, so I had to hand enter the data. I hope a 1-week illustration is helpful, even as the short time frame (and coming at the end of the month) may have caused other kinds of distortions.
Finally, another alternative is to present the distribution graphically in a histogram. This is the ideal answer if the aim is to give full information. But, the problem for the analyst is that full information is overwhelming. It might be fine for one time point, but comparisons across times or places would be exceedingly difficult to assess, and increasingly difficult as the number of comparisons increases (e.g., multiple months or places).
Thus, the trimmed mean is one way of addressing this problem.
Anyway, Happy Independence Day! I have been spending the last 5.5 months in Prague and I will be returning to the States in a few weeks. This blog has been a nice way for me to keep abreast of what is happening back home. Thanks to everyone.
IAT
IAT - The trimmed mean is an interesting idea. I will run such an analysis for a few D.C. area jursidictions and post the results in the next few days.
With respect to your San Fran analysis, you should re-check the data. As long as all entries are positive numbers, the mean can never be less than 50% of the median. To prove this, test it with a series of small numbers(i.e., 1,1,10,10,10). The median is 10 and the mean is 6.4. Thus, it is impossible to have a median of $2,150,000 and a mean of roughly $1,032,000.
Happy 4th to everyone.
nice catch
Let me see if I understand how hedge funds work. They print up documents, just like at Kinkos. They call the documents, bond certificates, and sell the worthless documents to investors for millions of dollars. I need to get into the printing business.
Damn Ben, unless you have a BOT working on these posts take a break!
“‘It is actually stunning the number of cars we’re taking from people who are supporting the local real-estate market”
ok now if these repo guys could add the new benz’s and all the fancy realtor pimp mobiles, i could enjoy this day more.
excellent article in LA Times: ‘More Americans fall behind on debts.’
Explains why credit card delinquencies were down in May: “People today, in order to keep themselves alive, they’re paying off their credit cards first rather than paying off their mortgages first in order to keep an open line of credit,” he said.”
http://tinyurl.com/36drl4
Jeez that article is lame: http://tinyurl.com/36drl4
“It’s a monster we all created,” - Bullcrap. I didn’t contribute at all. I’ve been saving my money for the time when consumer hard assets deflate. Harvest time for the bubble waiters.
“There are still signs of consumer financial distress, which will continue throughout most of this year as the worst of the housing problem works its way through the economy,” - Oh god, another “we found a bottom” shill. The worst hasn’t even gotten INTO the economy yet.
One thing I found out while researching a short sale for a friend in distress, the bank won’t even consider it unless you’ve missed payments already. They figure you are capable of fulfilling your obligation to them as long as you keep paying.
the article is lame? or quotes within it?
“‘We’ve had people in their 80s in here in tears,’ Blum said. ‘These people are devastated.’”
Welcome to America.
another person from Main Street satisfied with the Goldilocks economy.
Yeah, “The repo man is ‘getting busy’”…with Goldilocks.
These people were betting on the idea that relatively low income borrowers would be able to continue debt service payments when the debt service cost increased by insanely large percentages. Essentially, they bet on the inevitability of mass indentured servitude.
Forgive me for being somewhat deaf to their pleas.
“The county laid off five employees from its development department Monday and has lost another 40 or so in the past few months through attrition.”
They’re still hiring planners and related jobs at many towns in W. Colo, see lots of ads. It’s just another indicator I watch, when the ads disappear, we’ll be one step closer to reality here.
I’m going to ITT for their new construction manager program, damn ITT always got their finger on the pulse of what is HOT HOT HOT!
Yeah, like the people who got “degrees” in HTML in 99.
“Devaney boasts a Gulfstream jet, a collection of yachts, and a Rolls Royce. As of last year, he had 27 properties ranging from Vero Beach to the Bahamas. Last year, he and his wife bought a $16.25 million home in Aspen, Colo., and he has assembled an art and antique collection that includes Renoirs, Picassos and Chagalls. He also has one of the few original copies of the Constitution.”
Ironic that he owns an original copy of the Consitution. Maybe he should have taken the time to read the document.
remember this mr. devaney?
