Local Market Observations!
What do you see in your local housing market this weekend? Overbuilding? “In Loudoun County, Va., it seems that everywhere you look, construction crews are still building. But more than 440 foreclosures have been filed at the courthouse in Leesburg so far this year. ‘Everywhere you go, there are for sale signs and foreclosure signs,’ Jack Baumgartner said. ‘People got in over their heads with mortgages they can’t afford. It makes you sick.’”
Slower sales? “North Texas home sales continued a downward trend in August, with 10 percent fewer houses changing hands than a year earlier. The drop was even steeper in the condominium market, where sales were off 17 percent. ‘Some companies seem to be down significantly, while others are down slightly,’ said Jim Fite, president of Dallas-based Century 21 Judge Fite Realtors. ‘Same with areas’ of the city.”
Canceled projects? “A Chicago-area home builder will not proceed with expansion plans for a large condominium development in St. Francis that overlooks Lake Michigan. The move ends Kimball Hill’s troubled foray into the Milwaukee area.”
Housing related layoffs? “With the housing bubble bursting and new homebuilding in decline, Montana’s lumber industry is starting to feel the pinch, according to Charles Keegan, a researcher with the University of Montana.”
“After a five-year building frenzy fueled by low interest rates and real estate speculation, the downturn in building is expected to last through next year, Keegan said. ‘Construction this year and next year will be considerably below long-term averages,’ he said.”
“According to Keegan, the high rate of construction, which started around 2001, led to a glut in the market and a nosedive for housing prices nationwide.”
“Paced by losses in construction and manufacturing, the world’s largest economy shed jobs for the first time in four years last month, according to the U.S. Labour Department. ‘A drop of this magnitude has never been observed outside recessions,’ National Bank Financial economist Stéfane Marion remarked. ‘That is unnerving.’”
“Countrywide Financial Corp., the biggest U.S. mortgage company, plans to cut its workforce by 10,000 to 12,000 in the largest round of firings since the industry’s contraction began last year.”
“CEO Angelo Mozilo said in an interview he has ‘no regrets’ about adding staff in recent years. ‘We adjust to the environment we’re in,’ he said. ‘It was impossible to anticipate the credit crisis we’ve seen on a worldwide basis.’”
Lending changes? “Citigroup Inc., the largest U.S. bank, curtailed lending to mortgage companies, according to two people with knowledge of the decision. The bank’s First Collateral Services unit won’t accept new clients for ‘warehouse’ credit lines, which provide cash to mortgage banks so they can fund home purchases and refinancings, the people said.”
A letter to the editor? “In all of the articles regarding the mortgage mess I have yet to see some part of the blame directed to Congress for changing the capital gains provisions of the tax code in 1997, which in part contributed to the current problem.”
“Lenders were now free to design loan programs tuned to a 2-to-5 year turnover with a minimum of monthly payments and expecting that the property would be sold at a windfall profit. As a result, housing prices rose, therefore the price of raw land rose for developers, and the spiral began.”
“I am a Real Estate broker, have been since 1975. I’ve been through up markets and down markets for a long time. Consumers of bad loans should bear the action of their greed. All of them knew they were buying homes they really could not afford. And they all thought they could sell the property for much more than they paid for it in a short period of time. They need to accept responsibility for their own actions.”
Passing the buck, melanoma
“CEO Angelo Mozilo said in an interview he has ‘no regrets’ about adding staff in recent years. ‘We adjust to the environment we’re in,’ he said. ‘It was impossible to anticipate the credit crisis we’ve seen on a worldwide basis.’”
I also bet that Mozilo has no regrets cashing out all of his stock options whilst simultaneously “talking up” the market and prospects for Countrywide.
Same with that Toll dude.
Don’t even get started with Liareah. Classic Cuyestoga wagon elixir salesman
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‘It was impossible to anticipate the credit crisis we’ve seen on a worldwide basis.’
For you it wasn’t but for many of us it was. And for what do you get paid so much money, Mr. Mozilo, not to anticipate business conditions in the future?
Jas
“CEO Angelo Mozilo said in an interview he has ‘no regrets’ about adding staff in recent years. ‘We adjust to the environment we’re in,’ he said. ‘It was impossible to anticipate the credit crisis we’ve seen on a worldwide basis.’”
Yeh right, he had no clue, so that makes the rest of us pretty darn smart. Besides, what does he care if 10,000 people get laid off, he cashed a lot of his stock so “his” grandchildren could go to college.
leathery trolls should not breed
So when times are good you don’t expect business to hire people because they my get laid off sometime later?
He was making hay while the sun was shining, I would’ve done the same.
Citiregroup Bank
“Citigroup Inc., the largest U.S. bank, curtailed lending to mortgage companies, according to two people with knowledge of the decision. The bank’s First Collateral Services unit won’t accept new clients for ‘warehouse’ credit lines, which provide cash to mortgage banks so they can fund home purchases and refinancings, the people said.”
this is shutting the barn door after the horse is out. there aren’t any more correspondents alive to lend to, so this is kinda like a weed whacker to take care of the rest of them.
Although I included it in buckets, it deserves reposting: LA home sales down 50% in August.
http://latimesblogs.latimes.com/laland/
Massive price reductions cannot be far behind
Well it’s about time damnit
We have a loooong way to go:
http://losangeles.craigslist.org/wst/rfs/416784824.html
Does that 50% reduction in sales, really just a precursor to what a reduction of valuations will be, just 6 months forward?
Seems like a good #
From the latimesblog link:
We wonder if a drop-off like this is unprecedented — anyone out there remember a month when the market dropped this sharply — 25% from the previous 30 days? 50% from the previous year’s level? We only ask because we’re starting to believe the current downturn may not look like previous slumps. Yes, California real estate is cyclical, but as Countrywide said yesterday, this cycle is different.
Interesting. So we’re breaking previous patterns to the downside. Awwww… breaks my little heart. Not!
