Just A Couple Of Years Ago People Were Saying It’s A Myth
It’s Friday desk clearing time for this blogger. “New second-quarter data from Horry and Georgetown (SC) counties’ MLS shows…sales are still on the decline from last year, equaling the drops seen in the first quarter, condo sales down 41 percent and home sales down 20 percent from last year. Yet, analysts point out that today’s sales show an increase compared to 2004, meaning if you pulled out the ‘boom years,’ you’d get an upward moving slope for single-family homes.”
“‘It’s a slow market, not a whole lot of activity relative to what people became used to over the last couple of years,’ said Don Schunk, research economist at Coastal Carolina University. ‘But if you look at the sales levels [compared with 2004] they are roughly where they used to be. The tremendous surge created unrealistic expectations in people that we’ll be able to put our home on the market and we’ll be able to get what we want for it.’”
“More than 3,000 Jackson County homes are available, according to Southern Oregon MLS, which reported a 20 percent jump in homes on the market as of July 1. ‘There are so many homes on the market that you have to be careful with clients, because you can confuse people by showing them too much,’ says Rick Chezik in Medford.”
“The median price for existing homes, according to SOMLS, declined 2.7 percent to $272,000 during a three-month rolling quarter ending June 30, down from $279,500 a year ago. New home sales prices slumped 15.7 percent to a $295,000 median during the rolling quarter, down from $350,000 in 2006. Ashland’s median for existing homes fell to $405,000 for the three months, down from $439,000 a year ago.”
“‘If you’ve got a $400,000 home that you really want to sell, you’d best price at $390,000 or $380,000,’ says Colin Mullane of RE/MAX Realty Group in Ashland. ‘Otherwise you’ll just have to adjust it down and you’ll be catching up to the market.’”
“While the Kansas City area has had the luxury of being insulated from the pitfalls in the home-building and home-mortgage industry nationwide, it is clear now that what is happening elsewhere is also happening here.”
“When the rate of foreclosures skyrockets, it means there is something seriously wrong with the way business is conducted in the buying and selling of homes. Records from the Clay County recorder of deeds office shows that home foreclosures have been spiraling upward since 2005, and there are no signs that the trend is slowing.”
“When it comes to markets, we hold these truths to be self-evident: (1) It’s never different this time, and (2) Every boom leads to financial excesses that spark its undoing. (That’s why they’re called business cycles.)”
“‘The necessary conditions for a bubble to form are quite simple and number only two,’ investor Jeremy Grantham noted. ‘First, the fundamental economic conditions must look at least excellent, and near perfect is better. Second, liquidity must be generous in quantity and price: It must be easy and cheap to leverage.’”
“That pretty much sums up the world we’ve been living in, a world where prices skyrocketed for Miami condos, Indian stocks, and office towers in Dubai.”
“Georgia has enjoyed a building boom in the last several years. But economic sobriety may be growing faster than the high-rise buildings. Economic analyst Gia Khukhashvili warns of a coming crisis in the construction business.”
“Georgians both here and abroad are investing their money in local real estate, which has seen enviable appreciations since the Rose Revolution. ‘The critical limit has been reached; there aren’t any new buyers on the market. Soon, quantity will exceed demand,’ predicts Khukhashvili in the newspaper Akhali Taoba.”
“He adds that as banks have made huge loans for new buildings, a coming crisis in the market could be heavily felt in the banking industry.”
“Real estate agents from all three Baltic countries agree that more higher-income families have driven up demand for suburban houses. Prices for new housing in Lithuania increased 10 - 15 percent in the first four months of the year to reach 500 - 900 litas per square meter, according to In Real.”
“Latvia’s real estate market in general has entered a period of stagnation, albeit temporary, experts say. As part of the government’s anti-inflation plan, banks have had to implement stricter lending policies. Beginning July 12, Latvians have to provide lending institutions with a statement of income from the revenue service if they are seeking a large mortgage.”
“No doubt this is a much-needed cooling off for the market. Housing loans in Latvia soared 86 percent in 2006, a phenomenal rate by any measure. In…Babite, houses are growing ‘like mushrooms after the rain.’”
“A combination of an uncertain economic scenario with rising interest rates and costs of borrowings, rising conflict and abduction-for-profit, is affecting the real estate market and dampening the condominium housing boom.”
“Developers said property and new apartment prices were coming down while expatriate Sri Lankans are having second thoughts on investing on condos.”
“Nethru Nanayakkara, a realtor, said the Wellawatta property market is currently stagnating as there are no buyers and land values have dropped. Shan Kumarage, of the online real-estate portal ‘Bhoomi.’ also noted a drop in the market. ‘Going by the feedback we get from the brokers and buyers there is no market at all for residential property,’ he said.”
“Fine Gael’s Gay Mitchell has hit out at estate agents and mortgage lenders for raising expectations of house price increases over the past year.”
