Buying Isn’t Gone - It’s Just Deferred
The Des Moines Register reports from Iowa. “The slowdown in home building is dramatic, dropping 26 percent in the Des Moines metro area from January to May compared with a year ago, building permits from the U.S. Census show. Construction activity fell 23.5 percent in the Des Moines area from 2005 to 2006. Real estate leaders say the bulging inventory puts buyers in the driver’s seat.”
“Iowa Realty agent Kris Mehmen also is having tough conversations with sellers. ‘They may say: ‘You tell me my house should be priced at $200,000, but let’s try it at $219,000 or try $224,000 or $300,000.’ It comes down to the agent having enough gumption to tell them it won’t sell.’”
“Real estate leaders say 2007 represents a return to a more traditional sales market after setting a record in 2005. ‘It was the crest of the wave,’ said R. Michael Knapp, chief executive of Iowa Realty. ‘2005 was the best year I’ve seen in my 35 years.’”
The Clarion from Indiana. “Seven months into the year, Gibson County sheriff sales on foreclosed properties are moving at a pace to set a new record. Last week, the Gibson County Sheriff’s Dept. advertised its 99th sheriff sale this year, compared to 120 at year’s end in 2006, which topped a previous all-time-high 105 sales.”
“Chief Deputy Sheriff George Ballard said sheriff sales are the result of a court ordered bank foreclosure for the non-payment of standard monthly mortgages.”
“‘People borrow equity on their house because of credit card debt, then can’t afford two mortgages and the credit-card bills,’ said Indianapolis lawyer Andrew Klopchin.”
“Interest rates a few years ago were at their lowest point in 40 years and have since risen, increasing the monthly payments on adjustable-rate mortgages. ‘That’s why we’re seeing all the foreclosures that we’re seeing now,’ said bankruptcy attorney Gary Hostetler.”
The Star Press from Indiana. “Muncie bankruptcy attorneys say they have seen an increase in filings that echoes a 70-percent jump statewide so far this year.”
“And although some of that increase is in comparison to an artificially low total in 2006 that was caused by tougher bankruptcy requirements, one local attorney said the increase in home foreclosures also shares the blame.”
“‘The new problem is just that foreclosures are so bad,’ said Muncie bankruptcy attorney Gordon Doyle, who has practiced for 32 years. ‘The way you stop a foreclosure is a Chapter 13 bankruptcy.’”
“The Associated Press reported Friday that that bankruptcy filings in two U.S. bankruptcy courts in Indiana had increased nearly 70 percent over 2006. More than 13,000 bankruptcy filings were recorded through June, a big increase over 7,700-plus filed last year.”
The Indystar from Indiana. “The dramatic and widespread jump in Marion County property taxes threatens to depress housing prices or at least freeze the steady rise in home values that property owners have come to bank on.”
“‘I see values coming down to adjust to buyers’ ability to afford the home and the taxes that come with it,’ said Kevin Kirkpatrick, president of the Metropolitan Indianapolis Board of Realtors.”
“Real estate professionals say some sales are falling through as the impact of higher taxes pushes some properties out of reach for buyers. Others say the increases could result in even more foreclosures.”
“Tom Ellis and his wife had planned to sell their two-story College Park home and move into a newer one-story home in the area. But now the Pike Township couple are holding off on putting their home up for sale and seriously considering moving out of state.”
“‘We had been counting on getting a certain amount out of our house, but there’s too much stigma about the taxes to sell it now,’ Ellis said.”
“Just how severe a blow it will deal to the city’s already struggling residential real estate market is unclear. Realtors report some closings of home sales have been abruptly called off, while offers are being renegotiated to reflect the unexpectedly higher tax bills.”
“And some homeowners, particularly retirees on fixed incomes, may find they can’t afford to stay in their homes. ‘If you think the foreclosure rate is bad now, just wait,’ said David Matters, mortgage consultant in Indianapolis for Nationwide Mortgage Funding.”
“Indianapolis ranked third among U.S. cities in overall home foreclosures last year.”
“‘Some people have got to come up with $6,000 (extra) by the end of July’ to pay their new taxes and avoid foreclosure, said Pegg Kennedy, a Realtor in Indianapolis. ‘My voice mail is almost full from people saying, ‘Help me, help me.’”
“First Mortgage of Indiana called off one of its closings in the past week when the buyer no longer qualified for the loan covering the mortgage, taxes and insurance on the home. Once the new taxes were figured in, the sale ‘blew up,’ said Michael Strawn, a VP at First Mortgage.”
The Journal Sentinel from Wisconsin. “One big ‘if’ hangs over metro Milwaukee’s new-home market, pushing June’s production numbers to an eight-year low.”
“‘People are ready, willing and able to buy, with one contingency - the sale of their existing home. So everything waits until that sale,’ said Matt Moroney, executive director of Metropolitan Builders Association.”
“‘What we’ve got now is more perception than recession. Buying isn’t gone - it’s just deferred. A lot of people, constantly bombarded by bad news like markets crashing in Florida, Arizona and California, are just scared to make a move,’ said Waukesha builder Bob Flanagan.”
“‘Builders say there are a lot of people out there who are very interested in buying,’ Moroney said, ‘but they’re also very cautious. And even though it’s a good time to buy, interest rates are still near historic lows and builders are offering incentives, there’s nothing forcing people to act.’”
