The Recipe For A Price-Sensitive Market
10 TV reports from Ohio. “An excess of high-priced condominiums is forcing developers to get creative. A slowdown in the downtown condominium market is forcing developers to either drop prices or put them up for auction, 10TV’s Kevin Landers reported. ‘I think we’re going to sell them for less than what we hoped to sell them for,’ said Caryles Watch Condos developer Thomas Fortin.”
“Eight of the lofts will not have a minimum bid, Fortin said. That means that no matter what someone bids, the developer will accept it. ”
“Realtor Larry Schottenstein blames the condo cool down on slower sales in the suburbs. ‘If they can’t sell their home in Dublin, they aren’t going to move downtown,’ Schottenstein said.”
“Colleen Gilger, the city’s downtown development director, said that developers need to lower prices so that condo sales can pick up. ‘We definitely have more inventory at a higher price point and there’s definitely a need for more downtown housing at a variety of price points,’ Gilger said.”
The Columbus Dispatch from Ohio. “The foreclosure news keeps getting worse. In both central Ohio and the state, foreclosures increased sharply last month, mimicking a national trend.”
“A new report said 2,930 homes went into foreclosure last month in central Ohio, up 37.6 percent from July.”
“For the state, 17,793 houses entered foreclosure, ranking the state fifth nationally. That was a 33.6 percent increase from July and 138 percent more than foreclosures initiated in August 2006, according to RealtyTrac.”
“‘We’ve had such an artificial inflation of the problem that we need an urgent response to minimize the damage,’ said Ohio Treasurer Richard Cordray said.”
“Many of the loans, some of which adjust in as little as two years, were issued in 2005 and 2006 during the height of the housing boom. ‘There are a bunch of bad loans that are going to have to work their way through the system,’ Cordray said.”
The Monroe News from Michigan. “Plenty of homes. Too few buyers. It’s the recipe for what Kim Sachs, president of the Monroe County Association of Realtors, calls ‘a price-sensitive market.’”
“And it’s what makes it relatively easy to buy a home, yet relatively tough to sell one.”
“It’s no secret that Monroe County’s housing market has flattened in recent years. It’s also no secret that some people are caught between mortgage payments that are too high and incomes that are too low. Prices are down. Foreclosures are up.”
“‘Our job as Realtors has become increasingly hard this past year,’ says Fran Londo of Edward Surovell Realtors. ‘There are so many people in trouble.’”
“Although home values have been slipping, many home sellers still have misperceptions that their homes are retaining, if not gaining, value.”
“‘We all feel our homes are worth a million dollars but, in reality, what it comes down to is what the market is willing to pay and what homes have already sold for,’ says broker Annette Perna-Taormina. ‘If not priced right, the home will lose potential buyers and will be on the market longer and then everyone gets frustrated.’”
“‘Pricing is critical,’ agrees Marygrace Liparoto of Re/Max Experts. ‘Updating and maintenance are not upgrades and are not a factor in pricing,’ she adds. ‘If the roof was just replaced because it needed to be, the price of the house doesn’t go up because of it.’”
“‘If your home is not selling, serious sellers need to consider how much it is costing them to keep the home,’ Ms. Londo adds. ‘If it’s a $1,000 per month, consider dropping the price by what it would cost to maintain the home for a year.’”
The Detroit News from Michigan. “A glut of homes on the market combined with a sharp rise in foreclosure sales have driven Metro Detroit home prices down 17.7 percent since their peak three years ago, according to new data.”
“The region’s median home price fell from $188,275 in August 2004 to $154,919 in August 2007, according to data from Metro Detroit’s largest MLS. In Wayne County, the drop has been a staggering 35.6 percent.”
“‘The low prices are changing attitudes on both sides of the market,’ said Steve Cole, an agent in Birmingham. ‘Sellers are being very unrealistic about what they’re expecting to sell for; everyone thinks their house is the exception to the rule. Buyers are also expecting to have an offer at half the asking price accepted.’”
“Count John and Dana Declark of Warren among those who have seen their home investment shrink. Back in 1984, the Declarks bought their modest three-bedroom home not only to provide a roof over their family’s heads, but also as a retirement nest egg.”
“Just a few years ago, the value of their home seemed to grow by the day. Today, the Declarks have their house up for sale for $162,900, more than $10,000 less than its estimated worth just three years ago.”