And yet homes are so overpriced that jobs will have to move.
Cest la vie.
Got popcorn?
Neil
I just emailed them a $450K cash offer. LOL
$999000 Pristine California Bungalow/ AT THAT PRICE??? What, what whatttttttt!
You should have added little note to your offer!! 450k offer… This is the best offer you will get even if you wait for next 2 years
LOL
That was too high.
“I just emailed them a $450K cash offer. LOL”
No cash offers accepted. Must have bad credit. You would be a threat to the community because you could be a drug dealer.
Jas
450 for venice? but you need a flak jkt in most parts…
LOL… Thats great… You should have added note… 450K is the best offer you will get even if you wait for another 2 years!!
How is someone going to get the loan for it???? That’s the question…
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Sales were down 21% in Aug’06 from year ago.
SoCal should be in a recession due to housing alone.
Jas
Sam’s club in Palmdale was a ghost town this morning at 10:30am. Everyone must be out house hunting.
Or reloading their weapons for the weekend…
“It was impossible to anticipate the credit crisis we’ve seen on a worldwide basis.”
Ah yes, the ol’ idiot CEO defence!
Amazing how that works for them and some politicians and just about no one else.
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Being a good lair is great ability for top leaders, economic (including the Fed), or political.
Jas
I live in Ventura County (Ca.), where CW has a lot of sq ft in commercial, and the lay-offs will have quite a big ripple effect. Amgen, Countrywide, etc…, its going to do a real number on the McMansion market, and all the fake wealth.
I welcome a re-introduction to sound fiscal judgement.
Last night one of you mentioned rumors of another 10-12 thousand more to be layed off from CW down the road. WoW!… Mozilo made his millions… screw everyone else.
Too bad we’re not in the market for a McMansion in Ventura County (or Calabasas).
I’ve been watching W. Ventura closely, prices are still pretty much stuck where they were, I can’t find any price reductions over maybe 5-8%, there are REOs but they’re priced to market, I’ve got to think these layoffs will push that area over the edge, as besides Amgen and Countrywide, the only employer seems to be the Camarillo outlet shops…I don’t think retail jobs can support 500K+ prices for long
lainvestorgirl-
We sold our McMansion and are currently renting in Thousnd Oaks. This area is going to see some hefty home price deflation IMHO. Not to mention, my husband is an EE, and hi-tech has taken a hit around here too.
Bring on housing deflation. Prices have been stratospheric for way to long. We’re paying cash.
A sh*tbox around here, circa 1964 2,200 sq ft, is not worth $800K- get real. (we’re downsizing)
Are you “awaiting bubble rubble”?
I remember you were looking for a rental, but didn’t see how it all ended up.
If you don’t mind my prying…
What did you find & for what price (rent)? Also, how difficult was it to find a rental & how did the LL treat you? What’s your take on the rental market right now, better or worse than when you were looking?
Thanks!!!!!
Nope, I am not that person. In 2005 we sold and are renting a mo to mo $1335- 2+2 in the barrios of Thousand Oaks. Its a dump,but its a place to sleep until housing gets real again. We’re cash buyers, like I said.
The LL is a pos, but what else is new. She treats her section 8 illegals better than us educated, quiet, full price Americans.
Sorry to hear your rental situation isn’t better. At least you seem to be getting a fairly good deal for a 2/2 in T.O.
I think the other “awaiting” from this blog also lives in the same area & is renting there, IIRC.
Best of luck to you!!
Bye bye Cuntrywide!
” WoW!… Mozilo made his millions… screw everyone else.” and “I also bet that Mozilo has no regrets cashing out all of his stock options whilst simultaneously “talking up” the market and prospects for Countrywide.”
Unless this guy knowingly did something illegal more power to him. People and companies are in business for just that reason -making money. Several on this great blog (Thanks Ben and fellow bloggers) bemoan company executives for cashing stock options. Executives are constantly cashing stocks options as part of sound diversification. Even executives in blue chip companies do this and so would you. Also people bemoan greedy corporations for off shoring. Most pensions funds are major stockholders. If it’s greedy to make sure retired teachers, fire fighters, small business owners and other get maximum return good. Also the problem is the excessive tax and regulation here in the US. The political class works overtime to drive business away then complains the loudest when it’s gone.
RANT OFF.
Umm - when executives sell it means that the future prospects for that company are not good. Othewise why would they sell?
There’s nothing wrong with making money but dumping company stock while talking it up presents an ethical problem - doesn’t it? Or is it okay in this century to pull every last dollar out of company you are supposed to be leading to long term gains for your shareholders until you can bail?
I’m 33 and I can’t really remember a time when executives weren’t being handed million of dollars worth of bonuses and simultaneously cutting and/or outsourcing jobs - meanwhile, the money in their bonuses alone could have saved whole departments.
The issue is that right now execs as a class don’t give a crap about anyone but themselves: screw the workers, screw the company, screw the united states. I have zip problem with people making money - it’s the lack of greater social responsiblity that’s the concern. 3rd world banana republics are made of ruling/wealthy classes “who got theirs” and don’t give crap about what happens beyond their walled homes.
Exactly, Vermonter.
It’s that the WORKERS are being decimated, financially, while the useless executives who don’t actually produce anything are being rewarded.
Somehow in this country, we’ve gone from paying for goods & services to paying for “money changers”. IMO, money should be considered a substitute for labor & material. It should not be used simply to multiply money itself, at the expense of labor & the goods they produce.
Not sure if that makes sense, but we’ve changed to valuing those who have no value (hedge fund managers, bankers, etc.) instead of the people who make a country great — producers!!!
Just think…could a country really run on the “services” of those in the financial industry alone?
I have no problem with capital markets, but just like Realtors, the players (bankers & the like) just skim money out of the economy (large chunks of money) instead of adding value to anything.
What if we basically eliminated Wall Street and allowed business & people to meet and exchange services & money directly (via internet or some other free/low-cost intermediary)? Would we all be better off?
