Everyone Who Bought In ’05 And ’06 Is Just Walking
The Sun News reports from South Carolina. “August real estate sales continued to show large declines compared to last year, with the number of condominiums sold reaching less than half of what sold last year. Real estate agent Lee Horton said August started out looking like sales would pick up, since he had two contracts signed at the beginning of the month.”
“But then news of more mortgage tightening happened, and he thinks that affected the rest of the month. One of those contracts fell through. ‘The last two weeks of August it was really slow,’ said Horton.”
“Horton has a four-bedroom home on the market on which he lowered the price by $200,000. He said the $849,000 price tag was an amount the seller could have gotten a few years ago, but not today. A home in Arcadia Ridge that’s for sale started at $547,000 and lowered to $489,000. He has a contract for that one, but it’s lower than the asking price.”
“He has been told by some buyers that all the bad news has them believing now may be the time to buy, although few have acted on it. ‘The main thing is the psychological factors. Nobody wants to be the first [to buy],’ he said.”
The News Press from Florida. “Mortgage foreclosures in Lee County continued to rise in August while building permits fell to their lowest level since November 1981, according to statistics released this week.”
“Foreclosures are ’still an upward trend,’ said mortgage broker Jeff Tumbarello, who tracks the local foreclosure market. ‘It’s hard to know what to think of it until it hits the top. How many more can we have?’”
“He noted that they’re mainly recently bought properties that the owners, many of them speculators, are letting go of because they no longer make sense as an investment. ‘Everyone who bought in ’05 and ’06 is just walking.’”
“‘It is unfortunate about the foreclosure number but not unexpected,’ said Jamie Pirrello, president of Vision Homes USA in Fort Myers. ‘As far as the permit numbers it’s good news” because that means there will be a chance for the real estate market to start grinding away at the 15,000 homes for sale through Realtors.’”
“Mortgage broker Lane Houk in Bonita Springs said the relaxed rules for federal insurance of loans instituted by President Bush last week will help some but not all people facing foreclosure.”
“Houk said the new loan has to be no more than 97 percent of the home’s value and that can be a problem because many houses bought at the height of the housing boom in Lee County are worth far less than their mortgages. The bottom line, Houk said, is that ‘many of the people in subprime loans bought in ’04 still have equity in their home’ and could be eligible. ‘If they bought in ’05, they probably won’t.’”
The Orlando Sentinel from Florida. “Many Realtors and home builders privately concede that the slump is serious and has had a ripple effect on other businesses, but publicly they tend to remain upbeat.”
“Few Realtors, though, have the experience or plain-spoken nature of sales agent and developer E. Everette Huskey of Longwood, who said last month that the Orlando area is ‘experiencing one of the worst residential housing slumps — the worst I have seen in more than 61 years of real estate and developing in Central Florida.’”
From My Fox Tampa Bay in Florida. “Gone in 60 seconds. That’s how quickly homes in foreclosure sell on the auction block at Hillsborough’s Courthouse. ‘We’ve got about a 60 percent increase in mortgage foreclosures, and of course we didn’t anticipate that,’ said Clerk Pat Frank.”
“Frank says her office logged 900 new filing in August alone. ‘I would say we’re in for a couple rough years,’ she said.”
The Coloradoan. “Norlarco Credit Union wants to try to resolve more than 960 delinquent construction loans before it resorts to foreclosing on the properties, saddling the credit union with up to $70 million in property worth a fraction of its original value in one of the worst housing markets in the country.”
“State Commissioner of Financial Services Chris Myklebust, whose office oversees state-chartered credit unions, told the Coloradoan on Tuesday no foreclosure proceedings had been started on a portfolio of delinquent construction loans in Florida.”
“The loans, which Myklebust said were ‘not prudent,’ threaten to bring down Norlarco and Huron River Area Credit Union in Michigan.”
The Bradenton Herald from Florida. “Three months after The St. Joe Co. halted preconstruction sales on its $600 million SevenShores condominium development on Perico Island, the company still isn’t saying what its next step will be. ‘You know, you read every day about what’s going on with condo projects and inventories and I think they’re taking all that into account,’ said Scott Carpenter, a public relations representative for St. Joe.”
“Preconstruction sales at SevenShores first began in May of last year. As of December, only nine of the proposed 686 units on 353 acres fronting the Intracoastal Waterway near the Anna Maria drawbridge had been presold, despite the prices of starting units being dropped by $60,000.”
“Commitments for 20 units were needed in order to begin vertical construction on the first of 13 planned condo towers.”
“St. Joe officials offered to refund deposits on the units once the project was halted. Carpenter would not discuss the status of deposits on the units. ‘We’re not going to get into who’s been refunded what and how much has been refunded,’ Carpenter said.”
The Tampa Tribune from Florida. “A New York hedge fund is now poised to provide financing for the 52-story Trump Tower Tampa if Donald Trump drops his lawsuit against local developer SimDag LLC, a consultant working on the deal said.”
“Thomas Long of (a) Tampa law firm, is representing several buyers, including two who have sued seeking their deposits back. He said his clients have been hearing about hedge funds for two years and are not holding out hope that the latest one will decide to back the deal.”
“‘A bunch of lenders have said no, and those lenders charge normal interest rates,’ Long said. ‘A hedge fund will want part of the deal and they charge a large interest rate. I would think there won’t be much profit left.’”
“Some buyers, Long said, have agreed to get half their money back, but the clients who have sued declined the deal because that would mean forfeiting rights to get back their full deposit.”
“Buyers put down 20 percent deposits. Half the money went to escrow, Long said, and the other half was available for the developer to use on construction costs. ‘I don’t know how much money is left,’ Long said.”
The Palm Beach Post from Florida. “The region’s condo market may have cratered, but an Atlanta-area developer is betting that Delray Beach’s rental apartment market will stay strong.”
“Renting was considered a fool’s game during the housing boom that ended in 2005. But with mortgages less available and property taxes and insurance bills in the stratosphere, renting a home no longer looks like such a bad deal.”
“The median condo price in Palm Beach County plunged 23 percent in the past year, the Florida Association of Realtors said in August, and many would-be flippers are forced to rent their empty units. But Jay Jacobson, Wood Partner’s South Florida director, said there aren’t many of those empty condos near his site.”
