The Pendulum Has Shifted To An Over-Supply
The Patriot News reports from Pennsylvania. “In 2004, James Dailey and his wife were renting and not looking for a house to buy. At parties, he said, people would look at them ‘like we were weird.’ ‘That’s how I knew we had made the right decision,’ said Dailey. Now, Dailey and his wife…hope to find a house by spring between Hershey and Carlisle. He sees no reason to hurry. He’s convinced prices on homes $400,000 and up will fall.”
“A sharp increase in the number of homes listed for sale shows the midstate isn’t immune from the supply glut that is slowing the housing market nationwide. In particular, local observers say the midstate market has a surplus of homes priced at more than $400,000.”
“‘There aren’t as many buyers right now …,’ said Viola Thompson, president of Prudential Thompson Wood Real Estate in Hampden Twp. ‘We have some gorgeous homes out there, and they are sitting.’”
“‘Builders tell me they have reduced their homes by tens of thousands of dollars because they can’t sell,’ said Dawn Shughart, owner of Dawn and Associates Realty in Carlisle.”
“She and other agents say home sellers in the higher-end range have been slower to adjust to the reality that they might need to lower their asking prices.”
“Of 106 midstate homes newly listed one day last week, the asking prices for 95 of them had already been reduced before going on the market, Shughart said. That number usually is about 10 to 15.”
“The pendulum has shifted to an over-supply in parts of the market, and buyers are cautious. ‘What’s wrong with a buyer’s market? Half the clients we represent are buyers,’ said Greg Rothman, CEO RSR Realtors.”
From Chicago Business in Illinois. “On a late June afternoon, Laurence Kallen stepped to the podium in the Randolph Street office that serves as his cramped auction house. Mr. Kallen had 11 foreclosed Chicago properties to sell and 10 bidders in attendance. The auction lasted 10 minutes. He didn’t get a single bid.”
“‘Two to three years ago I’d get up to 50 people,’ Mr. Kallen says, gazing at a room of mostly unoccupied folding chairs. ‘For a while it was like that every day. People were buying properties like mad.’”
“Not anymore. Despite a meteoric rise in foreclosures — 17,096 Chicago-area homes were foreclosed on in the first half of this year, up 46% from 2006 — the market for investors in foreclosed homes has been in steep decline.”
“‘It’s counterintuitive,’” says T. J. McKinney, a Chicago-based investor. ‘To be honest with you, there’s less deals than there used to be.’”
“Foreclosed properties that don’t sell at auction revert back to the banks, which pass them off to a real estate agent to sell, exacerbating Chicago’s glut of unsold homes and threatening to push down home values.”
“‘If there’s enough foreclosed property, it will definitely affect the real estate values in a neighborhood,’ says Marvin Stockert, executive director of the Illinois Assn. of Mortgage Brokers.”
“Because banks don’t want to be landlords, or to pay the maintenance and property taxes on homes they’ve repossessed, they typically hand those properties over to real estate agents to sell at the market price.”
“Many of those properties are concentrated in neighborhoods where prices are already under pressure. ‘A lot of the foreclosed properties are south of the Eisenhower,’ Mr. Stockert says. ‘If you’ve got a real concentration, that really does hurt values in those areas.’”
The Chicago Tribune from Illinois. “More than a hundred people gathered Saturday in the Austin neighborhood as housing experts sought to raise awareness about an epidemic that has left in its wake a growing number of boarded-up houses across Chicago.”
“The forum came as the number of new foreclosure cases in Chicago increased 36 percent over the last year, from 7,558 to 10,294, the biggest single-year increase since 1993, according to the National Training and Information Center.” “More than half of foreclosures were on loans less than two years old.”
“Michelle Rodriguez-Taylor, a housing organizer at the information center, said the problem has spread in Chicago neighborhoods such as Austin, where boarded-up houses highlight a 65 percent jump in new foreclosure cases since 1993.”
“U.S. Rep. Danny Davis, whose district includes Austin, attributed the rise of foreclosures to homeowners signing mortgages without fully understanding the conditions of their loans. ‘They’ve invested everything they have into a place they can call their own,’ Davis said. ‘And then they have that taken away and they don’t understand why.’”
“Rodriguez-Taylor said many lending companies are skirting an Illinois law designed to protect borrowers from high interest loans by offering mortgages with adjustable rates that start as low as 4 percent but rise as high as 12 percent within a year.”
“‘We’re seeing people paying over 50 percent of their income on their loans,’ she said.”
The Journal Sentinel from Wisconsin. “News about the housing market is keeping Tony Barnes from house hunting - not news from the media, but news from his brother in Minnesota.”
“‘My brother and his wife bought a house a year ago, and now they want another one, and they can’t sell it,’ says Barnes, who just…landed a job in Menomonee Falls. ‘I don’t want to get into something I can’t get out of.’”
“Mortgage rates are reasonable, there’s a huge selection of houses to choose from, and local house prices are flat or edging down. But buyers are holding back, say those in the real estate industry.”
“Residential sales in Milwaukee are even slower than the national average. The Metro MLS reported last week that sales in the first half of the year dropped 11% compared with the first half of 2006. Sales were slowest in Washington County, down 26.3%, but lagged only 3.5% in Ozaukee County.”
“‘The lack of buyer confidence is holding back the market right now,’ says Lawrence Yun, senior economist for the National Association of Realtors.”