Well said, Vermonter.
Thank you Vermonter for your clear thinking. Capitalism is great (We own a Vet, a Piano, Investments) , but without a moral compass its bad news. The moral decay of the leaders of U S corporations, is killing this country.
Typed another response, but it must have been eaten.
Just wanted to say “Agree 100%,” Vermonter!!!
RE: 3rd world banana republics are made of ruling/wealthy classes “who got theirs” and don’t give crap about what happens beyond their walled homes.
You mean we’re not there yet? (smirk)
Guess the Pig-Men gotta try a little harder.
HERE HERE!!
We’re gonna be Brazil in 20 years if this sh*t keeps up…
Vermonter,
They sell for portfolio diverisfication. If you own $100 million of stock in a company that is considered good. Would you not think it a little bit prudent and sensible to to diversify such a large amount of money ?
Its been over two months (July) since I posted on this and much is already know on the blog but I believe another update on my market would be interesting information to some…..
For those who may not be aware, I am in Santa Clara, Ca. (Silicon Valley)…Pop. 110,000….
Last time I posted the number of single family homes on the market was roughly 90…..(In January it was 55)….We have 193 as of this morning….
Our market has changed dramatically since the spring…The credit debacle of a few weeks ago was just another blow to a already softening market….A friend, small builder, put 9 homes on the market in December….Three are sold and closed….Another put 10 on the market in November last year….6 are sold and closed….
Its going to get much worse before it gets better IMO….I believe data in November & December are going to show significant price declines vs 2006….
Next update; November 07……
scdave - Thanks for the update. Jas had an update somewhere around here, too.
Keep those coming, as it’s nice to see reality breaking through to the cognitively dissonant crowd down there.
One of my best buddies sold his house in Santa Clara in July ‘05 for ~2M. He says he could buy it back now for a 30% discount. He’s a mortgage broker. The bad news is he took the money and bought another overpriced house in Scottsdale.
I have never seen anything that compares to the death of the Las Vegas market. At this point I do not believe even massive price reductions would come close to clearing out the glut of inventory. It is somewhat sad since I have friends that are desperatly trying to sell, but at the same time they all looked at me like an idiot when I decided to sell and rent 2 and half years ago.
I really don’t care either way since I will never buy another home here in Vegas.
Can’t wait until we are at the same stage in Valencia, got my 20% all ready just waiting for the right price!
We go on a kayak trip on the Colorado River in the spring, and circle the Vegas area, starting with Henderson, down to Boulder City and back up on the 15, going west, upon leaving…
This past April, I couldn’t believe the rather obvious amount of spec homes, with nobody home, no curtains, no lights, no nothing.
I have a friend who was a realtor in Vegas. He gave up, moved out of state and changed his career.
Yeah but 6000 people move here every month….funny they have no stats for how many people move out every month.
Stupid question number one today, could someone in the mortgage business here till me is there an insurance policy required of the Brokers who get there money from the big money pot banks?
Just wonder if there was a needed policy in the business plan like workman’s comp or liability that the money pot would require before releasing funds to these guys.
if this is the case, just another industry that is going to be burned.
Do we have anyone in the mortgage business here? I think they are in the same denial as the homebuilders and sellers. This site doesn’t exist becuse the bubble doesn’t exist.
Another one of my clients is a local mortgage broker. The wife who co-owns the business was clearly surprised by this summer’s downturn. She also seemed to struggle with why lenders were pulling their exotic programs recently. They did at least plan ahead and know the massive refi boom was not going to go on forever. They have been focusing on construction loans but I’m not sure that’s going to save the ship.
I think reality is finally sinking in for all the people who bought overpriced McMansions in Loudoun County. I’m renting in a neighborhood full of overpriced vinyl monstrosities built between 2004 and 2007. Pretty much everyone who bought here is screwed, and there are LOTS of foreclosures. Right now the desperate housewives of LoCo are in a tizzy because one of the neighbors just listed their house for a price in the mid-500,000s. People were paying over $800,000 for the identical house in 2005. I have no sympathy for these greedy people who thought they would make millions (including my landlords, who are trying to hang on until the market recovers. They actually tried to raise the rent on this shitbox, but there were no takers. I think their mortgage is adjusting, but the rent I’m paying isn’t enough to cover it). I’m moving into another rental closer to DC– did I mention that the commute from here to DC can be 2 hours with rush hour traffic? And they are still building houses that no one wants out here. There are still some delusional people who think prices wil go up because “they’re building a Metro station here!” (when? in 30 years?). But I actually heard one of the neighbors admit that she will be selling her “investment” townhouse at a loss, and bringing cash to the closing. No jingle mail yet, but that’s the next step in LoCo.
But I actually heard one of the neighbors admit that she will be selling her “investment” townhouse at a loss, and bringing cash to the closing. No jingle mail yet, but that’s the next step in LoCo
Can’t you hear the jingle of coins from the broken piggy banks as people scrape to bring money to closing.
Before moving to the DC metro area 2 ½ years ago I did my housing homework. I was recruited by a reputable government contractor to work in a highly specialized area with many government clients. My salary is excellent. Some here would say that I have plenty of money to buy. It isn’t a question of not enough money; it is a question of common sense.
I was shocked, (not just about the prices because I knew everything here was overpriced), at the quality of the housing here. I moved from a large southern metropolitan area where standard of building and the design of housing so far exceed what one finds here, that it would be difficult for me to view the housing here as anything but sub-standard. (If you wanted to make money selling vinyl siding in 2002 - 2006 this was the area to be.) Where I come from most houses are made either of brick, hard coat stucco, or Hardie plank. It was apparent after my first month here, that I was definitely a housing snob. So I will rent until my contract is out. Then I will go to NC where money can buy a decent house at a decent price.