“Mitchell has claimed that the lenders have been talking up their forecasts in order to sell more houses. ‘I think they’ve been serving their own interests, and I think that they’ve a lot to account for,’ he said.”
“The latest house price index figures show a 2 per cent decline in prices over the first five months of this year.”
“Anyone who’s purchased a home is familiar with a mortgage getting sold to third parties who end up servicing it. According to the Federal Deposit Insurance Corp., the big investing houses have seen the value of the homes they own balloon by 53% from last year. As foreclosures blossom, investment bankers have become homeowners by default.”
“The banking houses must now choose between paying the costs until an appropriate price can be realized on the property, or dumping it below market value.”
“This is a crisis of banks’ own making. By fueling the homebuying frenzy with creative mortgage financing, investment bankers may now become the catalyst of their own devaluation.”
“Forget the notion that metro-area -real estate foreclosures are cooling off. For the first half of the year, the seven-county Denver area logged more than 12,000 foreclosures, a 25 percent increase over the first six months of 2006.”
“And expect them to keep piling up for several more years.”
“In certain neighborhoods, the current foreclosure problem is worse than it was in the late 1980s, said real estate broker Beverly Meade. ‘Some whole areas are being turned into ghost towns,’ she said.”
“She said she recently sold one foreclosed home in Aurora for $80,000. The home would have fetched $200,000 three years ago, Meade said.”
“Meade said she recently searched homes for sale in Denver priced at $105,000 or less and found 85. ‘Three years ago, you wouldn’t have found one home under $105,000 in Denver,’ she said.”
“‘Just a couple of years ago, people were saying it was not that big of a problem and it was a lagging indicator, just a small bump in the economy, (that) the housing bubble is a myth. That turned out to be absolutely incorrect,’ said -Zachary Urban, who heads the Colorado Foreclosure Hotline.”
Another great week! My thanks to those who support this blog. Please check back this weekend. Note: this blogs server will be briefly taken down for maintenance on Sunday morning.
The title of this thread: “Just a couple of years ago people were saying it’s a myth.” Yes, people like Fitch, who rated the subprime mortgage backed securities. From Mish’s blog and excerpt from a Fitch interview with First Pacific Advisors (read more at http://www.fpafunds.com/news_070703_absense_of_fear.asp ):
FPA: “What if Home Price Appreciation were to decline 1% to 2% for an extended period of time?”
Fitch: They responded that their models would break down completely.
Now consider this:
The asset quality problems in sub-prime and Alt-A have the potential to affect other areas, such as the collateralized debt obligation (CDO) market, in ways that many of the holders of those securities have little idea of how exposed they might be to unexpected changes in the security’s credit rating. It is estimated that U.S. banks have invested as much as 10% of their assets in CDOs, and the Office of the Comptroller of the Currency (OCC) requires that all of those CDOs be investment grade, says Kathryn Dick, deputy comptroller for credit and market risk.
Conclusion: When Fitch (+S&P + Moodys) downgrade these RMBS’ & CDOs, there is going to be a stampede for the exits by the banks. They will be under pressure from the regulators and be dumping the bonds, bad loans and calling in the hodge podge loans. It is either that, or boost reserves to the point there is no profitability left in their business.
Prediction: The pressure to dump foreclosed real estate will reach the same frenzy that “buying pressure” achieved in 2005. Sit down and wait for it. Every day I read this blog and look at the stats, it seems more and more likely each day. And to think, “Just a couple of years ago, I thought this coming meltdown was a myth.”
And because at that point, because the models will be effectivly broken, they won’t know WHICH AAA and AA bonds will suffer losses. It seems likely to me that we could see some AAA taking losses while some AA bonds are fine. (the same is likely to be true at whatever rating level one chooses to look at) Things are likely to go bad in an apparantly random (if one relys upon ratings) manner. It seems to me that this will depress the bond market (especially for CDOs and RMBSs)even more.
If difficulties were to progress through the ratings in an orderly fashion, holders and purchasers could convince themselves that the flood would stop short of their door. But with losses spread somwhat randomly through the ratings, nobody can assure themselves that they are likely to be safe.
And another thing in the link that you posted
According to the Leuthold Group’s data, investors are directing their cash flows to among the riskiest areas of the equity universe—foreign focus equity funds. $80 billion has flowed into these funds through May compared to $11.8 billion for large-cap domestic equity funds and a net outflow of $4.2 billion for small-cap equity funds. This is the second year in a row that the foreign sector has overwhelmed the flows into domestic equity funds.
Can you say “capital flight?” Despite my misgivings, and that piece has added to them, I’ve got a ticket on that airline.
This morning took a look at why the stock price of my employer went up nearly 5% on Friday, because nothing was announced at work and it didn’t make sense.