“‘The fact that household formation has drastically slowed in an expanding market is very unusual,’ says Yun. ‘This implies to me that people want to wait it out and see how long this housing slump will last before making that commitment. We haven’t encountered this buyer psychology in the past.’”
“The psychology that homeowner Lynn Bednarz sees is endless house hunting and procrastination.”
“She has been trying to sell her Wauwatosa 1920s-era brick house since last fall. She has dropped the price to $345,000…and now is throwing in a brand new car, all in an attempt to convert just one foot-dragger to a contract-signer.”
“‘A lot of people I know want to sell,’ says her broker, Pam Jerzak in Waukesha. ‘But they say, ‘Because the market is in the tank, I don’t want to buy, because I can’t afford two mortgages.’ They might let their dream house go by.’”
“The number of mortgage applications is up, too, but that could be a mirage, says Yun, because higher lending standards are forcing some applicants to apply several times before being approved.”
“First-time buyers are hardest hit by more stringent lending standards, says Christopher J. Callen, senior VP of lending for Brown Deer-based Bank Mutual, which has 22 offices in the Milwaukee area.”
“‘A couple years ago, on an adjustable(-rate mortgage), we would write the loan at the then-current interest rate. But today we look at the monthly payment, fully indexed, and for interest-only loans you’re looking at the interest rate fully indexed plus amortization, and from that point of view, can the borrower afford this mortgage?’ he says.”
“Refinancing volume is down, too, he says, because homeowners with low rates aren’t likely to give them up to move to a new house. ‘If I own a house, there’s a sense of hesitancy. I can have a great selection of houses to buy and a good price, but can I sell my house?’”
“Bednarz vows that when her longtime home finally sells, she will be buying in a warmer climate, answering the prayers of some stressed seller.”
“Or maybe not. ‘There’s a lot out there to look at,’ she says. ‘I might wait. I guess that makes me one of the people I’m complaining about.’”
“The pendulum has shifted to an over-supply in parts of the market, and buyers are cautious. ‘What’s wrong with a buyer’s market? Half the clients we represent are buyers,’
Definitely an over-supply in my TH community. This morning I drove around and saw additional units with FOR SALE signs on lawn. The real benchmark for a buyer’s market is how many end units are stuck in limbo. They usually move the quickest, and there are never more than one or two for sale at any given time. As of today, there are six.
Sure, it’s a buyer’s market, and it looks like the buyers are sitting this one out. (In addition to the ones who are being squeezed out by the sub-prime money meltdown.)
It is NOT a buyers market by any means what-so-ever! This is NASDAQ 1999 all over again. By comparison we currently at March 30th 2000 right now. We will have a tremendous freefall over the next several years and only then hobble along with 3% annual appreciations if were lucky.
I fully agree.
When I bought my house, my appreciation assumption was 3-5% a year. In light of current events, it seems to be right on the money.
assumption is the mother of all F#$kups!
Even taking appreciation into account in regards to RE is foolish. At best it should be viewd as gravy and not taken into account when doing the numbers.
Did you factor in 5-10% for maint, 5-10% for inflation, 10%+ vacancy (if rental).
This assumption of apprection is the key factor in these bubbles. It’s not easy credit, greedy RE people, builders, stupid buyers… it’s the assumption of appreciation. If the appreciation assumption was not there none of those other factors alone could press the bubble.
Ive said it before that I don’t care about appreciation, well as long as it keeps up with inflation. I want a house and land to live in and call home, nothing more.
How is this like Nasdaq 1999 all over again? Then and now are nothing alike.
I do agree though that now is not the time to buy out right.
Most of the money has already been made in the stock market this time around.
“In 2004, James Dailey and his wife were renting and not looking for a house to buy. At parties, he said, people would look at them ‘like we were weird.’ ‘That’s how I knew we had made the right decision,’ said Dailey.”
If you want to be successful in life, always do the opposite of the average, unattractive, fat a$$, ignorant American.
And 2004 was certainly the REAL top in terms of standard real estate cycles. Then they decided to blow out all the fiscal stops and experiment with credit so loose they practically shoved it down applicants throats. Then Wall Street and the Brokers got into the most wanton gluttony of greed we’ve seen EVER. Beyond the roaring 20s and the roaring 90s.
Question: Is real estate more like a religion or a cult? And what kind of world religion/cult does it most resemble?
I’d say Scientology, because its sole purpose is to separate fools from their money. Whether it qualifies as a cult or a religion is a matter of personal perspective.
all religions are cults, some just have more brainwashe… errr members than others.
“always do the opposite of the average, unattractive, fat a$$, ignorant American. ”
hey, wait a minute there! you’re talking about 90% of ths US population.
Indeed. A true contrarian.
The herd mentality blows.
Funny isnt it? If everyone is buying, rent! If everyone is selling, then you know its the bottom and time to finally buy
Many months ago it hit me, that this bubble was very pendulum like, in appearance…
My thought then, as is now, that for every extreme a pendulum may go (Sept 05′), it will go in the extreme opposite (50% of 2000 prices) at it’s nadir.
Prices will fall further than you’d think…
I don’t know, I can imagine quite a lot..
I would love to see that!
Cheap condos for everyone (maybe two), and a H3 Hummer (converted to E85 ethanol) for every driveway.
