Buyers Wait To See If Prices Will Keep Falling.
A report from the Arizona Republic. “The deepening residential housing slump continues to hammer Scottsdale home builder Meritage Homes Corp. The company reported Thursday that it lost $56.6 million in the second quarter as home closings slid 32 percent and revenue dropped 37 percent. ‘Weakened demand and increased price incentives have resulted in lower margins on homes sold and more write-offs on remaining inventories,’ Meritage CEO Steven Hilton said in a statement.”
“Hardest hit were Meritage subdivisions in Nevada where sales dropped 69 percent, followed by Arizona with a 58 percent decline and California, where sales fell 52 percent.”
“The company said slow demand and a high number of contract back-outs reduced the value of new home orders by 28 percent. Arizona led the decline with a 37 percent drop in orders, followed by California, down 35 percent.”
“Increasing numbers of newer Chandler homes are being abandoned by cash-strapped owners, leaving weeds, green pools and headaches for neighbors and city officials.”
“‘It’s scaring me,’ neighborhood services Sgt. Greg Carr said of the trend. ‘We’re trying to figure out how we can approach this, who do we call when homeowners walk away and we can’t find them?’”
“Carr doesn’t have statistics but said home foreclosures are rising and along with them code violations. His counterparts in Mesa, Gilbert and Peoria said the phenomenon is affecting those municipalities, too.”
“A significant portion of the recent Chandler complaints are from newer neighborhoods in southeastern parts of the city where homes once sold for $400,000 or more and values have dropped, Carr said.”
“‘It started ramping up during the past six months and I don’t see it stopping any time soon,’ said Ray Villa, acting neighborhood services director for Mesa. ‘We’re getting between five and 10 complaints a week that someone has walked away from a property and is letting it deteriorate,’ he said.”
“Villa, who lives in Queen Creek, said one of his own neighbors packed up and left a house. ‘It’s all over the place,’ he said.”
“Bill Patena, neighborhood services supervisor for Peoria, said he sees a connection between new subdivisions, ‘exotic’ mortgage-lending programs and abandoned homes.”
“‘I don’t think it’s out of control, but we have seen an increase in people abandoning their homes’ especially in the newer parts of north Peoria, he said.”
The East Valley Tribune from Arizona. “Valley builders and homeowners alike are continuing to struggle in an over-saturated real estate market, as buyers wait to see if prices will keep falling.”
“Two studies released this week show continued weakness in sales of newly built homes in the Valley and existing Pinal County homes. Some 2,988 new Valley homes were sold in June, compared with 4,348 during the same month last year, the latest Phoenix Housing Market Letter by analyst RL Brown shows.”
“Large inventories of both new and existing homes are still hurting the market, Brown said. More than 50,000 existing homes are currently for sale in the Valley.”
“‘There’s a lot of people who would buy if they could get rid of their present house,’ he said.”
“Despite the slump in sales, builders began ramping up production on speculative homes earlier this year, likely anticipating buyers returning to the market, said Ben Sage with research firm Metrostudy.”
“That hasn’t happened. ‘It means they’re going to continue to have inventory they need to get rid of,’ he said. ‘It’ll keep downward pressure on prices.’”
“Sellers are competing with investors and builders, who are trying to off load homes, said real estate agent Jason Hall in Chandler. Builders are getting cancellations, which adds to the housing inventory, Hall said. They can afford to cut prices by tens of thousands of dollars, while homeowners can’t, he said.”
“‘They’re the ones with the deep pockets,’ he said. For now, sellers need to keep lowering their prices, and if they can’t, they shouldn’t sell, Hall said. ‘Pay the bill and keep making the drive,’ he said.”
In Business Las Vegas from Nevada. “Homebuilders are slashing prices in the Las Vegas Valley, and KB Home has taken it a step further by announcing plans to introduce smaller models in its master-planned communities to jump-start sales by focusing on affordability.”
“Builders had emphasized incentives to lure buyers, but KB and builders have cut prices in the valley as part of a push toward affordability. So far this year, SalesTraq reports that the median price of new homes has dropped more than 7 percent to $318,807.”
“The median price of new homes surpassed $355,000 in May 2006. Home Builders Research reported new home prices in June were down 9 percent from June 2006.”
“‘You are still seeing incentives, but more and more what it’s coming to is that it was price all along,’ said local housing analyst Steve Bottfeld.”
“Amid a record level of inventory, the price cuts by builders create more competition for homeowners. Some analysts suggest that could further prompt homeowners to cut their prices.”
“Dennis Smith, president of Home Builders Research, said it’s not uncommon to see reductions of $25,000 to $30,000 on a $400,000 house.”
“‘There are a lot of deals out there. They are trying to sell houses. They want to get people motivated to buy a house. At this point, generally speaking, I would say it’s not working as well as they would like,’ Smith said.”
“KB has slashed prices in Mountain’s Edge, where buyers are now paying between $218,000 and $248,000 for its smallest models, down from the $269,000 to $290,000 it had been charging.”