“‘We decided now is the time,’ Dana Declark said. ‘Values are going down, people are losing their jobs. Looking at how many houses are for sale around here, we figured it’s now or later, when it could be worse.’”
“In Wayne County, 305 homes that were sold in August, or 18.4 percent of the county’s total, were foreclosure sales, the Realcomp report said. That compares with 10.2 percent in August 2006.”
“‘The only way this gets solved is by having a lot of people taking a huge hit in their home prices,’ said Don Grimes, a senior economic research specialist at the University of Michigan. ‘Until people make that decision, it’ll just keep dragging on and on.’”
“Alan and Lauren Ducharme of New York City are betting low prices will yield them a big home with a small price tag in Brighton, where they’re returning to be closer to family. Looking around their target neighborhoods in Brighton, the couple is confident they’ll be able to shave $15,000 to $20,000 off asking prices simply by waiting.”
“‘We’ve been keeping our eyes on a few homes and seeing how long they’re lingering,’ Alan Ducharme said. ‘We’re betting that if we wait until the right time, we can drive a hard bargain. They’ll get sick of that ‘For Sale’ sign eventually.’”
The Grand Rapids Press from Michigan. “Foreclosures continue to be up in Kent and Ottawa counties. Kent recorded 657 foreclosure filings last month, up 105 percent from August 2006 and 55 percent from July. Ottawa recorded 137 filings in August, up 128 percent from last year and just more than 5 percent from July.”
“The state saw 15,565 foreclosure filings last month, which is 11 percent higher than July and 127 percent higher than August 2006.”
“The Kent County Register of Deeds tallied 281 properties going to a sheriff sale last month, one of the steps in a foreclosure process. That compares with 193 in 2006 and 159 in 2005. The August number brings the total this year to 2,115, according to Chief Deputy Register Jerry Czaja, compared with 2,478 for last year.”
“‘It looks like it’s going to be over 3,000 this year,’ he said.”
“Home sales in the Grand Rapids area last month were 3.5 percent lower than August of last year and nearly 18 percent lower than August 2005.”
From ABC 7 Chicago in Illinois. “The rate cut is too little, too late to rescue many Americans who got caught in the mortgage mess. A new report out Tuesday shows foreclosures more than doubled from this time last year.”
“In Illinois, there were 72,000 filings last year. In Cook County so far this year, the number of filings is up by more than 50 percent.”
“The Federal Reserve’s decision could help builders. Overnight, the cost for developers to borrow big money for projects, such as the Granville condo complex on Chicago’s north side, will go down. And that could spur more construction and lower prices.”
“‘A half-point is a big difference in a project of this size, and that cost savings will be passed on to consumers,’ said Bill Platt of the Access Group.”
The Star Tribune from Minnesota. “As the housing slump worsens, home builders are resorting to tactics typically reserved for Labor Day furniture sales and year-end auto blitzes.”
“National builders with overbuilt developments in suburbs such as Maple Grove and Woodbury are now paying condo association dues and closing costs, as well as giving away upgrades worth tens of thousands of dollars in the hope of wooing buyers in a saturated and sluggish market.”
“Betty Hardle in Columbia Heights, has been in the home-building business for nearly four decades. She said that incentives certainly aren’t new but that the scale is greater ‘and the giveaways are more popular in this downturn than any other I’ve seen.’”
“Area home sales posted their worst monthly showing in August in more than a decade, according to numbers released last week by the Minneapolis Area Association of Realtors. In the past year, demand for new construction has dropped nearly 23 percent.”
“There are a record 10.39 homes on the market for each active buyer, more than double the inventory per buyer in September 2005, according to the Realtors group. Average price per square foot of new-construction units is down 8 percent.”
“Most of the incentives are coming from larger, publicly traded builders such as K. Hovnanian, which have monthly production and sales schedules to meet and shareholders to satisfy.”
“‘National builders have lumber contracts and lots of other things they’ve contracted for that they can’t stop,’ said John Shaw, manager of the Edina Realty corporate office in Edina. ‘They would rather build a home at low profit in order to keep going than to stop the corporate machine.’”
“Eva Tangen of Coldwell Banker Burnet, said she’s bringing more buyers to look at new-construction homes these days. Incentives are making nicer homes more affordable, which makes it tougher for existing homes to compete.”