The Wisconsin State Journal. “Like the single-family housing market, the Dane County condominium market suffers from excessive inventory.”
“A total of 2,470 condos were on the market during the first quarter of 2007, more than double the number two years earlier, and 252 were sold, according to the South Central Wisconsin MLS.”
“The high inventory is the result of slower sales and a boom in condominium construction. The number of Madison condominium parcels in new and converted buildings rose 12 percent last year to 14,012, according to the city assessor’s office.”
“About $194 million worth of condo projects were completed last year in the city, more than six times the $32 million in projects completed in 1997.”
“Developers who once planned on a two- to three-year investment turn-around for a condo project now expect six to eight years, said Brandon Buell, whose family is building the new Hometown Grove condos in Verona in partnership with Elliott Construction of Middleton.”
“‘These developers have got their necks on the line,’ he said. ‘They’re paying a lot of money to do this.’”
“The slow market has prompted developers such as Joe Krupp, who built Kennedy Point condominiums on Winnebago Street, to offer more buyer incentives, such as leases with an option to buy in, which some rent is credited toward a down payment. Kennedy Point had 10 of 42 units sold by mid-June.”
“‘We have no shortage of traffic and interested buyers going through our projects,’ Krupp said. ‘For some reason, they’re just not pulling the trigger.’”
“John Sveum of Yahara Builders is…worried about Prairie Park, the partnership’s second condominium project in Fitchburg’s Swan Creek neighborhood where nearly half of the project’s 32 units have sold in 10 months.”
“‘It truly is painful to do all right on one project and suffer on the next project,’ he said. ‘It’s kind of a helpless feeling on our end because it’s not anything we’re doing wrong.’”
“The slow condominium market doesn’t mean developers are desperate enough to accept extreme low-ball offers. ‘We’re not talking a fire-sale situation here,’ Krupp said.”
“(Developer) Pete Frautschi said he gets angry when someone offers $500,000, for example, on a $750,000 unit. But Frautschi said his sales staff calms him down so he can make a more reasonable counteroffer.”
‘Newly released data show that Wisconsin foreclosures remain at escalated levels. After rising 34% in 2006, Wisconsin as a whole had 9,229 foreclosure filings in the first half of 2007, which on average, equates to nearly 73 foreclosures filed every business day.’
‘Wisconsin foreclosure filings in the first half of 2007 were up nearly 23 percent compared to the first half of 2006, and filings for the month of June 2007 filings were up more than 8 percent from May. More than double the statewide average increase, Milwaukee County foreclosure filings are nearly 48 percent higher compared to the first half of 2006
Ben, I got to say you’ve done a fine job of combobulating all the stories today into cohesivifying posts. It’s taken me awhile to read through all your links.
“‘People are ready, willing and able to buy, with one contingency - the sale of their existing home. So everything waits until that sale,’ said Matt Moroney, executive director of Metropolitan Builders Association.”
The above statement/premise/conspiracy is one of the major factors in the real estate market run-up frenzy.
Since WHEN did the American Consumer/Market allow NAR/NAHB/REIC media gang to DICTATE and ANNOUNCE When, If and How much Buyers are ABLE and WILLING to pay for their overpriced POS and SERVICES?
Presumably, these people called a real-estate agent and asked to see houses (ready), voluntarily applied for a mortgage (willing) and were approved for said mortgage (able). However, they were smart enough to place a contingency on their purchase, effectively killing the transaction. Sounds rather straight-forward to me.
“(Developer) Pete Frautschi said he gets angry when someone offers $500,000, for example, on a $750,000 unit. But Frautschi said his sales staff calms him down so he can make a more reasonable counteroffer.”
If $500k wasn’t “reasonable” he would laugh in their face. But he’s not laughing. He’s getting upset. Which means he knows $500k *is* reasonable.
Give it 6 months, and he’ll be nodding his head at the $500k offers. It’ll be the $250k offers that make him “upset”.
500K for a condo in Wisconsin??? WTF - I am angry thinking people can be this stupid! I wouldnt pay 500k for a condo in DC unless I get water front views or something. I better see gold sprinkles around the doorways hahaha…
This is absurd. Does anyone know the median or average income for Wisconsin??? Holy Molly.
Does anyone know the median or average income for Wisconsin??? Holy Molly.
Ya sure. I tink it’s aboot enuf to buy plenty of that blue ribbon and a couple of them hefers.
If milk keeps at these prices the median income is going to buy a lot of new Ferraris.
Very rarely does one get an opportunity to make real moneys from cows. But since cows are eating field hay (water and sun) and just a little bit of work (milking) at $20/100 X 12,000 X 30 =
$72K per month minus normal operating expenses of 36K = yubba dubba doo
dairy animals eat a special grain formula (expensive) and hay. they only go to pasture for very short periods or if they are part of an organic dairy.
Nor is water free
“500K for a condo in Wisconsin???”
They built a luxury condo development in the little blue-collar river town of Prescott, Wisconsin, only to complain about the lack of millionaires arriving to buy them and turn the town around.
This bubble was a great example of mass delusions in action, and the idea that masses of rich retiring boomers wanted to move to a luxurious condo or McMansion in Hicksville, USA was one of the most pervasive fantasies.