No insider trading, no buybacks, no press releases.
The only thing I found is that Cramer included the company in an article on Monday that stated “in a bull market, $80 stocks tend to go to $100, then $120″. Adding fuel to the fire, Motley Fool included the company in an article about “money tends to follow money, buy these stocks”. *Nothing based on financial performance!!!*
Wow. Talk about irrationality. If I bought the stock I can’t sell it for until seven years after I leave my employer - hence, I only own what they give me for free every year.
I’m in a similar situation with a big chunk of restricted stock that comes loose in February. I’m hoping my company’s share price holds out until then, but I’m preparing myself to not be disappointed if it doesn’t. I don’t want to be like one of those house sellers who bought in early 1990s and have had windfall apreciation, yet they get indignant if someone suggests they should reduce their asking price. They point to what their house was worth a couple of years ago and say they shouldn’t have to take a loss. It’s not a loss. The asset never should have been priced that high in the first place.
“Anyone who’s purchased a home is familiar with a mortgage getting sold to third parties who end up servicing it. According to the Federal Deposit Insurance Corp., the big investing houses have seen the value of the homes they own balloon by 53% from last year. As foreclosures blossom, investment bankers have become homeowners by default.”
“The banking houses must now choose between paying the costs until an appropriate price can be realized on the property, or dumping it below market value.”
“This is a crisis of banks’ own making. By fueling the homebuying frenzy with creative mortgage financing, investment bankers may now become the catalyst of their own devaluation.”
Sweet schadenfreude! When are these boyz going to dump their REO holdings at fire sale prices? Or will they become the U.S. version of the Japanese banks circa mid-1990s?
Or will investment banks diversify into the landlording business? Can you imagine renting your Barstow, California home from Bear Stearns?
lets pray that the prices dont go “below market value”.
This statement is so perverse that it makes my teeth hurt even when I think it.
The term “below market value” is a sales tool applied to those dumber than a sack of hammers.
Hey, watch it! You just insulted hammers.
and sacks.
Tools of the world have been insulted!
LOL
“below market value”
how about this though:
As hundreds of thousands of properties fall off the price cliff and hit the official “bottom”, more than a few are ignored during the ensuing feeding frenzy, and actually overshoot the bottom.. and, for a time, these could be priced below market value?
Translation - Lets pray prices don’g go below todays market value
Of course properties will ALWAYS be sold at market value, since that is the value the market places on a given property. From a logical standpoint, it follows many properties are listed at OVER market value, or they would be selling!
Actually, a house can be priced for sale below market value, such that it generates an offer or offers above it. It can even sell for below market value if the seller accepts an offer despite receiving higher offers. Unusual, perhaps, but possible.
Value can be subjective and thus is a poor measure. I am still unsure how a home can have a “value” of $400K when it will not sell for over $380K. I guess being an engineer, I equate value as the price at which an article will reasonably sell for and what you get for that price.
lets see what the worldwide wiki consensus of the peepole is..
“For market price to equal market value, the market must be informationally efficient and rational expectations must prevail.”
So, it’s partly determined by market efficiency and by rational expectations. I’d rate the RE market around a 2 on a scale of 10 in both categories..
And, by this logic, one could argue that RE market price equaling market value is a very, very rare thing..
Well observed Joey…
Price is what you pay, value is what you get. Some offer more value than others for the price.
I tried to buy two different Bank Owned homes in 1989 -1990 in Manhattan Beach Ca. They wanted full market price and were basically asshats about them. Finally, I found a home priced at 187,500 and the seller told me that if I paid full price that she would give a 2nd for 18,750.00 for 5 years…. so we financed 80%.
That seems like a great price for that area. How far from the beach? For some reason, I have a hard time imagining affordable housing there.
All I know is that I wouldn’t trust BS to hold my deposit >; )
Can you imagine renting your Barstow, California home from Bear Stearns?
Or does that mean that your local BS broker will be wearing two hats, one of the broker and the second that of property management?
Southern ORegon is not toast, its burnt fricken toast…
those numbers coming out of Jackson County are still ridiculous…it rural, its got no economic base, its retirees….they just want free coca-cola night at the nickel bingo after the early bird $6.00 dinner special at McBadFood……
get over it Medford, Bend, Portland….and of course J-ville.
Jungle Man, speak to me. What is happening there? You live there? In southern Oregon? You write with emotion, and therefore I assume you have personal connection?
Speak in local, observational, personal terms, because that is what matters. Statistics are a bunch a crap.
I have paid lots of attention to Oregon. I love Oregon, love, love, and then you all adopted Measure 37, which was pretty much an invitation to paid rape, in sneaky, crouching terms.
Define why, if you would, why southern OR is ‘burnt fricken toast’. I am an attentive audience.
Here is one for you OG,
Measure 37 (goverment accountability for land use taking) will do more for creating housing affordability in the state of Oregon than any other single factor in the next 50 years.