You can get a nice 2/2 condo in Texas for $50k so there is no reason why condos won’t be nearly this cheap in Florida and some parts of California. How many condos can you build on an acre? Even expensive land is migitated by the fact you divide by many condos. Most of the cost should be in the building. It makes no sense for prices to be 5-10x more for the same condo elsewhere!
IMHO - you are right.
One of the items that the MSM misses is that historical norm for home ownership is 64%, as a result of the last 2 decades - home ownership approached 71%.
“Despite a meteoric rise in foreclosures — 17,096 Chicago-area homes were foreclosed on in the first half of this year, up 46% from 2006 — the market for investors in foreclosed homes has been in steep decline.”
Who is left to buy? I doubt that those of similar (to us) mind approach more than 1% of the population. The FDIC anticipates 10% of all home owners to lose their house. That would bring home ownership back to 64%.
If you have not yet bought, it is because you are a) astute or b) your in the enviable position of going to a different club med every week (or have a great rent) or c) your personal finances are in a shamble and could not find a lender.
Far enough that it’ll even shock most HBBer’s, by my reckon.
The boomer equity bubble that has propelled the trade-up market is bursting, and things won’t ever be the same afterward.
cause it’s not an auction !
The auction lasted 10 minutes. He didn’t get a single bid.”
also 400k in central PA ? WTF
biz activity up there is putrid
Unless that is a mansion with acres of land, I gotta laugh. Lots of $50k houses in northwest PA. East PA is overpriced, much more so than west.
Oversupply?!? I just tooled around my city this morning. Hundreds and hundreds of new foundations/frames/stuccoed/roofed homes being built. Those that are finished line the streets with “Homes available” signs. Contractors are laying curbs, building block walls, landscaping easements, digging trenches, paving new streets for subdivisions on and on and on. Most all new divisions are lined with the same old new homes with either crap brown on puke yellow textures (take your pick). The streets are so narrow you can only get one car through when there are multiple autos parked on the street (and there are). Oil stained asphalt and driveways are becoming all to apparent. Lawns running together with no borders between. God awful ugly neighborhoods.
Ok so developers need to finish contracts I have heard. Better to have a spec home than empty land I’m told. So What then? Are the builders just going to sit it out for a year or five as the inventory dwindles? What about all the labor that doesn’t have the reserves to wait for the rebound? For GOD’s sake stop building already!!!!!
Utimately, they will stop building all together.
It’s called the Ownership Society. President Bush coined that term. Nice, huh?
don’t worry the free-er healthcare welfare society will start soon
LOL
Yes “ownership society” is a “nice” term kthomas.
It implies people taking responsibility for themselves. Is the opposite “rental society” better? Gee, I remember a time when landlords were scorned yet a “rental society” would imply a society where landlords constantly had the upper hand, no?
How liberal is that? You can argue Bush didn’t help the current situation and I’d accept that, fully. But Bush didn’t force people to get 2/28 mortgages, lie about their incomes, bid prices up or buy properties when renting was a far more rational financial choice. Bush is supposedly both an evil “genius” and a dope. Exactly how did he convince people to commit financial suicide?
One program, to assist low income first time home buyers, was initiated by Bush with “bi-partisan” support in Congress.
If there’s one thing clearly exposed by this blog over the last year the bubble wasn’t ignited by low income home buyers as much as it was a broad based bubble that captivated people across the income spectrum.
You hate Bush, fine. But constantly trying to hang this problem around his neck is really getting old.
It was right after Bush was handed the presidency that the tax laws were changed to give people a 250,000/500,000 exclusion on the capital gains tax on selling their homes and the capital gains rate was reduced to 15%, much less than the taxes I pay on earned income.
So, yes, I can lay this at Bush’s door.
From the horse’s mouth, here’s GW blathering on about the housing bubble, though his speechwriters are too slick to call it that. And with his biggest financial backer the owner of Ameriquest mortgages, well, it was a no-brainer. And,like most of his schemes, it’s a catastrophe.
“This administration will constantly strive to promote an ownership society in America. We want more people owning their own home. It is in our national interest that more people own their own home…And this is a good time for the American homeowner. Today we received a report that showed that new home construction last month reached its highest level in nearly 20 years.
The reason that is so is because there is renewed confidence in our economy. Low interest rates help. They have made owning a home more affordable, for those who refinance and for those who buy a home for the first time. Rising home values have added more than $2.5 trillion to the assets of the American family since the start of 2001.
The rate of homeownership in America now stands a record high of 68.4 percent. Yet there is room for improvement. The rate of homeownership amongst minorities is below 50 percent. And that’s not right, and this country needs to do something about it.
Last year I set a goal to add 5.5 million new minority homeowners in America by the end of the decade. That is an attainable goal; that is an essential goal. And we’re making progress toward that goal. In the past 18 months, more than 1 million minority families have become homeowners. Many people are able to afford a monthly mortgage payment, but are unable to make the down payment. So this legislation will authorize $200 million per year in down payment assistance to at least 40,000 low-income families.” Heckuva job.
http://www.whitehouse.gov/news/releases/2003/12/20031216-9.html
ahem .. Congress makes laws, not the President.
The tax law for sale of residence changed in 1997. The name on that door is spelled C-L-I-N-T-O-N.
Yes, the tax law changed during the Clinton presidency. Funny how the ramifications of the 2/5 real estate provision is being ignored by today’s press, no?
