September 8, 2007

Now The Buyers Have The Hammer

The Columbian reports from Washington. “A total of 225 Clark County homes were lost to foreclosure through July, up from 138 foreclosures in the same period in 2006, according to data compiled by the Bank of Clark County. Mike Worthy, CEO of the bank said some may need to act quickly or risk foreclosure. ‘If the value of your home is staying even, you have a chance to make a hard decision, to sell the home and move to something less expensive,’ Worthy said.”

“He and other analysts acknowledge selling will be more difficult for buyers who bought homes during a three-year housing boom that lasted through 2006. Easy financing, or subprime lending, extended during the period allowed buyers to take on greater risk, too much, in some cases, said Dave Dahlstrom, CEO of Riverview Community Bank.”

“Subprime mortgages were offered ‘not just to people with low credit scores, but to people who didn’t have the traditional 15 to 20 percent down,’ Dahlstrom said.”

“The lax credit terms allowed buyers to ‘move up’ into homes priced just beyond their means, Dahlstrom said. Many of those buyers are now trying to sell, a situation that is adding to a glut of higher-priced, $400,000 to $450,000 homes on the Clark County market.”

“‘There are just too many of them,’ Dahlstrom said.”

“The inventory won’t sell off as quickly now because the pool of potential buyers can no longer secure subprime mortgages. Once considered high-yield by group investors, subprime and related ‘Alt-A’ loans are no longer a hot commodity. ‘The subprime market has dried up like a desert and the huge mortgage companies across the country are folding like tents,’ Worthy said.”

“Homeowners facing default ‘need to sit down with a real mortgage professional and evaluate their mortgage contract,’ Worthy said. ‘I’m sorry to say some people will find selling the house is the best option.’”

“Home construction inside Vancouver fell by 56.4 percent in August, when the city issued 24 permits for single-family homes, compared with 55 permits issued during the same month last year.”

“The year-over-year decrease in Vancouver mirrored home construction trends throughout unincorporated Clark County.”

The Register Guard from Oregon. “The University of Oregon’s monthly Index of Economic Indicators suggests that economy watchers should expect more of the same in coming months: slowing but continued growth in the state, with the potential for a shakeup if national figures head south this winter.”

“‘Our growth is slowing or has slowed,’ economist and index author Tim Duy said Wednesday. ‘We’re at a much more mature point in the business cycle (than in recent years).’”

“While residential building permits rose by more than 27 percent to 1,890 in July, Duy said the gain was ‘a balance-off’ of a decline from May to June of nearly 25 percent - to a six-year low of 1,483.”

“Duy said…new building permits in the Bend area have more closely followed the national trend of a deflating real estate bubble.”

“‘Looking into next year, I can see how those (declining) conditions are going to ease back - a fall nationally, and then a move sideways,’ Duy said. ‘It’s a bubble phenomenon, and bubbles don’t re-create themselves easily.’”

“The bottom line appears to be that Oregon’s economy appears capable of continuing to grow, but at a slower pace than the past few years. ‘With the caveat that nobody knows for sure how this current round of credit tightening will play itself out,’ Duy said.”

The Bend Bulletin from Oregon. “Just when the Prineville Railway had finally begun to become profitable, it learned that it will lose one of its top customers from Eastern Oregon.”

“The City of Prineville Railway will lose about 60 percent of the business currently in operation at its freight depot facility and about 20 percent of its total business when the Louisiana Pacific Engineered Wood Products plant in Hines, next to Burns, shuts down Oct. 18, said Dan Lovelady, manager of the Prineville Railway.”

“‘It’s unfortunate for us. We were building some base customers and getting to the point where the railway would again be profitable,’ Lovelady said. ‘It’s unfortunate that we’ve lost some of the gains that we had made, but it’s even more unfortunate for Burns. The loss of jobs is going to be very difficult.’”

“The Louisiana Pacific mill shutdown will result in the loss of 92 jobs at the facility, located near Burns, said Jim Campbell, plant manager for Louisiana Pacific, which announced that it would cease operations last month.”

“A slowing national housing market and a need to consolidate operations into other Louisiana Pacific Corp.-owned plants has been the main cause of the closure, he said.”

The Mail Tribune from Oregon. “August home sales haven’t been this slow in Jackson County since 1998, just before the market began a record run-up for several years.”

“Just 160 single-family residences exchanged hands last month as the stagnant real estate market produced the fewest sales this year since February — a month of winter sales doldrums rarely mentioned in the same breath as August in real estate figures.”

“According to figures compiled by Medford real estate appraiser Roy Wright, the county’s average single-family residence sale price in 1998 was $139,725, less than 40 percent of this year’s average of $348,623.”