I live in north, central Oregon, and it’s basically overrun with Calf equity locusts. The median house price is 8-10x local median income, which is a joke. A large % of locals in my town are real-estate “investors”, agents, etc. My landlord is an elementary school teacher, for gawds sake, and is speculating in real estate. A retired neighbor, a sweet lady, sold her house and bought a bigger one - it’s an investment, and of course, real estate only goes up. I have learned enough to keep my trap shut over such nonsense.
A Calf idiot moved in a few houses down from me, complete with a Hummer, Miata convertable, huge trailer, boat, and a few monster SUV’s to haul the toys around.
Real estate has more or less stalled here. Prices have declined a bit, but they have a long, long way to go before they resemble anything affordable. As far as I can tell, sales have fallen off a cliff - some sell, but most houses have been sitting on the market for a long time.
Measure 37 is strongly opposed here. If there is one thing Oregon has, it is it’s ability to control sprawl and over development through it’s land use laws, and Measure 37 threatens to unwind that.
“Forget the notion that metro-area -real estate foreclosures are cooling off. For the first half of the year, the seven-county Denver area logged more than 12,000 foreclosures, a 25 percent increase over the first six months of 2006.”
“And expect them to keep piling up for several more years.”
- Which is it? Is Denver burning or is it in great shape. The reports seem to vacillate between ‘everything is fine’ to ‘it’s in the toilet.’
Yet, analysts point out that today’s sales show an increase compared to 2004, meaning if you pulled out the ‘boom years,’ you’d get an upward moving slope for single-family homes.
LOL. How long ago did we predict on this board that once YOY turned negative, the salespeople were going to resort to comparisons from several years ago?
How long ago did we predict on this board that once YOY turned negative, the salespeople were going to resort to comparisons from several years ago?
I remember that!
The REIC probably monitors this blog heavily nowadays. Larry Yun, you on this blog as a lurker?
Holy cow DOW finished record day again [based?] on consumer spending. Boy old habits tend to die hard don’t they? I remember March 2000 all to well. Pass the Dramamine.
Feh, I’m a little suspicious about this DOW. I could be wrong, but I have a sneaking feeling in my gut it is a set-up for suckers.
Nah, we all the suckers — we’re trashing the dollar so the stock market goes up. Look at any 3rd world country that trashes its currency — the stock market goes up.
The dollar goes down so the market goes up?
Hmmm, in 1987 Treasury Secretary Baker made a statement that (essentially) said the US would not support the dollar.
I believe he said that the Sunday before “Black Monday”.
So its different this time?
I forgot about that…
Interesting historical tidbit.
Got popcorn?
Neil
Suckers are blind! Always have been. That is why they bottom feed. Always late to the party and get the left overs. These left overs will rot before the market rebounds the next time.
The dollar is DIRT CHEAP. So, the Dow/NASDAQ/S&P etc etc all over the world look like they are going up. They aren’t. The dollar is at an all time low.
“Good markets climb a wall of worry!”
Awwww bullshit.
Roidy
Remember it’s only made up of a set number of stocks. People could be losing their shirts on their own portfolios. Depends on what you’re invested in.
This is what i have been saying for YEARS about the Rap Music bubble take out the 2000-03 years of extra high sales, and the Music industry sales are just about where they should be.
So why does the RIAA sue people for downloading? Same analogy.
==================================
Yet, analysts point out that today’s sales show an increase compared to 2004, meaning if you pulled out the “boom years,” you’d get an upward moving slope for single-family homes.
Umm…isn’t downloading w/o paying stealing?
Nice summary in this comment:
http://www.inman.com/inmannews.aspx?ID=63862
“This week the rating agencies acknowledged error, and are re-rating with tougher methodology. That’s the trigger for the two-part end-game: If we have huge losses, where are they? Who is exposed? And, if housing distress is as bad as it looks, where is the effect?
Part one, the mortgage losses. Very little money has been “lost.” The market value of the securitized mortgages in question has fallen 30-70 percent, but if you don’t sell, you don’t have to recognize loss. The re-rating of this stuff to junk will force institutional investors to sell, to recognize, and probably depress value farther. We will also learn who has lost, and it’s going to be an embarrassing and painful parade. This week, S&P, Moody’s and Fitch downgraded no more than 1 percent of the trash outstanding; the outcome for the other 99 percent is sure as sunrise, the holders in frozen panic.
Market losses from forced sales are near, but there is still little actual credit loss from defaulted mortgages — that’s still ahead, and the loss magnitude will depend on the depth and length of the housing recession.
Part two, the housing market. Housing moves slowly, in an aching grind. Sellers resist discount, preferring to hold vacant, or to rent at a loss, or to stay put. Loan servicers are slow to foreclose: they are not staffed to do so (or to do anything except to send you all that mail trying to get you to buy insurance and pre-pay programs), fiddle endlessly and pretend to negotiate workouts of hopeless cases.
