People Are Wondering If We Have Yet To See The Bottom
A report from the Arizona Republic. “One of the Valley’s top housing analysts lowered his projection for the area’s new-home market for this year on Tuesday, saying that such stubborn problems as an oversupply of houses and turmoil in the mortgage business will delay the recovery. RL Brown said he expected Phoenix-area builders to pull 34,000 building permits this year, down from his forecast of 41,000 issued in January.”
“Brown expects the market to remain at the same level in 2008 before beginning its rebound in 2009.”
“Builders pulled more than 60,000 permits in both 2004 and 2005, a pace Brown said was unsustainable. He said the market still is flooded with homes for sale. The market has perhaps 70,000 to 90,000 of them, including the more than 52,000 on the Arizona Regional MLS typically cited as a baseline inventory figure, Brown said.”
“He estimated there are as many as 10,000 to 20,000 builder speculative, or ’spec,’ homes for sale, along with a similar number of investor-owned homes that are either vacant or being rented until they can be sold. Only some of those spec homes and rentals are on the MLS, too.”
“‘That’s a huge number,’ Brown said. ‘The point is that there are a lot of homes that are going to have to be sold or occupied before the supply comes into balance with the demand.’”
“Plus, the full effect of foreclosures hasn’t yet been felt.”
“‘We thought we had seen the bottom last year,’ said Dave Lorti, (an) agent in Tempe. ‘Some buyers were beginning to get back in the market. But now, people are wondering if we have yet to see the bottom.’”
“Phoenix-area builders still face cancellation rates from 20 to 40 percent. Builders also are reluctant to curtail production, even with a glut of unsold homes. ‘What do you do? Do you shut down the (production) line?’ Brown asked. ‘The home-building industry has never done that.’”
“Meanwhile, builders are writing down the value of land they bought during the boom, laying off employees, restructuring their businesses and looking for new ways to make homes affordable again.”
“Affordability will become increasingly important as the mortgage industry rethinks the way it did business during the boom. New lending requirements are knocking buyers out of the market, Brown said.”
“‘Underwriting guidelines have gotten very stringent,’ he said. ‘You have to have your stuff together to get a loan. What I hear more of is the people in the sales office make the deal but the buyer can’t qualify.’”
The Tucson Citizen from Arizona. “Dave Perrin didn’t plan to sell his house and buy a new one, but his wife’s illness suddenly thrust him into a bloated local real estate market that has buyers dictating terms and prices and sellers scrambling to fulfill them.”
“Perrin’s wife needed a home that could accommodate a bulky air filtration system, so they started shopping. They quickly found and bought a 2-year-old home in Vail. They paid just under $350,000 for a house that was listed for $357,000.”
“Two years ago, the previous owners pulled the home from the market when it didn’t sell for $480,000, Dave Perrin said.”
“The Perrins aren’t the only ones getting sweet deals. A glut of homes on the market, more than twice as many last May as in May 2005, has created a buyer’s market. New home prices are down, builders are offering incentives and sellers of existing homes are doing extra sprucing up to get homes sold.”
“‘It’s probably the best time in the past 10 years to buy a house,’ said real estate analyst John Strobeck, owner of Bright Future Business Consultants.”
“In 2005, investors flooded the Tucson real estate market. At the same time, buyers saw interest rates that had dipped to levels not seen since the 1960s. A ‘frenzy’ ensued that drove the median price - the price at which half of homes cost more and half less - of existing and new homes up more than 25 percent over 2004, Strobeck said.”
“But as more and more people tried to cash in, the market was inundated with homes.”
“Lately, prices have leveled off as the excess inventory is slowly being depleted. However, Strobeck said, the median price is buoyed by higher-end home prices that have not had the drops experienced by some mid- to lower-priced homes.”
“Prices are dipping because sellers are motivated. ‘When people are motivated they will come down, and we’re already beginning to see that happen,’ Strobeck said.”
“The current state of affairs has Realtors scrambling, said Holli McGarry, a Realtor who has been selling in Tucson for five years.”
“‘Two years ago anybody with a real estate license could just sit there and sell houses, but now we have to work,’ she said recently after a ’staging’ class.”
“The sluggish market has builders cutting prices and bending a little more than they have in recent years. Prices are dictated by the market, said John Bremond, president of KB Home Tucson. ‘We can only sell a home for what the buying public is willing to pay,’ Bremond said.”
“What the public will pay is illustrated by new home median prices. Last June, the median was $263,048. This year it was $241,650, Strobeck said.”
“Builders are still trying to sell homes built on speculation in the past year. The market has forced builders to accept less than the list price for such ’spec’ homes, McGarry said. ‘Builders are taking offers,’ she said. ‘They never take offers.’”
“McGarry is optimistic. Tucson is still growing, and it didn’t see the 50-percent-per-year price run-ups other cities, such as Phoenix, saw.”