People here go on incessantly about their houses. I can only assume these people have not lived where housing is truly beautiful, well-made and roomy. When someone starts to brag about their 885 sq. ft. condo in Arlington and how they can walk to clubs and restaurants it is difficult for me to identify. I have visited a few folks who live in those places, and no thanks. I will keep my rented 1900 sq ft. condo in the suburbs and drive to the same restaurants every once and awhile.
I have said to friends back home often, “DC residents are delusional.” I have never lived anywhere where people lived in such a bubble…and I not just talking housing.
Arlington is a sh**hole … walk to clubs my ass. Restaurants? Maybe El Pollo Loco. I have to admit, that fried yucca is quite tasty.
Yeah, Arlington sucks. Was out there on business last year. Being from SoCal I’m used to having a variety of foods available within walking distance. I swear, it was nearly impossible to find anything but American-style food in that city. DC might have been a different story, but I didn’t have the time to venture there…
“Consumers of bad loans should bear the action of their greed. All of them knew they were buying homes they really could not afford. ”
I have a few problems with this statement. First of all, if all the “consumers” knew they were buying homes that they could not afford, then surely everyone along the financial food chain knew it, too. It’s almost like saying, “We just provided the rope and tied it in a noose and placed the noose around the neck. We didn’t make the person jump off the box and commit financial suicide.” At some point, shouldn’t each person in whatever job he/she is doing have some ethics about the likely consequences for another human being? We are allowed to stab each other in the back to make a buck, and if we stab enough people, then we are judged to be a “success.”
Also, the media and government were partners in selling people on the notion that the bigger the house, the better, the more successful you are. Alan Greenspan said ARMS were a good thing! The people taking them out were smart!
Finally, our parents, education institutions and govt. also bear some blame because there are a LOT of people out there who can’t even answer what money is and what a dollar is. If you can’t answer those two questions, trouble is more likely to result.
When people are bombarded with such messages, indeed, brainwashing, it’s not surprising we are in the present mess.
I guess what I’m trying to say is that there is more than enough blame to go around.
“At some point, shouldn’t each person in whatever job he/she is doing have some ethics about the likely consequences for another human being?”
You would think. And in a utopia, you would expect. But in this day and age, it’s very apparent that we all must look out for ourselves. Companies take advantage of employees and customers, and our parents grew up in a time when they didn’t have to worry about this and are naieve to the system. My parents for example, very trusting people to their own detriment no matter how many times I tell the oppositely. But ultimately, it is up to us as individuals to take care of ourselves and know what we are doing and the consequences thereto. If we sign on the dotted line, we have no one to blame but ourselves. If we didn’t sign, the companies, gov’t, etc. wouldn’t be able to do what they do because there would be no takers.
The problem is that anymore, most people are not smart enough to save themselves from themselves. Is it sad? Yes. But until said stupid majority pulls their heads from their collective behinds and starts to effect change in the system, the gov’t, the schools and the businesses, nothing is going to be different. We’re a complacent society and it’s not going to end well.
We are the creators of our own destinies.
Good points, but …. who is responsible for bailing them out?
NOT ME! (and not me via taxes collected by the state or federal governments.)
You could make the same arguement that if it weren’t for the prevailence of bars and liquor stores there wouldn’t be so many alcoholics.
No matter what the inticements, at some point people have to take responsibility for their own actions.
True, but they don’t have people in bars and liquor stores claiming to be health professionals & telling customers that drinking whiskey on a daily basis is smart and will greatly improve your health.
Just heard it the other night again on those “people are smart” commercials. They went on to say that people should consult “the experts” to help them with their loans.
See, people could once rely on lenders to tell them the right thing…”you can’t afford a house right now.” (heard that myself back in ‘93 or so)
At some point, the kindly lender at the local bank, who wanted to be sure you could pay off your loan, became the “mortgage broker” **salesman** who was rewarded for putting you in a loan you couldn’t afford. The less you could afford it, the more money they made.
They forgot to pass the memo along to the borrowers.
In many states, bars are held responsible for DUI. In NE I remember barkeeps who held onto keys and who cut off customers after a certain number of drinks and made them dry out before they left.
Point well made, and taken.
Loudoun is toast. The good thing is, compared to most exurban counties, there are jobs out there (AOL, MCI, Dulles coridor across the boarder in Fairfax). But, things were built way too fast with little or no planning, making the area a traffic nightmare. And, they just kept building, and building, and building…
With supply vastly outpacing demand the last few years, the last direction prices should have gone was up. But they did. Now the laws of supply and demand are going to come back and bite them in the ass.
Oh, and traffic still sucks.
Did you list “AOL” and “jobs” in one sentence? AOL won’t be around 10 years from now; if they’re lucky that is.
PHX inventory @ 64,008 this morning, up about 1000 from the first of the month.
The 64,000 House Question?
whoa baby, harsh toke!
Talon, out of curiosity, where do you get the data? About a year ago it was 54,000. Six months ago 56,000. I see no drop in for sale/for rent/for lease signs so I think that 64,000 number is likely.
Here:
http://www.ziprealty.com/registration/register.jsp?cKey=cj11080s&districtId=14&metro=phoenix
Centex sent out a postcard for a “one day sale” in NorCal. “Save up to $200,000*) No idea what the asterik means. http://www.norcalcentex.net/ Link shows the map from heck. Merced, Bakersfield, Sacramento etc. Click on the Sale box and a big bunch of subdivisions pop up. Few prices listed, and usually the larger models, are still easily 6-8x median .
Slowing in the Austin area. Late but interesting headline in the Austin Business Journal from Aug 10. “Fla company drops $4B Leander Plan” Mix of 10K SFH, 3K multi and 2.5 mil sq ft of commercial etc.
Friend of mine finally got an offer on his condo after two months on the market. He bought in ‘04 @ 95k. His greedy behind was asking 135k - with minimal cosmetic rennovations. Get this, a realtor wants to buy a unit for his sister. He offerred 117k. Counter was 125k. Second offer 123k with closing costs paid. Second counter 126k with closing costs paid by seller - and he thinks it will fly. This is for a studio on the Drive on the north side of Chicago.