The housing picture is changing — not selling, just changing. Foreclosure data is notoriously bad (every county and state has different procedures and law), but RealtyTrac’s trend is probably about right, if only in consistency of error. The pattern is stark: national foreclosure filings are up 56 percent year-to-date, but mortgage defaults are up 86 percent — foreclosure lag. Based on housing markets early to the distress party, Colorado the leading example, Bubble Zone foreclosures will increase for at least the next three years (announcements of bottom in 2008 are fantasy-based).
Do some math. Home resales run a tad over 6 million annually, plus another 1 million new-builds. Re-sellers still want to re-sell, and builders, desperate to unload land and to maintain survival volume, are still building at undercut prices. Demand is off (un-affordability and anxiety), but a new seller has arrived: first-half ‘07 foreclosure filings just short of 1 million. Pull-through from filing to foreclosure is unpredictable, but it looks as though re-sellers and builders will soon be joined by another million foreclosure re-sellers (or two, or three…). That’s market saturation, not clearing.
We are going to get spillover into GDP. Book it. And we’re going to see a serial credit panic. However, the disaster mongers are mistaken. Credit losses are distributed globally, and there is great long-term strength in housing (population growth, land scarcity, wealth…). The forecast here continues to be for a long period of flat prices in the Bubble Zones, but vastly more foreclosure damage from flat prices than previously modeled or imagined, the Great Hangover from the ‘01-’06 Mortgage Credit Party.”
First, investment banking houses keep sub prime under the rug until after bonus time. (Jan-March) Then reality starts. Now, they are running up equities to create a new (trap)floor. Play the game, or be poor.
“Play the game, or be poor.”
It’s “heads I win, tails you lose” with Wall Street. Let ‘em play whack-a-mole with each other.
was the dot-com bubble a set up for suckers, I made money.
was the housing bubble I set-up for suckers, I made money.
is the DOW a set up for suckers……Im 5 years long, this rally is the cream at the top, and it will sell off, just not before the turn of the year, an election year, with the Exec and Leg split….its a stalemate….FED is hog tied.
Trigger on downside risk is a function of Asian currency and banking systems…when they jerk the liquidity bubble will pop,but hey man, the punch-bowl just got here…..time to drink, get what you can while you can, maybe take some gains off the table in Jan. after the really big run-up in December.
this is part of the problem, bubbles are very real and they are happening, you have to get out of the way prior to the pop.
Additionally, who though the housing bubble would expand all the way to 05?
“was the housing bubble I set-up for suckers,”
AH, so now we know who to blame for the housing bubble. And yes we could all have made money in the tech.com game and the housing game but to time when this market will roll over is insanity.
Tech bubble was easy to get in and get out at any price.
You could buy $35 or $350 or $350K of stock. No additional costs for holding the investment (property tax, maintenance, insurance costs) not to mention it was all very liquid move and fully cash purchase. Favorable Tax treatment on losses.
The RE Bubble is much worst. Your purchase is very high…$350K to $1M… Your stuck with a fixed liability, in many cases the ARM loans will increase, while market value of your purchase is declining. Now that the credit is being tightned, no supply of cash and no demand from buyers, it almost impossible to dispose and stop the bleeding.
Let the blood flow on the streets of Paris.
Let the blood flow on the streets of Paris.
It will be world wide. Its liquidity that is important.
Stocks are very liquid.
Homes are not. Poeple are over leveraged.
As I noted before, I know quite a few people who won’t *need* to sell in the next few years. But they will… to free up the funds for other uses.
As to blood in the streets… I’m not sure if Miami or Palm Beach will take the tops… But Sacramento or San Diego will flood too..
No city lacks flippers… Every city is going to take the economic hit. Its only a question of when. Bubbles continue for longer than anyone can predict.
The credit tightening will be… interesting. How the heck can credit cards, auto loans, and zero down persist when the CDO market has become tainted? Oh… they’ll all be there tomorrow. Just tighter.
And I stand by my prediction of 25% down payments during the darkest days of this downturn (excl. FHA).
Got popcorn?
Neil
“time to drink, get what you can while you can, maybe take some gains off the table in Jan. after the really big run-up in December.”
I have no way of knowing if you’re right or wrong, and I doubt anyone else does either, but it makes me imagine the “smart money” saying the same thing in the summer of ‘29. If a person is pretty sure a crash is coming, to me it makes sense to start taking money off the table before everyone heads for the exits. Seems like you’re risking a %10-%20+ loss (from today’s value) just to maybe squeak out another few percent gain if you time it right.