“‘What goes up, must come down, and we didn’t go up as far so we don’t have as far to fall,’ she said. ‘People are thinking, ‘Well, we can go outside now. The storm has passed.’”
The Explorer News from Arizona. “The rollercoaster real estate market seems to be leveling off, but activity is still high in the Northwest area, according to numbers released last week by the Tucson Association of Realtors.”
“The numbers indicate the local market has settled since the volatile real estate boom of 2005, said Judy Lowe, president of the Tucson Association of Realtors. ‘We’re not seeing a lot of price declining,’ Lowe said.”
“Despite median and average home prices being up, this is not a direct indication that the market is taking a turn for the better, said Maile Nadelhoffer, a computer database specialist with the University of Arizona’s Economic and Business Research Center.”
“‘I don’t think the indications in that latest report were enough to think that the recovery has really started in the housing market yet,’ she said.”
“Some of the reasons the market is not ready to begin the recovery are the housing supply is still a little high, as are average days on the market and existing home sales. Existing home sales are still on their way down, Nadelhoffer said.”
“The small increase in the median and average prices is just part of the natural variability in the prices and doesn’t look like enough to push the entire market toward recovery, Nadelhoffer said.”
“‘We’ve been thinking one of the reasons for that is a lot of the sub-prime part of the market has dropped out and that’s sort of buoying the median price of housing,’ Nadelhoffer said.”
“Last Wednesday, Federal Reserve Chairman Ben Bernanke said the lagging housing market would put a drag on the national economy. Nadelhoffer said Bernanke’s comments hold a grain of truth.”
“The numbers for construction employment are declining in Tucson, which have a tie to 20 percent of the jobs in the area, she said.”
“Real estate agent Joe Evano, who has been in the business since 1994, said people are starting to adapt to the market cooling.”
“‘Sellers are getting more in tune to the fact that 2005 pricing is not there anymore, although home prices are climbing,’ he said. ‘They aren’t climbing at the extreme rates that they were in 2005.’”
No, we have not seen the bottom yet. This is the 3rd inning of 9.
Aren’t you in Tucson?
Nope Chandler, AZ
“This is the 3rd inning of 9.”
If so, I vote for the TOP of the 3rd…
But Mr. Brown thinks that things will pick up by next year…LMAO
My gut says we’re only in the bottom of the 2nd.
And this may go extra innings. This is not your ordinary baseball game, fellas. We are in uncharted territories where the rules are rigged, the bats are corked, loans on steroids, and umpires are blind.
I agree with that
Very well said!
That’s pretty funny.
Since my area seems to always lag behind other areas, I’m going to say we’re still tailgating in the parking lot.
Maine?
Or Vermont?
‘Strobeck said, the median price is buoyed by higher-end home prices that have not had the drops experienced by some mid- to lower-priced homes.’
‘The small increase in the median and average prices is just part of the natural variability in the prices and doesn’t look like enough to push the entire market toward recovery, Nadelhoffer said. ‘We’ve been thinking one of the reasons for that is a lot of the sub-prime part of the market has dropped out and that’s sort of buoying the median price of housing,’ Nadelhoffer said.’
When I brought this up on NPR last month, the host reacted as if it was a new concept. Come on MSM, get the news out about the flaws in the median statistics!
Some people still don’t get the “median” like these shills. The high end is still getting plastered. I know for a fact it is in SoCal (except where lainvestor girl lives, apparently). There’s just more high-end than low-end skewing the numbers.
I listened to that broadcast, and I can’t believe how ignorant people are to the facts. Median price is practically useless in determining value. Price per square foot and same sales paint a much clearer picture.
Great point! If I may give an absurd example to further emphasize the point:
Let’s say new rules state that only millionaires may buy a house. The housing market would tank. However, the median would probably increase tremendously.
Wow what timing! The credit sphincter is tightening just as the inventory log is at its largest! That should end well…
“The current state of affairs has Realtors scrambling, said Holli McGarry, a Realtor who has been selling in Tucson for five years.”
- Realtors are scrambling … for jobs at Target, Walmart, Taco Bell …
And since nobody has money to spend, even those august employers won’t be hanging “Help Wanted” signs in their future. Expect employee turnover at those places to drop like a rock.
And that it why the real hurt has yet to come. All of the shills on CNBC every day state that the economy is good, so the stock market will continue to be a place for growth. One liar even went so far as to state this morning that DOW is much more likely to hit 14,000 instead of retreating to 13,000. But when the economy actually slows, which is happening now, then where will all of these unemployed people work and how will they buy the things they need (Cheerios, milk, etc), let alone pay for the excesses like MB and Beemer payments, mortgage payments, etc. Then there is the commercial r.e. implosion that is also coming. Even in Scottsdale, AZ, which is supposedly a “rich” city, there is tons of vacant commercial.