“‘They can get brand new for the same price,’ Tangen said.”
Welcome to our corner of the US and A. Guess it’s not different here.
Which area are you in Blano?
Monroe County, between Detroit and Toledo, Ohio.
No offense, but…oof!
(I’m a native Clevelander)
Lol, don’t worry, I ain’t braggin’….. : )
Moody’s is on the ball with this one:
‘Detroit prices are experiencing the steepest fall of any large Rust Belt city. Moody’s forecasts a 21.3 percent drop in Motown, which was hit earlier - in the third quarter of 2005 - and will suffer longer than most places. A turnaround in Detroit isn’t expected until early 2009.’
The report doesn’t seem accurate for some area. For example, they predicted that Ft. Myers, FL will see 17.1% percent drop. I remembered watching some news in the area that during an auction, houses in Fort Myers were sold at 50% discounted.
I can find it on youtube if anyone is interested.
Maybe if the Fed’s reflation program is successful, nominal price drops won’t look all that large through the rear view mirror.
do u expect 50% inflation per annum, that’s about how much reflation you’ll need for several years to make housing truly (25 to 28% of GROSS income) affordable
Too bad you need that much wage inflation. Ever higher stock, oil and PM prices will not do the trick of solving planktons’ affordability problems.
I agree with everyone that the magnitude of the Moody’s prediction is off.
However, my job security isn’t based on my housing price prediction under predicting the magnitude of the drop. For the guys at Moodys, they will catch hell for these numbers.
So I’ll respect them for publicly calling the bubble and respect the fact they will anonymously tell their friends the real predictions.
Got popcorn?
Neil
I remember that video. Dude it’s not fair!
http://www.youtube.com/watch?v=10WoQZKZkNs
A turnaround in Detroit isn’t expected until early 2009.’
By turnaround, do you think they mean steeper drops, ‘cuz 2009 looks pretty early to me.
Meh.
They said the peak for DC metro was Q3 07: they’re off by a year to 18 months (i.e. 2006). They’re also predicting an 11.5% drop from peak to trough (Q4 ‘09). We’ve already lost 15% here, more in some exurbs. Considering that we have 2 more years until their trough, I’d have to say that the verdict is that their predictions are garbage.
“A new report said 2,930 homes went into foreclosure last month in central Ohio, up 37.6 percent from July.”
At least the one month foreclosure increase in central Ohio is smaller by half than the 80 percent one month increase in San Diego…
http://www.signonsandiego.com/uniontrib/20070919/news_1n19default.html
At least the one month foreclosure increase in central Ohio is smaller by half than the 80 percent one month increase in San Diego…
Ouch! For the record, hot dark roast coffee hurts when it comes out the nose. Part of the reason I laughed so hard is a coworker just told me how “Southern California, including San Diego is simply not expected to go down much more in price.” She was serious. Three of us laughed at her and gave her a link to a few bubble blogs. Sheesh….
Got popcorn?
Neil
Hey, even hedge fund managers are reluctant to buy now….
http://www.nytimes.com/2007/09/19/business/19hedge.html
Maybe out-of-work Realtors can retool themselves as psychotherapists for stressed-out hedge fund managers.
After years of eye-popping returns, sudden losses can be wrenching. Aware of the psychological impact that high-pressure trading can have, several funds have retained psychologists to counsel stressed managers.
“It has been a very challenging period for these people,” said Jonathan F. Katz, a psychologist who works with large hedge funds. “I have seen people shaken, their confidence eroded. They are upset and depressed.”
Such anxieties become all the more acute when taken with the boundless spending habits developed at the height of the hedge fund bubble.
“a very challenging period for these people”
Yes, those earthquakes in Peru were devastating, and things are terrible in Darfur, and New Orleans and the Gulf Coast are still struggling and…oh, you meant those hedge fund pigs…hey, I’ve got access to the roof of my building, wanna jump?
an anecdotal story, got my hair clipped this morning. the stylist was hitting on all cylinders. first, she was planning on buying a home that her parents were going to sell to her. they bought it as a flip but couldn’t sell it so they were planning on unloading on her. she was planning on getting another one of those “liar” loans, just like she did with her ex-boyfriend in the spring on a house that he now lives in. no concern about being on two mortgages supported by clipping hair. the public is oblivious to what’s going on in the market. it scares me to think that the fed has put out the punchbowl for these morons again.