Chicago remains sticky to stay the least. Prices remain stable but cracks are showing. Traffic at nearby new developments and conversions is almost non-existent but even so, more projects are soon to break ground. Latest local development - 17 story tower at 5440 N. Sheridan is about to break ground after creating much controversy last year - surprised they finally found financing.
The difference between 123k w/closing costs and 126 without is likely about a grand. Why the hell would you risk torpedo-ing a sweet deal over that little amount of money? I bet this friend, once he gets his place sold, takes the equity and makes a downpayment on a $340,000 one-bedroom place in Streeterville. Good luck to those developers in getting that price, but thanks to believers in a permanent bull market they just might.
Actually he wanted a 2 BR in “West” Andersonville on Ravenswood for 215k - reduced from 238k. His brother and I have talked him into waiting until March. To make his matters worse I learned just this morning that his own realtor talked him into relisting @ 129k this weekend to try to beat the deal already on the table. Can you believe that?
Yikes.
I had some friends close on a 3/2 condo in Albany Park right before Labor Day.
I couldn’t talk any sense into them, either. But maybe your friend will have the sense to wait until spring — and maybe he’lll have seen the light by then.
That’s something I can’t understand about Illinois real estate sales….. The buyer, having signed a contract, could have the deal ripped out from under him literally at the closing table. I do not understand this way of doing business.
I’ve been reluctant to share a story of a member of my family who’s gotten burned in the bust, but oh well, I guess it’s time to dish some of the details:
He bought some land adjacent to a golf course in a small town in fly-over country…it was raw land of lots of pine trees that made up the out of bounds areas of the fairways at the golf course.
He bought the land two and a half years ago for about $200K with his own money….then takes out a loan from the bank for about $500K so he can develop the land and sell the lots to builders/investors. There were about 35 lots and the average asking price was around $40K per lot.
Now, fast forward to today…only a handful of lots have sold, and so there are at least 30 lots still for sell and no offers, I mean nothing….even after cutting the asking prices by 30% to 50%.
Again, this is in a very small town in fly-over country with a population of less thank 25,000 people, where WallyMart is the largest employer, and per Wikipedia, the median household income is less than $25K per year and the nearest major city is about 150 miles away.
There are more details that I won’t share, but just to give you an idea of some of the risky bussiness decisions that small developers made in the last few years.
risky business decisions the LENDERS made!
He put $200K in hoping to make $700K. The bank loaned him $500K… at what? 8%. His risk/reward was WAYYYYYYYYY better then theirs!
I can top that.
Gotta friend here in ORegon who traded a house for a golf course lot. Brilliant move…..house was paid for, rented at 750 a month (tiny 2 bedroom)…..golf course lot charges him, 75 a month to “keep the weeds down”………the brilliance never ceases to amaze me.
He continues to assure me that the lot is gonna be worth hundreds of thousands in few years. Oh, did I mention a realtor owned the lot?
Rent to own ratios are not created equal.
I’ve been having the slow realization this morning after doing a little research that suburban Syracuse landlords collect the same rents for 3-4 bedroom houses as in the greater Boston (suburban) areas even though their median housing costs are night and day. There is low rental inventory in the Syracuse burbs so landlords have been able to get their increases (except in Syracuse itself which has crime and school quality issues), I’ve been told.
That could explain why housing is slowing down more slowly here than in the bubble zones.
I’m not sure why Syracuse renters would rather pay that much here than in an area near the ocean, near a more world class city, and near exponentially more jobs. But I do think this little tidbit will be the end of the Syracuse market. The local fishwrap already reports we have more job openings than viable job applicants. The affordability factor rearing its head?
Something tells me this COuntrywide possibly laying off 12000 workers is going to get ugly. I knew that we’d have a big blowout in employment somewhere and Mozillo’s comments on how the finance industry is in hot water are expected. Wasn’t Mozillo the same guy that said that teens today would be living with their parents until they’re in their 40s and buying their parent’s house for $5 million? If so, that smart@zz remark is going to bite him back hard.
it was Robert Toll who made those dumb-ass comments. At least Mozillo has been saying the downturn was going to be “bad” for at least a year.
At least Mozillo has been saying the downturn was going to be “bad” for at least a year.
Yeh he said that for the last year, all the while making his unethical loans to any sucker he could reel in. Sleeze doesn’t come any better than him.
Why don’t you talk about unethical borrowers who took more than they could pay back? Sure, CW enabled it, but I highly doubt that they held peoples’ pencils to the paper. You signed your name, so you promised that you able and willing to pay back the loan.
Let’s get off this “lenders are at fault” horse and go after the people who hold a vast majority of the blame: borrowers.
From MSN.com just a few short weeks ago:
No crisis for mortgage lenders
Troubles in the mortgage-lending market are overblown. Countrywide Financial is one stock that is well-positioned to take advantage of eventual improvement in the market.
Crisis” is one of the most overused words in the financial media, especially when it comes to the mortgage market.
The latest example came July 24 after one of the nation’s largest lenders, Countrywide Financial (CFC, news, msgs), missed Wall Street’s earnings estimates by a mile and predicted at least 18 more months of problems in the mortgage business. Countrywide cited losses in its home-equity lines of credit, stoking fears that lending woes are spreading from the subprime to the prime market.
But was the report really further evidence of a credit crisis? Or was it just hype? The facts suggest the latter.
http://articles.moneycentral.msn.com/Investing/StreetPatrol/NoCrisisForMortgageLenders.aspx
Does anyone really consider msn an important source of facts?
Yeehaw. I guess I’ll get rich on my 17.75 shares. LOL
Not holding my breath
“Congress for changing the capital gains provisions of the tax code in 1997″
The prior provision was all the gain was tax free, it was a one time election a tax payer could make. The prior provision was much better for seniors since they can sell take the full gain as nest egg and downsize. The current law will make many homeowners loans underwater where the gain is useless.