Reminds of those old Westerns where all the towns fought over train stops.
Madison is one of those mysteries. I have the opportunity to relocate there from Chicago, but there is absolutely no way I am willing to pay more for housing in cowtown than in Chicago. Not to mention their property taxes. I had a realtor send me some listings. One place for sale at $350K had taxes of $11,900!!!!
(Madison actually is a fairly nice/hip/cool place, though.)
bk, that is almost a grand a month in taxes. For that, the county and state better provide me with the following:
-waiter
-driver
-chef
-masseuse
-personal physician
-housekeeper
-someone to actually go to my work and do my job
I know someone there who grew up in a nice-ish 4br house on a small lake in SE WI. In recent years, these prices have gone through the roof because of specu-flippers from Chicago. I believe he told me his mom’s taxes are now up to 27K.
Please tell me those tax numbers are off? That is crazy
No Wisconsin has a 2.2% tax rate (less if you live north of 110).
Madison is 70 square miles of insanity (fun?)surrounded by reality.
Yes but is there a sales tax or state income tax as well?
Yes, there is a normal sales tax, PLUS their income tax rate is pretty much 6.5% if you make any kind of money.
“Does anyone know the median or average income for Wisconsin?”
“The per capita personal income was $32,157 in 2004.”
wiki-Wisconsin
Which has essentially no relationship with incomes in the big cities there where pay is much higher and nearly comperable with the coasts.
In six months he’ll be bankrupt, his spirits will be crushed, and we’ll be reading about how he plunged himself off his half-filled condo project.
What he needs is a prescription for Prozac…
I think a dose of reality…and then high doses of Oxy.
It is STILL half a MILLION dollars you douche be happy you have people dumb enough to give you that….bah!
“(Developer) Pete Frautschi said he gets angry when someone offers $500,000, for example, on a $750,000 unit. But Frautschi said his sales staff calms him down so he can make a more reasonable counteroffer.”
Now that’s funny stuff. I can just see the guys face turning purple as his staff tries to console him. He’s in the anger stage of grieving.
Flashback 2003….Every backwater, jack@$$, podunk nowhere town decided that ALL THE BOOMERS were headed right for their little towne to retire (or at least have a 3rd home)…..
Fast Forward 2007……Whatya mean Condos arent a good idea? Everbody wants to live in a million dollar condo with SS appliances, marble floors, and granite counter-tops…..
Condos in [insert podunk towne] were NOT, are NOT and NEVER WILL BE good ideas in small rural towns….
that is why God made apartments.
They are not a good idea even in bigger towns where they want to sell condos for $400K+++, but you can rent something similar a few blocks away for $800 a month.
Yes, and besides, condos are just another sign of middle class capitulation.
Never, ever buy from an angry developer!
ABX indices got slaughtered today folks, even AAA is beginning to crack
http://www.markit.com/information/affiliations/abx.html
‘80-’82 was worse
“What we’ve got now is more perception than recession. Buying isn’t gone - it’s just deferred. A lot of people, constantly bombarded by bad news like markets crashing in Florida, Arizona and California, are just scared to make a move,” Flanagan said.
My, how the winds of the RE WARS have changed. You didn’t notice the likes of Flanagan and all the “war profiteering” 6%ers complaining about the happy news BOMBARDMENTS of “Buy Now” and Get Rich with Appreciation on your RE Investment HOMES
An estimated 25 million baby boomers soon will turn age 55, creating more demand, Alexander said, while the cost of construction materials continues to rise.
And they’ll ALL FLOCK to Madison in snowshoes at -30 degrees to BUY a $750,000 “Ice Palace condo” overlooking the frozen tundra while drowning in debt and dreaming of Acapulco ?
Someone IN RE is buying and smoking some GOOD WEED in downtown Madison
Deferred buying means the same thing as “no sales,” doesn’t it? Or are we in the land of Realtorspeak, where it means something else?
This is the absurd new mantra of all markets: Any decrease in value is a short-term phenomenon. We’re seeing it now with hedge funds too, where monthly measures of value are being made instead of more accurate daily measures. Why? Because these daily drops in value are supposedly “just short term moves”. The same is being said for housing, where sales haven’t really vanished, they’ve just “temporarily” vanished, of course. This is all part of the denial process. First we had “housing always goes up”, then we had “it’s a normalized market”, then we had “a stable plateau”. And now everyone’s acknowledging that its tanking — but hey, it’s just “temporary” — sales are “deferred”! LOL.
There’s one surefire way to get the whole world to acknowledge that the market is truly shattered and falling to pieces: Just sit back and wait. Because all the spin in the world can’t stop this cataclysmic crash.
Its a clever stall tactic to allow the sharp sharpies to get out while they can/move money/prepare for lawsuits/shredding documents as we speak.
Joe Public wont have a chance to sell, just like the Enron pensioners.
Nah, Apple woulda been ecstatic with 500,000 people “deferring” their iPhone purchase.
‘It was the crest of the wave,’ said R. Michael Knapp, chief executive of Iowa Realty. ‘2005 was the best year I’ve seen in my 35 years.’”
Yeah and it was a great time to buy in 2005 right..chump!
Get religion a little late. The REIC took homedebtors to the cleaners. Now substantial price declines are coming to a neighborhood near you.