Lotsa risk…I’m steadily rotating 401k money into what I *think* is safer, but I don’t have many really safe options. I’ve got some in cash (money market, wish it was T-bills), some foreign, some tech, the rest still in standard spread-out 401k crap that has way too much exposure to finance for my taste but I haven’t figured out what to do about it yet.
Latvia? 86% increase in housing prices in 1 year all due to inflation?
What the hell? If the cost of doing business (paying higher wages
for employees mortgage) isnt going to help Latvian Businessowners small or large since many corporations are seeking cheaper salary and wage earners to compete global. Did the Latvian start having tons of Babies? No! Are Europeans moving to colder climate areas? No! WTF! What a bunch odiots!
did the latvians just convert over to the euro? that might have been it.
That’s part of it — the rest is that the Euro locusts have glommed onto the cheap property prices outside the capital cities ( forget about Riga, Tallinn or Vilnius — in the Old Towns small condos sell for $500K USD bare — with most you only get the shell and have to do your own renos; counters, cabinets, flooring etc.). I’m cleaning out my mother’s estate in Estonia — a year running now. One property she deeded to the municipality to make a park — amazing the bureaucratic crossing of t’s and dotting of i’s that required but is now complete. A second property she had agreed to sell to the long term tenants shortly before her death— our agent there couldn’t believe we insisted on honouring her agreement on price… that also is done. The third property is still in limbo though I’ll probably end buying out my sister’s share, while not very valuable since it is quite remote, it is a pretty wooded 40 hectares with a river at one end.
Sounds like your mother was a very kind & generous person.
OT, sort of.
There’s a pretty good concensus here that prices are going to fall in the housing market. I agree with that, in fact, I think prices are going to go way down.
I was at the car dealership (Honda) today inquiring about trading in my CRV. On the other side of the screen were a whole bunch of agents complaining that nothing was selling and wondering outloud as to why. One guy says, “everyone I know is losing their house, how are they going to buy a new car?”
My question to all of the experts here: do you expect car prices to tank?
I’m at that moment where I can get a good bit for the trade and got an offer on a Pilot LESS THAN what I could get a used one for at Carmax.
Basically, if there is reason to believe that the prices will be less on cars in 12 months, I will wait. The agents seemed pretty desperate.
Thoughts?
Thanks,
novasold
Used hondas are the WORST deal in the world. They are for SUBPRIME borrowers. New hondas are cheaper than used for people who can qualify for the lowest rate if you do the full payout rate.
Novasold, do you NEED a new car?
Bill:
No, but, I’m looking for reliability and my CRV has not lived up to it’s reputation.
It’s been paid off (early) for two years but has had a boatload of repairs that by reputation shouldn’t have happened. Recently, the compressor inside of the A/C system exploded. I did some research and found out that Honda has a ’silent warranty’ on that issue b/c it’s failing in a tremendous amount of CRVs between ‘00-’05. Counting in what has been covered by my extended warranty (through Geico $7 a month) I think the dollar value of what has been put into this car is around 7k. That’s repairs beyond normal maintenance. I’m very dissapointed to say the least.
I have at least ten friends who bought Hondas in the late 90s who have 200k miles on the car and all that they have done is oil and tires.
Right now I can get 6k for the CRV although reading the forums I’m advised to hold out for edmunds or kbb value.
To answer your question more specifically, no I don’t NEED a new car, but given my research for used “dependable” cars, I’m now finding you can get a new car with warranty for the price of what the used car shops are putting up the same car, older model, with 30k miles on it for.
Bill: be kind. I’m a girl and in search of advice here.
I’m also worried about the strange difference between what seems like a really low offer and the prices for used on Carmax. Mainly because if my suspicion is right, and consumer spending is going off of a cliff, the offer they made today for the Pilot, might be available for 5k less in a year or two.
Flat: yes I’m going to try and sell it myself. I was HUGELY irritated with the trade in prices offered to me. I’ve maintained this car by the book. Screw them.
I’m in Fairfax County and went to Rosenthal Honda and Bill Page Honda. These guys are desperate. My gut tells me to hold out.
Maybe I’ll start going ot repo auctions!! I have the cash to buy with my trade at the current offer and that new car appeal was very tempting. But, I’m not going to be a fool.
More thoughts please.
Love you all.
novasold.
Hi Novasold:
It sounds like you got a lemon, so it might be in your best interests to get something sooner, rather than later, IMO. It’s hard to imagine car prices falling considerably in a years time. Usually they just resort to 0% and even some cash back crap that the sheeple go for. I would advise that you look for a dealer who offers wholesale pricing, and buy something new. They can be had for better prices than used vehicles with low miles. Since I’m on the west coast, I don’t know of any in your area, but they’re out there. Maybe check the internet. I bought my truck (brand new in 2005) from a place in Idaho with unreal prices. The price was more than $10k lower than the lowest price my neighborhood dealer would offer, and about $13k off the MSRP. Good luck.