“The 25,000-plus homes on the resale market has impacted builders to make reductions, according to Jim Widner, regional general manager of KB Home. Until all builders are willing to adjust their prices, it forestalls buying.”
“The lowering of prices by builders often leads to complaints from homeowners who bought at a higher price point weeks or months earlier. ‘It is always disappointing to pay for something and the price goes down,’ said Renee Gervais, the KB vice president of sales and marketing. ‘When you have an oversupply of homes on the market, people are not willing to overpay. They have all kinds of choices out there.’”
“KB said it’s sold about 60 homes in Inspirada since the end of March with the town homes and garden homes. ‘We would like it to be a little bit faster but given the market conditions, it is outselling anything in Inspirada, said Widner.”
“Toll Brothers recently opened four of the five models it’s selling and has made 17 sales through the end of last week, said group president Gary Mayo. He said everyone had different expectation of sales two years ago when the market was hot, but he said the sales at Inspirada are in line what’s happening elsewhere in the market, not any better or worse.”
“‘I think what’s going on is the market purely driven by a lack of consumer confidence,’ Mayo said.”
“Robbie Graham knows the title business from the ground up. Graham who has been with Nevada Title Co. since its infancy nearly 30 years ago, is the company’s president.”
“Q: How has the housing slowdown affected your company? A: ‘Residential resales are off between 37 percent and 40 percent. The homebuilding area is down dramatically…plus the subprime market, that has had a real effect on every title company. When you have individuals that were only making loans and getting homes because they could finance something 100 percent of the time, that takes a lot of people out of that buying area.’”
“Q: What caused the housing slowdown? A: ‘We had a lot of investors that came in and invested in Las Vegas, just an incredible number of people. I don’t know the exact percentage, but of the 26,000 homes that are on the market, you have got in the neighborhood of 9,000 or so that have never been lived in.’”
“‘Those are homes in which people came in and made that investment because the prices were going up. There was some false sense of what was happening because the subprime market allowed everybody to get into that market. Then what happened is it gets to a certain level, it stopped being affordable and working in this market.’”
“‘We are blessed with having industries such as the gaming industry, but at the same time there are a lot of blue-collar workers who are the backbone of making that industry work who aren’t in a place to afford $350,000 or $400,000 (homes).’”
The Las Vegas Business Press from Nevada. “Those awaiting the arrival of a new Conrad/Waldorf-Astoria condo-hotel on the Strip will have to wait a while longer. Developer Lorenzo Doumani recently announced that the high-rise is on hold.”
“‘We will have an announcement in October,’ said Doumani, CEO of Majestic Resorts, who declined to elaborate further.”
“The project has had a long and bumpy ride. The Conrad-branded luxury condo-hotel project was first announced in February 2004. The glass skyscraper was originally supposed to open last year. Three and a half years later, the 5.5-acre-site still sits vacant.”
“Doumani retains one advantage; cheap land. Lorenzo’s grandfather acquired the property 50 years ago for $95,592 an acre. Regardless, it still may not be enough to build the project.”
“‘The strongest time to market and create project interest is when it’s first announced,’ said Bruce Hiatt, owner of a Las Vegas residential high-rise specialty firm. ‘The slowdown in Miami has people doing more due diligence. In this market, you have to show progress. People want to see it’s real.’”
‘Centex holds one-day sales event. Reduced prices offered today at 15 neighborhoods valleywide. Centex Homes’ Opportunity Knocks promotion, a one-day sale, runs from 10 a.m. to 8 p.m. today at all of the home builder’s neighborhoods, according to operational marketing manager Jillian Lura.’
‘Lura said the sale prices for each neighborhood will remain a mystery until 10 a.m. today. The first time Centex sales executives will have access to the one-day prices is when they report to work this morning, she said.’
‘Home buyers can take advantage of the one-day sale at 15 Centex neighborhoods, including Mesa Verde, which opens today. The gated community of attached homes in North Las Vegas offers seven two-story floor plans.’
‘Although affordability has improved, higher gasoline prices and more congested highways continue to impact the housing market in Pinal County,’ said Jay Butler, director for realty studies at Arizona State University.’
‘While investors were drawn to the inexpensive housing in Pinal County in 2005, today’s higher prices have limited their role in the local housing market,’ Butler said.’
‘Much like the sales activity, the median price has steadily eroded from $220,000 in fourth quarter 2005 to $204,600 in first quarter 2007 to $200,000 for the second quarter. It was $211,000 for a year ago.’
‘Home buyers can take advantage of the one-day sale at 15 Centex neighborhoods, including Mesa Verde, which opens today. The gated community of attached homes in North Las Vegas offers seven two-story floor plans.’
This is nothing but another ploy to promote a sense of urgency on the part of the buyer.
“The first time Centex sales executives will have access to the one-day prices is when they report to work this morning, she said.”
Big deal…homebuilders in the are have been very flexible on their prices, and tell who ever walks in “just name a ‘reasonable’ price and you are in”. No need for all of the mystery and hushed tones of this sham event.