The real hurt hasn’t even begun to take effect yet…
“…there is tons of vacant commercial…”
You know when I was there I didn’t notice that… Actually Scottsdale as a whole looked pretty vibrant. I was a little surprised about the asking prices of some of the properties but other than that things looked good. Now the other side of Phoenix was a different story. Buddy took me out too a place called Laveen near where the Sheriff has them living in tents. Lots and lots of vacant stuff. Residential and Commercial.
Record amounts of new commercial currently under construction. Much of what openend in the first half of this year is still vacant.
Record amounts of new retail nearing completion. Sales tax receipts dropping.
Construction our #1 industry.
No problems.
I didn’t notice that while I was there in the Scottsdale area. Maybe I was in the wrong part of town. I didn’t really get a chance to get too Downtown this time around so I may have missed it. But I didn’t really see it anywhere else. I actually am a little surprised with the Phoenix area it wasn’t too long ago, where they were giving that property away. How soon some forgot.
It isn’t that there is huge amounts of commercial space sitting empty. It is that huge amounts of new space is being built, and not getting filled up. You are right, for the PHX area, Scottsdale, especially on the 101 corridor is probably at the low end of this. But, when I worked over there, there were huge new complexes going up all around 101 and Raintree. I don’t see how all of it will get filled up. For the first half of this year, state corporate tax were declining. Not a good situation for lots of new commercial space being built.
Each time I drive in the Chandler/Tempe/Mesa area near Phoenix, I count the # of “Space available” signs in the commercial buildings / strip malls. I have been doing that for the last 6 months or so, and *every* strip mall or commercial building I have seen has that sign. I used to be surprised, not any more.
Went to Macy’s over the weekend (Chandler mall), clothing prices have come down. More clearance racks in the women’s section than before. Prices at Williams-Sonoma haven’t dropped yet!
I don’t think the credit spigot has been turned off completely yet; the parking lots were full and there were lots of women shopping at the mall - Nordstrom had a sale. Maybe that’s why.
Preach it brothah. People, even some on this board, do not realize the world of hurt we are in for. The debt piper has let us all play our little games for 25 years and then some. Well, now the piper is coming home. He is barely visible and look at how markets are beginning to unravel.
Once again, YOU CANNOT RUN AN ECONOMY OF DEBT FOREVER!
70% of the economy is consumer driven and I ask how much debt do consumers have?
Thank you. Case closed. These is gonna get bad. How fast, well if only I knew that.
Two choices. Crash and reset, or hyperinflation to rob the ants to pay off the debts of the grasshoppers to allow the grasshoppers to continue to party.
“Well, now the piper is coming home. He is barely visible and look at how markets are beginning to unravel.”
Yes, barely visible: we’ll have a bankrupt major builder in the not-too-distant future, and it could even happen tomorrow, to paraphrase The Weather Channel. What will the market do when you wake up in the morning and find that KBH has filed bankruptcy papers? Dow down 500-1000. How about when two or three more, and a CFC or two, go down, which could quickly follow?
Let’s look at CFC. Didn’t they just say they are seeing problems beginning to start with their A paper? Nice. If CFC went down, I can’t even imagine how fat the DJIA would sink. See, this thing has been propped up a long time. Once the SHTF, people are going to sell faster than rats tried to get off the Titanic.
Cash will be king (at least for awhile longer)!
“One liar even went so far as to state this morning that DOW is much more likely to hit 14,000 instead of retreating to 13,000.”
Yes, indeed. Was it a woman? Because I saw some shill lying through her teeth this afternoon, touting the strength of the economy, low unemployment, blah, blah, blah. She was belching a “don’t panic” proclamation while her own face was riddled with fear, no doubt because her job is on the line. These people make my skin crawl.
FEar, she hasn’t seen fear, yet. Wait until unemployment hits 20% and we have soupline because there is no more cash available for anything and the middle class is laregely wiped out.
Fear, she has no idea what’s REALLY coming. Oh yeah, did I forget to mention peak debt, peak oil, peak energy. Nice. The managerial job at McDonald’s should cover us all during the time of economic crisis.
Yeah, lay-off’s and divorce always happen to the other guy.
Now is when all those people employed by the lending binge are really gonna find out just how much
of the American jobs infrastructure has been off-shored.
The politico’s who’ve been on watch during this fiasco on both sides of the fence should be tarred, feathered, and run out of town on a rail.
Chris, I like today’s stock dive of 2%. Better now than in two years. This stock dive could continue Friday and go through another three weeks. I’ll have a sense of relief if the Dow goes down to 10,000 and we start seeing people swear off stocks. You know me! Heh! I’ve been into mutual funds for more than 18 years so I won’t swear them off. The mistake many people made in October 2001 through March of 2003 was in not buying stocks and swearing them off forever. Now the same people have recently gotten back in. Go figure!
Walmart does employ more Arizonans than any other single entity, just to give you an idea of the strength of the economy.
I wouldn’t be surprised to see Walmart Bank and Walmart Realty befor this is all through.
Walmart has been trying to get permission to go into the banking business. I can’t recall the details, but NPR did a story on it a few weeks ago.