A couple months back I got a pre-approval letter from National City, but have not bought a house yet (and would not get a loan from them even if I did - I don’t expect to borrow more than 30 to 50K when I buy). Today an envelope shows up with a bag of microwave popcorn in it with the mortgage broker’s name and phone numbers printed on the bag, and a letter saying they still want to make me a loan. Oh honey it is going to take a much bigger bribe than a bag of popcorn to get me to think about you all for a mortgage!
Eat the popcorn while you watch them blowing up! Sad that they sent you only one bag.
Popcorn, no kidding? That’s a strange choice of incentive. It couldn’t possibly be from a broker with a very dark, HBB inspired, sense of humor could it? Nah, they couldn’t be that clever, but I’d admire it if they were.
Got popcorn? (c) Neil
Was it the popcorn that has the poisonous butter flavoring?
Hi All! Thought I’d give ya a giggle…late post. Both of these properties are located miles from where I recently sold my old abode. The funny and not so funny.
http://tinyurl.com/ytef8b
What does 17.2 million buy?
http://tinyurl.com/yvsn5m
Efforts to assess fines for dilapidated Summerhouse building stymied.
We had a very amusing experience at Macy’s last week. I took my wife clothes shopping for her birthday, and decided to take advantage of the 10% savings for opening a Macy’s credit card account. The sales associate only asked for a driver’s license, credit card, and whether we rent or own. Apparently, renting counted as three strikes against us as our application was denied. I was amazed! We make $125k on one income, live well below our means, and have no debt. I was thinking maybe I was the victim of identity theft, so I pulled up my Experian credit report. I found that it was flawless (no lates – not even 30 days) My score was 787 which they say is “Excellent” and in the 96th percentile. Prior to selling our house (3 years ago) my score was in the 800s. So here we are in our rental with $330k in our new house savings alone, and Macy’s deems us uncreditworthy because we’re renters? We decided to take our business elsewhere.
JC Penney asked the same questions, and decided that even though we we’re renters, they’d take a chance on us and extend us a whopping $500 worth of credit. I have no doubt that a FB whose ARM is about to adjust up another thousand dollars next month could waltz into any these stores and open accounts with limits 10x what JC Penney gave us. I’m in awe of our current system of determining creditworthiness. Maybe things will change in a few years.
I hope so - it seems like the system is playing catch up.
The banks really had worked out a pretty good system of who was credit worthy and who was not. The ability to save anything from 5%-20% and a 1/2 decent credit score was a pretty good indication of future payment behavior.
Of course the last decade of easy lending as wiped all of that out - but the credit systems in place today still assume that the reason you rent is because you’re some sort of block head who is unable to buy for whatever reason. I’m sure at some point the credit system will start to worry more about cash in the bank and clean credit rather than your living arrangements.
People with credit get more credit. People with cash have an awful time even getting credit. Go figure.
Years ago my father in law tried to buy a house and the bank where all his accounts were would not give him a loan, because he didn’t owe anything and had no established credit. He finally found a bank that would give him his 10 a year loan,even thought they insisted he should get a 20 yr. He paid it off in 8 yrs and never bought another house. This country is not set up for people who do not live on credit and they wonder why the savings rate is so low. It’s disgusting.
That’s me. I’ve got a credit score in the mid 6s because I refuse to be in debt.
I thought the deal was that it used to be the case where, if you already have the money, they will loan to you and if you have nothing, they will not loan to you. What a sad state of affairs that this is now reversed!
Go Diamondbacks!
I hope the Angels kick their ass
I am glad to see that someone here has made reference to the capital gains provision change in 1997. If you look at multiple charts regarding the housing bubble — house prices, MEW, etc. — the primary inflection point is in 1997, not in 2002-2003. This could be a result of that change. It may be that this bubble was not primarily initiated by Greenspan, but by Congress. Greenspan just made it worse…
–
Guess who are always behind these law changes? The Hopebuilders and NARealt-Whores. The bankers and financiers were very happy too for increased business and securitization of mortgages.
Jas
i agree. and also b4 the tax law change in 1997, if you bought a less expensive home, you also had to pay capital gains taxes. i sold a home in 1989 for over $300,000 and bought another one in a less expensive area for a little over $200,000. Had to pay a big capital gains tax on that transaction.
IMO, the capital gains exemption had very little to do with the bubble. Yes, it gave move-up buyers a bit more money if they sold a previous home for a profit, and it likely caused a higher turnover rate. That being said, high turnover does not, in itself, signify higher prices (we are about to witness plenty evidence on the downside). Also, there’s a logical reason to exempt cap gains that is in-line with inflation. Otherwise, you’re just paying taxes on inflation (dollar is worth less, makes it look like you “made money” when your purchasing power is relatively flat).
Personally, I think the exemption had very little to do with the run-up. Prices were poised to rise in 1997/98 because we were at the bottom of the RE cycle and rent/own ratios were favorable to buyers (cost less to own than rent).
It was in 2001 that we should have neared the top of that RE cycle, then 9/11 happened, the dot.com crash, etc…and the Fed & govt. decided they couldn’t handle a housing downturn at the same time.
Lots of manuvering at that point WRT Treasuries (elimination of 30-year bond), historically low rates, etc. so we could get that recession out of the way.
IMO, we’ve been in recession since 2000/2001, but the credit bubble has masked the symptoms. The results of the credit bubble will magnify the problems going forward.
Local – Santa Clara County & San Jose (repost from bits)
“Movoto founder and broker Henry Shao said listings in San Jose are driving the county’s overall inventory trajectory. Listings in San Jose are about double their level from three years ago, he said.”
This is a flat out lie. The SFH listings in Santa Clara County are more than triple and in San Jose they are more likely to be four times that of Aug/Sep 2004. I am sure those condos are not much different than SFH.