Well with cancellation rates running at 36% somebody is lying.
From the original post:
“‘There’s a lot of people who would buy if they could get rid of their present house,’ he said.”
That’s right, buddy! Keep the spending frenzy going. Buy, buy! No clue about the relationship of debt to the decline of life in Amerikah!
It would be fun to go to one of these and see how long they keep calling you for afterwards and at what point they crack and slash the price to squat.
Of course they’d call at 630pm (Dinner time) in LA every farking day….
Not all builders are that desperate yet. Anecdotal evidence, but a friend of mine just tried to negotiate with one of the big builders in the Chandler area. She’s a realtor and has done her homework to know what a fair offer was. Besides that, the builder had been offerring a $100K discount (funny, the discounted price was $320K, which means the insane bubble price was $420K for something under 2000 square feet). At the time she made the offer, they were advertising an $85K discount. With her knowledge of the local market and the previous “sale”, she pushed for the $100K off. The builder’s realtor said they wouldn’t even present the offer (this is actually legal in AZ if they have instructions in writing from the seller). She went back and forth and played hardball. So did the builder. My friend walked away from the deal, and the builder never pursued her. Stupid realtor for the builder, perhaps; or maybe, they’re not afraid yet.
–Chet
Why can’t home owners lower their prices? Just bite the bullet and reduce if you want to sell or follow the market down. Another 4+ years to go, eh, bloggers?
I hate to say it, (no I love to actually LOL), but the builders did it to themselves. Oh well, they knew it was coming. Time to cash out the stock. Oh wait, they already did that! Ha!
“Hardest hit were Meritage subdivisions in Nevada where sales dropped 69 percent, followed by Arizona with a 58 percent decline and California, where sales fell 52 percent.”
Those are huge declines. But, the builders knew that speculators were responsible for the frenzied market and they should have been more prepared for the drop off. Instead, they kept loading up on land as if the party would never end. No sympathy.
Look at how far sales are down and that gives you a good estimate of the amount of speculators that were out there.
But remember when your realtor told you real estate only goes up!
Where are all these realtors working now, you guessed it, walmart.
Builders “you take a number and stand in line” days are over. Over priced, low quality homes now on the market. Great! Can’t sell them, rent them.
The CEO of Meritage, Steve Hilton, is a valiant supporter of thwarting the will of the citizens of Arizona and their representatives in the Legislature. I wonder why a house builder would be so concerned about a law that penalizes businesses that employ illegal aliens.
http://www.azcentral.com/news/articles/0713sanctions-opposition0713.html
“Hardest hit were Meritage subdivisions in Nevada where sales dropped 69 percent, followed by Arizona with a 58 percent decline and California, where sales fell 52 percent.”
Those are huge declines. But, the builders knew that speculators were responsible for the frenzied market and they should have been more prepared for the drop off. Instead, they kept loading up on land as if the party would never end. No sympathy.
“Bill Patena, neighborhood services supervisor for Peoria, said he sees a connection between new subdivisions, ‘exotic’ mortgage-lending programs and abandoned homes.”
Wow, this fellow Bill is a genius! What keen insight!!
Give him a special award w/ a smiley face for his great deep thought.
Heck of a job, Bill!
He’s sharp, like a sphere. Sort of like this guy:
“‘You are still seeing incentives, but more and more what it’s coming to is that it was price all along,’ said local housing analyst Steve Bottfeld.”
At least he gets it. There are still otherwise-intelligent people out there who have no idea that real estate is in the doldrums.
At least he gets it. There are so many otherwise-intelligent folks who have no idea that real estate is in the doldrums.
You can say that again!
gov worker- he’ll get a raise
“Amid a record level of inventory, the price cuts by builders create more competition for homeowners. Some analysts suggest that could further prompt homeowners to cut their prices.”
DUH!
“Some analysts suggest that could further prompt homeowners to cut their prices.”
Although it seems logical, there’s something about this statement that does not ring true…
Precisely what entity is “cutting prices”? Is it sellers, at their own discretion? Or is it the Market itself?
“‘We are blessed with having industries such as the gaming industry, but at the same time there are a lot of blue-collar workers who are the backbone of making that industry work who aren’t in a place to afford $350,000 or $400,000 (homes).’”
Neil is confused by this math. Not that the blue-collar workers cannot afford, but the assumption that the gaming industry creates that many six figure jobs!?!
Got popcorn?
Neil
Neil…… What do you think the 4 Bedroom den family room and 3 car garage homes are for?
to have you and 5 roommates to pay off the mortgage. 6 casino workers could do it.
Agreed. The gaming industry does not create very many $100,000+ jobs. Most people make about $30,000yr and while there are some card dealers and pit bosses who make good incomes, they are few and far between. Further, probably a substantial percentage of the gamblers at tables - are really just middle-class MEW’s.
The casino industry creates mostly blue collar jobs. The jobs pay a bit better due to unions. The average price of houses in Las Vegas is way out of line with average incomes.