“Single-family home sales haven’t topped the 200 mark since August 2006, when 216 deals were reported. Meanwhile, the inventory of houses on the market grows with nearly 2,300 homes on the market, up 16 percent from a year ago.”

“‘If the sellers are in a situation where they have to sell, the price is coming down and those are the ones the buyers are locking on to,’ said agent Ron Galbreath. ‘The buyers are sifting through the inventory looking for the bargains and they’re determining the values. For the four or five years before this, the sellers determined the price. Now the buyers have the hammer and they’re popping it over the sellers’ heads.’”

“Sandy Lighthall of Eastside Realty said real estate agents have forgotten some of the tools in their box in recent years. ‘For the last three or four years, all you had to be was an order taker,’ he said. ‘The way things are you need to be listing 5 percent below market value. If your house is worth $300,000, you need to list it at $285,000 to sell.’”

“Lighthall said sellers are running out of time to grab buyers’ attention before they hunker down for the school year. ‘People have to be very competitive to move their houses right now,’ he said. ‘After Sept. 10, people are pretty much situated for school.’”

“With the exception of east Medford, prices dropped in all of the county’s urban areas, Wright said.”

RSS feed | Trackback URI


Comment by Ben Jones
2007-09-08 08:16:45

‘Developers of a downtown high-rise condo project submitted building plans to the city of Olympia on Friday. The developers plan to convert the vacant Capitol Center office building across from Capitol Lake into eight floors of 36 condos.’

‘Falkenburg said the developers have not decided how much the view condos would cost, but one of the development partners this year estimated the range from $600,000 to $1 million. The building offers views of the Capitol Building, Capitol Lake, the Olympic Mountains and Mount Rainier.’

‘The project has received environmental and design review approval. As long as the developers meet city codes, they can expect building permits, city manager Steve Hall said. ‘I think it’s terrific that they’re moving ahead,’ Hall said. ‘That would be just the kind of residential influence that would really help us liven up downtown.’

Comment by Leighsong
2007-09-08 12:14:54

MORE f*ing condo’s!!! (reaching for aspirin).

Comment by mattR
2007-09-08 14:51:39

Well, it looks like Northern Virginia condos aren’t immune to the implosion after all.

Condominium sales have dropped by more than 50 percent, changing the course of some of Northern Virginia’s major projects and crippling sales of one of the regions most important types of housing.
The heyday for condominiums was 2003 and 2004, when buyers snapped up 13,000 condo units and cranes towered over parts of Northern Virginia as new buildings were going up.
Though the Washington area is well behind what Delta Associates Vice President William Rich calls “destination cities” like Las Vegas or Miami in condo and apartment development, it is one of the major centers for this type of housing with nearly half a million apartments and 200,000 condominium residences in the area…

Shumaker says the “majority of the people buying those types of condos are planning to buy them for a short period of time and reselling them for a profit. If you did that now, you’ll own that condo for 10 years. Reselling is no longer an option. Plus you’ve got condo fees. I’ve seen condo fees that run from $350 a month to over $700 plus you’ve got your mortgage. What would entice them to do that? Why would you do that when you can buy a townhouse or a single family home?” He said that banks and lending institutions also charge higher interest on condo mortgages.

Condos in this area are crazy. New ones are small, usually in the middle of nowhere (they build 300k condos in Loudoun, an hour from DC proper, in the middle of a cornfield), and they call it “urban living.” I fully expect these things to be worthless in 5 years. But remember, the government jobs will keep us afloat, it’s different here, and of course, that granite countertop makes it all worthwhile.

Comment by novawatcher
2007-09-08 20:40:22

It seems like only yesterday that people were campling out in Alexandria and other parts to be the first to buy a condo.

Fast forward to today, and my, how things are different.

Speaking of condos, there were some condos that were being built at the intersection of 28 and the Dulles coridor. I haven’t passed by there in a while, but my recollection was that they were still in the “see-through” stage. I remember having the feeling that they would either never be completed or that they would become apartments.

(Comments wont nest below this level)
Comment by Clint8200
2007-09-09 11:25:53

You can follow the Portland market anytime at the Portland Housing Blog. Stop by and see what building is going up, and where prices are going down.

Comment by deejayoh
2007-09-08 15:55:43

that’s laughable. million dollar condos in Oly, Wa. you can get 100 feet of waterfront in the same town for less than that.

Comment by BanteringBear
2007-09-08 16:05:55

‘Falkenburg said the developers have not decided how much the view condos would cost, but one of the development partners this year estimated the range from $600,000 to $1 million.’