Got No debt?
I’m seeing this play out right behind me. House was sold a year ago for about $30k less than the original asking price.
The new owner, who I like to refer to as The Real Estate Genius, listed the house at the very same asking price that the previous owners started out at two summers ago. And, guess what? It’s still for sale?
So, now I’m seeing evidence of remodeling. New, dressier window shades. I guess that’s a touch that the home stager forgot when the house was for sale back in July ‘05-March ‘06. But the exterior paint job still sucks. And the yard is full of weeds. Both of which probably won’t be attended to any time soon.
And that’s the “Arizona Slim Spies on the Neighbors” report from Tucson.
“‘I see values coming down to adjust to buyers’ ability to afford the home and the taxes that come with it,’ said Kevin Kirkpatrick, president of the Metropolitan Indianapolis Board of Realtors.”
Duuuhhhh You think? Shill!
The funny money is drying up and so are the dopey homedebtors. lol!
“‘I see values coming down to adjust to buyers’ ability to afford the home and the taxes that come with it,’ said Kevin Kirkpatrick, president of the Metropolitan Indianapolis Board of Realtors.”
Bingo !!!!!! the lights
just came on for Kevin
Bummer “Kevin” Cannot do the math on how low those prices are going to be…
Nor understand… we allways undershoot the mark. Oh… this is going to be worldwide and ugly… When? I wish I knew. But it will start a hard fall in 2007.
Christmas will suck. (Maybe I can finally find a wii in the store? Naaa…)
Got popcorn?
Neil
“And some homeowners, particularly retirees on fixed incomes, may find they can’t afford to stay in their homes.”
I’m on a “fixed” income…and I’m not retired. Most of us are. I have no sympathy for retirees…they could have worked longer or invested better. They had two bubbles as of late (stock, housing) to make up for shortfalls. Too bad.
Incidentally, since this is a Midwest post, some observations are in order. I’m visiting relatives in Topeka, Kansas, and notice a bunch of new California plates…at the Best Buy, at the Macy’s, in the newer subdivisions by the lake. The equity locusts are here in Kansas!
If you are stuck chest deep in the deep muddy of flyover country, is there any exit strategy?
Can’t go to the coasts, can you?
Pretty Harsh Dude
You typical retiree is interested in preservation of capital and may be in fact quite old and not able to participate in chasing bubbles. We’ve already seen plenty of examples of younger retired people posted here who attempted to further expand their generous retirement savings and lost it all. I for one would not wanted my grandparents to lose their home to a overly greedy tax system.
I’m on a “fixed” income…and I’m not retired.
I find it amusing when older people just assume that today’s worker bees can just ask for some overtime to make some extra bucks.
I haven’t seen overtime in at least seven years, they just won’t pay for it anymore.
That is a small business reality. OT is a gross margin killer.
You can work all the overtime you want in high tech. You just won’t get paid for any of it!
I’m on “part time” at my firm at around 45 hrs/wk. Seriously. I had it great by comparison when I was in IT… {Sigh}
I think we missunderstand what “fixed income” meant. Back in the day, you retired with an x dollar a monthly pension, and that was your income…. FOREVER. No cost of living increases.
Fixed income meant you weren’t getting any raises. If your pension was $500 a month in 1950, it was still $500 a month in 1970.
Even Social Security started like that…. no COLA.
So, if you’re on a fixed income it is important to ALWAYS be spending less than you make because you need to be putting away money for next year when the prices are higher.
I think the 1970s with its double digit inflation put an end to “fixed income”. People realized they needed to be living on something that paid more as prices went up… or a portion of the interest that their nest egg generates. But again, the nest egg needs to be generating a return higher than the rate of inflation, and you would have to live just on that “above inflation” to preserve the nestegg. This lead to risky investing seeking high returns, which inturn, ate the nestegg.
In case you never thought of it, part-time, second jobs are still an option. My father did that in order to pay the mortgage off sooner, and later to boost their retirement savings.
Great point Anthony. Who isn’t on a fixed income? For cryin out loud go ask your boss, if you have one, for more money. See if you get it. Also, we are all limited by how much we make. Just because Amex says you can spend a million in month doesn’t mean you can. retirees all whine w/cheese because they don’t have the income from work anymore. Well, go become a greeter at Wal-Mart then. What can I tell you.
See, that is another pet peeve of mine in this country. Bad enough most people want to retire at 45 in this country. However, it is compounded by the fact that you expect to love free for the next 50 years. Sorry, everyone’s gotta pay the freight. There is no free lunch in the universe, unless you are the Fed and can just print your own money and then lend it out with interest. What a racket.
Meant to say “live free.” Freudian slip.
“Fixed income” has always been a euphemism for “low income”.
There’s nothing wrong with that though - in previous years the assumption was that by the time you’re retired low income is not a problem - you don’t have kids to support, and you have a paid off house, so your expenses are low. Problem is that now gramma and grampa have gotten their McMansion and not only have high mortgage but also high utility bills, maintenance costs, etc.
And at least around here gramma and grampa are still supporting kids; their grandkids.
There is a good chance that these are US Army families from Fort Riley….a lot of them come over to the west side of Topeka (Wanamaker) to shop on weekends. They keep their out of state plates, when they find out how much Kansas zings you for Property Tax on vehicles.