“Las Vegas from Nevada. “Homebuilders are slashing prices in the Las Vegas Valley”
Lies! LIES I TELL YOU! Everyone know that Las Vegas is going to be America’s next “Great City”! Buy a high-rise condo on the beach, err, I mean The Strip, or be priced out forever!
Pretty funny. Build the world’s biggest pumpkin next door to a high rise condo complex, and the pumpkin view condos will be priced a great deal more then the non-pumpkin view condos. haha
“‘We are blessed with having industries such as the gaming industry, but at the same time there are a lot of blue-collar workers who are the backbone of making that industry work who aren’t in a place to afford $350,000 or $400,000 (homes).’”
Ummm, did someone just set the wayback machine to two years ago when we were saying exactly this?
“Blessed” by the gaming industry is an understatement..
Were it not for the casinos, LV shrivels.. coyotes feast on the flesh and it’s bones bleach white and crumble to dust in a year or so, under that scorching sun..
LV’s already destined to shrivel due to construction (or lack thereof). Casinos are the only thing that keeps it from dying altogether.
Given the coming nation-wide real estate and economic crunch, along with the recent spread of gaming outside of Nevada, can buying in LV be a wise long-term move?
Aside from LV’s inherent weaknesses like water availability, etc., all other States will soon take a serious tax hit in general. Will more gambling be encouraged almost everywhere?.. and is LV’s somewhat unique appeal bound to shrink further than expected?
Casinos are the only thing that keeps it from dying altogether.
Hall of fame statement.
Prediction: “Gaming” will retrospectively prove to have been disproportionately driven by easy money from other recently popular forms of gambling (residential real estate investment wealth gains + stock market wealth gains).
i remember reading that gambling increases in bad times, and it wasn’t difficult to Google some backup.
http://www.library.ca.gov/crb/97/03/Chapt2.html
Third Wave (Early 1930’s to Present)
“The great depression led to a much greater legalization of gambling. The antigambling mood changed as tremendous financial distress gripped the country, especially after the stock market crash of 1929. Legalized gambling was looked upon as a way to stimulate the economy. Massachusetts decriminalized bingo in 1931…”
But won’t LV take a hit with online gambling? Why go to the expense of going to LV when you can gamble at home?
i don’t follow the industry closely, but i do know they have spread out to other states and other countries, not just because of online competition..
As far as online, just one poker site, PartyPoker, grossed something like $14 billion last year while it’s parent company was in the 40 billion range if memory serves.
So, sure, online gaming must take some of the profits away from Vegas
.. but i go to Vegas to get away from it all.. to screw around and party. Gambling is just a small part of that for me.
Although there will be attractive bargains galore, I just dunno if buying RE in Vegas in the foreseeable future is a good idea.. the city’s core economy is gambling, implying the need for a steady supply of a lot of disposable income, as GetStucco suggests. A recession could really hurt local property owners.
Gambling is dumb! If you want to gamble, buy a cd rom called vitrual casino or something that uses vitrual money/chips. When you lose, its “game over” and “do you want to load a new game?”
If it was real life, youd need to reset your life. What is the fun in throwing money away? Gamble free vitrually!
My brother in law does or rather did online gambling. Congress recently passed a law to prevent competition for real casinos and presumably, state run lotteries. Basically, online gambling places can’t run US credit cards (enforced through the credit card processors). Losing that has effectively shut down offshore online gambling.
“Gambling is a tax on ignorance.”
Warren Buffett
“i remember reading that gambling increases in bad times,…”
It may depend on the base level of gambling. My guess is the gaming industry has already had its run during this credit bubble which fueled it, and will contract with the end of easy money. Back in the 1920s, gambling was a vice; now it is an industry.
When gambling went from a VICE to a gaming industry, it was just more mental brainwashing on its effects. An industry produces products and services that add to the gross national product and life if it is a good product and useful and priced fairly.
Gambling is not an industry.
The housing bubble bust coupled with Peak Oil will do in this “industry”.
After “touring” the northern plains for some weeks and looking at Indian casinos, there is already a lot of emptiness there coupled with little traffic on secondary main state and federal highways.
The long recession is already here in rural upper mid-west.
“i remember reading that gambling increases in bad times…”
Local and state governments increase their fees for everything during the downturns since many of their societal obligations increase. This has been the case in California twice during my lifetime, and this third downturn approaching will likely be worse the the previous two combined due to the huge number of ageing baby boomers.
“I think what’s going on is the market purely driven by a lack of consumer confidence”
The credit crunch might have a little to do with it too.
It’s getting to the point where people have to actually qualify. That means prices have to come down….much further. Stop blaming consumer confidence.
So the wreckless behavior of everyone involved in your industry just blew up in your collective faces?
How sad.
“‘It started ramping up during the past six months and I don’t see it stopping any time soon,’ said Ray Villa, acting neighborhood services director for Mesa. ‘We’re getting between five and 10 complaints a week that someone has walked away from a property and is letting it deteriorate,’ he said.”
I love that the person charged with dealing with the fallout from Mesa’s vacant houses and neighborhood deterioration lives in the Queen Creek area. Physician, heal thy own street.