“As long as the developers meet city codes, they can expect some sweet building permits, city manager Steve Hall said, taking a massive lung torching hit off of his bong, ‘I think it’s totally terrific that they’re moving ahead,’ said Hall. ‘That would be like just the kind of residential influence that would really help us liven up downtown and stuff. It’s far out, man.

There. That clarifies things a little better.

Comment by garrison
2007-09-08 20:30:10

that’s hilarious

Comment by Lost in Utah
2007-09-08 12:10:35

Prineville should be glad Louisiana-Pacific left. They’re one of the dirtiest companies in the industry. I did a series of articles on them for a major magazine when they were in Montrose County, Colo., very unethical employers plus polluting and trying to hide it. They’re moving their operations to S. America here no one complains. They’ve had a number of people die in their plants from unsafe practices. Their main product is waferboard, made with tons of formaldehyde, which they pour into nearby streams, etc. They got tons of fines and never changed a thing. A major product in McMansions that will make you sick as it outgasses.

Comment by MacAttack
2007-09-08 12:25:36

Yeah, remember Inner-Seal? LP made crappy siding on Harry Merlo’s orders. Harry should be replacing siding all over Portland. Instead, his name is still up on buildings in town.

Comment by salinasron
2007-09-08 17:23:13

“A major product in McMansions that will make you sick as it outgasses.”

That’s exactly why I think a lot of those houses shut up tight in Az and Nv in the heat will be considered unhealthy before long.

Comment by Leighsong
2007-09-08 12:24:05

Tried posting this earlier in the earlier post about FL, but it didn’t take. Thought you’d like a giggle.
What does $17.2 million of South Walton real estate look like?
Efforts to assess fines for dilapidated Summerhouse building stymied

BTW, these babes are just moments from my previous stomping grounds…LOL.


Comment by Joe Kennedy
2007-09-08 12:24:19

A lot of good information there, but I don’t agree with listing a property “5% below market value”. Market value is what someone is willing to pay for it today - not what someone thought it was worth yesterday. People just have to realize that “market values” are dropping. In the Puget Sound area, properties have been greatly overvalued for at least a couple of years (due in no small part to the easy availability of money to anyone who could spell real estate) and need to return to some level of reason. Unfortunately, many people will suffer. AAA’s goal is to help people with their real estate problems.

Comment by Blano
2007-09-08 13:44:29

I read it that if you “think” your house is worth 300, list it for 285. Problem is, what you “think” (the seller I mean) is irrelevant now. You want to sell it, you probably have to find out other listing prices and undercut them, seems to me.

Comment by Kime
2007-09-08 14:29:22

She should have said ” 5% below the latest comps,” which is probably what she meant.

Comment by SoBay
2007-09-08 12:27:15

“The lax credit terms allowed buyers to ‘move up’ into homes priced just beyond their means, Dave Dahlstrom, said. Many of those buyers are now trying to sell, a situation that is adding to a glut of higher-priced, $400,000 to $450,000 homes on the Clark County market.”

- Yes Dale, people were allowed into homes priced just beyond their means. But it is much worse than you think - they were allowed to purchase homes 6 to 10 times that which their income could support. Now, they must reconcile their mortgage the same way you must balance your check book.

2007-09-08 16:39:22

“Affordability” is not like horse shoes, close don’t get it. “Just beyond their means” is a meaningless statement. They might as well have been “way beyond their means”, the net result will be exactly the same.

Comment by Darrell_in_PHX
2007-09-08 17:04:11

unless you think the fed will cut rates 1%, and that will directly result in lowere rates to debtors (instead of the widening of the risk spread). Then, just out of their means becomes just inside their means. It is part of the illusion that fed cutting rates will somehow magically save the ponzi scheme from colapse.

2007-09-08 18:17:00

Just inside, just outside, living on the knife edge must be fun. I guess it has to do with your personal tolerance for risk. Considering that the purchase of a home is the single largest investment most people will make in their lives, one would think that having a margin for error built into the deal to account for the unpredictable (interest rate changes, illness, job loss, etc.) might be prudent. Maybe it’s just part of the mindset that bad things always happen to someone else?

(Comments wont nest below this level)
Comment by Vermonter
2007-09-09 04:57:52

My MIL, who “naturally” seems to chase assest bubbles, remarked after my grandmother in law got ovarian cancer how scary it was that “anyone could get cancer at any time”. Quite the revelation for a 50+ year old. I guess bad things do just happen to other people.

Comment by az_lender
2007-09-08 12:48:41

“If your house is worth $300,000, you need to list it at $285,000 to sell.”