“‘As long as you’re not in an area where there are a lot of condos that are being rented, the apartment market is strong,’ he said.”
‘State projections indicate Martin County’s share of sales tax money this year is going to be $2.5 million less than anticipated, County Administrator Duncan Ballantyne said Tuesday. ‘We now believe we’re going to be in an even worse situation for this year,’ Ballantyne said. ‘It is clear to us that we’ve entered into a period of extended financial distress.’
Hello Ben. I am wondering if anyone knows about a documentary that might have been made during the height of the mania. I saw one regarding the dot com bust and even a really good one about the end of the heavy-metal hair band craze. Certainly somebody with some foresight and video production skill must have documented some great footage of this particular debacle? Does anybody on this blog have any knowledge of the existence of such a compilation? It could become our cult-anthem.
Isn’t it a serial called “Flip This House” on the HG network?
FWIW: the movie Startup.com was amazing. Having been there, I’m glad somebody caught it on film. I was particularly amazed that there was footage of the VC negotiation.
Great, now your comparison of the RE bubble and hair bands has me trying to come up with words for “BubbleHead” lyics to the tune of Blotto’s “Metalhead.”
“‘As long as you’re not in an area where there are a lot of condos that are being rented, the apartment market is strong,’ he said.”
I have an addition to that. As long as you’re not in an area where there a lot of condos being rented AND you price yourself 10% lower than renting from an individual, the apartment market is strong.
The biggest issue I see with the rental market is falling rents. Too many flippers are pulling homes from the market and renting them instead. A 2/2 condo that once rented for $1,395 is renting now for $995 because of the competition. If you’re a developer with a whole building of condos for rent, you had better be renting them for $895 with a very low security deposit. As a renter, I would much rather pay the FB $995 if we were talking about the same money. At least they wouldn’t hit my credit score (in most cases) with an inquiry and they would be much less likely to jack my rent at lease renewal time. I would just need to make certain they weren’t about to have the unit taken by the bank.
ROFL. And where would such area be in S. FL? If there are condos, there are alot of condos being rented. The condos are located in traditional rental areas (as they were rental units just 2-3 years ago), and there is a ton of supply for both rentals and for condos.
I would like to know where (any major city in FL) the rental market is strong right now. Perhaps there are some, I really don’t know, but from my experience in S. FL, rents are falling through almost all price ranges (the one exception seems to be the very low end units, they seem stable) with the biggest drops being seen at the top end (because of the 1000’s of McMansions in this area that are competing for the same renters, all at 1/2 to 1/4 the carrying cost for the unit.. It’s like a competition to see who can lose the least amount of money!).
Anyway, the point being, I don’t think there are any strong rental or home sales markets in this area, the massive oversupply of inventory, coupled with totally unrealistic salaries (compared to median home price) has killed both markets.
“And where would such area be in S. FL?”
Some of the more “gritty” areas of Riviera Beach???
Nahh, the Marina Grande has tons of units for rent; I am sure. Make sure to have your LL include a bulletproofing for your car, you’re going to need it. Also, don’t even think about walking outside the unit after dark; you would have better luck walking through a field of landmines!
There are a few buildings that I just absolutely love as examples of the excesses in the housing sector; Marina Grande is one of them, along with the Landmark at the Gardens. Both of these buildings are going to be VERY LUCKY if they only lose 50% of value. It would not shock me to see both of them selling at 25% of orgininal price 5 years from now (when people realize that water views are not worth your life, and when people realize that “location” is not a mall parking lot).
Mike…I beg to differ…a mall parking lot is a location. A location for the projects!
That building is going to make great low income housing, that’s for sure.
Honestly, like all things, if the price was low I would certainly go look at places like The Landmark and Marina Grande. However, the developers of both of these properties thought they could overcome a crappy (or death defying) location through granite and stainless.
That’s not how it works. You price the Marina Grande at ~80 sq/ft and all of the sudden it seems like something I might have to look at. They were asking 300/sq on avg for that building (so I heard, no first hand knowledge); that’s just F-ING bananas, too much crack insane. If I can afford that kind of price:
A) I am probably going to live on the beach in a condo
and
B) I am smart enough to not buy a condo in the middle of the hood
Just no F-ing way.
But hey, that place looks cheap compared to the Landmark (closer to 500/sq/ft). The location there is not dangerous, but other then that, it is uniformly awful. Who in the he** want to spend that kind of money to live in the mall parking lot? Were they catering to fabolously wealthy (some of these got deep into the millions) shopaholics? WTF?? Is there such a demographic?
For 3BR’s and rental houses, the rental market in coastal LA is VERY strong, assuming that the price is competitive.
There are so many people waiting out the market here, that rents for both of these have risen almost 25% in the past year (based on my very unscientific browsing on CL). I’ve had my eye on there weekly, and it’s amazing what people are getting for the tiniest POS’s.
jjinla wrote:
“There are so many people waiting out the market here, that rents for both of these have risen almost 25% in the past year (based on my very unscientific browsing on CL). I’ve had my eye on there weekly, and it’s amazing what people are getting for the tiniest POS’s.”
just because you see an ad on CL for a particular price. It means nothing in terms of actual price something is rented or sold for.
Did you all notice pending sales numbers for july were down 12 % month/month. Looks like all is well to me. Get out there and buy a house today.
Just fyi, my understanding is that credit inquiries of this nature do NOT affect your credit score at all. Only inquiries where you are actually trying to acquire credit affect your score. This is my experience, and I have also been assured of this by various sources.
“This is my experience, and I have also been assured of this by various sources. ”
Depends on how the apartment complex reports. Many of them report as an application for credit to be extended. That hurts your score just as applying for credit cards does.
That hurts your score just as applying for credit cards does.
So does applying at 3 different banks for a mortgage.
NPR morning news from Tucson brings this gem. I’m paraphrasing, but here’s the gist of what was said:
If your house isn’t selling, you can rent it out. Turn it into a cash machine. And get tax benefits.
Reaction from the Arizona Slim Ranch: My breakfast almost got hurled across the living room.
Conspicuously absent from this story was any mention of:
1. The need for positive cash flow on a rental.
2. The abundance of other vacant SFRs in the Tucson market.
3. The need to screen tenants throroughly.
Hence, my strongly negative reaction to the story.