Aside, Roths were introduced during the 1998 tax year, I believe.
“The streets are so narrow you can only get one car through when there are multiple autos parked on the street (and there are).”
The city I live in has made a policy decision to limit the width of its roads - both newly built and those being re-done. They’ve given us two reasons. The first being traffic calming. Studies have shown people drive more slowly and carefully on narrower roads. Second reason - environmental impact of paved surfaces. Runoff water costs money to move and treat, and it damages the lakes and streams it eventually empties into. The city’s deadly serious about reducing the amount of runoff water we have to pay to get pumped (lifting stations) and treated, so narrowing the roads is only one point in the plan. They’re also encouraging property owners to build rain gardens to catch runoff, and we’re getting billed environmental impact fees on our sewer bills. Businesses are assessed based on the amount of structure/pavement on their property; homeowners are charged a flat fee for the time being, but we’ll eventually also get assessed based on how we’re using our land.
Living across the street from a former lake now swamp/sewer, I can’t help but support this, even though it meant my street got considerably narrower when it was rebuilt.
I would not want to live in a SH*TTY neighborhood like that. And I don’t like ugly house.
“Mr. Kallen had 11 foreclosed Chicago properties to sell and 10 bidders in attendance. The auction lasted 10 minutes. He didn’t get a single bid.”
I guess someone wasn’t interested in selling at market price that day.
“Because banks don’t want to be landlords, or to pay the maintenance and property taxes on homes they’ve repossessed, they typically hand those properties over to real estate agents to sell at the market price.”
Banks should make up their mind about whether they want to sell at market price or not.
“‘The fact that household formation has drastically slowed in an expanding market is very unusual,’ says Yun. ‘This implies to me that people want to wait it out and see how long this housing slump will last before making that commitment. We haven’t encountered this buyer psychology in the past.’”
How old is Yun? And who is “we”?
‘This implies to me that people want to wait it out and see how long this housing slump will last before making that commitment. We haven’t encountered this buyer psychology in the past.’”
Yet two of my friends took the plunge this year despite hearing my reservations about this market. Granted, I didn’t supply them with spreadsheets, or hard data, just my observations about what was occurring. (Having been in and out of real estate most of life, I figured I might have had some credibility with them.)
Oh well, they bought at the top of the market. There are worse things that can happen to a human being.
if they bought recently they got 10-15% off the top
that ain’t too bad
we’ve had no more downward move here in 22151
may05 to may 06 was down then flat
There are worse things that can happen to a human being.
Just ask Stedman
Interesting thing happened this weekend. A young couple we know that bought a new “custom” home last year advised to NOT buy right now. Rather than rationalize their purchase, they admit to making a mistake and don’t want us doing the same thing.
Interesting buyer psychology: People who bought last year are hosed. Maybe I’ll wait…
“‘The lack of buyer confidence is holding back the market right now,’ says Lawrence Yun, senior economist for the National Association of Realtors.”
Blake: PUT THAT COFFEE DOWN! Coffee is for closers.
Blake: A-B-C. A-Always, B-Be, C-Closing. Always be closing, always be closing.
AAAAHHHHH!!!! so it’s the CONFIDENCE that’s the problem. hey Larry, do you think the 2-3X overpriced scenario might have a little something to do with it?
Hey, Lawrence, ez solution to the “Lack of Confidence” problem.
How about a MONEY BACK GUARANTEE !!! 20% of Sales Price held in Escrow for 1 year, and then a an appraisal by someone you hire and someone I hire. Property drops in Value, I get the money credited back to me.
Put your money where youre MOUTH is Lawrence. Otherwise
SHUT UP, FOOL !!!
“They’ve invested everything they have into a place they can call their own,’ Davis said. ‘And then they have that taken away and they don’t understand why.’”
HOLD ME DOWN OR IMMA KILL THIS GUY!!!
Prices will keep falling. This is so funny.
Ben, I love this site!!!
wonder how many members NAR is losing per day ?
Good question. How much does it cost to join this outfit anyway?
I think I saw some free membership passes on the counter while at my credit union the other day
It costs one half of your common sense and your rational thinking ability to join. This is a subscription fee - and must be paid annually.
dd
And what happens to these properties, which are generally neglected since they’ve been vacant for 6 months to a year, when they don’t sell via a realtor?
I’ve seen foreclosed houses sit for months and months, and from what I hear, the banks will not take less than what is owed on the property.
How long will a bank sit on a house, before they decide to clear the books and sell it off?
I know one property which has been bank owned for almost 2 years. Vacant too.
The banks may well not “decide” to sell of REO. Last time, regulators had to force them to do it.
Remember, banks are bureaucracies (inherently stupid), are run by people and are thus subject to the same wiles as everybody else. They don’t take a loss (in the ledger) until they sell the “underwater” house. They will “hope” this goes away in a few weeks or a few months, with the same degree of delusion as garden variety homeowners.
That helps explain things a bit, but I thought there was a “rule” or at least a “standard” (I know, I know, a crazy thought) where after a fiscal year, or X months, the property is cleared from the books.
I don’t know how they’re carrying these properties for years, which have taxes in excess of $20,000 a year, add in maintenance of the lawn, ‘winterizing’ the plumbing to stop from freezing since the heat is turned off, etc.
One house has a roof leak, and the house gets continually damaged each time it rains. Multiply by 2 years.