Housing Fallout bruises Oregon:
http://tinyurl.com/2aznxh
I love how the state “economist” says at the end that the housing market is in a terrible mess but will bottom out in late 2007 and rebound in 2008.
Jeff Parker FLORIDA TODAY
“…JUST MINUTES FROM GOOD SCHOOLS, BEACHES, AND ANOTHER PRICE REDUCTION…”
BOY, I HEARD THE HOUSING MARKET WAS IN A SLUMP, BUT…
http://cagle.com/politicalcartoons/PCcartoons/parker.asp
My favorite part is the bag of doggie doo the guy is holding.
“Increasing numbers of newer Chandler homes are being abandonded by cash-strapped owners, leaving weeds, green pools and headaches for neighbors and city officials.”
Not to worry, these homes will soon be occupied once again; deadbeats will discover them and just move themselves right on in.
That’s what happened in Lancaster,CA during the last RE downturn. Neighbors would see a Yellow Ryder truck pull up and unload in front of a vacated house and assume the house was recently purchased. Such was not always the case; Often squatters just decided to move in and live out their lives rent free.
“Often squatters just decided to move in and live out their lives rent free.”
I’m thinking of trying to find a squat. I’m serious. Change the locks, turn on the electric in my name, take care of the lawn, maybe even pay the taxes, if they’re not too great. Why not? I’d be doing the community a huge favor.
Anyone have any ideas how I’d go about doing that? Do I just cruise the area looking for empty houses? Then look the address up in property records to see what the status is? I’ve also thought of dropping by the local sheriff’s office and see if they know of any abandoned properties that they can’t contact the owners of.
Check up on the laws regarding “adverse possession” — you might just end up owning the place for free!
tj, I’m looking into that. I might even go so far as to have a consult with a Florida real estate attorney on this. I figure it might be years before the hedgies establish who owns what. By that time, I could have myself a fine little crib. Free and clear. And I wouldn’t have the least concern about it. I’m serious when I say I’d be doing the community a huge favor.
And if I find one with a pool or nice patio, I might even host a party for local HBBers. A family event, barbeque, pony rides, that sort of thing. Could be fun.
i like that.. especially how certain properties that share very particular conditions of title or liens (or similar) may be the ideal candidates.. a new frontier to explore and exploit..
In Florida, you have to occupy the real property for seven years.
http://www.thehousingpages.com/articles/adverse-possession.asp
See you there!
How about just visiting the REO banker and offer to occupy the home, rent free, while you take good care of the joint for them.. sounds like a win-win to me.
What the heck, maybe a bunch of us HBBers could squat in a nice HOA where a bunch of places were abandoned. Pay the taxes, pay the HOA fees (which I wouldn’t mind provided I didn’t have to pay a mortgage). We’d probably be welcomed, just for keeping up the property values.
“How about just visiting the REO banker and offer to occupy the home, rent free, while you take good care of the joint for them.. sounds like a win-win to me.”
Well, that’s fine, too, provided you’re willing to be there temporarily. Adverse possession requires that you do not have the permission of the owner, in order to acquire the property for yourself. Once they give you permission, it is no longer considered adverse possession and you can’t get the title to the property. Check out the link above. Very interesting.
i did read that link but i don’t think that info is as complete or as accurate as it could be.. So, i’d still consult an attorney.
My dad once bought a Calif home and the empty corner lot across the street. Near the lot was another home. They used to drive right through the empty lot as a convenience.. After about 5 years of this, I advised my dad to put a stop to it, or else they would have a permanant easement to drive across it. A check with an attorney confirmed this. So, after talking to the neighbor did not do a lot of good, we had no choice but to put up a barrier..
Well, that’s fine, too, provided you’re willing to be there temporarily.
“Temporarily” could end up meaning a decade or so for some areas of FL, AZ, NV and inland CA.
In AZ, adverse possession requirement is 10 years.
–Chet
Don’t buy, don’t rent, squat. Maybe this will develop into a whole new opportunity for homesteading. Shall the Democrats update the Homestead Act for 2009?
Well, you know, NYCresident, it IS the ultimate solution to all these unoccupied properties and for governments on the local level. There are many of us responsible renters. We deserve these abandoned properties, if we want them. We’ll keep them up, pay the taxes and contribute to the communities. I could actually see a scenario where it gets so bad, the local governments might even encourage responsible, taxpaying squatting.
Free sqats for all HBBers!
I meant “squats”.
“I could actually see a scenario where it gets so bad, the local governments might even encourage responsible, taxpaying squatting”
No doubt, in some communities it may get so that absentee owners, be they trustees for CDOs or whatever, are not paying property taxes or for general upkeep. And perhaps the free market won’t provide an acceptable sale of the homes. Even so, and I’m not a lawyer, but the laws of adverse possession will likely be dictated by each State. My bet is on Wall Street players of the money class finding a “market” solution funded by taxpayers. I guess I’m a little cynical.