Hey, let those GF’s and FB’s rent out their houses at a loss. The tenants are the ones laughing as they get a good deal. Once those FB’s walk away and prices crash, the winners who rent will have the money to buy at steep discounts.
In my opinionm, NPR is increasingly a slick, liberal/touchy-feely version of the MSM (this is coming from a liberal/touchy feely type–not sure about slick). While there is still a big difference, my impression is that it just peddles the typical BS on the market.
In my opinionm, NPR is increasingly a slick, liberal/touchy-feely version of the MSM (this is coming from a liberal/touchy feely type–not sure about slick). While there are still some key differences, NPR just peddles the typical BS on the market.
“increasingly”
sorry, dude, but aleays has been. Its just bad enough now for you to notice.
wow - the was the medicine year
we don’t do that anymore
“lowest level since November 1981, according to statistics released this week.”
Help-Las Vegas people
I am in the last 2 months of a house lease in the Summerlin area. Although I have a pretty good deal, I will not be renewing my lease for the following reasons:
1)I do not like Summerlin or West Vegas in general-in my opinion the people out here are trailer trash low lifes who”think” they have made it big, it is hysterical-95% of them have no money, no education and no class. Every one is 100 lbs. over weight and smokes.
2)The house I am in is too big and it is also depressing that 75% of the homes on my cul de sac are for sale or in foreclosure.
3)Worst of all I hate driving on 95 every day to get to central Vegas where all of my business and my office is, I think this is the most dangerous road in the country.
Here is my dilemma, I want to rent a place that is either 2-3 bedrooms that is close to the strip. I am only going to be in Vegas for another 2 years max so I am flexible but I do want the following:
1)As mentioned close to strip 2)Preferably not more than 5 years old 3)A safe area-gated if possible
Can any body recommend a good area?
Thanks
The area you are looking at is older than 5 years, but there are some nice homes with gates between Decataur and Industrial from Sahara to Spring Mountain. Look at the side streets off the main streets.
I don’t live in LV but my sister and mother have been there for 11 years. They live in the Spring Valley (southwest area, near Buffalo, Tropicana, Flamingo), which is considerably closer to the strip than Summerlin. I think the area is pretty nice. Here is a realtor.com link to the rentals in that area:
http://rentals.realtor.com/rentals/search/searchresults.aspx?zp=89147&ml=3&typ=40
BayQT~
Is it finally hitting the fan:
Pending Home Sales Fell in July to Lowest Level Since September 2001
http://tinyurl.com/29ozst
Then there’s the following gem:
Yun called the problem temporary, and related to jumbo home loans above $417,000 that can’t be packaged into securities sold to investors by government-sponsored mortgage giants Fannie Mae and Freddie Mac.
Yun, everything is temporary, but it all depends on how long a period temporary is going to be.
yo, YUN that was august home boy
He knows his intended audience is less mentally capable than he is - so why should he concern himself with mere details? Those nervous FBs need to be soothed at all costs - as they have the power right now to tank the whole thing - simply by walking away en masse.
He knows his intended audience is less mentally capable than he is
Most realtors and mortgage brokers only have a GED or a High School education.
I think Yun’s moments of clarity and insight are fleeting and temporary.
‘Yun called the problem temporary’
- I have seen him on TV several times. He projects absolutely no confidence and command of the position that he holds. I actually felt a little sorry for him … he even seemed to struggle with the english language.
Conclusion - he is a meathead.
the depression was temporary yun.
twit.
*ObGroan*
…so were the Dark Ages
Contained to the global economy; temporary during the next 10-50 years.
temporary? yes. it will soon be much worse
Folks, folks, folks!
Am I the only one noticing that the mortgage market blew up, in AUGUST. These guys are blaming an AUGUST EVENT for sales declines in JULY.
Dudes,
Its contained. Don’t you get that. Why most of my coworkers are telling me the bottom will be mid-2008. So why not buy now? Why hey, housing is such a bargain compared to just a year ago. You had better buy now before you’re priced out even more! Buy now while you can still get a mortgage.
‘/sarcasm
Neil
I know that it is sarcastic post, but what would happen if nobody could get a mortgage? Wouldn’t prices fall even further up to the point where people with cash can actually buy it?
Same for a lot of consumer products, and then I wonder how much of my salary is actually driven by credit?
Pop corn is in the microwave and free where I work!!!
If nobody could get a mortgage? Oh, there will remain $417,000 mortgages. So prices will drop to downpayment+$417k (prime credit). Just that those people will want the best house for their hard earned savings.
Let’s put it this way, I won’t be able to afford beach front when this is done… but the question is how nice of a home will I be able to afford?
As I told my wife, the best thing that could happen to us is that for six months we couldn’t qualify for a mortgage.
I do wonder how much of my salary is from credit…
Got popcorn?
Neil
wow- what’s everyone going to do in the recession ?
august will be worse -er
Pending Home Sales Fell in July to Lowest Level Since September 2001
well, a lot of people will recess - from work
Thing is, they won’t admit that August sales are supposed to be higher than July. They’ll just keep talking about the mid-2008 rebound (yea, right). We’re going to have to keep waiting.
Got popcorn?
Neil
“Foreclosures are ’still an upward trend,’ said mortgage broker Jeff Tumbarello, who tracks the local foreclosure market. ‘It’s hard to know what to think of it until it hits the top. How many more can we have?’”
“He noted that they’re mainly recently bought properties that the owners, many of them speculators, are letting go of because they no longer make sense as an investment. ‘Everyone who bought in ’05 and ’06 is just walking.’”
Thats because everyone who bought in 2004 has already walked and most that bought in early 2007 are yet to walk.
There’s an article in the WSJ today where regulators are asking lenders to restructure the loans of “millions of borrowers at risk of losing their homes.” Is there any chance that could actually get pulled off?? I don’t think so, but that doesn’t mean anything.
Blano;
I guess they are asking the lenders to make the mortgages affordable by converting ARMs to fixed or something of that sort. I also read where someone suggested a 50 year amortization as a solution.
If a ARM with a starter rate of 2.5 is converted to conventional 30 yr fixed, at 6.25% isn’t that the same as the ARM adjusting up?