SFH sales for the county are 30-40% of the 2004 level (a sharp fall in the past four weeks). In San Jose, they are closer to 25-30%.
The supply-demand is off by a factor of ten! Based on the escrows closed in August the inventory for the county was 6 months and based on sales pending and increased listing presently it is 8-9 months. In San Jose, it is close to 10-12 months.
Jas
Not my local area, but close by - just south of the border.
“U.S. housing woes go south — to Baja”
Flipper takes a bath…
Linky to LATimes
“‘Flippers’ from California who invested in the construction boom on the northern Mexican coast are now finding it difficult to unload their condos.”
Serious Schadenfreude happening here - The Trump wannabes are now FBs.
“She said many flippers had not been able to sell their units. Meanwhile the rental market is so saturated that most can’t cover their costs by leasing their properties.”
“With the Arizona market now cooling, some investors don’t have enough equity remaining in their U.S. homes to close on their Mexican condos, nor can they get financing in a tightening credit market.”
“The real estate market in California was so strong and so crazy that it was like they were stoned on it,” Sims said. “The thinking was that somebody will pay no matter how high the price is. . . . Conditions have changed.”
Bwah-hahaha These will make nice inexpensive vacation rentals in few years, once the banks sell them off to strong hands.
They can be Trump wannabes indeed - follow him to bankrupcy.
Sure, now that they’ve turned the area into the OC and ruined it, prices will finally come down to affordable.
I’d like to rent a beachfront for a couple of weeks. I love Baja.
DoctorsFlippers Without BordersIn NW burbs of Chicago.. noticing more and more rental houses as people are giving up on selling (usually rent with option to buy)
Just checked that yesterday in anticipation of moving back after the Iowa caucuses, and there are a LOT of houses for rent out Bull Valley/Woodstock/McHenry way, but they didn’t get the memo. Apparently they think I’m going to cover their mortgage. I can wait. Can they?
Here’s my favorite listing from Laguna Beach:
http://homes.realtor.com/search/listingdetail.aspx?zp=92651&ml=3&mnp=40&mxp=39&typ=1&sid=122206649f304ca7858ea6271428a741&pg=2&lid=1086628698&lsn=17&srcnt=19#Detail
Bought: May 15, 2005 for $1 million. Listed 3 months later for $1,450,000. No takers, prices reductions since then down to $1,159,000. This has got to be a flip. Now the listing says:
“Seller wants out! No qualifying!! Take over payments. Seller will wrap existing financing poor credit ok! Or lease option.Trades considerd for units. Virtually a new home situated on a double lot backing to greenbelt large yard with room for pool. Remodeled in 2006. All new windows and doors, hardwood flooring, new fixtures, gourmet kitchen, new bathrooms. Rear decking canyon and ocn. Views. Short walk to moulton meadows park - hiking trails, tennis , basketball ,playground & soccer field.”
And here’s the runner up for my favorite in Laguna:
http://homes.realtor.com/search/listingdetail.aspx?zp=92651&ml=3&mnp=41&mxp=40&typ=1&sid=ef252c0497b541aaa893c683009798a7&lid=1055994297&lsn=10&srcnt=25#Detail
Square feet: 720. On the market: 563 days. Original asking price: $1,800,000. Last reduced in April 2007 to $1,495,000. It’s still sitting there, ocean view and all.
You know, numbers like that just make me faint almost. 1.5m ask price for 720sf, that is just beyond my comprehension.
Incredible. I’ll take my $970 per month 1000 sq foot apt and a plane flight to LA every few weekends with an ocean view motel room. I laugh at the FBs.
‘a plane flight to LA every few weekends’
LOL, going timeshare is the answer for the FBs.
N San Jose, a condo dev I’ve been tracking for a year now:
Of 12 listings I’m tracking, 2 were withdrawn, 3 are new this week, and 5 out of the remaining 7 have posted price downs from last month:
Amount % Down
(8112.00) -1.8%
(7000.00) -1.3%
(9888.00) -2.2%
(8888.00) -2.0%
(14999.00) -3.4%
This is the first time I’ve seen such price activity in about 6 years. The sellers are blinking.
Ben - You made it seem as though everything is rosy with builders in Loudoun County and that’s far from true.
Just to clarify, builder activity in Loudoun County, Virginia is way down. Some builders have cancelled projects altogether while others have delayed future phases of existing projects. Builders have slashed their prices and/or increased their incentives just to try and remain competitive with existing homes for sale. I have been having a field day for quite some time now getting money off and increased incentives for my clients that want to buy new.
Builders are getting hard. Really hard. And so are the contractors/subcontractors - many are out of jobs.
Charlotte has weathered the year pretty well as one of the few “bright spots”. But something seems to be changing. There is one house on my street that went under contract, than back on the market with a small reduction. I’m seeing inventory creep up a little.
The story with uptown development will be interesting to watch next year. The VUE keeps delaying the groundbreaking on a 50 story tower. There is another condo development simply called “The Tower” where construction appears to have stopped. The crane just sits there without budging, and I have not seen any new exterior walls raised all summer.
Looks like subprime mortgage resets have reached the consciousness of those in Northern Iowa, too. All together now: “but it’s different here.”
http://www.globegazette.com/articles/2007/09/08/latest_news/doc46e2263a7223a971891336.txt
In Florida they are about to allow Vegas table games in an effort to drum up more money for the schools. That way the FBs and GFs can gamble their way out of bankruptcy.
The local casinos are usually full of old people and those on receiving government checks.
Sorry for a long post coming, but thought I’d share some insights. Been handling the disposition of two estates over the past couple of months & this is what I’m seeing:
1. Selling SFH, in escrow for almost 30% below peak (2005) prices. Lots of activity (we priced right), but only one qualified buyer. They lowballed & won, still trying to play hardball through escrow. We have a back-up offer @ 100% of list price (25% below peak), but they are 100% LTV, etc.