“I’m thinking of tying to find a squat”
I wonder if the IRS would consider squatters as folks enjoying the benifits of Imputed Rent (the dollar value of the free rent they receive) and tax them accordingly.
Wouldn’t that would be ~30% of fmv rental ?
I wouldn’t want a squat in Texas. Who knows will pick up title.
We have a lot of shoot first/ ask questions later people and juries of their peers, sympothetic to that train of thought.
Interesting, combotechie. Of course, I am no legal beagle, so that would be part of an attorney consult, but I’d be inclined to say no, on the following grounds:
1) Are people who live rent-free (such as a family member or friend or charity case) responsible to pay taxes on imputed rent? What about a grounds-keeper who lives on an estate rent-free? I could perhaps see the grounds-keeper scenario, if housing is part of his compensation. But then, how would that be calculated? Who decides what the value of the rent is?
2) Also, the whole point of adverse possession is that it is not mutually consensual. Imputed rent would imply that the title holder had given permission for the occupation of the property, which is not the case in this scenario. In fact, one of the defenses to adverse possession can be the posting of the property or filing in public records by the title holder that the possessor is there by agreement of the title holder. Should that occur, then imputed rent might apply, but if it does not occur, the concept of imputed rent would not apply.
3) The point of adverse possession, ultimately, is that the possessor acquire title to the property, free and clear, by a motion to quiet title. So, if someone owns their home free and clear, I don’t think the IRS goes after them for imputed rent or imputed mortgage payment. Nor could it be considered a gift or award, by the nature of the adverse possession.
That being said, the IRS can try anything it wants, and the burden is on the person they are going after to prove them wrong, often at great expense.
Hmmmm. To enter a vacated residence one would have to break in (assuming the house is locked). That’s called “breaking and entering”, a criminal offense.
But then again, if a house is considered abandonded then breaking in probably wouldn’t be considered a big deal. There is some legal line here but I haven’t a clue where it lies.
It it were me I’d contact some squatters and pick their brains about the matter.
wikipedia’s page on “trespass” is interesting.
“It’s a squatter’s market!”
“The lowering of prices by builders often leads to complaints from homeowners who bought at a higher price point weeks or months earlier. ‘It is always disappointing to pay for something and the price goes down,’ said Renee Gervais, the KB vice president of sales and marketing. ‘When you have an oversupply of homes on the market, people are not willing to overpay. They have all kinds of choices out there.’”
OH. MY. GOD. Check out the major slip of the tongue there. In other words, people OVERPAID when there wasn’t a glut. If I was a KB homebuyer during the bubble, this quote would have me seeing red.
Got Freud?
“When you have an oversupply of homes on the market, people are not willing to overpay”
Good catch!
yep, just proves KB knew their houses were overpriced. Too bad the buyers didn’t know that.
That quote does not logically imply that KB “knew” their houses were overpriced, only that they now (today) know it.
“‘You are still seeing incentives, but more and more what it’s coming to is that it was price all along,’ said local housing analyst Steve Bottfeld.”
Penetrating analysis, Steve. That’s why you get the big money.
With the housing market failing in SoCA, you have to be crazy not to wait. House prices will keep coming down no matter what realtors or industry tell you — they are in deep denial. The house prices are outrageous and no one can afford them — there’s only one way to go now and it’s down…down and down to an affordable price. The bubble has burst and anyone that made money is long gone. For those who bought at a high price, live there until the next RE cycle or if you can’t afford it, sell at a reasonable price and minimize your losses. The worst senario is to foreclose and give the house back to the bank .. consider it a good lesson learned.
Denis Smith: “It’s not uncommon to see reductions of $25,000 to $30,000 on $400,000 homes.” Yawn……Give me a call when the reductions are $125,000 to $150,000 on a $400,000 home and please don’t insult my intelligence with reductions of $30,000 which can be classed as pocket money after the ridiculous price run up in the last 5 years.
Exactly. With internet it’s easy to see price histories. I keep tabs on Manhattan Beach, HB, south RB, and the Palos Verdes Peninsula area. I know that most places in those areas in late 2003 / early 2004 were valued at less than half the current for sale price. Incomes in those areas did not double in three and a half years. I keep watching and reinvesting my dividends and my interest in money market funds, CDs and government securities. I keep working to add more to the principle I invest. There will be a time I’ll buy a house / condo built before 2000.
What about this one in pv? 4 bedrooms in 1800 sqft at only $850.00 per foot! Can you just image those 8 foot high ceilings?
http://tinyurl.com/2zkkxa
http://www.wattsrealestate.com/featuredproperties.html
Or check out this one. All of 1144 square feet for only 1.6 million and it was built pre WWII. I wonder if they used lead paint in 1940. Can you spell “termites”?
Last sold in October 2000 for $660,000 (courtesy zillow.com). For sale today for $1,550,000 according to realtor.com.
NO WAY!