Real nice parents there…
They have the daughter they deserve.
She’ll be back with Ma and Pa within a year.
Yep…
This anecdote just convinced me that credit needs to tighten up quite a bit more. Oh… look here, commercial paper needs to be renewed…
Well thankfully the Yen carry trade is healthy…
chuckle.
Neil
Now there is an idea. Every family can arrange a scape goat that will use liar loans to buy up all of the real estate the rest of their family is underwater in and then default. Only one person takes the loss and the credit hit, that person then moves in with the other members of the family free of charge.
Isn’t this a hallmark of 3rd world nations? Where the eCONomy is basically nothing but a series of scams as everyone tries to cheat each other and avoid the rules?
Good thing the Fed is here to keep the party going!
My Barber told me when things get tough people stop getting their hair done as often. Easy to wait another two weeks between cuts if you don’t mind being a little shaggy or cutting real short to begin with. And you can buzzcut your kids at home.
FWIW -
A chain haircutter staff person told me recently that the business has been dead in SF the last two weeks.
Normally, I would attribute it to “everyone” being back at work after the August / Labor Day vacations.
Now? I’m not so sure that’s the reason any longer.
“the public is oblivious to what’s going on in the market. it scares me to think that the fed has put out the punchbowl for these morons again.”
It scares me that the Fed is either oblivious or indifferent to what’s going on in the market.
We must be the poor section of Ohio. A house in our area that was worth 200,000 in ‘02 by 05 was worth 205,000 and now are priced between $200-205k. Values here crept up very little or moved sideways. However the one advantage to this area is incomes are still in line with housing values. Someone with a $35k income can still find houses in the 75-100k range. Not McMansions, but decent houses in nice neighborhoods. We are a world away from Columbus prices. My house here is worth $225k in today’s market in our area and in Columbus it would be priced in the 500’s. Plus taxes there are crazy compared to here. We live 10 miles from the PA border, 25 miles south of Youngstown. Of course you can buy houses in Youngstown for under 10k, but not in areas that you would live long enough to make the first payment. Our area is small little towns, with less crime than most places in the US.
Hey Ghost - we bought in Liberty Township last year and got a steal. Great old fashioned 50s country club type neighborhood. 1800 Sq. ft, with 1800 sq ft finished basement on 2/3 acres for $95K. Dated, but only needs cosmetic update. Have our eye on a house at the corner - 4000 Sq Ft on 4 acres w/pond in immaculate condition still listed at $345K. Been on the market for a long time - thinking of offering $250K. Housing didn’t go sky high in these areas so I don’t think they’ll tank as much.
I bought my house just north of Cincinnati 18 months ago for $265k (house is circa 1880 on 3 acres of land).
The previous owners bought it in 1997 for $245k and sunk $30k into it. So in effect, the house sold for $10k less in 2006 than it did in 1997, in nominal terms.
Pretty much the same in my home turf in TN. Prices never were that high to start and only got a little ‘nip’ of the bubble. Homes even in around major metros like Nashville, Knoxville, and Memphis can be had for sometimes under 100k- 2-250k for a nice home.
Even so, there is a slowdown ever here as well with many more homes for sale and anything over 200k languishing on the market. About the only buyers are from Fl and up North… mostly baby boomers cashing out, which is highly annoying.
Out in the hoity-toity section of Cuyahoga County (Cleveland): Houses went for high 300s in 97, and settled down into low 400s by the turn of the century, whence they have stayed ever since. Prices never ran up and have been pretty stable (not counting inflation).
On the other hand, the originally higher priced houses in the same suburbs- 800k and up- can’t be moved without a sunbstantial (100K+) haircut from their original new prices. I think in these parts anyone intending to go north of 600k in price is going to be extremely particular of their 1/2 acre 5000 ft/sq (not counting basement) property, and are not looking to buy someone else’s hand-me-downs.
From San Diego:
“There were actually more default notices in August than there were existing single family home sales — something that never happened over the course of the early-1990s housing bust.”
http://voiceofsandiego.com/articles/2007/09/19/toscano/878augsalesperdefault091707.txt
Wow — I just raised the question here last month about when this would occur!
Wow indeed
Wow…
I’m stunned. I just e-mailed that to a coworker who thinks San Diego will recover quick. Below Professor Bear notes that the ratio is twice as bad as ever before.