That’s one of the big shames in all this. Right now there are 2.8 million homes sitting vacant waiting to be bought. With no one to care for them they will fall into disrepair, such that much of the previous work to maintain and/or build the house will have gone to waste or be redone. Usually it takes a lot less effort to maintain a house for 2 years than it does to let it go for 2 years and then repair it.
For what it’s worth, I would argue that banks don’t maintain the landscaping. It seems that every foreclosure I run across has a dead lawn, and weeds to the sky. Winterizing the plumbing? I think that would involve putting a call into a plumber, thus “managing” the property. Banks aren’t in that business. Hence, the house decays.
Here in lies the dilema. I’m watching a REO property with wishing price 450K. Old farm house and POS. At best maybe 150-200. When\If they mark to market the real pain will begin.
Yup, funny thing is the vast numbers of competant bank regualtors brought into play in the 90’s are all gone. Do you think Bush will step up and reinstitute these regulators?
It is going to take many large banks going insolvant to trigger Gov action, just like last time. These banks will not admit to these losses willingly. It will take a regulator (under threat of liquidation) red lining all these crap loans to make em budge.
The interesting thing is that last time the regulators red-lined a shitload of performing loans “just to be sure”. If the banks would just take care of this by themselves (hahah, i know. i know) it would prolly be less painful overall, but smaller pain now is not in the plan.
I often wonder if the banks will offer to sell their depositors non FDIC insured investments (and then screw them) to try to end run the regulators? With the wonderfull banking deregualtion (banks now assholes to spew fed dollars at any cost) the banks can now dally in many products that are out of the relm of traditional banking.
I bet that once they pull all their home lending signs down they will be replaced by Uberinvestment signs with only the smallest of small print disclosing a non FDIC insured product.
“Invest in your community for the future!!! MBS that cure all the worlds evils while making you rich!!?
Does anyone have any first-hand experience with what this process is actually like if the loan has been securitized? I’m curious how much power servicers have to take a loss on behalf of investors.
Excellent question. Anyone?
“‘The lack of buyer confidence is holding back the market right now,’ says Lawrence Yun, senior economist for the National Association of Realtors.”
“‘The fact that household formation has drastically slowed in an expanding market is very unusual,’ says Yun. ‘This implies to me that people want to wait it out and see how long this housing slump will last before making that commitment. We haven’t encountered this buyer psychology in the past.’”
“The psychology that homeowner Lynn Bednarz sees is endless house hunting and procrastination.”
———————
NAR/seller rants are evolving into a psychoanalysis of the hesitant buyer, and I wonder how much longer until they begin to make references to the “mental illness” and “personality disorder” of buyers who refuse to pay the inflated prices being asked?
It’s seems like what they really want to say is “Look you stupid F’in buyers - give us what we are asking and just play along with the system! What - do you think you are better than us? I want my money, and you need to give it to me! Stop asking so many questions!”
Yun seems just on the brink of calling non-buyers cowards or idiots.
Must be a very different morning Yun faces everyday than Lereah did. His was ‘morning in America’, Yun sees only in-coming in the Green Zone. He must flinch with each new report - starts down, sales down, inventory up. He won’t last another year.
Are Realtors in any danger of losing the capitalization of their calling?
$345K in Wauwatosa WI ? That is just plain nuts. This market has a “long “way to fall.
I lived most of my adult life in the area. 12 years ago you could buy a beautiful brick 3 bedroom home, with a 2 car garage, and finished basement, all in move in condition for around $125K
And using a “Midwest appreciation rate” of 4% due to slow economy, weather, etc, the current price should be about $200K.
In Arizona I use 6% due to growth, and I still get about 25% to 40% less than current “values”.
In normal times and normal places, noone assumes 4% annual appreciation. The old rule of thumb to not buy unless you’re going to be there 7 years holds because it will take 7 years to appreciate enough to pay the realtor. Therefore 1%/year is more reasonable in my opinion.
I agree.
So, RE is local right? I keep seeing reports coming in from all corners of the Country if not the globe with problems. If it is truly local, I guess I would like to know where are all these good places that are hot now? Since everywhere I read about is getting pounded and what not, where is it good locally?
I’d call it it “localized anti-froth”.
Mountain View, Menlo Park, Los Altos, Palo Alto, Cupertino, Fremont in the Bay Area.
Is that enough for you?
Mr. Kallen had 11 foreclosed Chicago properties to sell and 10 bidders in attendance.”
Sorry Mr. K, but those weren’t bidders. They were homeless people who just wandered in looking for free food.
LOL. love it just love.
Don’t they have to “register” in order to be “bidders”
‘My brother and his wife bought a house a year ago, and now they want another one, and they can’t sell it…I don’t want to get into something I can’t get out of.’
What were they thinking. In recent years, it seems, Americans have been trading houses like baseball cards. If there isn’t a reasonable expectation of staying in one place for more than three years, rent!
The government removed the last reason to always own when it changed the capital gains rules (which previously required a captial gains tax on sales unless you bought another property for more money.
WT, please tell it to the guy behind me. He’s trying to sell his house after living in it for ONE YEAR. And, surprise, it’s not selling.
Could someone more knowledgeable (sp? irony?) weigh in on the “three year” call? I have always heard that it’s 5-7 years…
This Veruca (”No daddy, I want it nowwww!) Salt mentality that many of us have becomes more and more obvious and jarring every week.