Or they are relatives from Cali, visiting their relatives who took the Santa Fe railroad buyouts a few years back, and moved to Topeka when they closed down all their California shops.
Or they are illegals……..
There is no reason WHATSOEVER to move to Topeka
“(Developer) Pete Frautschi said he gets angry when someone offers $500,000, for example, on a $750,000 unit. But Frautschi said his sales staff calms him down so he can make a more reasonable counteroffer.”
HAHAHA!
I offer $250,000 clown! get a real job.
500k to Frautschi = upsetting, but a start to negotiations
400k to “= a bit more upsetting, but still negotiable
300k to “= lip quivering
200k to “= blue in face pissed
anything under 200k is gonna be “call in the paddy wagon, cause’ somebody just got their eyes gouged out.” time
Today I received and E-mail from Kimberly Blanton of the Boston Globe. (Real Estate Cheerleader; Buy Now or be priced our forever).
Want to make a comment on a bailout story I’m writing today? I’m
interviewing lots of folks- not just you - but would like to get your point
of view into the paper.
My response:
No thanks,
I do not think that your reporting is fair or accurate nor do I believe that your newspapers’ editorial viewpoints are in line with mine. In my opinion you have been a paid shill for the local Realtors who advertise in your paper by extolling the virtues of home ownership when the economic fundamentals are not there to make such a statement.
Then you try to play the other side of the coin by saying how all of these victims of predatory lending need a bailout.
So what is it?
• Does Real Estate always go up as you have written for many years. If this is true then there is no need for a bailout. Greed is good an people can take out toxic loans knowing that they are “Toxic” but want to flip the house in 2 years.
• Or are all those folks victims?
Good luck with your story. We are now in the second inning of a really terrible mess due to easy money. Housing prices are going to tank. Read the news today about S&P declaring all subprime loans as junk. Lending standards are tightening which will force prices to take a nosedive. Consumer spending is drying up (Look at Home Depot and Sears today). This will be bad.
Yet in the last 2 years you chose to put blinders on and print reports straight from the Mass Association of Realtors and NAR even though they were playing with the numbers by publishing month over month versus the normal year over year. You either chose to ignore this or did zero research. So now that it is absolutely apparent, you want to hop sides.
The Globe portrays themselves as a mouthpiece for the little guy; The poor and middle class. But your reporting over the last few years has guided people to financial ruin and I hope you understand this and use better judgment in future stories.
NIce job. I’ve emailed her in the past regarding the Globe stories about a potential bailout for homedebtors. She sent my email to her editor who contacted me and asked if she could put my email in the editorial page. I declined because I don’t trust the Globe.
What? They want to print your opinion but you declined? Why did you decline, especially if your opinion differed from their’s on the subject?
Newspapers reserve the right to edit letters to the editor drastically.
what if you write to an editor other than, Drastically?
A bit of fun at your expense, I hope you are not angry.
I wrote a few letters in Hawaii, and each one was published word for word….concise, and well thought out are what those guys want…..
“(Developer) Pete Frautschi said he gets angry when someone offers $500,000, for example, on a $750,000 unit. But Frautschi said his sales staff calms him down so he can make a more reasonable counteroffer.”
If Frautschi is angry now can you imagine being a buyer ballsy enough to demand to see the build costs before making an offer ? Why are developers entitled to 50-70% markups anyway
50-70% markups are sought for the risk/return requirement. However, 3 years ago, this “great idea” was a risk free way to make loads of money…RE going up, up, and away…..Demand was UN-SATISFIED, almost an unqquenchable thirst for more and more sh@tboxes…… Now, downturn is in full swing, and the RISK/RETURN is getting normalized after the run-up…..and little Frautschi is getting spanked by the market….
His little lip quivering on “percieved” lowball offers….”Hows the cant miss investment in real estate now pal?”
Developers are entitled to whatever markup the rubes will pay! Just like the parasites with earned income credit, food stamps, and other welfare have their entitlements. Section 8 to the rescue.
“(Developer) Pete Frautschi said he gets angry when someone offers $500,000, for example, on a $750,000 unit. But Frautschi said his sales staff calms him down so he can make a more reasonable counteroffer.”
It must be tough to be in the construction business when you get emotionally attached to the product. I wonder if this guy will get violent if the offers start coming in around 400, 350, etc. To me a 750K condo is something you see in a movie based in NYC, with rich people swilling drinks and looking out over the Hudson. I can’t imagine what the view is of in Wisconsin - a dairy farm?
That is too funny a 750k Unit. Perhaps it is a hundred million dollar unit - that is if he declares it to be. Call it what he wants, if the best price he can get is 500K, that is the deal, and if he does not like it he should take his properties off the market for a few years. As for dealing with angry people, life is too short. I would be walking as he was counter-offering at $750K anbd offering to upgrade the refrigerator…
I mean no insult to Wisconsin here. However, nothing short of the governor’s mansion should be running for 750K in WI. Puh. Lease. When homes and condos are going for the same as the bubblicious South OC you have serious problems. For all our problems, at least we have sunshine year round. I am not justifying that OC is better. I am just amazed. The mark up on these, as pointed out above, has to be in the 50-70% range. Man, these guys are so greedy! However, that is the new paradigm. Make millions so you can retire at 45. Damn! We are so screwed in this country. So much for RE being local. This mother of all bubbles is still in the first inning. Forget about 2nd inning. This clown is going to get his financial head handed to him.