Bantering:
I will defintely check that out. The internet certainly does help out.
If anyone out there can reccomend a brand for and SUV or Minivan of the lesser than ‘08 variety I’d appreciate the reviews.
It seems like no matter the reviews on Edmunds they all seem good.
Thanks again.
novasold
I love my 2006 Toyota Sienna. No mechanical issues whatsoever, an ergonomically friendly layout, a nice smooth ride, and decent fuel economy (nice with gas at $3).
Plus there’s a really cool set of overhead switches that lets you pretend you’re an ex-Air Force Jet Blue pilot instead of a thoroughly domesticated guy in a minivan.
We own a Honda Odyssey and love it, though we seriously considered the Toyota Sienna. Did a lot of research & recommend these two.
We also did a lot of internet research & bought brand-new for better than some friends were buying used.
Good luck!!!
you lose 25%+ on a trade= sell it yourself
craigslist.com is free
wow, where are you in N VA , Loudoun ?
you’re spookin me
Why wait? I don’t see car prices going down significantly no matter what happens with the economy, and how much time are you spending on this car-buying project, anyway? I agree that you should find a good deal on a new car that you want and go for it. Trading in is usually a bad deal, so if you are up for selling yourself, use Craigslist (as suggested)–worked well for me. Be careful where/when you meet potential buyers, however.
Good luck!
Yeah, margins are thin enough, except for the top selling models, that prices really can’t go down on average, at least for the “same” car. What can happen is that the mix of cars for sale drifts downward. Of course since this is a slow process “BIG factories, lots of expensive machinery and tooling” that what MIGHT happen is that as people’s ability to pay goes down, margins (and prices) go down on more expensive models, and go up on cheaper models. We saw this during the gas crisis. Sadly, for the last 10 years Detroit has made most of its profits from large margin SUVs while foreign manufacturers have sold smaller models. This is going to be another nail in the coffin of Detroit IMHO.
I agree that cheap cars can’t actually be made much cheaper right now. So, I’d expect used cars to get cheaper, maybe a few fire-sales on new cars (generally on the makes and models you don’t want), and then for many of the new car models that we currently see to go away. The surviving automakers will probably be making the stuff *really* cheap in China/3rd world and it will still seem a bit expensive to us. At that point the decent quality used stuff will stop falling any further in price because it will be so nice compared to the new stuff coming out that we can afford.
I agree that used Hondas are a bad deal (at least the popular models) because they’ve hardly depreciated. I like Hondas and don’t want to spend a lot, so I solve this issue by buying less popular models that HAVE depreciated a lot. I owned an ‘86 Acura Legend a long time ago and currently a 98 Honda Odyssey (both bought very cheap) and never regretted either purchase.
“‘If you’ve got a $400,000 home that you really want to sell, you’d best price at $390,000 or $380,000,’ says Colin Mullane of RE/MAX Realty Group in Ashland. ‘Otherwise you’ll just have to adjust it down and you’ll be catching up to the market.’”
OK, here we go again. If your house is not worth 400K it is NOT a 400K house. Whatever it may have been worth at some point in the past is irrelevent. If you can get $380K then it is a $380K house. Next year it may be a $340K house and so forth.
“Otherwise you’ll just have to adjust it down and you’ll be catching up to the market.”
I do have to hand it to Colin, using the word “down” in that statement. I’ll bet that hurt. But he makes a nice recovery by referring to “Chasing the market Down” as, “Catching up to the Market”……
Sounds so much better than telling the sellers, “Hey clueless, the ship is pulling away from the dock! Each and every day you fork around at an unreasonable wishing price, it becomes a more difficult and longer jump to catch the boat. Soon, jumping is not an option and you’ll have to rely on being a strong swimmer. If memory serves, the last time a lot of people were thrashing around in the water hoping to get on a boat….. it didn’t turn out so well.
My neighbor, Fairfax,VA, has been trying to sell his house for 3 months. No visits lately.He said the realtor told him “Nothing is moving now but wait til October.” I asked him “Why October?” He just shrugged and mumbled something about how everyone will setttled in for the school year.
We just looked at a model priced at 1.4 M A nice house but… I wandered into the office and found they are halfway built-out. UAE Army bought one of them.
I never have seen so many houses for sale in the 1.6M hood. Heck, in this area and we bought at the top last time around and got to watch the market dive.
October?
Oh… nothing moves October through February. That’s why prices decline that time of year…
This Christmas will suck.
Got popcorn?
Neil
“Yet, analysts point out that today’s sales show an increase compared to 2004, meaning if you pulled out the ‘boom years,’ you’d get an upward moving slope for single-family homes.”
“‘It’s a slow market, not a whole lot of activity relative to what people became used to over the last couple of years,’ said Don Schunk, research economist at Coastal Carolina University. ‘But if you look at the sales levels [compared with 2004] they are roughly where they used to be.”