Not really. If your house is WORTH $300K, someone will pay that much. However, if your house or its duplicate sold for $300K a couple of years ago, it is probably worth $160K in cash-flow terms, and that’s the price you should put on it if you need to sell quickly. Keep in mind that the Federal Government of Brazil will guarantee me 9.5% on a 9-year bond. (Currency risk? Yes. But how good a risk is the US dollar?) Anyway I don’t see any RE deals beating that.

Comment by LA Friend In Deed
2007-09-09 00:51:02

az_lender wrote:
“…Federal Government of Brazil will guarantee me 9.5% on a 9-year bond…”

If someone lives in the U.S., where can they buy Brazilian bonds?

And, if they wanted to sell them before maturity, where can they be sold?


Comment by Leighsong
2007-09-08 12:54:30

UHoh Ben. Buyers may loose the hammer (love the title) under this proposal (I missed this one…hope it wasn’t already posted.

GOVERNOR DEVAL PATRICK is reportedly moving toward a proposal that would give up to $5,000 to people who lose their homes in a foreclosure. This is a sensible and humane response to the subprime crisis, but there may also be ways to help avoid more foreclosures altogether. If the state can induce lenders to offer refinancing at lower interest rates, by offering them a share of future housing price appreciation, then foreclosures could be reduced without trampling on creditors’ rights…Another way is to make refinancing at lower interest rates more attractive for lenders by encouraging shared-appreciation mortgages. These mortgages, which are relatively rare in the United States but more common in the United Kingdom, offer lower interest rates in exchange for some of the upside potential on the house. For example, a lender might offer a 6 percent interest rate instead of an 8 percent rate, in exchange for 50 percent of the increase in the value of the house at the time of eventual sale. Most borrowers don’t want to lose this upside, but for someone facing foreclosure, losing the upside may be a lot better than losing the house altogether…(con’td)×3yy6

Comment by SoBay
2007-09-08 13:30:13

‘a proposal that would give up to $5,000 to people who lose their homes in a foreclosure’

- I hope that our Govenor Arnold Schwarzenegger will also give me 5k for my loser lotto tickets. There is no difference between me gambling on the lotto versus a fully amortized mortgage that I could never afford.

Comment by edgewaterjohn
2007-09-08 13:40:23

Ummm, don’t these guys realize what happens when you give away many for nothing? Oh yeah, that’s right - they’re politicians they would know perfectly well what happens when someone is given money for nothing, wouldn’t they?

Comment by James H
2007-09-08 13:47:23

Yeah, lenders will all line up to give lower rates now in hopes of some return in 10 years. I thought that the lenders don’t have any money now with the liquidity crisis, and with jumbo’s at way higher rates, how could anyone subsidize this? Dream on, gov. I think that the gov. knows this isn’t gonna happen, just lip service to make the “lenders” look like bad guys.

Comment by jerry from richardson
2007-09-08 15:41:49

In order to collect that $5,000 of taxpayer money, the FB should be required to have IDIOT permanently stamped across his/her forehead.

Comment by hd74man
2007-09-08 16:07:33

Stupid chuck mortgage dead-beats couldn’t understand the terms of their ARM’s.

Like they’d have a chance understanding shared appreciation.

Just another op to create another government housing bureauracy.

Comment by salinasron
2007-09-08 17:36:03

Leighsong, what a piece of convoluted thinking. Any slack to J6P will just allow him/her to buy more debt elsewhere on the ‘How much’a month it’a gonna cost me plan’. That’s exactly why the current mortgage fiasco hitting wall street is a ‘redherring’ to the housing bubble collapse; all eyes should be focused on CC debt collapse, that will be the point of no return.

Comment by KayLaw
2007-09-08 17:56:37

I am a humane person and think that money would be better spent expanding food pantry programs and homeless shelters.

Comment by jbunniii
2007-09-08 18:10:06

$5000 will buy a lot of library books on the subject of financial literacy!

Comment by jerry from richardson
2007-09-09 00:05:38

You’re assuming these clowns are willing to admit they made a mistake and actually do something to improve themselves.

(Comments wont nest below this level)
Comment by Kris in JP
2007-09-09 10:27:38

What I don’t understand is that I thought real estate transactions in MA have to have a lawyer to close on both sides. Wouldn’t that be a safeguard against any funny business on the part of the mortgage broker to change the terms, try people to get more house than they can afford, etc. I mean, isn’t that to safeguard against having the taxpayer pay $5000 for people to stay in houses they cannot afford? I am stunned.