Agree.
I remember being shocked at $400k condos on Miami Beach. Sorry, but $500k condos anywhere in the midwest is ludicrous, let alone $750k condos.
Even $500k condos here in the ‘burbs of DC is ludicrous. Maybe downtown near the river, if they’re *really* luxurious condos, but even that’s a stretch IMO.
$500k condo is reasonable for Manhattan, San Francisco, and Miami Beach, and maybe some small pockets in other major popular cities, but that’s about it. $750k is too much to pay for a condo anywhere, unless you’re a Fortune-500 person or thereabouts. Not too many of those in Wisconsin though.
Article about 750K condos in Suttons Bay, Michigan: “A couple who agreed to buy a BayView condo unit in February and paid a $73,900 deposit filed suit in Circuit Court against the developer of the condos on Monday, claiming an illegal disclosure statement and purchase agreement were provided, among other allegations.
Meanwhile, the owner of another BayView condo unit, Melinda Funston of Northport, stands to receive the $789,409 she is owed by the developer of the condos following a separate action Monday in Circuit Court.” Leelanau Enterprise 6/12/2007
“$750k is too much to pay for a condo anywhere, unless you’re a Fortune-500 person”
I agree, and would like to expand.
500 people / 50 states = 10 of these $750K condos per state.
And I’ll bet you can increase the state average when taking out places like WI, ND, SD, MI, IA.
I grew up in WI. (30yrs) Now live in So Cal till I find my next “stop” in life. WI has GREAT people, and is a great place to live GO BIG RED - GO PACK!! As long as you don’t mind the winters.
I was lookin at condos in Madison area before moving. Top of State St. they were building some big towers by the capital. If I remember correctly they started around 230K-250K.
Even though “Real Estate always go up” whoever is askin 750K for a CONDO IN WISCONSIN must have just come off that dairy farm after getting kicked in the head by one of the cows!! Regardless if your lookin in Milwaukee or Madison…THAT’S RIDICULOUS!!
Speaking of Milwaukee; Are they still busing there?Or have they implemented Friedman’s wonderful ‘School Choice’ program?
no idea - I have family there - but not in Milwaukee..
“‘What we’ve got now is more perception than recession. Buying isn’t gone - it’s just deferred.”
What we’ve got here is failure to communicate……
“Real estate leaders say 2007 represents a return to a more traditional sales market after setting a record in 2005. ‘It was the crest of the wave,’ said R. Michael Knapp, chief executive of Iowa Realty. ‘2005 was the best year I’ve seen in my 35 years.’”
Yes Mr. Knapp, as a RE agent it was the best year of your life, now explain please what was the best year of your 35 years to have been a buyer and what were the parameters?
“‘What we’ve got now is more perception than recession. Buying isn’t gone - it’s just deferred.”
Correction: Buying is gone, and recession is deferred.
Getstucco:
Correction: Buying is gone, and recession is deferred
Great POINT
“Real estate leaders say 2007 represents a return to a more traditional sales market after setting a record in 2005.
There’s going to be nothing traditional about the sales market over the next several years. Traditional is when people buy and sell with no frenzy, overbidding and overpricing. Traditional is when people qualify for the mortgage they’re getting and can make the payments. Traditional is when incomes allow people to buy in the area they live and work in. Traditional is when people can actually afford the taxes and insurance. You’re going to have to go a long way back to see traditional.
As Palmetto would say: “Testify, brothah!” Traditional is also being asked to bring in 2-3 years of tax returns, last 2-4 weeks of pay stubs, maybe 2 references (non-family), 3-6 months of bank statements, and justify/describe the credit report that the bank pulled, vis-a-vis, what are all these CCs and car loans, etc. It also means having 6 months of payments in the bank in case of job loss, etc.
“You’re going to have to go a long way back to see tradtional.”
So let’s see just how far in real numbers, not just all the paperwork mentioned.
Average person or household income is $60K/year. I know, I know that is high, but let’s go on the high side just to see how it plays out. Assuming 2.5X income, see I went a little more conservative there, you are at a 150K home. I realize that even at full financing @ 6%, you are at 900/month for 30 years.
Put another way for every 100K borrowed at 6% annually you have the following:
100K = 600/month = 40K/year (assuming 2.5x income)
200K = 1,200/month = 80K/year
300K = 1,800/month = 120K/year
Well, you guys get the picture and besides once we go beyond the 300K, you have to ask is the house really worth it since you may never recoup what you put in unless you make a big downpayment. In addition, once you go above 120K/year, you are getting into rarified socioeconomic heights, even in these robust economic days of the US.
Yup. Traditional is when people brag about how they survived the qualifying process for a mortgage. Stuff I used to hear growing up.
Got 10% down?
“‘We have no shortage of traffic and interested buyers going through our projects,’ Krupp said. ‘For some reason, they’re just not pulling the trigger.’”
Mr. Krupp, just maybe some equate ‘pulling the trigger’ to shooting themselves in the head. Hope you like eating hotdogs and popcorn as I see lots of both in your future!