250k at 2.5% is 987.80 per month, less Insurance and taxes
The same loan at 6.25% for 30 years is 1539.29 per mo and at 50 years is 1362.43 per month. And what about the mortgages that were sold as securities? Who knows.
At 50 years it’s $375 per month more. That might work for some homeowners. But it probably wont be an affordability issue. You get tired of paying all that interest on a house that is worth half or less than you paid for it, when you will be able to rent the same house for less than $1K per month.
I don’t really see what the government can do except cover the banks losses to prevent a complete meltdown. I’m not sure they can or will do anything.
Thanks for the good analysis. The additional problem is the dollar. While some anaysts I respect are looking for a bear market advance in the dollar over the next year, the advance should be followed by a resumption of the decline.
A plunging dollar at some point will force the FED to defend
the currency which means credit controls and abnormally high interest rates.
Think Russia in 98 and Argentina in 2001. How nice. The second wave of resets hit in 2009-2010 as the FED must raise rates in the midst of a weak US economy and dollar. That is my expectation and a perfect storm to provide the kind of atmosphere that long term lows are formed. Ugly but necessary. This thing has a long way to go.
Bear;
Your right. If this was a baseball game we’d be in the first inning.
“There’s an article in the WSJ today where regulators are asking lenders to restructure the loans of “millions of borrowers at risk of losing their homes.” Is there any chance that could actually get pulled off?? I don’t think so, but that doesn’t mean anything.”
My understanding is since the banks don’t own the paper anymore, they cannot modify a loan without the permission of the investor(s) who own the loan. That’s the big wrinkle with CDO’s. It’s not easy to figure out who exactly owns any one loan in particular…you get my drift….by the time they could figure it out, the house would probably be in foreclosure.
Lisa;
You make a good point, but typically bad loans are sent back to the originator and the originator/bank is required to make it good. They are required to keep mandated cash reserves for such. So if a bank gets a loan back, they own it and can do whatever the law allows.
I may be wrong but I believe it is against banking regulations for a bank to negotiate a short sale to the homeowner, i.e. shave 30% off the principal and rewrite it as a 30 yr fixed. If banks were allowed to do this, everyone would be negotiating their loans down. Now, they can short sell it to a third party and forgive the debtor for the difference and of banks are now doing that.
If emergency legislation was enacted to allow them to short sell to the Homeowner, what criteria would decide who gets a short sell rewrite? Remember if the Government gets involved they’ll handle it like Katrina. I can see lots of potential abuses if they allow short sales to homeowners.
In the end the Taxpayers will fund this mess, like the S&L thing. However I believe this will be way bigger than the S&L debacle and maybe too big for the Feds to fix. The subprime meltdown is but a part in the larger picture.
DarthRealtor wrote:
“…If banks were allowed to do this, everyone would be negotiating their loans down…”
Darth, it is my understanding, in contract law, if all parties of the original contract agree, they can renegotiate the terms of the contract. Ofcourse, the new terms, just as the old terms would only be legally binding if they are lawful terms.
examples of terms that would not be lawful include contracting to commit a crime. And regulations may limit the percentage rate (max) that is lawfull, but I do not know of a any minimum percentage.
On the other hand, the share holders of a bank could sue if a bank does not earnestly do all in their power to protect share holders share value and production of profit for share holders.
If by the term “lenders” you mean the originators of the loan then I think there might be some hope.
But if you mean the holders of the mortgages … well, that’s another thing altogether, mainly because who knows who the holder of a mortgage is anymore. The mortgages have be packaged up, sliced and diced into tranches and sold off to everybody on the planet. So who knows who to talk to about restructuring anything.
“If by the term “lenders” you mean the originators of the loan then I think there might be some hope.”
Since the originator doesn’t hold the paper, they can’t just decide to modify a mortgage…it would have to be done with the permission of the mortgage holder….whoever that is…and we’re back to square one.
But the lender may still service the loan. That may give him responsibilities to fulfill edicts handed down from Congress or whoever. I wouldn’t rule out anything at this point.
Combo;
You are correct. We were talking Bank loans above but when a Mortgage broker in Florida writes a mortgage for a bigger broker in Wisconsin and they in turn sell it to investors who sell it to other investors…yada yada…who exactly owns the mortgage and who forecloses.
The situation gets real ugly when a few of the companies in the chain go belly up.
Again, the poster who said why would a Colorado Bank fund Florida RE. Real good question.
The only satisfaction I can get out of this is that 30 to 40% of these subprime backed “Securities” were bought by the Chinese and other foreign countries. The Chi-Comms may be retaliating by selling us poison Barbies. They may also own your house.
No. They’d have to buy bck the loans from the MBS holders, restructure them, then try to sell them… or take them on book… either of those result in mass losses of money they don’t have.
This is govt. trying to look busy.
Exactly
From what I understand ,a certain amount of MBS’s paper contracts gave ability for the party that services the loan to re-write loans ,sell REO , conduct short sales ,go to court ,etc.
I find it had to believe that the makers of these MBS’s didn’t allow any recourse for the servicing of the loan paper by the loan service company . I would love to see proof that the only option these funds have are to buy back the loans from the investors in order to re-write the loans . It’s more likely that there is a clause in these contracts that state that the loan service departments that service the note have options regarding the servicing of the notes .
Once again. If anyone is interested in buying, forget all the “Bottom is in,” b.s. For starters we are not anywhere NEAR the bottom. We haven’t even had the first surge of dip buyers (GF’s) move in to buy and, because this is such an incredible mess and it’s world wide, we will probably see several dip buying surges over the next few years as experts get paraded out in front of the cameras on the CNBC Comedy Business Show to yada-yada on with their b.s. about the credit squeeze being behind us with “Sniffer” Krudlow leading the charge.
So when will the “bottom” be in? Easy. Sit back and watch the show ’cause when the bottom is in it’s gonna stay there for a long, long, long, long time.
This Mr. Magoo Greenspan created disaster has four things which make it far worse than any other time. (1) Massive inventory which is still growing. (2) A new religion in the area of lending oversight. (3) A lot of people vary wary of real estate to say nothing of those still in bankruptcy over foreclosures. (4) Non-affordability for the majority who are already debt ridden and will not even be able to come up with the 15% to 20% downpayment.