Anyone else notice that you can search for short sales on Zip now?
The realor scare tactic is alive and well in South E Florida. I got an email from a Realtor with ziprealty claiming that the “buyer’s market” was about to end and I’d better buy now because the Sellers market of the last few years is about to re-start. He says he is seein a 50% increase in sales and lots of traffic the last two weeks.
Why isn’t this considered fraud, because it surely is a lie and he has to know its a lie. I wrote back among other points that his sales went from 2 houses 1st quarter to 3 houses 2nd quarter for a 50% increase. The realtor assoc has a firm grip here in Fl lauderdale, Miami and Palm Beach. Even the online newspapers don’t report the facts. I guess they want to try to lie without getting caught. This realtor jerk also wrote that a “huge tax break” had already been passed by the legistrature. That is totally false.
Hope Ben and the HBB powers-that-be don’t mind, because I’m going to perform a Bits Bucket transplant. Renter is suspecting possible fraud in an e-mail from an agent. Dimedropped just offered the following in the Bucket:
I am an appraiser in Orlando. I starved during the runup as I did not believe the so called values etc. I am loathe to work for brokers and refuse to cut fees for the management companies so they can take half my hard earned fees. So I was was pretty much screwed this past 4-5 years.
Now I am working for large law firms in the area in fraud investigation. It is nothing short of amazing. I will be giving seminars on fraud investigation to the bar association throughout the state beginning in the fall. As a part of this effort I need to compile the types of fraud evident in real estate now and in the future.
There are greater minds than mine on this board and I would greatly appreciate your help in putting this list and detail together. In the end it will benefit all of us as we clean out this rats nest.
Please send any and all scams you have heard about along with details to my email at jconnor3@gmail.com
I will keep it confidential in all cases.
Your help is appreciated and I will post data here as it comes to me.
(I starved during the runup as I did not believe the so called values etc.)
Looks like honest appraisers (mortgage brokers, mortgage securitizers, etc) are the exceptions to the America’s soaring obesity rate.
Tell him you’d be very interested in buying now as long as he is willing to rep and warrant those assertions, backstopped with a buy-back remedy at 10% over whatever you pay. If the market is really set to take off again, he can’t lose!
http://tinyurl.com/2ypo42
Relax. Chicago market almost ‘normal’ now
“Woozy, maybe. Not fatally stricken.”
“That’s one new diagnosis of the Chicago housing scene from a study of 50 cities around the country that estimates how much home prices would have to fall for housing costs to return to each city’s historical ratio of income-to-housing costs.”
“To reach this number, housing-industry consultant John Burns factored in mortgage payments, property taxes and down payments and concluded that Chicago home prices would need to drop 8 percent (or $20,000, by his reckoning of a $250,000 current average price) to get back to “normal.”‘
“Burns’ firm devised a “barometer” that scores each market based on its own history of affordability. A score of zero means a market is the most affordable it has ever been, in relation to income. A 5 indicates median affordability, and a 10 suggests it’s at its most expensive.”
“On that scale, Chicago scores a 5.9.”
Yeah, so stop asking for discounts and just pay an 8% premium already. BTW, the reporter never told us the name of Mr. Burns firm, who funded the study or gave us any info as to what statistics they use. Does the press ask questions anymore?
maybe mr. burns should take a look at the condo glut within the city, just for starters. or take a look at neighborhoods that aren’t exactly gentrified, but not affordable for long-time residents, either.
chicago prices aren’t nearly as bubbly as california’s, but they’re certainly overinflated. most neighborhoods need to drop way more than 8% to meet the affordability criteria cited around on HBB.
Ain’t that the truth, lotsa crappy condos around town nowadays and they’ll drag this market down. Its still early in the game though, let’s wait and see how the local job market fares - this thing could turn on a dime.
I’ve been stunned for years that all the crappy new construction is selling at all, lots of it on busy streets/bad locations.
I’ve been spending some time on Chicago’s north shore and many homes there are selling at below 2004/5 prices. One home i recently looked at sold for $1,385,000 in 2004 and is currently listed for $1,230,000 (for a 2,556 SF 1920’s house on an 8,000 SF lot). Ouch - an 11% drop, just based on asking price and it will sell for less than that. they might have overpaid in 2004 because there was so little on the market then - they just bought the first normal house they could find.
Not all prices are down - i’d say It’s a spotty market. But there is significant weakness at the mid-level of the north shore suburbs.
Mortgage applications, another myth and worthless indicator bites the dust.
The number of mortgage applications is up, too, but that could be a mirage, says Yun, because higher lending standards are forcing some applicants to apply several times before being approved.
http://www.jsonline.com/story/index.aspx?id=632229
How difficult would it be to report mortgage applications approved?
‘They’ve invested everything they have into a place they can call their own,’ Davis said. ‘And then they have that taken away and they don’t understand why.’”
So, they have invested EVERYTHING they have. How much is that? 50 cents? They are living in a house they can’t afford at somebody else’s expense. Get those bums out.
They don’t understand why??? I know that’s very complex, but here’s a hint: make your mortgage payments on time! Don’t but anything you can’t afford.
Yeah, and this guy Davis is a rep of the people? What a joke. First off, they invested absolutley nothing - 0 down with 103% financing most likely. Second off, they know why they lost their home to the bank - duh, they could not pay the mortgage.