I’m in shock… In no way did I expect this news from August. October? Sure. Not August. Ghad… Scary…
Neil
Worst prior used-home-sales-to-default ratio (August 1992): 1.4.
Current used-home-sales-to-default ratio (August 2007): 0.7.
Oh-oh…
BTW, under what rug is this elephantine number of defaults hiding? It does not seem to show up on the SD County MLS…
Interesting statistical tidbit about the last SoCal housing bust: If you look closely at Rich’s chart, you will notice that the last time his ratio of used home sales to NODs dropped to a semi-permanently-low plateau (Jan 1991), it did not recover for six years (until after Jan 1997). This might be another good rule-of-thumb for those wondering about when to buy — don’t start shopping until this ratio makes a significant move out of the basement.
“It’s important to note that due to data limitations, we are measuring a subset of home sales (existing single family homes) against defaults of all types.”
Regardless, we’ve all seen the chart… we all know the worst is still yet to come.
I like how the media is starting to talk about fundamental things like price, loan carrying ability, inventory levels, affordability, etc.
I’ve been on this site since day one. We clearly forecasted that things would unravel like this. I can remember days when people would come onto the site and criticize people here for not buying, for not jumping into the fray. How wrong the criticizers were. Now it has come to light how right this board was.
I find it surreal to read about things unfold now, how the rest of the world is surprised and yet we knew it all along.
I still can’t believe BB dropped the Fed rate 50 bps. They still don’t get it, do they ?
I still can’t believe BB dropped the Fed rate 50 bps. They still don’t get it, do they ?
I’m not sure why you are that shocked, for our interest rates are still higher than Japan or Europe. Housing is a lost cause no matter what the interest rate is, and the rate cut is meant to address the general economic picture. I believe in the bubble and nasty side effects, but I also know the government will try to please (minimize pain for) the greatest number of people.
The game is rigged. Play along and take advantage of its holes or tilt at windmills. Buy those assets likely to inflate due to the rate cut–but certainly not real estate.
“Play along and take advantage of its holes or tilt at windmills.”
Or folks can do nothing at all; however, as the last best rock group once said, “If you choose not decide, you still have made a choice.”
(ahem) That’s “not to decide,” actually.
Ah gess laitly ah bin readin’ two many articels with FB qwoets in dem.
I’ve been on this site since day one.….
When was that?
Just curious.
March 2005. I posted the first post and others joined in from there. I’ve got a copy of emails that I sent to Ben in May of 2005.
I just checked. My first email to Ben was April 21, 2005.
Was that the original site? I thought the original started in 2004….
Yeah, it was mid 2004 I think. I was on it for 6 months or so, (thehousingbubble) til Ben took it down and moved here.
“The Federal Reserve’s decision could help builders. Overnight, the cost for developers to borrow big money for projects, such as the Granville condo complex on Chicago’s north side, will go down.”
I’ll have to take some new pictures. They broke ground this past winter @ NE corner of Broadway and Granville. It is a big project as far as in fill projects around here go. Trouble is, two ‘el stops down @ Bryn Mawr the three condo towers of Catalpa Gardens remain dark at night. During a walk a few nights ago I noticed one unit (out of three towers) had a light on - but last night a light was on in a different unit - maybe the contractors just forgot to turn them off?
And the condos just keep comin’…
“The Federal Reserve’s decision could help builders.”
This notion suggests extreme ignorance of the problem, which is that new homes are currently under construction at a rate of about 500,000 per year in excess of sales. How does respiking the interest rate punch bowl solve that problem?
It lets them build the projects that will sit empty.
All they need to do is to figure out a way to get a govt guarantee behind the bagholder on all these empty homes, then they can pass the bill on to the ever-resilient U.S. taxpayer.
I think they’re only trying to squeeze every last drop of juicy bubbliciousness out of the rate cut - before it reality crashes the party again. Time is not on their side.
I can’t picture the Granville development, but I’ve seen those other towers to the south, I think.
(I guess completed and empty is better than 25% done and flat-out broke with rebar sticking out of the ground.)
You can’t miss those three towers @ the Bryn Mawr ‘el stop - they are now painted a garish combination of maize and purple - the developer’s initial conception called for more tasteful shades of blue. I also overheard that each tower was supposed to get two elevators - but that’s been reduced to one each. That’s bad - the first building I ever lived in was half the size of just one of those towers and its sole elevator was beat up but good.