Did you notice the two Adirondack chairs out near the front? I’ll betcha none of the people living in that home ever sits in those chairs. I hate such phoniness Definitely someone with two fewer balls than me is in charge of landscaping. At 3.7% inflation per year, it should be selling for $850,000, which is 46% less than the advertised price. Methinks a baby boomer is trying to finance his retirement by hoping to lure a greater fool.
yeah.. that whole thing was set up as a formal showcase.. kid’s bikes on the side and all the pristine white interior decorations? no kids and no way in hell..
Bill,
I live in South RB. Many of the owners here will say that you’ll be waiting a long time before any significant price drops, especially on the homes close to the beach. Their reasoning is simple;
1. We have great weather.
2. There aren’t very many “nice” areas left in LA.
3. Everyone would love to live here.
4. The people who own here are not financially strapped, so they won’t have any problem making there mortgage payments.
The list of reasons I’ve heard goes on and on. They seem to think the home prices in surrounding areas could get cut in half but the prices here have reached a “permanently high plateau”. I guess time will tell.
“there mortgage payments”
oops - their (damn)
I am going to ask an off-topic question. Many have mentioned in the past. Where is the best place to draw the highest interest rate on some money that I want liquid where the credit card company have been so kind to provide a 0% free loan. I would like to let the money to pay that off earn some interest until the 0% ends, then pay that back in full. Thanks for any ideas who will pay 5% or higher, and in what account
Countrywide has a savingslink account that yields 5.4% right now.I did the same exact thing with a couple 0% cards for ~ 14months.I made a few bucks on the deal.One card was from advanta and the other one from chase.
check out emigrantdirect.com for your savings at above5% with no gimmick, no minimum, no catch. that’s where i bank now and have been for over 1 year
A loaded question as it depends on the $ amount. Eg/ etrade has a MM checking account but rate is dependent on how much you deposit.
Caveat is they are lending it out to who know who, so whilst FDIC backed, it may be subject to a major feckup as they obviously lend your money for the margin players. FDIC may give you money back eventually but it may be many years later.
If it is cc loan, double and triple check that cash is in fact 0%. Those sneaky bastards aren’t known for their altuism.
Hey need 2 leave Ca
Cool question! Attempts to answer this will help me too. Okay I just got a 0% 6 month credit card in the same bank where I have a 12% interest credit card. Let’s say I had $6,000 in the 12% credit card when I got the 0% card and voila! I paid off the 12% at once. Okay now I have a 0% credit card. I use it to buy gas, groceries, occasional dining out. At the same time I buy Treasury bills earning 4.8% to 5%. In 6 months I’m 2.5% better off and the chickens now come home to roost and I pay off the 0% card and have a 2.5% gain on the amount in t-bills. Federally taxable. But it’s very liquid. I would expect a 4.8% T-bill is better than a 5.13% money market fund account that is both state and federal taxed on its interest.
If your 0% rate is on for a year, consider a dividend stock that pays a higher interest than 5%. Why? Your gain is 15% taxed instead of taxed at your ordinary rate, which is what you get with a T-bill, as long as you hold the stock for one year.
Use an internet stock screener to find large company stocks with consistantly increasing dividends for the last ten years with a low P/E and with a yield above 5% in that case.
I have a friend who has been taking advantage of 0% interest offers from credit card issuers for years. He claims that by never missing any payments, and paying off the balances when the teaser “rate” ends, that he continues to get new offers at ever higher amounts. I personally don’t trust cc borrowing. But it does seem like an interesting strategy. My friend claims to net a nice sum of money annually from the strategy. I agree with bill in Phoenix that a T-bill money market fund might be the least risky investment option, particularly if you are subject to state and local income taxes. Using cc debt, even at 0% temporarily, as margin to fund stock purchases seems foolhardy to me.
I did something like that for a year or two. At some point you have too many credit cards for the rating agency models and the credit limits on the new cards start going down drastically.
If it is true that some people are borrowing large amounts on 0% cc offers, and investing the proceeds, than cc lending procedures are just as indiscriminant as “liar loans” for subprime mortgages. Given that the banks are using the same off balance sheet “asset backed” lending vehicles that they have used for mortgages, could problems emerge here as well? I persoally wonder whether higher incidence of cc writeoffs are being camouflaged by the tremendous growth of balances. Should the funding for these vehicles dry up in the current credit freeze, might the balance growth ebb, and the credit quality stats deteriorate?
No one has brought this up yet, re KB’s plan to build smaller, more affordable houses. What makes them think I’m interested in buying a zero lot line crackerbox for $250 a square foot any more than a McMansion for the same unit price? It’s called value, look into it before you come up with any more of these genius plans, homebuilders.
I’m not saying I prefer the giant stucco monstrosities that litter the Vegas valley, mind you. Just that you can’t expect me to buy the same shoddily built abode perched on a postage stamp sized lot in a poorly planned and depressing development if you just lop the floor plan in half and charge the same amount per sq/ft. Won’t happen. I want a real bargain.
lv- they aren’t interested in you. Just some suckers who look at price tag and per the cartoons, see $$$ appeear in their eyes.
Afterall, the mantra is real estate always goes up.