There’s a local Chicago asshat that uses the same excuse as this guy. “We’re up compared to 2004. ‘05 & ‘06 were records years and we’re just coming back to normal”
Thing is 2004’s arrow was pointing up and 2007’s arrow is pointing down. In ‘08 he’ll be saying we’re up from ‘03, in ‘09 he’ll be saying we’re up from ‘02 etc etc etc
Hey, we’re up from 1930. Especially if you forget to adjust for change in population!
Below is from
http://ml-implode.com/
only 1 more until ml-implodes go triple digit!
In light of such overwhelming evidence (A huge body of tips - thanks!) supporting Alliance Bancorp’s implosion, we are now making public Alliance’s “implosion”. We have attempted to contact Alliance’s General Counsel for confirmation; however, he was unavailable for comment (Out of the office replies on both email and voicemail).
We have gotten word that approximately 400 people will be laid off as part of this closure.
I need to change the topic to share this with you all. The world has gone mad when people buy parking spaces to flip. So it seems at least in NY, the real estate frenzy has yet to chill anything.
People paying $225,000 for a PARKING space.
http://inventorspot.com/articles/have_money_burn_pay_225000_parking_spot_5679
That is insanity! But then who even needs to drive with all the public transportation? I bet the bubble will burst there soon
Prices in New York City are insane. I sold my NY apartment in 2005, parked the cash, and got priced right out of the market. It was a gamble, and I don’t mind the money that I made, but I’ll never be able to get back into Manhattan and I did like living there.
Don’t worry you will be able to buy back in Manhattan in a few years when the bubble bursts there. I bet all the surrounding areas will be even cheaper.
Same story with me. Sold my condo on the Upper West Side in July, 2005 and the market moved down during 2006, but is back up again. We still live in Manhattan as renters, however, and the interest pays the rent. If there is a recession, Manhattan prices will drop like they did in the early 90’s. One factor I had overlooked was the growth in NYC population by 205,000 since 2000. Still, the fat lady hasn’t sung yet.
So long as you can rent for significantly less, don’t worry, just put away the extra money in savings. When the cost of buying gets close to the cost of renting, THAT’S when you should start looking.
“‘If you’ve got a $400,000 home that you really want to sell, you’d best price at $390,000 or $380,000,’ says Colin Mullane of RE/MAX Realty Group in Ashland. ‘Otherwise you’ll just have to adjust it down and you’ll be catching up to the market.’”
puh-leeeze! 100% overpriced house and 5% off is a bargain? Call me when that house is priced at $200k.
“She said she recently sold one foreclosed home in Aurora for $80,000. The home would have fetched $200,000 three years ago, Meade said.”
If this is any indication, I expect the bottom to be this severe with houses dropping over 50%
“Meade said she recently searched homes for sale in Denver priced at $105,000 or less and found 85. ‘Three years ago, you wouldn’t have found one home under $105,000 in Denver,’ she said.”
Ive noticed the same in my own city. At the peak, you couldn’t get anything nice for under $300k, now theres hundreds of nice decent sized houses for under $300k. Give it another year and youll be finding good houses for $200k
Same with Vegas. Little for less than $350K before in Summerlin, lot’s now.
‘When it comes to markets, we hold these truths to be self-evident: (1) It’s never different this time, and (2) Every boom leads to financial excesses that spark its undoing. (That’s why they’re called business cycles.) “The necessary conditions for a bubble to form are quite simple and number only two,” investor Jeremy Grantham noted in a recent newsletter headlined “The First Truly Global Bubble.” “First, the fundamental economic conditions must look at least excellent - and near perfect is better. Second, liquidity must be generous in quantity and price: It must be easy and cheap to leverage.” That pretty much sums up the world we’ve been living in, a world where prices skyrocketed for Miami condos, Indian stocks, and office towers in Dubai.’
Add in yet another parabolic blowout in stock prices (the second in seven unlucky years) and a bunch of subslime infested hedge fund blowups and you have the perfect recipe for KAPOOM!!!!
Hard landing is too mild for the situation we are in. This one is destined to go down in the history books like the panics in 1819, 1837, 1857, 1873, and 1893 and 1929.
http://memory.loc.gov/ammem/today/aug24.html
http://www.britannica.com/eb/topic-181213/Panic-of-1873
The Sumter, SC real estate market is continuing its decline. YoY sales are down and so are average prices. Yet our County Council is still taking requests to build bigger and better new subdivisions. There are rumors that one big subdivision in town approved about 9 months ago will not materialize…ever or way down the road.
http://ourcarolina.com/modules/wordpress/?p=64
Central South Carolina is really an affordable place to buy a home when compared to most places in the country but with prices creeping downward, the new apartment complexes might be the big winners.