Comment by Jas Jain
2007-09-08 12:59:46

“Homeowners facing default ‘need to sit down with a real mortgage professional…”

A real mortgage professional — ehe ones who peddled the toxic mortgages?


Comment by edgewaterjohn
2007-09-08 13:20:10

Regarding the Prineville railway’s loss of traffic, just yesterday the Yahoo financial page featured a story saying CSX was a “top ten” stock buy. Also in recent week’s there’s been MSM buzz about Bershire Hathaway buying up shares of BNSF. Why would these companies appear to be such good buys on the cusp of a recession? Coal and other bulk commodities will need to move, but containers from overseas will take a hit.They would only seem like a good buy if: 1. the economy does indeed skip a serious recession and accompanying dearth of consumer spending - or - 2. fuel prices went so high as to make interstate trucking a losing proposition. What gives?

Comment by Leighsong
2007-09-08 13:23:57

I posed this very question about a week ago, when it was reported Buffet was into rail stock.

The general opinion was the ration that you stated–fuel.

Comment by flatffplan
2007-09-08 13:25:16

good point- Buffet isn’t always on the money
Clayton homes has had to sck , among others

Comment by Brad
2007-09-08 15:03:34

Clayton has been hugely profitable.

Comment by flat
2007-09-08 15:26:42

my bad even champion is doing ok
the card board guys will really kick as..

(Comments wont nest below this level)
Comment by MacAttack
2007-09-08 20:22:19

I live in a “card board” house - 2×6″ construction, R38 ceiling, R19 walls/floor - same vinyl windows, same roofing… $45 a square foot, placed on a 40′x52′ slab. Far better built than a lot of the crap built lately. It’s the future.

Comment by Blano
2007-09-08 13:47:59

Railroads are one of those “difficult entry” industries Buffett likes. You can’t just start one up. Plus, he’s been buying hard assets for years now, much more than any stocks. True, he could be wrong, but he’s willing to ride things out and can do so better than most.

Comment by Neil
2007-09-08 16:43:20

Exactly. And in a downturn, they will spend a fortune to improve transportation… and this time the railroads will get some of the pie (due to their constraints and political lobby).

I think Buffet still has it. Oh, he makes mistakes. So what. What matters is that he continues to do well overall.

Besides, he predicted this market years ago; in other words he knows how to make a buck off of it.

Got popcorn?

Comment by combotechie
2007-09-08 14:21:07

My thinking is that China is in the world market looking for raw materials that it can convert into finished goods.

The U.S. is a large producer of raw materials (i.e. coal, grain) and a shipping infrasturcture is already set up to transport this raw material to China. Railroads are a part of this shipping infrastructure, thus it may be prudent to buy railroad stock.

This is my thinking; can’t say if it is Buffett’s.

Comment by jerry from richardson
2007-09-08 15:36:28

Buffett is buying railroads and major diversified banks. Berkshire is at 25% cash. It looks like they are hoarding up cash to buy distressed assets in the coming crisis.

Comment by Matt
2007-09-08 18:56:47

OTR has been dying for a while (fuel, lack of drivers). Most are already shipping by rail (even LTL). The problem with rail (and ports) is that they are close to capacity. Also, the problem with intermodal, it ends up throwing more trucks on local roads (20ft containers). I work at one of the BNSF yards, business has picked up some (holiday freight), nowhere near what it was 1 or 2 years ago.

Comment by Leighsong
2007-09-08 13:24:56


Comment by jerry from richardson
2007-09-08 13:40:19

Some California equity locusts are getting reamed in Baja, Mexico:

“We nearly had . . . fistfights” over choice units, said Michael Coskey, sales director of the Residences at Playa Blanca, a 274-unit development under construction north of Rosarito in which the average condo is priced at $500,000. “We were all appealing to people’s greed.”

Greed has turned to regret for some investors who now can’t sell their Mexican properties.

Comment by SoBay
2007-09-08 14:59:02

investors who now can’t sell their Mexican properties.

- Hee hee hee. Nothing new here, those folks were dumbass’s. Mexico has been doing this for the last 20-30 years.
Mexico insist that we allow there folks to cross our borders illegally and they won’t allow us to own any of there resources.

Comment by MacAttack
2007-09-08 20:24:31

Yes, you can own property there. But anyone paying a half mil for one of those condos deserves what they get.

Comment by cereal
2007-09-08 16:10:22

these suckers will feel double the misery as ordinary united states flippers.