Yes- they continue to keep building here in Chicago. It is really amazing- given what is going on in the news. Custom home builders are continuing to do the teardowns (without a buyer) in the suburbs while fully finished custom homes sit unsold for years only blocks away.
The condo buildings also keep going up downtown. They just opened up a sales center for a building that will have 700 condos about a block from the Sears Tower. Who is buying all of those?
And re-sale inventory continues to grow.
IMHO most of the new condo projects, especially the further one gets from the CBD, appear to be marketed heavily to young adults. Something the size of what you mentioned near Sears Tower, however, would likely need to draw from more mature, and thus especially well heeled, base of buyers. Far and away, the imploding economies of towns and small cities throughout the Midwest pretty much assures some flow of young adults into the city. The big question is how many of them will be able to keeping absorbing the record (and growing) inventory. Logic would suggest the most economically viable of these transplants have already bought - and that future arrivals will be less suited to buying at current high prices.
CONDO…the new five letter curse word! grrrrrrrrrr.
A slowdown in the downtown condominium market is forcing developers to either drop prices or put them up for auction…
Overnight, the cost for developers to borrow big money for projects, such as the Granville condo complex on Chicago’s north side, will go down…
Maple Grove and Woodbury are now paying condo association dues and closing costs…
Everywhere I look I see the five letter curse word…I saw raze the damn things…very few seem interested in them anymore!
saw=say…blushing
What’s this? Common sense from my alma mater?
“‘The only way this gets solved is by having a lot of people taking a huge hit in their home prices,’ said Don Grimes, a senior economic research specialist at the University of Michigan. ‘Until people make that decision, it’ll just keep dragging on and on.’”
That’s the token common sense dude.
they are trying to , but BB is gonna get in their way
OT…Blow to the head!
http://www.atimes.com/atimes/Global_Economy/II20Dj01.html
Good article. My wife is Chinese, and she tells me that more and more Chinese are openly critical of their government losing tens of millions of dollars by holding onto a sinking currency.
A sea change may be in the works.
This is a must read…indicative of our national leaders failure to their stewardship responsibilities!
Thanks,
Leigh
China price freeze to crimp oil mkt, refiners fret
BEIJING, Sept 19 (Reuters) - China’s move to freeze prices of commodities under state control, including oil products, will sustain robust demand despite record-high crude, tightening supplies and inflame refining losses, industry officials said.
Beijing’s announcement on Wednesday not to raise prices that it controls for the rest of 2007 amid mounting fears over inflation also threatened to force the shutdown of independent small refineries that supply 15 percent of China’s oil market.
http://tinyurl.com/ypx4n9
Great read. I especially like the “orgiastic party” on Wall Street, while the nation was debasing its’ currency, with Ben thumbing his nose at the Chinese bagholders. Someone ought to remind him, payback is a bitch.
Gatsby believed in the green light, the orgiastic future that year by year recedes before us. It eluded us then, but that’s no matter – tomorrow we will run fast, stretch out our arms farther — And one fine morning –
So we beat on, boats against the current, borne back ceaselessly into the past.
from The Great Gatsby
– F. Scott Fitzgerald –
“Someone ought to remind him, payback is a bitch.”
You mean they might cut off our supply of toys with a massive lead content? Sob!!
Seriously, though, I know they could do a number by dumping dollars.
Expert on credit derivatives says “we are headed for an epic Bear Market”: http://tinyurl.com/2gylh5
Das is pretty droll for a math whiz, but his message is dead serious. He thinks we’re on the verge of a bear market of epic proportions.
The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way.
He’s not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U.S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates.
What I’m seeing in san diego is that the banks are not putting all their REOs on the market in downtown. If they did, REOs would be around 33% to 40% of all condos on market. Just north of downtown in mission hills, the sellers are absolutely in denial, asking $500/sq.ft. and up when they were in the $200/sq.ft. range back in 2000/2001
friar john
there’s that five letter curse word…LOL.
“‘National builders have lumber contracts and lots of other things they’ve contracted for that they can’t stop,’ said John Shaw, manager of the Edina Realty corporate office in Edina. ‘They would rather build a home at low profit in order to keep going than to stop the corporate machine.’”