It is actually an excellent comparison, since at todays prices, purchasing would be financial suicide for the majority of potential buyers. Things are just too expensive right now, and purchase prices are running double rents in many bubble areas or more. I can see where the pull the trigger thing came from.
So many stupid deluded developer quotes and so little time,
“This is the best time to buy a Downtown condominium,” said McGrath, who opened Nolen Shore at 350 S. Hamilton St. early last year. “It’s a very competitive market and it’s not going to stay this way forever because of higher costs.”
Guess thats why home depot is having such a hard time, eh ? Guess costs are coming down with no demand !
“We have no shortage of traffic and interested buyers going through our projects,” Krupp said. “For some reason, they’re just not pulling the trigger.”
They’re called “looky-loos” dummy, they have no intention of buying.
“It truly is painful to do all right on one project and suffer on the next project,” he said. “It’s kind of a helpless feeling on our end because it’s not anything we’re doing wrong.”
You built expensive condos in a college town dummy, that wasn’t wrong ?
“At Bella Casa, Hendrickson said she doesn’t negotiate price.”
And Hendrickson doesn’t sell any Condos either, you go Girl !
“There’s not adequate supply to meet the demand and prices will go up,” he said.”
It’s Wisconsin for Gods Sake, their is land everywhere and low wages to boot !
“They closed April 30 on a “white box” condo, which they currently are finishing.”
More like “white elephant”, another twit buys a place without selling the 1st home when he knows it’s a buyers market. Arrrg !
“It truly is painful to do all right on one project and suffer on the next project,” he said. “It’s kind of a helpless feeling on our end because it’s not anything we’re doing wrong.”
Sorry, but if you’re “suffering” on something, you’re doing something wrong.
Sometimes doing ANOTHER project isn’t the right thing to do…..
Ummm….I believe we are starting to see the beginning of what is to come.
This is prime right??
https://www.markit.com/information/affiliations/abx/history
Umm…S&P let the cat out of the bag today?
http://www.marketwatch.com/news/story/sp-finally-says-subprime-mostly/story.aspx?guid=%7BDFBA4993-031E-4E88-8F56-5B08FD9AA07D%7D
Why am I telling you guys this I am sure you heard about this all over the news I mean I am sure this is going to be front page top story material….right?
The DOW should be very interesting tomorrow, only -150 slide today, what will tomorrow bring….hmmm.
My boss predicts a small additional drop and then a run up to 14,500. He’s done really well so far.
*THEN* the drop happens. “Markets stay irrational longer than you can stay solvent.”
Got popcorn?
Neil
and so if continues to fall apart. Once the credit rating agencies lower their ratings on these bonds, you can put a fork in the whole bubble. Without funding the mortgage industry will run out os steam quickly and housing sales will all but stop.
OOOOOOOOOOOOOOOOOOOOOHHHHHHH! Lockup in the housing market. This will get interesting indeed. This may actually bring down the whole literall house of cards faster than anyone could have predicted.
For example, in the OC the avg. home is at about 600K. Well, if no one, but 250K/year earners/families can qualify, homes will either sit forever at current prices waiting for Gates and Buffet to come along or they will have to come down and FAST!
This is going to get very interesting.
As an aside I love hearing the term junk used again. reminds me of my college days and Michael (B)ilken (sp?) and his junk bonds.
“…homes will either sit forever at current prices waiting for Gates and Buffet to come along…”
This is exactly what I see happening in San Diego, while builders continue adding SFRs to the 131 New Home Communities in the area. Who is eating the costs while these homes sit unsold?
How many houses can a 250k earner buy? Plus how many would they want to buy in the same area. The 250k earners are few and far between.
What I want to know GS is this. If homes at these prices are not moving or are not moveable, why not build to sell, i.e. build 100-150-200K homes? Why is this so hard. I would rather be in a business moving stuff on nickels and dimes then trying to win the Powerball with every sale. I guess it goes back to greed and the ability to make a killing and retire at 45, rather than 65.
I just feel so dirty and disgusted by all this.
…why not build to sell, i.e. build 100-150-200K homes?
They are… they just don’t know it yet.
All I can say is “Holy Bleep !”, gonna be interesting stock market tommorow.
The way this market has operated, it will be up 80-100 on a single earnings report.
July 10, 2007: Commence the slaughtering of home prices.
Patricio - Just like the days of old, when the Kremlin would announce that the premiere had a bit of a chest cold - 10 minutes after he had already assumed room temperature.
Maybe the next meltdown will be credit rating agencies? I’m not really even sure that there’s much of a future for Experien, Equifax & Transwhatsit. At this rate, soon at least half of everybody who can fog a mirror will be in default of something. The other half will notice this, and swear off borrowing in moral terror, if they hadn’t pretty much already done so.
Which means you have to go back to the less attractive group to do any lending whatsoever. People who sell homes need people to borrow. So do people who sell stuff. Especially the people for whom selling stuff is kind of secondary to the selling of the financing of that stuff.
In the end, I bet Congress declares a holiday (debt forgiveness — Jubillee for you biblical types) — maybe right ahead of the elections. You know, strategically. Well, no debt forgivenesss for those who borrowed in moderation and can pay back. They’ll have their interest rates - even the fixed ones - raised retroactively, the better to share the sacrifice with wiped out pensioners, and homeless RE agents, etc.