Comment by Brad
Comment by luvs_footie
2007-09-08 15:00:41

Ah yes…………Real estate investing. When it’s good it’s so good, but when the tide turns all those swimming naked are totally exposed. :smile:

Comment by jrutt17
2007-09-08 15:42:37

Love the Mexican mortgage rate of 12%

Comment by jbunniii
2007-09-08 16:18:47

$300k for a condo in Mexico, good lord. Before the bubble, a median-priced house in Orange County was cheaper than that. Doesn’t anyone spend 5 minutes on a reality check before committing to such obviously unsustainable prices?

Comment by Neil
2007-09-08 16:46:13

30% minimum down payment. I read the article in the “dead tree” LA Times and just chuckled. Who is going to pay $500k for a waterfront Mexican condo… not me. They should be going for 2X the final retirement salary of the people buying them. That implies a bottom of $160k to $180k. Awww…

As you pointed out, a median OC home went for less than that a few years ago. This will get ugly fast.

Got popcorn?

Comment by Lionel
2007-09-08 17:17:58

Well, dern it, if condos in Mexico are crashing, looks like I’ll have to goes all the way to Panama to buy a cheap ‘un.

Comment by Curt
2007-09-08 16:21:22

At least they’ve got a real technical way of explaining the plight of the “investors:”

“The ones who bought multiple units are going to be in real deep doo-doo,” said real estate agent Roberta Giesea, owner of Baja4U Properties….

Comment by hd74man
2007-09-08 19:16:53

LMFAO…half million $$$ flipper condo’s in a notoriously corrupt 3rd world doper country.

And people don’t think this won’t be the greatest financial bust ever?

Get your popcorn and a gun.

Comment by Johnny B. Good
2007-09-08 15:09:29

“August home sales haven’t been this slow in Jackson County since 1998, just before the market began a record run-up for several years.”

I don’t know whether to laugh or cry at this statement. Tagging that little bit of hope at the end of the sentence makes it sound like the housing market might be in a position to make another ‘record run-up.’

I think record run-down will be the case. Home debtors will be run down by this market in record numbers. It’s the worst since the great depression and it’s just getting started.

Comment by Mike
2007-09-08 15:12:21

Despite the obvious fact that the recovery from this Mr. Al Magoo mess is going to take many years and a lot of financial pain, not just to average Joe America but to America itself, there is one single all important nagging question. Where are the fast diminishing (because of Bush) middle class and working class (who’s ranks will grow in the coming years) going to come up with anything from $40,000 to $120,000 CASH? That’s the figure they will need as 20% deposit on todays average property prices which range from $200,000 in places where the majority do not want to live (myself being one of them) to at LEAST $500,000 in places where people do want to live (myself being one of them).

Unless my mind is playing me tricks, most people couldn’t come up with a 20% deposit when sanity ruled the day prior to the boom in the 80’s and 90’s. That means a property in a popular area which cost $200,000 in those days meant a $40,000 or 20% deposit. Now that same person looking to buy the same property, would need $100,000 (20%) for a $500,00 property.

However, under the Bush tenure of looking after corporate America and screw those in the ranks, CEO’s incomes have risen hundreds of percentage points but wages and incomes for the majority of Americans have risen just 3%.

Actually, I’ve answered my own question. Prices will drop to their 2000 levels at least.

Comment by jbunniii
2007-09-08 16:06:28

Looking into next year, I can see how those (declining) conditions are going to ease back - a fall nationally, and then a move sideways

Dream on, dreamer. Unless by “next year” you really mean “next decade.”

Comment by Neil
2007-09-08 16:48:06

Chuckle… ease back? Oh no. Whatever drop we see in 2007, we will see double in 2008. And I predict 2009 is the year of the largest price drop.

Sadly, there is a lot of unemployment about to happen. We won’t have that many layoffs in 2007. But as 2008 stays ugly, stay away from the exits. The theater will be on fire.

Got popcorn?

Comment by jbunniii
2007-09-08 17:45:24

I believe you’re right - 2009, or perhaps 2010, will see the biggest drops. Also, it will probably be 2012 before the direction actually becomes “sideways” instead of downward.

Even once it’s sideways, it’s really still downward once you account for inflation. Patience will be greatly rewarded. Anyone buying now or in the near future will be just as screwed as those who bought in 2005, IMHO.

Comment by TimeTraveler
2007-09-08 19:06:09

2012 is the latest possible kickoff of a baked-in demographic downturn. The boomer big-spender 35-54-year-old cohort ages out of the range and consumption falls. Actually, it’s 39-54 but when you adjust for younger entry into heavy consumption by immigrants, you use 35 as the bottom of the range.

(Comments wont nest below this level)
Comment by Neil
2007-09-08 22:37:01

Anyone buying now or in the near future will be just as screwed as those who bought in 2005, IMHO.