Exactly right. I think new homes will keep coming on to the market severely undercutting the existing home sales, in regions where there is buildable land. The corporate builders can cut the costs, pay less for labor & material, etc and then can also take in less profit. If they price their product properly, any buyer will want to own a new house rather than a used house.
There are some ancient houses (>100 years old) that are for sale in MA and the sellers are asking for about the same price as a 20 - 30 year old house. It is quite ridiculous.
Ancient houses are much nicer than most of the crap built around here in the 1970s and 80s.
WTF would anyone want to move from a house in Dublin to a downtown condo in Columbus?
Because all the downtown houses surrounding said condos are in the ghetto?
It’s easier to get drunk and riot in the streets after a Buckeyes game.
Good point, the whole “get drunk at the game and stumble to your condo” scheme is a big driver of many urban condo projects. One can observe this throughout the nation - pick your favorite example as there’s plenty to choose from.
How many drunken sports fans have enough money to buy these condos?
In Chicago at least its perceived to be quite a few. After all, one of the city’s earlier and perahaps most famous areas for gentrification was Wrigleyville. Throughout the boom infill condos and townhomes sprouted around Wrigley Field in all directions - the area is effectively sold for its lifestyle - which happens to include sports and alcohol. To a lesser extent infill projects have also sold well near U.S. Cellular Field and the United Center. The sports venues being but one aspect of the allure.
wmbz,interesting article.
The ticker on the Bloomberg channel had said more or less the same thing yesterday a few hours before the Fed announcement. “Foreign buying of US government securities turned negative in July.”
Oops, supposed to be under wmbz “blow to the head”
test
From the first article:
“Nearly everyone agrees that now is the time to buy because falling prices won’t last long.”
In addition to the fifth dentist who doesn’t recommend sugarless gum, I’d like to hear from those who don’t represent “nearly everyone.”
Had to verbally slap brother around this morning when he started spewing NAR talking points saying that he doesn’t think some areas will be hit by bubble and named Seattle. I said they’re just late to the party but as long as starter houses are at $500K and credit requirements stay tight, there won’t be enough buyers to qualify to buy. Luckily he got it quick then went on raging about the Fed cut and how they sold us down the river.
A few comments concerning previous posts: First, to poster ‘Incredulous.’ Your posts concerning other posters being anti-American statement. Nobody is anti-American except nutcase radicals like Osama Bin Laden. The comments you read which appear to be anti-American are actually anti current American government or should I say American politicians of all stripes who are doing nothing to change anything. Don’t believe me? Check out the polls. The polls tell you all you need to know. 11% approval rate for congress who have simply changed the old guard for the new guard when the majority of voters thought and hoped they might do something to change the current “destruction of America’s culture” course. The result of a change in congress? Zip, zero, nada (except yada-yada which is all they ever do). A 29% approval for Bush (amazes me why it’s anywhere near that high when it should be close to zero considering the mess he’s made with the destruction of young American lives and US treasure based on lies and half truths) which says that people are disgusted with the White House and, of course not only Bush but the biggest crook ever to be second-in-command, by the name of Dick Cheney who has ratings which are a joke.
Next, ‘Noonan’. If you think that the Fed is independant, you need to get out more. One of the reasons the polls are so low concerning the US political landscape is because the average American has woken up to the fact that the VERY few who own most of the wealth in the USA, control everything by controlling the Fed, the government, politicians, etc. They control it by the use of the greatest asset they have. Big MONEY. If people sound anti-American, it’s not because they hate America it’s because they are frustrated that those in power are bought and sold by those who have most of the money.
Personally, I think the internet and the expansion of the media was a Pandoras Box which, when opened up, let many of the secrets out as to how it all works in US government and politics. The average American is now subjected to videos of criminal CEO’s doing perp walks and politicians engaged in mis-steps like fraud which, 30 or 40 years ago, would never have seen the light of day because it would have been “hushed up”.