End result. No need to fall for the realtors, “Now is a good time to buy,” crap. Just wait and take your time. Only when the blood which was on the streets has dried -which will NOT be overnite, will it be time to buy. If you happen to be one of those people who get nervous that they will miss the bottom, at least wait for a 20% to 30% drop in places like California and Florida.
You could also watch for any uptick in activity amidst the eventual survivors of the big builders but they are usually a lagging indicator. Personally, I fully expect a lot of the big builders to bite the dust in the next 2 years.
30% drop is way too little. I would wait till prices are at 1998-2000 levels which means more than 50% haircut.
“1998-2000 prices”. I’ve always been an optimist!
I tend to agree. I have already seen 30% “price reduced” from peak 2005 levels. So 30% price drops based on what level, Mike?
In one section of southeastern Florida I follow, average 3/2 SFH and condo prices are around $175 per square foot, relatively competitively priced ones around $150, and very few around $130, some of which need work or are senior community, etc.
At what price per square foot does it become interesting? A good selection at $125, $100?
Again, I am talking about some of the better neighborhoods in SE Florida.
My estimates put Palm Beach County at $70/foot for houses. I just saw a 3300 living square foot nice newer house for $399k or about $120/foot. House prices overall need a little over 50% more haircut before they bottom out.
But everyone wants out of Florida for many reasons and prices in NW Pennsylvania will be had for $20/foot(at $25/foot now)
Please, tone down your rhetoric somebody may hear you in my neighborhood. As a first time home buyer, I was naive when I bought a townhouse in the burbs of West Palm in ‘04. My neighbor was successful this month in selling for only 20% off peak prices ($130/sf) and I’m going to try starting next week. I could handle a 30% reduction off peak, but 40-50% off peak would wipe me out. At least I can afford my payments if it doesn’t work but I hate my neighborhood.
Good luck. You should be able to sell 25% off peak pre-commission. (Yes, it is falling that fast.)
Do recall the rules: People looking but not bidding: 5% overpriced.
No lookers: 10% overpriced.
Let us know how it goes. One of my coworkers just sold. CLOSED! Why the emphasis? Zero down buyer! Whew! He’s parking the profit to buy again in 2 years. (They wanted a better school district when the kids turn 5.)
Got popcorn?
Neil
30% drop is way too little
More like 50-60% from peak in the Tampa Bay area. I just talked to a new purchaser who was upset that the realtor had told them this was a good time to buy. They now owe more than the property is worth and is taking legal action against the realtor.
But everyone wants out of Florida for many reasons and prices in NW Pennsylvania will be had for $20/foot(at $25/foot now)
Wow, NW Pa must have some really cheap areas. Bad places in Youngstown and Cleveland for sell for $15-$20 sf. In the section of NE Ohio I live in that’s what prices were in 1981.
More like 50-60% from peak in the Tampa Bay area. I just talked to a new purchaser who was upset that the realtor had told them this was a good time to buy. They now owe more than the property is worth and is taking legal action against the realtor.
That’s a waste of money. There’s little clauses in somewhere in the realtor’s paperwork that says current valuations are no guarantee of future valuations.
I agree with the 50% drop.
I couldn’t agree more with the statement regarding the ‘bottom’. I live in California and the prices got so insanely overheated beyond anything close to being logical or possible that I have absolutely no clue what future the state is going to find itself in. Simply put, too many people here are totally tied financially to their homes. If the prices fall, so do their financial futures. Anyone with half a brain realizes that buying is ridiculous. Any stragglers that thought otherwise are now very aware since the mainstream news finally caught on.
So here we sit. The houses for sale just sit there, month after month, with the same high prices and no lookers. Something will eventually give. My guess is that half of those who bought with all their money tied to the house will sell lower and move out of state.
Lastly… I guess we ALL saw the DOW this morning. I guess the Fed or someone else will step in and throw more money at it, claim borrowers were victims and must be saved, or some other little trick that will ensure that the stock market will have another 2-3 days of healthy numbers before even more bad news comes out. How much longer can they keep on ignoring the obvious, which is that this thing MUST be allowed to run it’s course?
This is such a simple problem yet nobody in the economy seems to want to admit that the biggest problem right this very minute is affordable housing. Admit that problem, let the economy burn out the rot, and start over again so that the long term growth pattern will be more healthy.
my contempt for realtors grows daily - just saw an ad, “Don’t throw your hard-earned money away, call a realtor today”
the most overused word from their mouths? The word “only” - only 5 million dollars, a stea - etc ad nauseum
“Don’t throw your hard-earned money away, call a realtor today”
Isn’t that like an oxymoron?? (emphasis on moron here)
I agree that most of these expert financial people are missing the biggest issue - and that being that house prices are absolutely out of line with economic fundamentals. In Los Angeles especially they were inflated beyond all reason because of this Exotic Toxic lending. Why are they trying so desperately to keep house prices at this unrealistic level????
I bet ‘ya Miami Condos will take a 75% haircut before the market rebounds. The upper segment of the market will get hit less severely (maybe around 30%) than the lower end(slums) which will see a 50-75% decline. $250K for a 1000sqft slum property anybody?…ANYBODY? How about at hafl off? Want to live in the slums for $125K with bullets buzzing through your living room? Still no takers?
Not many years ago you could buy condos in SFL for 20-30 thousand. You will be able to again.
Are we talking adult 55+ condos or regular condos? Big difference. I don’t think non 55+ condos were $30k even in 1998 before the bubble. I say more like $50k is realistic for a nice 1/1 non 55+ condo at the bottom(they cost $150k at peak so 67% drop)
4 great points mike, but I would like to add one more that I think is the biggest:
(5) China.
As the owner of a small manufacturing company(plastic injection molds), we have been hammered down from 20 employees to 5.
I have heard some say that losing blue collar jobs is OK, but these same idiots don’t have a clue where durable goods come from and the skill level of the toolmakers involved. I am not talking about some Illegal immigrant or union assembly worker, these are skilled craftsmen mold-makers that used to make $60-100k with overtime and good benefits, now I am competing with Communist Chinese backed companies that pay mold-makers $10/week. With no manufacturing base in the U.S. I feel we are in for some very serious economic trouble that will last a very long time.