I agree 100% with your post. Personally, I expect 2009 to be the grand daddy of the price drops. But guess what. If I’m wrong, we’ll just have to keep debating this into 2010. ;)

And yet we’ve already seen 35% (or more) price drops in some areas. Bwaaa haa ha! So the discussion is far from academic.

Got popcorn?

(Comments wont nest below this level)
Comment by jbunniii
2007-09-08 16:08:00

If your house is worth $300,000, you need to list it at $285,000 to sell.

I guess that means it isn’t worth $300,000 after all.

Comment by txchick57
Comment by arizonadude
2007-09-08 17:31:49

“If long periods of uninterrupted expansions lead people to believe that the Fed can prevent any future recession, consumers, firms, investors and borrowers will be encouraged to take bigger risks, borrowing more and saving less”.

This is so true. All these housing gamblers think the fed will somehow save them. Mortgage rates are still low so why aren’t they buying houses? This is a specutaltive boom that has turned in the opposite direction.

Comment by KayLaw
2007-09-08 18:10:06

Well, just one more thing certain people can see that the majority can’t. Good info.

My husband and I just came back from dinner on the beach (St. Pete area). We’re convinced we want to move there (ten minutes drive) some day. There are so many properties for sale out there, you wouldn’t believe it. We are very patient people but also ready to strike when the time is right. I love this sort of information because it’s almost like ammunition.

Comment by combotechie
2007-09-09 05:53:15

“I love this sort of information because it’s almost like ammunition.”

It IS ammunition. Knowledge is power.

(Comments wont nest below this level)
Comment by novawatcher
2007-09-08 21:05:26

The Economist is the only paper rag worth reading.

Comment by measton
2007-09-08 23:13:15

There seem to be a few more articles questioning whether the fed will cut rates. I still can’t convince myself that they won’t. They won’t do it so much to help the housing market which is lost but

1. The US is up to its eyeballs in debt. Inflation shrinks the value of that debt. Grover Norquist plan - “Starving the beast” use budget deficits to force future reductions in government expenditure. Bushco has accomplished this in spades. They’ve spent tons of money while passing out generous tax cuts.

2. US is about to see rising unemployment. US worker is not competetive with overseas workers who live 10 to a house and eat dirt. Inflation is a great way to cut US workers wages without them knowing about it. You just can’t do it so fast that they notice. Elites don’t want unemployment as that leads to people go to the voting booth and to actually think when they pull the lever. Suddenly gay people holding hands just doesn’t seem so important.
3. Politicians - Can’t say no at election time.
4. Last I checked Dick Cheney was in oil, long foreign bond funds and moneymarket funds. GW had put his money into large S. American land purchase. Sounds like great places to be for crashing dollar and market.
5. The last time FED suggested Zig they Zagged. So when the articles suggest there is some doubt on a cut, you can count on it.

It’s all a dog and poney show

Comment by Vermonter
2007-09-08 17:36:19

My MIL clings tight to the “Fed will save us” mantra. She is the proud “owner” of multiple houses in Colorado Springs.

Comment by JayInMD
2007-09-08 18:06:07

In regards to MA Gov Patrick’s bailout plan, all must consider the fact that prior to runnin for gov, he sat on Ameriquests BOD. So he was stupid during the run up, so why wouldn’t he be stupid when it comes to bail out proposals.

Comment by cynicalgirl
2007-09-08 18:18:40

Between 1995 and 2000, 9 out of 10 retirees stayed in the same home or county when they retired. So much for the “everyone wants to live in FL” theory…

Comment by M.B.A.
2007-09-08 19:42:59

thank god they stopped those awful “The Villages” commercials for some podunk inland mosquito trap in FL. Like most people wouldn’t get bored golfing a non-challenging course everyday. Why else move there? Anyway, obviously no takers from here in CT- or more likely they ran out of funds to advertise.

Comment by RoundSparrow
2007-09-09 07:24:11

thank god they stopped those awful “The Villages” commercials for some podunk inland mosquito trap in FL. Like most people wouldn’t get bored golfing a non-challenging course everyday. Why else move there?

My parents bought two places in The Villages in 2003 and I’ve gone down every six months. They sold their own house in Indiana (no huge gains, I think broke even on the sale, and my mom was a Realtor for 30 years in northern Indiana)

For those who really choose to not work again, The Villages really is a pretty decent setup. The gated community / age restricted aspect makes it safe, as you really do know your neighbors. THE BIG APPEAL is that you really get into this for the “community”. There are clubs and groups for everything. From the same home stage, same college, etc. Cards, chess, football games on TV, you name it, always a bunch of other retired people looking to network.