They want to set up as a bank just so they can process the debit cards and credit cards themselves instead of having to pass all the fees to other banks.
Target has a credit card through a bank that gives them discounted processing rates. Walmart wants to issue a Walmart Visa/Mastercard and keep almost ALL the fee for themselves.
The other “banks” are afraid of Walmart and am sure their lobbyists have shut down walmart for now. You have to give credit to walmart for helping the middle class. The $4 prescription drug program is a good example. They need to get in on the other high margin areas like banking / RE / financials. Those old bankers I’m sure are fighting tooth and nail… Imagine for the consumer a Walmart debit card. This would kill banks fees. I’m all for it.
“You have to give credit to walmart for helping the middle class.”
I’m not so sure about that. Is driving down wages, squeezing the competition, and violating labor laws really helping anyone? If I go cut down a few dozen people, abscond with their wealth, and distribute it to some less than fortunate people, have I done good by society? Just throwing that out there.
Well, if you compare them to a JPMorgan, BofAmerica, GM, UAL (now uaua), etc. etc. they don’t look too bad. Squeezing competition is a good thing no?
The thing I like is that they are going after the real money and that is the banking system. If they force them to compete, we all win. Right now, the banking system seems more like a rigged system of gentlemens agreements between banks to not cut margin. The fees they charge are horrendus.
“Squeezing competition is a good thing no?”
Not necessarily. I’m not a fan of these super corporations putting the mom and pop stores out of business. Sure, stiff competition can benefit consumers, but can also come at the expense of society. Lots of double edged swords out there. Personally, I try to stay away from Walmart. Then again, I’ll pay a little more for something to keep the little guy in business.
And how many people go to to the local mom and pop stores, no-one, and they all complain about Walmart. Just for the record I refuse to go to Walmart also, but I think it is good for the working person.
I vaguely recall something about Wal-Mart giving up on the idea of going into banking a few months ago. Though it might only be for the time being.
It’s a damn shame they didn’t get into subprime mortgages. That might have taken them down and out.
“You have to have your stuff together to get a loan,” said Brown.
Then he cried, realizing the fog-a-mirror era has ended.
Oh my, where to begin…
I would say that if I were going to trust someone with MY money on the promise of delivering 30 years of good payment behavior, then yeah, I’d probably like it to be someone who has their stuff together. Maybe it’s just me though.
Oh my, where to begin…
I would say that if I were going to trust someone with MY money on the promise of delivering 30 years of good payment behavior, then yeah, I’d probably like it to be someone who has their stuff together. Maybe it’s just me though.
See the DJI volume spike at 3:10, and the subsequent rebound of price? Care to speculate as to what that is all about?
http://finance.yahoo.com/q/bc?s=%5EDJI&t=1d
I don’t completely discount the possibility of PPT interference, but there are a lot of black boxes out there that trade on reversion to the mean. This could have been a trigger point. Then other people with momentum-based technical trading strategies follow suit and and make the pendulum swing even bigger. Who knows.
Enough with the unprovable/undeniable PPT already…
Come on Ben, let us have our fun!!! Conspiracy theories are mostly cherished for their entertainment values.
Thanks Ben.
The constant daily stock market predictions on this blog are kind of annoying.
Geez, back off Ben. I didn’t realize this had already been beaten to death elsewhere.
I’m with Ben.
People have been trading barbs and “facts” about the PPT for more than two years now - if you want entertainment on that subject, go back and read the archives.
Did you actually read the post, or did you just read the first part of the first sentence? It was neither a barb nor a “fact” about the PPT. So I still say back off, lighten up…
In blogs as in life, you shouldn’t be rude to someone who was just trying to add something useful to the conversation. If you do, they go elsewhere and you look like a jerk.
Ciao.
What are you talking about? Take a breath.
I didn’t miss a post, nor any part of any one of them. I completely understood your original comment with regard to programmed trading, etc.
I repeat what I said earlier:
I’m with Ben on this nonsense about the PPT’s “existence or not” debate - it’s old. If anyone wants to read about the debate for its entertainment value on here, go read the archives.
[Maybe you missed a post; note that PA said: "Conspiracy theories are mostly cherished for their entertainment values."]
Margin blow out completed probably.
If that were the case shouldn’t it send the prices down further, instead of up?
Depends on who’s margin is it. $1 million margin call, you’ve got a problem. $1 billion margin call, the brokerage has a problem.
Right; but in any event the brokerage isn’t going to buy more shares to cover margin, are they? They would sell right? And selling would push down the prices.
Nah, they don’t advertise that, they make phone calls. They hide, they don’t pay, they squirm. They try to find a buyer off the exchange for large blocks. And they can write other fancy warrants.
I think what tx meant is that the uptick might have reflected a completion of that cycle.
“I think what tx meant is that the uptick might have reflected a completion of that cycle.”
I see; that makes a lot of sense.