H-stan,
More of a rant than anything. Do you think the market will see the lower prices and actually bite on this (IMHO) bad deal? I wouldn’t put much past the buy buy buy American consumer. The spray-on-hair infomercial was a watershed moment for me in losing all respect for some of my fellow citizens.
“Same cr*p, Smaller Bag! Get them before they’re all sold out”
i do not think it’ll work for the reasons you point out.. specuvestors are gone.. the remaining buyers are suspicious, are up to speed as far as falling prices, and are not searching for any POS stucco Mc-mini-mansion that fits their budget so much as they are looking for a good long term value.
lvrenter, for fun you can offer to buy one square foot for $250 from them! LOL. I brought up the same point weeks ago on this blog. Builders are trying to sucker in people in a last ditch attempt to hang on to their business.
I do think it’s wise to downsize to smaller homes, since they use less energy and other resources. I won’t become interested until the price for the house and land is under $200,000 though. Price per square foot depends on location. I’d be willing to get a South Bay (of Los Angeles) house within half a mile from the ocean for $200,000, for a 1200 square foot two car garage deal. But most likely they will become as low as $400,000.
“Hardest hit were Meritage subdivisions in Nevada where sales dropped 69 percent, followed by Arizona with a 58 percent decline and California, where sales fell 52 percent.”
Just like with the r.e. agents in general, lots of homebuilder employee bought into the hype as well and purchased homes to flip. So there will be lots of double hurt: first job loss, then multiple failed flips.
Know of two girls (one is salesrep at homebuilder and the other is loan officer for mortgage broker). They together purchased 5 houses in 2005/2006 for flips and/or rentals. Also purchased primary residence from homebuilder as well. All props have not been sucessfully flipped and none will rent for positive cash flow.
Probably will have a tough 2007 and an even tougher 2008/2009 trying to avoid bk and wage garnishments.
Back from a trip to the Mountain States on a road trip and incommunicado about the stock market collapsing, except for brief motel visits and watching in fascination CNBC talking over/papering over “The End”.
Observations along the way. Eventhough real estate has collapsed, housing tracts are still being built in the windy high prairie isolation of Cheyenne and the Rapid City area. Talking to home owners, housing has fallen in value and once out on the prairies of Nebraska, Wyoming and the Dakota, economic activity is collapsing. Add to several years of drought in some locations, and it is not pretty.
It is amazing how many 30-40-50 dollar motel rooms you find.
Some towns are being abandoned altogether.
Want to see the future of America in a collapsing real estate economy, see the central plains.
Same thing I saw; Drove recently through Missoula, MT and saw a lot of empty bubble homes. Some of them were even “Tyvek Homes” (Homes half built where builder ran out of money, covered in waterproof paper). Here in Portland, Oregon, I have made it a habit to carefully watch out for Tyvek homes as a way of measuring builder pain. In fact, I think quantity of Tyvek paper sold may even be a good indicator of builder pain!
“‘You are still seeing incentives, but more and more what it’s coming to is that it was price all along,’ said local housing analyst Steve Bottfeld.”
“Amid a record level of inventory, the price cuts by builders create more competition for homeowners. Some analysts suggest that could further prompt homeowners to cut their prices.”
My apologies if another poster has already raised this question, but does the dessication of easy money spell the end of builder incentives? It seems rather challenging to explain to your typical wealthy subprime hedge fund investor why it makes sense to finance exotic vacations, fancy cars or just plain cash as a portion of the loan proceeds for which the FB’s house is supposed to provide the loan collateral, against a backdrop of falling home prices.
the amazing story of a master of the universe.
How Many Yachts Can John Devaney Water-Ski Behind?
By Mark DeCambre
TheStreet.com Senior Writer
7/27/2007 2:33 PM EDT
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The seas have turned decidedly choppy this summer for United Capital CEO John Devaney.
TheStreet.com has learned that the hedge fund manager has put one of his most prized possessions — a 142-foot Trinity yacht dubbed Positive Carry — up for sale, along with his $16.5 million second-home in Aspen, Colo. The house, called Sardy House, is the site of the nation’s largest living Christmas tree.
http://www.thestreet.com/s/how-many-yachts-can-john-devaney-waterski-behind/newsanalysis/wallstreet/10370759.html?puc=_googlen?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA
just remember to mark your house and boat to market!
Isn’t this guy also one of the main financiers of the 510 million dollar deal for Briny Breezes in FL?
House prices will drop 50-75%. Ive said it before and will say it again. Those of you who are hoping to pay $350k on a $550k house are potentionally still overpaying. Look at 1998. We may see those prices again(not even adjusted for inflation)
“For now, sellers need to keep lowering their prices, and if they can’t, they shouldn’t sell, Hall said.”
Someone help me figure out what this idiot is saying!
If you can’t lower your price, and an offer comes in at asking price, you should reject the offer (don’t sell)?
If you can’t lower your price, just stop making the payments and live rent free until the bank comes to take the house?
Hello!!!!! If you can’t lower your price, you CAN’T sell.