2. Had a mobile home in senior park in escrow at 8-10% below peak price. It fell out due to financing problems (yikes!!! this is well below $100K). We just received a cash offer 18% below peak price. MHs in senior parks were not as affected by the bubble as there aren’t really any flippers & lending is different.
3. Tried to sell **a lot** of MBS paper in the bond market. “AAA” agency paper, some short-dated, some longer. Decent rates, even up to 6%. Very little liquidity there & we took a hit (still well worth it, IMO). Thank God for accrued interest.
4. Having an estate liquidator handle the contents of one property. First thing out of his mouth was:
“Too bad you’re not doing this last year. Things have really changed in the past year or so. Our best buyers used to be first-time buyers, but there aren’t any of those. No more first-time buyers.”
5. Went to Lowe’s to get a new security screen for a property. Guy volunteers his opinion about how bad the economy is & how “everybody’s hurting” right now.
—————
Basically, there is no more denial by those who work close to the housing market. It’s bad, and everybody knows it. IMO, we are well into a recession as the bottom of the economy (workers on the street) are usually the first to feel the effects. No denial there. None.
That’s the bad part. The little guys get hit the hardest.
nice post.
Banner headline in the Detroit News website for Wayne County foreclosure auctions last half of 9/2007
From the OC, center of the universe.
No shortage of short sales
http://tinyurl.com/22tzo3
Teetering homeowners need to consider options
http://tinyurl.com/yqpmy3
Best quote from the article: “Many of your contributors seem to think we’ll plunge into outer darkness, being led by the credit crunch and foreclosures. I’m guessing that those of your contributors who display this emotional imbalance were real estate speculators during the price run-up.”
lol
Lansner blog: Insider Q&A learns home sellers should cut prices 10% or more
http://tinyurl.com/2hbtro
OC Business News: Pimco’s McCulley sees 1 in 6 chance of a recession
http://tinyurl.com/2dz2du
I predict near-term upward revisions to McCulley’s predicted chances of recession.
Clayton, North Carolina. There are a fair amount of homes for sale around here, south of Raleigh…saw three “price reduced” signs last weekend! The bubble is finally cracking around here.
I have frequently mentioned the fact that there are too many homes on the MLS for my zip code (Rancho Bernardo, San Diego 92127) which are priced at levels where they will never sell. Here is a statistical display to support this assertion. This is an application of John Tukey’s famous stem-and-leaf diagram, calibrated so the stems (the values to the left of the vertical bars) represent $millions, and the leafs (digits to the right of the vertical bars) represent the nearest $100K. The graph displays current list prices for all 153 SFRs currently on the MLS (as of yesterday) for 92127; for instance, there are 27 homes currently listed for between $550,000 and $649,999 (as indicated by 0|666666666666666666666666666… on the graph), while the two highest-priced homes currently list for between $7,950,000 and 8,049,999.
The lowest list price for any of these homes is $450,000 (rounded up to $500,000), which is a $33,000 downpayment above the conforming loan limit of $417,000. Good luck at selling all of these Jumbo-loan elephants at anywhere near their current list prices!!!
0|555555555555555
0|6666666666666666666666666667777777777777
0|888888888888889999999999999
1|000000000000011111111111
1|222222222233333333333333
1|44444444444455555555555555555
1|6666666666677777777
1|888889999999999
2|0000000111
2|2333
2|4444455
2|6667
2|99
3|001
3|2223333
3|4445
3|66677
3|99
4|00
4|3
4|45
4|
4|9
5|0
5|
5|
5|6
5|
6|0
6|
6|
6|
6|
7|0
7|
7|
7|
7|
8|00
Oops! Typo alert:
153253 SFRsP.S. As of today, the number of SFR listings for 92127 has increased by two up to 255, with a current median listing price of $1,300,000, though the seller will “entertain” offers up to $1,500,876. Entertaining indeed!
It looks as though the appraisers are on the brink of royally screwing up the comps in a California neighborhood near you. Don’t shoot the messenger!
Value leaders
In a down market, appraisers can find disbelief, feel pressure
By Emmet Pierce and Roger Showley
STAFF WRITERS
September 9, 2007
(EDUARDO CONTRERAS / Union-Tribune
Real estate appraiser Sara Schwarzentraub drove through Fletcher Hills to gather information on comparable sales for a client. In today’s changing market, she said, an appraisal may only be valid for three months instead of the normal six months.)
With home prices on the decline, San Diego County’s residential real estate appraisers often are bearers of bad news to sellers who are hoping to get top dollar for their properties.
Appraisers hold a key position in virtually all home sales.
Mortgage brokers need appraisals that support sales prices in order to secure approval for home loans. Supporting the broker’s number was relatively easy during the 2000-to-2005 housing boom, when the value of many homes doubled. Today clients often are disappointed.
“I typically wear a shirt that says ‘Don’t shoot the messenger’ to every appointment,” joked veteran appraiser Dave Eshelman, who is based in Carlsbad.
http://www.signonsandiego.com/uniontrib/20070909/news_lz1h09apprais.html
Know a couple of families that have accepted job transfers out of the Phoenix area, husband has already moved in both cases while wife and kids stay until house is sold. I belieive these 2 homes were bought 10 years ago so can conceivable be sold at a big discount to market. How long will they wait to slash prices? 1 year? I doudt it. One is already been on the market 5 months.
From the Dallas Morning News piece: “While the local housing market has cooled this year, conditions in North Texas still outshine many other parts of the country. In August, there was a seven-month supply of pre-owned homes for sale in the Dallas-Fort Worth area, compared with almost 10 months of inventory nationwide.”
The DFW market has actually held up a bit better than I thought it would. We won’t face the kind of economic turbulance that is in store for much of FL, AZ and CA, simply because we never had the wild price inflation and real estate is a tertiary element of our local economy.
There was an enormous amount of overbuilding in the metroplex, which will keep prices low for many years, but I think we will likely avoid much of the devastating fallout the aforementioned bubble markets are certain to face.