Paulson says everything is ‘contained’…nothing to see here. Go buy stocks.
“The Perrins aren’t the only ones getting sweet deals”
‘Sweet deals’?
Who writes these articles, Casey Serin?
I liked that line, too. The brainwashing of the media is apparent when the writer uses wording like that.
>
Napolean Dynamite.
“‘Sellers are getting more in tune to the fact that 2005 pricing is not there anymore, although home prices are climbing,’ he said. ‘They aren’t climbing at the extreme rates that they were in 2005.’”
Climbing back down the ladder…
I thought for a minute they were admitting the obvious — prices are below 2005 on a house-by-house comparison.
No — they were just spewing more of the usual REIC propaganda — making mutually contradictory statements in order to flumox the sheeple.
And of course, the “reporter” whose salary is paid by REIC advertising dollars chooses not to question the obvious non sequitur and risk biting the hand that feeds. {Sigh}
Did that article say there are 90,000 homes for sale in the Valley of the Sun?
There are over 54,000 homes listed in MLS for Maricopa County, and selling at a bit under 5K a month. 11 month supply.
There are 61,000 listed in MLS for the areas that make up greater Phoenix, which has splilled out of Maricopa County into northern areas of Pima County (like the cities of Queen Creek and Maricopa).
Then there are a totally unknown number of FSBO, REO and builder spec for sale. No one is sure. Could be as few as 10,000 or as many as 30,000 additioanl houses not in MLS, giving a figure “possibly as high as” 90,000 homes for sale.
Sweet deals? Really?
“Dave Perrin didn’t plan to sell his house and buy a new one, but his wife’s illness suddenly thrust him into a bloated local real estate market that has buyers dictating terms and prices and sellers scrambling to fulfill them.”
“Perrin’s wife needed a home that could accommodate a bulky air filtration system, so they started shopping. They quickly found and bought a 2-year-old home in Vail. They paid just under $350,000 for a house that was listed for $357,000.”
“Two years ago, the previous owners pulled the home from the market when it didn’t sell for $480,000, Dave Perrin said.”
“The Perrins aren’t the only ones getting sweet deals.”
Actually, the Perrins’ deal isn’t sweet until they sell their old house.
I too am not impressed with this sweet deal. Last year my parents had to sell their house because my mother had a knee replacement and the two-story home they bought in ‘92 wasn’t going to work anymore.
A sweet deal is finding a builder willing to transfer all the superficial upgrades into the hidden upgrades (like 2×6 exterior framing with additional insulation, triple-pane windows, etc) and then cutting the price by allowing my parents to buy and install all of the flooring and fixtures (huge profit margins there!).
And then my parents refused to give the builder a dime or commit to doing anything until they CLOSED on their old house. And then moving into a ground-floor apartment in a complex offering 2 months free while waiting for the house to be built.
I never thought my parents were unusual or strange or anything. But apparently this type of thinking just won’t get you interviewed for a news article.
It’s playing out just as many on this blog said it would over the past few years - “experts” continually calling a new bottom all the way down (it’s just getting started) during the very correction they said would never happen.
“‘It’s probably the best time in the past 10 years to buy a house,’ said real estate analyst John Strobeck, owner of Bright Future Business Consultants.”
Hmm….Is he suggesting that prices haven’t been this good since 1997?
What would you expect from someone at “Bright Future”. Sounds like the short bus to me.
““Bright Future”. Sounds like the short bus”
LOL, I was thinking the same thing.
And yet, “‘It’s probably the best time in the past 10 years to buy a house,’ said real estate analyst John Strobeck, owner of Bright Future Business Consultants.”
How can you look at PHX/Tuscon/etc. inventory, and tell people with a straight face, that there won’t be better deals/opportunities over the next two years? I mean, really, is there any way in hell this guy actually could believe that statement?
Between liar and moron for this guy - my money’s on “liar”
Let’s see - if I had bought before 2002 I could have doubled my money, even if I sell today 10% below comps. But today is even better? Wow, that’s remarkable. I vote for moron and liar, both in top 10% percentile. (And also perhaps suffering from a combination of drug withdrawal and Jesus Freakdom: “Bright Future Business Consultants”?)
BTW, ZPZ, wahoowa (an insider remark)
Ha ha. Yep. That’s me. I was wondering if someone would make the connection one of these days.
You’re going to have to give me a shout out on that other board and identify yourself some time.
The flippers that bought in Tucson in 2005 are still trying to make 40% over what they paid. Definitely not a “buyer’s market” in Tucson.
Look at the name of his “business” more happy talk from a consultant. What do they actually do anyway?
They sell real estate reports to agents, brokers, etc. $32 for a single copy, $216 for an annual subscription, delivered right to your computer in PDF.
http://bfbc.stores.yahoo.net/info.html
“‘Two years ago anybody with a real estate license could just sit there and sell houses, but now we have to work,’ she said recently after a ’staging’ class.”