Prospering in an Implosion; Subprime Market’s Fall Plays to the Strengths Of a Bold ContrarianApril 12, 2007, Thursday
By VIKAS BAJAJ (NYT); Business/Financial Desk
Late Edition - Final, Section C, Page 1, Column 2, 1643 words
DISPLAYING ABSTRACT - John Devaney has ammassed fortune by dealing in asset-backed bonds through his United Capital Markets company; often makes decisions against conventional market wisdom, turning big profits while others falter; his early beginnings in business are profiled
-he owns an ‘original copy’ of the Constitution-
Is that something like owning ‘negative equity’ in a house ?
Sorry, I have ZERO sympathy for the seniors who lost money in a speculative venture. Thats zero, zip , nada, none.
Being on the receiving end of these cheap-assed money grubbing retirees in the 70’s/80’s in the hospitality industry, they act like Florida & the average worker should bow down and kiss the ground they walk on.
Cheap tippers, arrogant attitudes, miserly cranky blue hairs driving expensive but crappy Cadillacs are my memories of this set.
Used to laugh at the lines snaking out the door at Dennys at 6am for the Early Bird Special !! ( gotta save $2.00 you know )
But it’s ok to spend $50 a night on bingo cards/markers/troll dolls.
They all got exactly whaty they deserved: greedy people who got scammed by smarter sharks!
Sure, a few seniors are pretty decent but overall the Fl retiree class makes me loathe setting foot in that state again, with the attitude of
” I got mine, now screw anyone else .. and keep the noise down you young punks “.
Also, as a prior poster asked, I do the same: where the HELL has all the money gone from the record years of tax revenue?
The Tampa Bay area infrastucture is a miserable joke. Long lines in retail stores because of slow computer networks, horrible DMV offices w. slow lazy understaffed people, and more. The state obviously hasnt & will never spend any money on useful infrastructure. Just an ever increasing horde of govt employees and take-home-car law enforcement officers.
Gee, wish I had a company car at taxpayer expense. Of course when that jaywalker causes 14 officers to respond, and they then stand around & bullshit for an hr. then drive off in a mad mob to the next scene, why then I’m mighty glad for them take home cars for such swift response.
ok- I’m done. for now!
S***, Aqius, if they’re so bored, send them over to Alachua County. We have burgeoning narcotics trade, property crime, traffic violations (leading to injuries and deaths), and violent crimes.
In return, we’ll send you some of our plentiful crop of bums.
Screw the cops… I hate cops…
Andrew, how often do you have to report to your probation officer? How soon will you be off probation?
I’m sure this will make make it to “prime time” in the blog tomorrow, but I just had to post it tonight, as it’s hilarious. These people are shocked! that there are bums in downtown Miami. Shocked!! I think you have to go to herald.com to get it:
Vagrants are tough reality for Edgewater condo owners
BY LAURA MORALES
llmorales@MiamiHerald.com
If we are already seeing houses now for 50% off, then we can expect to see further drops in the next months and years. This is music to my ears as I have been priced out of almost any house almost anywhere. A 50% drop would make houses in many cities and states affordable to us middle class people.
Questions:
1. Is said drop based on peak prices in q4 2005?
2. Are the drops adjusted for inflation?
3. Will even “cheap” locations experience as much drop? Less? more? I get conflicting answers on that. Some say cheap locations are undesirable and therefore must drop more. Others say cheap locations are more affordable so most people will buy there over the more expensive locations.
4. If the disparity between “cheap” and “expensive” locations shrinks enough, won’t it make more sense to pay a slight premium(as opposed to a huge premium) for the desirable location?
5. Is there really a such thing as “location, location, location” or is this made up by realtors and speculators to justify the bubble prices?
Just one random comment: Shouldn’ it be “a drop of half the PRICE is not unrealistic now?” No way did these houses double in VALUE over the Bubble - was there some sort of sudden increase in the innate utility of particleboard and granite? Nope - the bums involved just doubled the price (as salaries remained flat) and expected everyone to get in line for a financial beating. If anything, from a purely VALUE viewpoint, the Bubble-houses are disasters: often thrown together, poorly designed, horribly built monsters that are not practical for a world of higher energy costs, not to mention many of them will probably start falling apart about when the doomed owner’s ARM resets! Hahahaha!