The construction is rather restricted, had a waiting list for years, only approved builders. The golf courses keep people from being entirely on top of each other. The electric golf cart at every house is really what they all like.

// The real way to make a killing is to run a church at the villages. Swimming in cash.
/// The ‘town square’ food and such is very reasonably priced for such a captive audience.
//// For those who all like to go to dinner at the same time, see your same friends, this really is the ideal “relive High School” or “College” but wiser world. Not my cup of tea, but I think a lot of older people really do want that after a full life of work and raising kids.

Comment by aeyra
2007-09-08 20:08:53

According to figures compiled by Medford real estate appraiser Roy Wright, the county’s average single-family residence sale price in 1998 was $139,725, less than 40 percent of this year’s average of $348,623.”

And I’ll bet we see the 1998 numbers again. Got Lube?

Comment by Lionel
2007-09-08 20:42:12

Was taking a brief respite from bubble blogging to check out some travel blogs re: Washington and I stumbled upon one based in Leavenworth, WA. Alas, all roads seem to lead to the bubble:

“Leavenworth Mortgage Crises?

People have been asking me how the recent mortgage meltdown will affect lending in Leavenworth. The truth is, the ‘crises’ is actually helping people in Leavenworth. As you might imagine, few people purchase a vacation home with a subprime mortgage, and the typical Leavenworth buyer is at the far end of the spectrum from the person who needs one. So the collapse of this financing doesn’t hurt the Leavenworth market at all.”

Comment by rocketrob
2007-09-08 21:05:46

Rocky Point , Mexico - summer of 2006- I listened to a drunk flipper from NY tell me over and over and over again how he make “two million dollars” flipping condo’s there. He had down payments for 9 more condo’s then, two were the penthouses. You just can’t get beach front property this cheap, you know.

God, I wish I could listen to him now!

Comment by Aqius
2007-09-09 01:26:20

youll see him w/his brother soon enough on a sidewalk in a lean-to drinkin ripple.

Be sure n drop some do re mi in his lap so he can exclaim” Mortimer, we’re back. We’re BACK ” !!

Comment by AKron
2007-09-08 21:33:41

I apologize if this has already been posted… a good article about the very rapidly approaching bank collapse:

A couple of quotes:

“Banks worldwide now reportedly face risk exposure of US$891 billion in asset-backed commercial paper facilities (ABCP) due to callable bank credit agreements with borrowers designed to ensure ABCP investors are paid back when the short-term debt matures, even if banks cannot sell new ABCP on behalf of the issuing companies to roll over the matured debt because the market views the assets behind the paper as of uncertain market value.

This signifies that the crisis is no longer one of liquidity, but of deteriorating creditworthiness systemwide that restoring liquidity alone cannot cure. The liquidity crunch is a symptom, not the disease. The disease is a decade of permissive tolerance for credit abuse in which the banks, regulators and rating agencies were willing accomplices.” (Henry Liu,”The Rise of the Non-bank System”, Asia Times)

“That’s right; nearly $1 trillion in worthless asset-backed paper is clogging the system putting the kybosh on the big private equity deals and spreading panic through the money markets. It’s a slow-motion train wreck and there’s not a thing the Fed can do about it.”


“The investment banks are also facing enormous potential losses from liabilities that “operate off their balance sheets” In David Reilly’s article “Conduit Risks are hovering over Citigroup” (WSJ 9-5-07) Reilly points out that “banks such as Citigroup Inc. could find themselves burdened by affiliated investment vehicles that issue tens of billions of dollars in short-term debt known as commercial paper”… Citigroup, for example, owns about 25% of the market for SIVs, representing nearly $100 billion of assets under management. The largest Citigroup SIV is Centauri Corp., which had $21 billion in outstanding debt as of February 2007, according to a Citigroup research report. There is NO MENTION OF CENTAURI IN ITS 2006 ANNUAL FILING with the Securities and Exchange Commission.”

lots of good stuff, including systematically ripping Alan Greenspan a new one. :)

Comment by Kevin
2007-09-08 23:21:10

This is how the mortgage companies got into such a screwed up state.

This thing claims that I can afford a $650k house on my $95k annual income (naturally, using an ARM).

When I checked rates on a 30 year mortgage, it suggested that I could afford $475k with a 50k downpayment.

Just to do the math on that one, it would cost me over $3200 a month. My take home pay is only about $6200 a month. I guess if you don’t eat, own a car, or use electricity these numbers might actually make sense.

WTF were/are they thinking?

Name (required)
E-mail (required - never shown publicly)
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post