Goes to show Realtors are lazy bums!
A staging class? It’s going to take a lot more than clutter removal and a few plants to get me interested in their overpriced POS.
Too bad Casey flamed out so quickly. Seeing him waste money on staging classes for his fixed flips would have been more interesting than the pathetic tale grinding to a halt now.
There *will* be a Casey Serin movie (maybe “made for TV”?), mark my words…
In California it is more difficult to become a barber than a realtor.
Thus we have more realtors than per Cap than any other state.
Yet the wide scale economic destruction via fruad over the past 10- years caused is unparralled in our state history.
There seem to be a lot of stylist/realtors in the state. I know mine is!
Also stylist/real estate investers!
And that’s only why they wait for their big acting break!
“Ah, thank you Ms. Relitter-lady… I like this haircut much better than the other one you sold me.”
Here’s your six percent, *clink*.
From Brownie, “What I hear more of is the people in the sales office make the deal but the buyer can’t qualify.”
What a tragedy. Broke people no longer control the direction of Phoenix house prices.
LOL.
LOL too. That was rich, and I’m definitely using that one in the future.
Yeah, every once in awhile a poster says succinctly and very accurately what would take me a novel to write.
Thanks.
Who are the qualified buyers that really need to buy a home right now ? What is the urgency factor that would drive someone to take on a 30 year debt obligation when you can rent for 50% less. Young first time home buyers have all the time in the world to get into real estate . The real estate industry lured uqualified buyers/speculators into the buying pool in recent years along with people who would of waited for a number of years to save a down payment .Now the industry is just going to need to wait until some of these buyers can really qualify . The only other answer is that prices come down enough that more of a buying pool can qualify . I can’t imagine that the speculators will be that interested anymore and most of those clowns didn’t really qualify either .
Problem ….Big supply of homes for sale ….low demand because of affordability ,(now that many lenders are making it a requirement that the buyer must qualify )
It would be interesting to know right now how many purchase money loan applications are being denied .
Rent for 50% less? What market are you in?
It’s definitely the case in San Diego. You can easily rent a $600K house for $2K a month.
Right now, that’s just about any market, U.S.A.
Yup, ditto for greater L.A. Virtually everything here can be rented for 50-60% less than monthly cost of PITI (assuming a ‘real’ mortgage of course), even when the MID is factored in.
Not quite that bad in my area. My $250K (bubble price) house would cost a good $1800-1900 PITI a month to buy, but could not be rented out for more than $1300. Indicating a good 30-40% overvalued. That is already down 6-8% from peak price of a year ago.
Our ratios are closer (a $240 k house *might* rent out for $1600 per month) but are still clearly overvalued. I remember when a friend of ours bought a house 4 years ago for $204K. I thought she and her husband were insane to take on that kind of burden and they had a substantial down payment.
Right now, little 50’s 3 bed/1 bath ranch houses in a good neighborhood are $245K. I remember when a 1/4 of a million dollars was a lot of money.
There’s nothing in the VT economy that supports those prices.
Agreed. And, yes $250K is still a lot of money, IMHO anyway
In SF Bay Area it’s not unusual that you can rent for 60-75% less.
For me, last time I checked, it was 58% less to rent. Though we do have a good deal on our rent.
If I had to find a rental today, it’s probably closer to 50%, as rents have climbed in the last 14 months or so, but seem to be growing slower lately.
in kingman az. you can rent a new 3/2 1200 sq ft for $725.00 mo. sale prices $150,000-$200,000 lots of homes for sale and rent.
I seem to recall not so long ago, that people we adamant that there wasn’t a housing bubble. It didn’t even exist. Those same people are now the ones that are saying “it’s contained” or “the stock market/economy is so good that home sales and prices will recover.”
Instead of looking objectively at the data, they are just saying what they want to hear, just believing what they want to believe.
Fail to plan and you plan to fail.
Heard on the 1pm financial wrap: Structured credit turned lead into gold!
I loved it when he blurted it out.
LOL!
I lived in Tucson for 20 years, 1983-2004, and the one thing that I hated most was seeing them bulldoze acres of gorgeous, lush Sonoran desert to build acres of stucco crap.
I’m sure they’ve built tons more since I left, but it’s slightly comforting to know that it’s going to be grinding to a (relative) halt soon.
At least for a while…
“Perrin’s wife needed a home that could accommodate a bulky air filtration system, so they started shopping. They quickly found and bought a 2-year-old home in Vail. They paid just under $350,000 for a house that was listed for $357,000.”
Seems to me that they could easily install quote ‘a bulky air filtration system’ in their existing house. I say this is BS. If they had to sell because she needed a wheelchair and only had bedrooms upstairs or 30 inch hallways that’d be a horse of a different color. Also note, they got more house then they thought they could afford.
They are in AZ and the only Vail I know is in CO so does that mean they are relocating and if so wouldn’t they be changing their air quality, possibly without any need for an air filtration system?