Please stop with the sob stories, it’s not my fault, I was duped, etc. Every greedy and/or stupid person in the chain is to blame from the bank I-banks to the “lowly” borrowers. Throw in the middle portion of the fraud chain - realtors, mortgage brokers, appraisers, etc. - and let justice have it’s way.
They’ve invested everything they have into a place they can call their own,’ Davis said. ‘And then they have that taken away and they don’t understand why.’
Well, they might have called the places “their own,” but they weren’t theirs. They had nothing of theirs taken from them.
Is it just me or does this Yun fellow sound a lot more honest than David LIEreh?
It’s just you.
And it’s just us HBB-ers too.
honesty from a paid NAR economist ?
“She has been trying to sell her Wauwatosa 1920s-era brick house since last fall. She has dropped the price to $345,000…and now is throwing in a brand new car, all in an attempt to convert just one foot-dragger to a contract-signer.”
F@#king “foot-draggers”!! (stamps feet, clenches fists and screams): “Buy my overpriced POS, buy it NOW!!!!
Sorry, but I’m just not willing to finance a car over 30 years.
Or pay property taxes on it.
Fyi: indirect reference to Veruca Salt.
Sorry to steal your V. Salt reference in my post above. Hadn’t gotten this far.
“Scratch that, reverse it”
I’ve never felt so powerful telling people why I have no interest in looking at homes. My wife’s family really wants us to buy… but the wife just sees the flood of homes on the market and has noted the $100k+ drops in the asking prices. She’s also noted homes are going for $100k to $250k below asking…
So we’ll just sit and wait.
Got popcorn?
Neil
Every time one of my Kool-aid drinking relatives tried to pressure me (rarely happens these days), I’d usually say something like, “If your so sure buying right now is such a ‘can’t lose’ proposition, why don’t you go buy a nice house and then rent it back to us for market rent? That way, you get to keep all that sweet equity when it keeps going up another 20% a year.”
That’s a great retort! If I said that to my relatives, however, they’d simply say that they don’t have the money as they have a mortgage to pay. As opposed to us, who have money socked away in the bank and having a nice easy time just paying rent and putting our feet up.
How many times have you heard people complaining (when you suggest going for a trip or a night out or something else that requires them to shell out a few bucks) that “no thanks, we have a mortgage to pay” as if they were forced into a life of hard labour and we renters are just freeloaders and easy spenders?
Imagine how pissed off they’re going to be when the one thing that justified all the hard work of maintaining and paying for their “own home” - constant appreciation - goes negative in a way that is really apparent, and we’re still flippantly paying rent and not chained to our abode?
I hope they don’t expect us to feel sorry for them and subsidize their self-inflicted hardships. Luckily my relatives in this boat all earn more than we do so they won’t be likely to come to us for handouts. The only exception is my mother-in-law who is sitting on a roughly $180k gain on the condo she paid $120k for and still hasn’t sold despite our pleas and threats over the past 3 years. This is in Newark, CA. I don’t want her to lose all her equity as it’s not the same as turning your back on your siblings, who have the ability to look after themselves.
We sat down and showed my m-i-l how she would get an additional $1000/month in positive cashflow by selling her place and renting now. She didn’t deny the numbers but kept muttering something about a “roof over her head”, which was perpetuated by my dumb sis-in-law who is sitting on a $750k house they paid $250k for (also in Newark) and swears on housing values. They are only going to realize their folly when their house value goes down to $500k and it’s too late.
Actually, in Californiastan, holding on might not be such a bad idea.
Remember, that property tax is set at purchase which will be very low. No transaction costs to hold.
For an older person the thing they want to minimize is unexpected risk, since they have less time and ability to bounce back. If they hold on with a *fixed* rate mortgage then there’s predictability in payments as well as property tax. If there’s a Great Inflation then at least they’ll still have somewhere to live, whereas somebody on a fixed or low retirement income will be whacked by rapidly rising rents versus somebody working whose wages are more likely to track with inflation.
An older person is less likely to want to deal with the hassles of moving and landlords and worrying about other nosy rental neighbors or just new neighbors in general.
Perhaps she bought for that kind of mental stability and she really might not care if that phantom equity evaporates for a while.
She’s old school. A house is a place to live in, not a financial manpiulation tool.
Also, consider your mental stability: anything you advise a Mother-in-law to do, and she later comes to regret (rationally or not), will be remembered as if carved in marble on the Parthenon.
You’ve made your case now and she made her choice. I think it’s best to be quiet.
wow, excellent advice DrC. One fact I forgot to mention (which strengthens your argument) is that she owns the home free and clear and hence has no mortgage issues. It still doesn’t mean she could do better by truly liberating her equity by selling and investing in a 5% or better instrument. She could maintain her living standards on a $1k - $1.2k rent.
But you’re right about the mental stability part; I think that does mean a lot to her.
Having said that, she’s always dropping hints that we “stretch our dollars” to buy some crappy place in the area that’ll eat up all our spare time and cash to fix up and maintain, instead of living it up in our 1900sqft 8-year-old 3BR+den/2.5BA/2CG SFH that we’ve been renting for the last 4 years for $2k/month. They just raised our rent for the coming year by $25/month. Oh well, we’ll have to somehow struggle and find that extra $300.