All of this doesn’t even include the extreme burdens that our own government places on us. I fled California in 2005 because I was fed up with the cost of doing business there.
It sickens me to see how well a communist country who still labels the U.S. as “number one enemy” has grown her economy while J6p stands by watching his standard of living go in the toilet and doesn’t even know it! I hope we never have to fight the Chinese as there are already things critical to defense (rare earth magnets, vitamin C, etc) that are no longer made in the U.S.A.
I refuse to print color books in China, although that’s what everyone else does in the publishing world. I use local printers and pay more, but I have control over the end product. I’ve seen some real disasters come out of China (color books) from other publishers. It’s nice to be able to do your own proofs at the printing press with someone who speaks the same language. Corporate greed isn’t just corporate, I know a number of small publishers who will suffer and do anything to save a dime. No, I’m not wealthy in money, my wealth comes in other forms. I also refuse to shop at WalMart for the same reasons.
Lost, I know that I rag on Tucson’s housing market quite a bit, but I’m going to say something good about another aspect of Tucson, its printing industry.
We have some very good four-color printers here, and I’ll bet there’s at least one that could do a bang-up job on your books. Want some company names? I’d be happy to post them.
sure, would love to have them, thanks Ben, for letting us go OT here.
A number of years ago, I went to Tucson to visit one of the first POD (print on demand ) printers in the country and was very impressed. have lost track of them.
Slim, if you prefer, you can post the info to wannabelostinutah@yahoo.com
thanks
With no manufacturing base in the U.S. I feel we are in for some very serious economic trouble that will last a very long time.
I would have to agree with you. All you need to do is take a trip up to Michigan, Ohio and Indiana and you can see the damage done to these fine states. It’s just not manufacturing, it is Information technology, acounting and engineering jobs that are being sent offshore. These jobs are being replaced with low wage retail jobs or service sector jobs which are not the types of jobs that drive our economy.
One other job that I think people might not be aware of being shipped to India is the person who reads your xrays and mri’s. A lot of these are sent electronically over there, read, and the results sent back. Another good paying job being filled in India for $500 a month.
There we go again, more misinformation!
Repeat after me, “a dollar an hour”. While nowhere near US minimum wages, it’s the going rate for factory labor in China.
With the decline in the USD and inflation in China, this is only going to go higher.
So sorry, whoever told you “they pay $10 per week” is smoking some fine stuff. If the mold-makers are skilled, they will probably make between $40 and $100/wk - which while still low is an order of magnitude off from your fantasy.
These are all very good points. Commerce Department just came out with new income figures.
In my area, median price will have to come down considerably - 78K is income, house is about 425K in DC area. Median familly with excellent credit AND 20% down can not afford to buy, by a long shot.
So says Drudge:
UN: American economy growth will fall behind rest of world in ‘07… MORE… For first time since ‘01, both EU, at 2.8%, and Japan, 2.3%, are predicted to have higher GDP growth than USA, it will be reported this afternoon… Developing…
Other parts of the world have even larger housing bubbles then the US.
So, all these attempts to ‘Americanize’ this issue are ridiculous.
From My Fox Tampa Bay in Florida. “Gone in 60 seconds. That’s how quickly homes in foreclosure sell on the auction block at Hillsborough’s Courthouse. ‘We’ve got about a 60 percent increase in mortgage foreclosures, and of course we didn’t anticipate that,’ said Clerk Pat Frank.”
Don’t get the idea that these foreslosures are good deals. If it’s “gone in 60 seconds”, thats probably because the bank bought it back at the balance of the mortgage.
In June I went to a number of auctions in Central Florida and have yet to see many good deals. The majority of homes were bought back by the bank and few were good deals. There were some sales to “investors”, but IMHO they overpaid. I quit going for now. I check on prices every week and the last Auction I checked on, was on August 30th and not much change from June.
At some point, the dam will break and prices will plummet and auctions will be worth going to.
As this thing continues to shape up, It looks more and more like there will be so many houses, condos, lots etc that people won’t want them at any price. It’s conceivable that in certain areas the taxes and insurance would make a house worth 0$ or close to it.
Another issue is that in Florida if a house is vacant for a year or more, with no A/C, you most likely have a mold problem. Thats a potentially huge issue here. I’ve seen alot of houses that had to be gutted because of mold. You might as well bulldoze it and build on the slab.
To foreclose is now taking a year in a lot of cases, even if the homeowner has abandoned the property. Usually because the lender is out of state.
I believe we had a poster ask why a Colorado Bank is financing Florida RE. This is why they its a bad idea. It makes it tough to foreclose.
If Florida does not put out a much lower assessment, they are indeed corrupt. They rushed to raise taxes when houses were appreciating.
“They rushed to raise taxes when houses were appreciating”
PULEEZE………..stop using Realtor-speak when referring to house price and other asset INFLATION.
Call it what it is……Inflation or price increases.
Do you call stock price increases…stock “appreciation”. NO. You don’t.
This type of talk makes it sound likes it’s a normal function of the housing market to “appreciate”.
It’s simple price inflation from Cheap Money.
Thanks, Alan, you bug-eyed idiot. Thanks for the easy money!
Don’t get the idea that these foreslosures are good deals. If it’s “gone in 60 seconds”, thats probably because the bank bought it back at the balance of the mortgage.
Yeah, that’s what I was thinking. It just means that these homes have NOT cleared the market yet. Until the banks actually sell these foreclosures we haven’t established what the market price actually IS. Just like Winnie the Pooh after HIS baloon burst, it’s going to be a Long, bumpy ride back down to the ground.
Wait..the banks are holding onto all these foreclosures and trying to sell at close to mortgage balance..soon the “fire sale” will begin and then we will see true market value..
Every REO I’ve seen in my hood with the exception of 1 or 2 has been listed with a 20% or better haircut because the 2nd is being wiped out at auction. Both of the full price listings were reduced by 20% after a short time on the market.
http://tinyurl.com/2utgt4
Wicked;
That’s a factor but in Central Florida a 20% discount ain’t s**t. The REO’s are building and will sell when Banks get real. Until then a repo is a high priced house that now belongs to someone else.