Oh no. There’s a Vail southeast of Tucson. Lots of mobile homes and custom homes on acreage. At least it was 4 years ago. Chances are they’re a few large developments. The people who have to work will have a 50-80 mile round trip from Vail to Tucson, though.
Unless they’re working in Sierra Vista at Ft. Huachuca.
A friend lived in Sierra Vista years ago and described a S.V. Yuppie as:
Having both a job AND a car.
Oh yeah. Lot’s of Arizona Hillbillies.
Lucky for me, no water in my mouth…
No we have not hit the bottom. The downslide has just begun…. wait till the schools reopen and the winter arrives…. Hard to believe all the lies the media and the real estate guys tell..
How can we hit the bottom in a span of 6 months when the price run up went on for years and the prices almost doubled… Everybody who was supposed to buy already bought and some more than one house.. There is no way its gonna go up again.. what about affordability… How many people have their salaries doubled in the last 5 years to keep up with the home prices and the inflation…. its all bullshit…. no matter what the media says or the realtors…. the affordability factor alone plus tightening of lending is enough to bring the prices down…..
Exactly. The buyers were blind to basic economics. The higher the prices go, the fewer willing to buy! LOL. It’s such a simple rule to live your life and run your business by. I remain astounded.
Western AZ going into the toilet fast. I know people from California who went nuts over these as second homes investments…One guy in particular is a realtor who is talking about walking away.
Laughlin Ranch files bankruptcy:
http://www.mohavedailynews.com/articles/2007/07/15/news/top_story/top1.txt
Question: If the bank takes back the house does the bank still have to pay the property taxes on it? Does the bank have to maintain the property (i.e. keep the lawn mowed)? Does the bank have to pay HOA dues?
If the answer is yes then the banks are really gonna have incentives to dump their REOs.
Cities are making efforts to make banks do a beter job of maintianing foreclosed properties. HOAs are also working on it. They either pay the taxes, or have a tax lein on it when it sells (droping the value of the property).
Thing is, here in AZ property taxes are WAY low. My house with a bubble value of $250K has $1500 a year property tax. That just reset up from $1200. I hear numbers of $5000 and $10000 from my sis’s that live in CA and I’m happy I don’t live there.
The answer is yes, yes and yes to all your questions. Owner is responsible for all maintenance, taxes, HOA dues, etc., regardless of how they became the owner. I’m sure that most banks are holding their REOs for now, trying not to flood the market, but these holding expenses will soon become unbearable, when added to the loss of capital and lost interest.
Thanks for the responses.
The cynic in me has emerged and is suggesting the next move by the banks will be to lobby congress to take off their hands all of these expensive drains to their bottom lines by having the taxpayer buy them up and make government low-rent subsidized government housing out of them, or something similar.
Property is property, no matter who owns it. Even charities have to pay property taxes. Ditto for HOA’s.
Regarding maintenance, I doubt anyone would enforce that.
Oooh, you hit a tender spot. Churches generally don’t pay property taxes. Why shouldn’t they? Not only should many churches be shut down by the state for chronic and systematic criminal behavior (e.g., psychological, emotional, and sexual abuse of children AND organized theft of and racketeering relative to the estates of senior citizens), but we’re forced to subsidize the damn things because of some absurd twisted reasoning about separation of church and state.
Subprime coming home to roost?
By John Authers
Published: July 26 2007 19:27 | Last updated: July 26 2007 19:27
At least some people are benefiting from the pain being felt by American homeowners. Word on Wall Street is that the head of one trading desk, after making a lucrative bet against securities backed by mortgages to people with bad credit histories, has had T-shirts made up that cheerfully proclaim: “I’m short your house”.
Few share this glee. Difficulties for the US housing market have been evident for at least a year and data this week showed the overhang of unsold existing homes at its highest level since 1992, at the end of the nation’s last housing recession.
Nowhere are the difficulties more evident than in so-called subprime mortgages, extended to people with poor credit histories, for which the losses could be as high as $100bn (£49bn, €73bn), according to the Federal Reserve. The ABX index, a popular measure of bonds backed by subprime mortgages, is down 60 per cent this year.
http://www.ft.com/cms/s/3e9f9006-3ba4-11dc-8002-0000779fd2ac.html
“I’m Short Your House” - I like it! Maybe I’ll go have one made and wear it when attending open houses.
Again, lucky for me I had no water in my mouth…LMAO
How about “I’m short your retirement”?
Ouch. Tough but fair…
Check the discussion board of that top article from AZ Republic!
My argument was pretty simple. Prices became unaffordable because lenders did not care about buyers’ ability to repay. Now that lenders do care about buyers’ ability to pay, prices will fall back to support levels based on affordability, cost of construction and cost of rents. Buyers won’t buy until they can afford to and it is more cost effective than reting. Builders won’t stop pushing inventory into the saturated market until prices have fallen below cost of construction.