If we were to buy the place it’d cost $800k. I don’t know what the realistic rent/own ratio would be here but I’m estimating about 50% taking everything into consideration.
$2000 a month rent on a $800k house is 1:400. I can see that $800k house dropping to $300-350k
I begged my parents hundreds of times to sell their house in early 2006 and either buy a smaller house, relocate or rent. They don’t care, their excuse is I bought it to live in, not to invest. Oh well they will lose all that phantom equity. I estimate they are going to lose half a million between the equity and capital gain missed opporunity.
If I had owned the house, I would have put it for sale the next day, be happy to sell it for $500k at this point(was $750k at the peak) take the $500k and relocate.
If I told that to anyone in this area they’d laugh in my face. The peak value of these homes was around $810k in 2005. By the start of 2007 a couple sold at around $750k. Then this June we had 2 sales at $800k again. Despite all our valid theories, psychology, all that, the fact remains that people are buying these houses for 800k and even 700k seems like a fantasy at this point. This is Fremont, CA, and not even the better part of Fremont. There is a railroad track running alongside one side of the complex, and some Mexican gang activity a couple of blocks away. There was a shooting murder in broad daylight a block away 2-3 years back. Not exactly a prime neighbourhood. But the buyers keep coming. The sellers refuse to lower their asking by even 10k after 3 months. And why should they, when the house eventually sells for what they want for it?
You’ve a great wife, Neil. Go tell her so.
I’m near the “it’s different HERE !” enclave of Wonderful Wauwatosa (Tosa ), Wi. and now they are feeling the tax crunch as well rising energy, fuel and food costs.
A lot of the Tosa crowd are well established seniors with money and they got a little too greedy waiting to pull the pin on this RE handgrenade.
Some of the older mini McMansions of only 300k are getting smacked with almost 7000 Grand tax. They danced for glee in block parties when these 150k shacks soared in asessted values and now they screaming mad at the tax bills.
Wait until it’s 30 below in January….Ho ho ho !
Yikes…Lynn Bednarz only lives a couple of blocks from me on Church Street in Wauwatosa.
Nice safe area, tree lined street and very close to the quaint downtown village and less than 1 block from nice river/park system but overpriced for that block.
It is a nice area and Lynn is only paying about $5000 in Taxes. A new 2007 Saturn Ion2 vehicle valued at $15,745
If she was offering a 2007 Blue Audi S4 Cabriolet Convertible for that price, I might offer 300-306k cash
Here’s a link and photo of the houses and “freebie” car in case you want a shack and transportation to the Wisconsin State Fair in August.
http://homes.realtor.com/search/listingdetail.aspx?ctid=18527&ml=3&mnp=27&mxp=26&typ=1&sid=8ed6d519db394bd7b42c04fa50fad85b&pg=2&lid=1083401131&lsn=12&srcnt=13#Detail
My wife and I are renters. We got those “looks” during family parties, we overhear our status as “renters”. I usually mind my own business, but if they confronted me, I usually reply back. “It’s not the right time for us. I can’t afford a home with these kind of prices. We’ll wait and see” Mind you that my income is probably twice more than what they make as a two income earner.
We don’t hear that anymore. I figure their situation is different now. Stress, financially strapped, etc. I don’t strike any real estate conversations with them.
I don’t know how long we are going to wait but housing is definitely coming down and we are very optimistic in purchasing one within 12-18 months. If we do buy one, I’m not the one to move in 5 years or less. I’m in it for the long haul. BUT we’re not in a hurry.
I think “Dailey” must be Olde English for “knife catcher”. A key skilled trade in medieval times, I’m sure.
Not that I’m a big fan of property taxes, but I would not mind seeing legislation that lets municipalities step up and become the landlord on abandoned properties, if the banks aren’t up to the task. Already, they have a lien interest where back taxes are involved, and many cities have laws regarding keeping up homes (grass mowed, roofs and fences in good repair, etc.) If on top of that they could win the right to maintain properties that have been abandoned so as to keep their taxable value high (charged to whoever is the owner) - and I do mean everything from watering the grass to running up the A/C bills in hot/humid weather - that would create the potential of escalating liens on the property and light a fire under those who hold the morgage paper or own the REOs.
Cities could even politely offer to play landlord themselves on these properties if the banks don’t want the job. It might be a nice little revenue source, covering property taxes, management and maintenance fees, with money left over even to help defray the banks’ loss on the loan. Set rents at 85 - 95% of prevailing, depending on the market, no Section 8s except in neighborhoods where that is already the default - FBers may grouse, but will many really want to bet that a falling-apart hovel is better for the comps than a clean rental?
I suppose there’s some reason this is completely unworkable, legally, but boy do I. Hate. Waste. Seeing a gorgeous home go gradually to hell because everyone who has an interest is playing chicken with the accounting, resigned to letting it rot — that drives me nuts. I don’t think it should even be legal, from a conservation standpoint.
More government? Ugh. No thanks!
‘I don’t want to get into something I can’t get out of.’
Buy now and be priced in forever!
I live with parents(very cheap rent) and will simply wait and save up money and buy sometime in 2010 when every seller is mad with desperation to sell NOW before prices go down, down, down! I will play upon seller’s fears and lowball 20 sellers and whoever goes down the most will get that sale. Anyone agree that ill be able to score a nice big house with many acres of land for around $50,000 in NW PA?