3) After that, credit-worthiness will be all about verification, debt-to-income-ratios, verification, how well you’ve been resisting temptation since the Great Consumer Come-to-Jesu$ moment of 200…8? - and verification. Knowing that there is no bailout, the lenders will get really good at judging risk for themselves, and will hold themselves to the highest ethical standards, while sagely advising consumers to avoid carrying a revolving debt.
Yeah, I almost had me for a minute.
ROTFLMAO! I almost bought into that as well. But. It. Ain’t. Ever. Gonna. Happen!
“…I am sure this is going to be front page top story material…”
I am guessing it will be contained to the bowels of major newspaper financial sections. Don’t want to scare the sheeple…
“‘We had been counting on getting a certain amount out of our house, but there’s too much stigma about the taxes to sell it now,’ Ellis said.”
Narrative fallacy: they don’t have a clue, so they make up a story to ‘explain’ what’s happening. Same BS on the way down as on the way up.
In other news, for those of you keeping score at home, the Implode-o-meter is currently sitting at 96. Who made predictions about when it would hit 100? You guys/gals are getting close.
We are leaving our rental in Eureka, CA for a cheaper unit soon: the landlord was a 26 year old who had daddy give her $2 mil worth of properties to manage, and I didn’t want my hard-earned money going to this b****. Anyway, on our way out, a 30 something couple stopped by to look at the house across the street, which has been on the market for a year at $619K with no price reductions. The couple looked pretty stupid, and my wife yelled over to them, “it isn’t worth the price!” They asked, “what is the price?” After telling them, my wife also commented that “you’re right across the street from all these rentals!”
See, people still obsessed with RE in California such that they’re home shopping and don’t even know the price or character of the neighborhood. When will people ever wise up?
Your wife is a keeper.
You lucky b***ard
Agree.
What in the world was a young couple even looking at properties in the 600K ++ Range?
KB Homes stock made 52 week low.
Yeah at this point i am deferring buying. Like, forever I think…
Buy now or be priced out forever! Or maybe sell now or be priced in forever.
“Pete Frautschi said he gets angry when someone offers $500,000, for example, on a $750,000 unit.”
Don’t worry Pete, it’s just a flesh wound!
http://www.toyvault.com/montypython/Black%20Knight%20-%20Large.jpg
“We have no shortage of traffic and interested buyers going through our projects,” Krupp said. “For some reason, they’re just not pulling the trigger.”
Cruising open houses for food will be the new entertainment and eating out treat for FB’s. That is when they’re not at Sam’s & Costco eating at the senior buffet.
“‘Some people have got to come up with $6,000 (extra) by the end of July’ to pay their new taxes and avoid foreclosure, said Pegg Kennedy, a Realtor in Indianapolis. ‘My voice mail is almost full from people saying, ‘Help me, help me.’”
Good lord. People are in a panic over a measly SIX-THOUSAND-DOLLAR debt. This is a perfect illustration of how absurdly overextended and on a knife-edge the American consumer is. They can “afford” a $2 million McMansion and all the Chinese-made crap to fill it, but once they have to cough up a little actual cash: Game Over. Yeah, looks like a nice, soft landing is in our future.
The average joe is sitting on $9k worth of credit card debt that never gets paid down, more the bare minimum…
‘Help me, help me.’
The Fly, right?
““(Developer) Pete Frautschi said he gets angry when someone offers $500,000, for example, on a $750,000 unit. But Frautschi said his sales staff calms him down so he can make a more reasonable counteroffer.”
Maybe because he’s having problems…
From the Madison Commons:
http://www.madisoncommons.org/article.php?storyid=860
“Drive past the luxurious Weston Place condos at 625 Segoe Road after sunset and the 12-story tower is three-quarters dark. That’s because just 35 of the 121 units have been sold since the project opened 15 months ago.”
and
“And with prices ranging from $285,000 for a 1,046-square foot, one-bedroom up to $829,000 for a 2,403-square foot, two-bedroom, Weston Place prices rival those of many downtown high-rises.”
I checked realtor.com and found $1 million condos in Madison, WI…wow. Then I saw that $1 million can get you waterfront property (4,000 sf with private dock). Who would buy a condo when you could buy waterfront property with private dock for that price? At least in CA where I live, a $1 million condo seems almost reasonable since waterfront property is at least $5 million. But if in CA I can buy waterfront for the same price as a condo, there’s no way I’m taking the condo.
$5M in Malibu, sure. But there are MANY places I have seen on the SoCal coast for less.
A lot of people, constantly bombarded by bad news like markets crashing in Florida, Arizona and California, are just scared to make a move,’ said Waukesha builder Bob Flanagan.”
That is plain BS Bob Flanagan! The real reason are the RE pricing fundamentals are so out of wack having been driven up by speculators and flippers. Nobody in their right mind would purchase property when the fundamentals have been driven so far out of wack it no longer makes financial sense.
chad, i was comparing the $1 million Wisconsin waterfront homes that have 4,000 sf right on the water with 100′ of boat dockage, those would be $5 million and up anywhere in So Cal. In Huntington Beach you can get old waterfront for maybe $2 million but those are only 2,000 sf and 40 years old.