It’s the same in N Colorado. The houses that are bank owned are mostly not a good deal, and that’s just looking at them from the outside, they seldom put any interior photos on the listings. Also, so far, to my knowledge no auctions. They’re all being sold through regular channels. The realtors are getting craftier about hiding the status, too. It used to be there was a blurb about an as is addendum or some similar wording in the listing. Now there’s narry a word about who really owns the place - except the county records. Realtors ™ are becoming obsolete. Your best bet is to do your own research and represent yourself.
Of course there are no inside pictures because that would involve actually *shudder* going inside the dump. I saw an REO with inside pictures once on Zip and instantly felt the need to shower. Eeeew
The places in FL will have to be burned to the ground and then bulldozed. No way in hell some worker can go in there and start removing black mold infested drywall, carpeting, studs etc…
REO’s 95% of the time are not a good deal. The buyer has no clue what the problems are with the property. Sometimes fixing them can cost as much as or double the property cost. There’s mold, burst pipes(you can’t tell because water is shut off), septic problems, termites, etc. There’s too many hidden hazzards that no one discloses.
“An auctioneer flew through 14 properties, all of which were sold back to banks. ”
That statement was from further into the article, and yes, I thought it was misleading as well. I drove the length of Hillsborough county on Monday, there is a huge amount of inventory. Once these REO’s hit the market en masse, the real death spiral will begin.
I can see all of us at the housing auctions when the banks or whoever owns them will let them go at the highest bid. When we are at the auction, as soon as someone gives an opening bid, no matter how low, we’ll just drop out and wait for the next one as we will all refuse to up the bid on any house. No need to worry as there will be plenty for all.
In June I went to a number of auctions in Central Florida and have yet to see many good deals. The majority of homes were bought back by the bank and few were good deals. There were some sales to “investors”, but IMHO they overpaid. I quit going for now.
We should all be going to auctions. It’s entertainment, it’s free, and you can get a good laugh.
Lee County issued 63 permits in August 06. It issued 588 in Aug. 05. That’s the lowest number since 1981, when 45 were issued. To give a little more perspective. The population in 1981 in Lee was about 205,266. In 2007 it’s estimated at around 600,000.
Oh, and 1981 is also known to be a pretty significant recession year.
Numbers should be in Aug. 07 and Aug. 06..my bad
Oh, and 1981 is also known to be a pretty significant recession year.
It absolutely was. Interest rates were 21%. We bought that year from a friend of the family @ 12%, and we were one of the few who were buying. Her parents were in a nursing home so we got a really cheap price, otherwise we never would have done it.
Minyanville.
When will they stop kidding themselves?
If I hear one more time that the Fed needs to move because the housing market is crashing - and it is - my head will explode. People are not buying homes because:
1. Everyone with a pulse bought one more more homes during the bubble.
2. See No. 1
3. See No. 1
The “demographics and employment” arguments are a farce. I’ve quoted this stat too many times: 85% of individuals wih income above the median already owned a home as of the middle of last year; the U.S. fertility rate is 2.02, which means that new births are barely replacing deaths; and if one wants to roll the dice on the veracity of the employment or inflation figures, then I suppose that one will also believe that the subprime mortgage problem is well contained - because the sources of both data are the same.
The Fed can lower rates to zero and the same people who could not afford their house for the last three years are still not going to be able to afford it; the newly coined droves of “real estate investors” - the reason for the insanity we witnessed - are out of the picture and they are not coming back.
My comment: indeed. I feel very smart being one of the 15% who does not currently own a house (other than inherited properties with a zero cost basis)
You almost blew $300k for a house in Texas but “came to your senses” after we all told you that now is NOT the time to buy! You were getting emotionally attracted to this nice, but overpriced(you even said so yourself) house. Please wait till 2010 at the earliest, that house will be $200k by then.
I know it’s not the time to buy if you’re trying for a rock bottom price. I’m not 28 years old and trying to impress the Joneses however. I can pay cash. But I was angered in this case by a price increase in the house which was dusted over by the stupid realtor without a valid reason. The only comps in the area are foreclosures and they want to INCREASE the price? Forget it.
They (or the person who bought it at the increased price) will come to regret that decision.
Trust in the math that undlies this entire bubble, it gives us a very clear picture of what is about (and is already) to happen. In FL it is happening faster, because we got crazier; however, it will happen across the country, no doubt about it.
As sure as 1 + 1 = 2
A median HH income of 55K does not = 400K median home price.
Or 55K != 400K
Nobody bought it. It’s still there. I will come back in in about 6-9 months.
You will be able to score one of those foreclosures at an honest auction for $100k in 2010-2012. Please have some patience. You have every right to be angered by those rip off prices. I am moving to NW Pennsylvania, it is one of the few good locations where prices make sense, a nice house can be had for under $50k.
Most of Texas isn’t too bubbly, I see nice big houses for around $150k, it’s those $300k and up houses that will be dropping alot. Prices should bottom out at around $30/foot for cookie cutter houses and $40-50/foot for nice custom houses like that $300k house you almost bought.
Texas is as bubbly as any coastal city.
Then how cheap are you predicting prices will fall? You can already get a 2500-3000 square foot cookie cutter house in many parts of Texas for around $150k. That same house in south Florida is around $400k!
The bubble parts of Texas are the inner loops and inner cities of Dallas, Houston, Austin and San Antonio, along with “resort” and vacation type areas. Credit quality stinks here and people are over-encumbered. We also have the added interest of home equity lending only being in existence for the past ten years.
I’d say it could go down a long way.
The only comps in the area are foreclosures and they want to INCREASE the price?
Toss the comps out the window because in most areas they are tainted from the run up in prices. I prefer to use on existing homes prior to 2003, the base purchase and inflation plus one or two points to determine fair market value.
Toss the comps out the window because in most areas they are tainted from the run up in prices. I prefer to use on existing homes prior to 2003, the base purchase and inflation plus one or two points to determine fair market value.
With the fastly depreciating market there are no comps anymore that would be valid.
Even if they bail them all out, it won’t work because they can’t live within their means - when the house ATM closes and the credit cards are maxed it will be chaos. Imagine all those attention whores with all their bling having to live on their paychecks.