Based on historic norm affordability, cost of rent, and cost of construction it looks like we need a 40% drop from last year’s peak, 30-40% off current prices.
Responses from one guy were:
“You need to take some economics classes. Banks will not sell foreclosed properties at 60% of value on a large scale!!! Get a grip. There is a bottom to the market. Jesus, I’m glad you are getting out of the housing market. Please do us all a huge favor and invest in stocks.”
“Darrell you have the rationale of a 10 year old. There will never be a 40+ % drop in values. To sell at that rate, banks would have to approve those losses. What don’t you understand about this.”
“Buyers that have substantial equity (20%+) can likely find a way to re-fi and will rarely sell and lose that equity. Those without equity (100% financing) are typically the ones needing to sell at a large loss, thus the banks in control. This is capitalism, people are not going to start forking over money by the truckload. Be it banks or individuals, people will not give away their money. THINK LOGICALLY YOU IDIOT”
He calls me an idiot.
Darrell, the bloggers on the AZCentral site just do not know the facts. Don’t mind them. They are ignorant. Ignorance is not an insult. It basically means they do not know!
They are whistling in the dark. I read some of the posts there. What about the ones who blame the media on the bad news about real estate! LOL. They are basically monkeys chanting what the shills are saying. The real issue is (gasp) AFFORDABILITY!
Yea, the way I see it, let them think that way.
I’m up a great bit of change in my shorts, simply due to people like this that keep believing the REIC.
REALTORS are now taking ” staging classes ” !??!
AHAHAHhahaha my ex wil LOVE to hear about that. She owns an 3-person interior decorating co. in Tampa ( front for tax write-offs ).
She’s a DIE-RECT-OR of the company, doncha know, so I guess know her head will spin even faster when this latest news reaches her.
(thats the latest high-class title, you know. One isnt simply a manager, owner, CEO, no no no, you must show you have panache & be ” Director” .. it’s so artsy AND empowering w/images of the obligatory Starbuck coffee in-hand driving an expensive import to impress clients. kinda like a … Realtor .. hmmm .. arent you so impressed ?! I know I AM )
Was home in flagstaff this week to see the folks. Up the street from my folks a house that has been for sell now for over 3 months, by owner, has dropped the price 10000 still no takers. Interestingly, they want 269000 which by all rational standards is 120000 too much. But for Flagstaff a good deal, yet there it sits. No interest only loans left to put two walmart employees in this house.
Just got back from my apartment’s manager office. Next door is a bulletin board. There is a flier advertising a house for sale for $375,000 - don’t throw your money away on rent! Ha! I just signed a lease for October 7 2007 through October 6 2008 for $958 per month. That’s 1/3 of the PITI per month (at least) on that house! I did the math based on a 15 year loan and 6.5% interest with 20% down, $42 monthly insurance and $229 monthly property tax. If I buy that house, the amount per month extra payments I’d make amount to $950, in addition to my $958. Granted, it’s a 3 bedroom place, not the 2 bedroom that I have.
I will continue to wait and laugh at the overinflated homes the greedy are trying to sell.
Correction: My rent is 1/2 the PITI of that house, not 1/3. In addition I have the hard to price features of freedom to move to another apartment complex within this corporation (coast to coast) without breaking the lease, carefree maintenance, etc.
Bill,
everytime you mention that we should all be mobile, you make me take three steps back from the thought of purchasing a home next year or the year after. I wouldn’t want to be in a future wave of FB’s. Thanks.
You are welcome Chris! The economy could get difficult for the stuck buyers. Like the others, I am hoping this is a slow slide so that people like you and I can have more time to save for the great deals a few years ahead. Make it a point to stay in great health and encourage your wife to do the same. Health costs of unexpected illnesses could be expensive (part of the reason why some people had to foreclose). Better to incur those costs as a renter.
Not much selling this summer in Tucson, no more Greater Fools from California coming over!
While I am enjoyed reading many of your comments and I am very much aware of what’s happening to Arizona’s home marketing, it occurs to me that I do not see any impact on the Senior Resort Retirement community such as Del Webb. Am I mistaken that they are not reducing their prices? What is your take on that?
Kiss your housing economy goodbye. I’d expect the median price in this country to drop by 40 - 50% nationwide within the next year. Yes it can drop that much. If we have had a negative savings rate in this country for the past few years, then how in the hell can anyone buy a house? Gold and silver and gas and all of the other crap will deflate too, probably back to 1999-2000 pricings. Problem is, most people have no money. I’d think you’ll start seeing some big tent cities outside the ‘hip’ big cities full of the former middle class and yuppie class. They can use Ramen noodles and gravel for money for all I care. Also, you might see a lot of abandoned Hummers and BMWs and such driven by the former limo liberals and soccer moms sitting along the road……
But, I’ll just sit back and watch the show from up in the Icy North (full of the ’stupid stubborn people from the Midwest’. I guess I have the last laugh - hahahahahaha)