Let’s do the real estate related unemployment numbers and cross check them with (fake) government numbers. RealtyTimes is reporting that 88,000 jobs were lost in the financial sector (so far) this year but that number was prior to the credit crunch. 44% were mortgage related. Remember, these are just in the area of finance.
Rumor has it that CountryWide is going to eliminate 10,000 jobs. They have a combined workforce of 60,000. Now add in construction. That HAS to be a gigantic number. Of course, a lot of construction workers in this boom were part of the estimated (probably a low number) 11 million illegals from south of the border. If they join the ranks of the unemployed they will not be counted. I think I just heard a government hack who tracks the unemployment numbers breath a sigh of relief.
Now we are going into the fall - then winter. Not good for construction. Thousands and thousands of condo’s and ticky-tacky cookie cutter sh*tholes are still being built (thrown up with spit and glue). Builders would have stopped building but the credit crunch caught them with their pants down and they have to service the bank loans and honor contracts. Once these contracts end, a tsunami of unemployed will hit the streets. Then we have the sub-contractors finding no work. Recession baked into the cake?
and a linked blast from the past
http://www.minyanville.com/articles/index/a/10856
“Houk said the new loan has to be no more than 97 percent of the home’s value and that can be a problem because many houses bought at the height of the housing boom in Lee County are worth far less than their mortgages. The bottom line, Houk said, is that ‘many of the people in subprime loans bought in ’04 still have equity in their home’ and could be eligible. ‘If they bought in ’05, they probably won’t.’”
and here lies yet another reason why the bush bailout is so laughable. by the time anything gets to committee, the ‘04 group will be upsidedown too. a hospital full of dead bodies.
“Houk said the new loan has to be no more than 97 percent of the home’s value and that can be a problem because many houses bought at the height of the housing boom in Lee County are worth far less than their mortgages.
NO homes bought during the boom with subprime have equity. If everything is dropping in value nothing bought at 100% is worth enough to have 3% equity. End of bailout.
“He noted that they’re mainly recently bought properties that the owners, many of them speculators, are letting go of because they no longer make sense as an investment. ‘Everyone who bought in ’05 and ’06 is just walking.’”
Okay, multiply this statement across all the U.S. markets with some degree of speculation.
Suddenly, I’m less worried about all the bailout talk. There’s going to be some % of FBs who will have NO interest in a bailout, now that their golden goose investment is cooked. The mess is just too big for anyone to artificially prop this market up with loan modifications or bailouts or whatever.
- This is from Yahoo Poorest Places to live;
The lowest income town of any with more than 65,000 population was Youngstown, Ohio at $21,850, which finished last by a large margin. Muncie, Indiana was its closest rival for this dubious distinction, with residents there earning $25,859, a difference of 18 percent.
I was born and rasied on a farm in Muncie In. Many times I have stated that the last place in America that should of had a housing boom was Muncie. Yet, it caught on there as well as Indianapolis.
I think Ben posted something about the market in Muncie - not good, neither is Indy, Terra Haute, South Bend…
Real estate woes in Indiana are due to the change in property tax being assessed on market value rather than purchase value; it has nothing to do with a boom in housing prices.
The lowest income town of any with more than 65,000 population was Youngstown, Ohio at $21,850, which finished last by a large margin.
I live in a small town 25 miles south of Youngstown. My husband is a principal in Youngstown Schools. He said people don’t realize what some of these families live on. However prices there didn’t change much in the last 7 or 8 years. What sold in the 90’s is selling now for about the same price.
“…St. Joe officials offered to refund deposits on the units once the project was halted.”
Come on St Joey…can’t you guy’s just build at least x2 condo’s?…look at your pals Lennar…the’re still able too pull a permit for a least x1 house construction in… Bakersfried, CA…I really feel you guy’s can do better,… either shit or get off the pot…now come on: “Just Do It!”
“He has been told by some buyers that all the bad news has them believing now may be the time to buy, although few have acted on it. ‘The main thing is the psychological factors. Nobody wants to be the first [to buy],’ he said.”
Now is not the time to buy unless you enjoy losing money. Wait about a year or so and then it may be time to buy. Do the opposite of what the NAR and it’s realtor members say and you will be fine.
“Mortgage broker Lane Houk in Bonita Springs said the relaxed rules for federal insurance of loans instituted by President Bush last week will help some but not all people facing foreclosure.”
Moral hazard is in play. Neighbor who invests in LA condo’s was heartened by the news and told me, “See? The government won’t let things get bad.” So he’s back in the market buying up more property.
‘We’ve got about a 60 percent increase in mortgage foreclosures, and of course we didn’t anticipate that,’ said Clerk Pat Frank.”
The number quoted is incorrect and it is actually 90%. There have been over 10,000 homes forclosed in Tampa Bay so far this year and still trending upward. The majority of the forclosures were sold back to the banks, which have not brought these units to market. If you add the forclosures, for sale by owner and current MLS listings, the number of units for sale in the Tampa Bay area is probally around 80,000+.
$849K in South Carolina? I don’t think the whole state is worth that much.
You’re right. Now, will you other 49 states please keep your citizens from all wanting to move here!!
Only thing keeping them from moving is that they can’t sell there FL house.
And where might you be from?
“The loans, which Myklebust said were ‘not prudent,’ threaten to bring down Norlarco and Huron River Area Credit Union in Michigan.”
Ouch… Got FDIC? My wife isn’t happy with me for forcing the movement of funds into a more secure bank with no bank having above $100k of our cash (classy problem to have…). We’re going into S&L 2.
Got popcorn?
Neil
Boy, your wife ought to be happy to have such a “problem.” I’d love to be in such a situation, or anything close to it.
credit unions are not insured by the FDIC. They have their own separate insurance fund.
Hi,
Here is little details from hcpafl.org on sales records in Tampa Bay last few years!! It gives very interesting situation and when august results are out, I believe all kind of market will be in panic. June to July sales dropped by 18% (nationally 12% down) and I predict July-August will drop by 30-40% …
annual sales records in hillsborough (SF homes)
2001=>19.1k
2002=>20k
2003=>22k
2004=>24k
2005=>28k
2006=>19.8k
2007=>7k (so far)
2007 records
————
jan 906
feb 967
mar 1061
apr 982
may 1081
jun 1081
jul 885
aug 54 upto aug-6th