Example: Ralph Nadar was banned from appearing on the Johhny Carson show because he went after the US auto industry for making unsafe cars. These days, Nader can get onto YouTube and a hundred other internet outlets. There used to be (he died about a year ago) a guy by the name of Richard Ney. He was once married to Greer Garson and played her son (he was much younger) in the movie, “Mrs. Miniver”. Richard Ney abandoned acting and became a Wall Street trader. He was amazed at the corruption he saw on Wall Street and wrote several books, one of which exposed the Financial Gangsters Of Wall Street. The major bookstores were “told” not to sell Ney’s book and and they didn’t and he was also banned from appearing on the Johnny Carson show (and any other show). Again, he would now find a willing outlet on the internet to express his views. YouTube being a good example. Because they would have problems “banning” anyone these days, talk shows offering many different opinions and many minds get changed by someones view when that person makes sense. Unfortunately, shows like the CNBC Comedy Business Show “tilt” the guest list and cheer leaders like Maria Bimbolini and Larry Kudlow get more attention than, say, someone who would express consternation that there is a property bubble like Schiller. Once hallowed figures like the Fed Chairman who’s decisions used to get a three line mention 30 or 40 years ago and most Americans had no idea who or what the Fed was and certainly didn’t know what nefarious doings might be going on behind closed doors, now get held up to be examined and a lot of people do not like what they see. They smell a rat as the massive volume of information pours out and doesn’t add up. Thus, the crooked CEO’s who were once protected (how many crooked CEO’s did anyone see on CBS, NBC or ABC 30 or 40 years ago doing a perp walk) are now held up for all to see - and many do not like what they see bubbling beneath the surface which - bringing me back to my original point - shows up in the polls.
Great rave…salute.
Leigh
There is a difference between disliking our elected representatives and trashing the country and all Americans.
Since Americans hate their “leaders” so much, why do they keep re-electing them? Those of us who find politicians dubious must not be voting.
I didn’t vote for Bush; I voted for Nader twice, and have been getting flack about it for years.
Excellent excellent post Mike. Thank you.
More good news which will help house prices keep rising here (sarcasm off now)……..
http://www.freep.com/apps/pbcs.dll/article?AID=/20070919/BUSINESS06/70919042
Here in Missoula MT we still have starter homes at 220K. Is a price like that for a new 3/2 on a small lot a good sign that they haven’t drunk the Koolaid here yet? Not to say it’s different here. But it might me and the local realtors aren’t sayin. Single family res down 14% from last year.
Having family in Missoula I can tell you that 220k is overpriced for a ’starter’ home. Where the heck are all the jobs in Missoula that would pay enough to handle a 200k mortgage (that’s assuming that tightened standards would require at least 10% down and household salary level of at least 60k)? We looked at several homes around U of MT (around a playground/wading pool park) and didn’t see anything decent for under 350K. In fact, a really nice brick Victorian house was pulled off the market in the week we were there as it was taking no business.
We also saw lots of new construction around the airport and a ridiculous area of new high-end homes in the high 300K range around a new golf course.
I love Montana, but 220k for a starter home in Missoula is Bubbleicious and needs to be popped.
unfortunately, $220,000 still only buys the 2 car garage here in orange county
“‘Pricing is critical,’ agrees Marygrace Liparoto of Re/Max Experts. ‘Updating and maintenance are not upgrades and are not a factor in pricing,’ she adds. ‘If the roof was just replaced because it needed to be, the price of the house doesn’t go up because of it.’”
Classic feature of a depreciating asset.
Uhhh, where’d my comment go.
If a town still has new 3/2 starters at 210K, is that a sign we haven’t had a real bubble yet? Local res sales down 14% from last year. Seems like building has stopped and lots not selling.
I am from Columbus and I don’t know what these boneheads were thinking. Who the hell does Larry Schottenstein think is going to sell their house in Dublin to move into a downtown condo? Sorry, Dublin is a upper-income, WASP suburb, full of families with children, and conservative both politically and personally. They are not moving to some condo and getting Columbus city schools. And the only young singles who would voluntarily choose to live in Dublin are the kind of lifeless, soulless cretins who would never choose to live downtown, even if you could give them the same amenities that they’re getting in their wooded, treelined Dublin mansion.
These imbeciles built dozens of condos, completely priced out the recent college grads and 20-somethings who would be the people most interested in them, and expected exactly who to buy them? Oh but then I can’t live in historic “Italian Village”? I’m sorry, I’ve been referring to it as “the ghetto between campus and downtown” for years; I didn’t realize I was besmirching the name of a cultural landmark.
Just saw head of FHA on Kudlow and Company (BTW: Kudlow has changed his tune on global economy!)
Anway, head of the FHA dude says he wants to keep lower middle class in their houses. Then he says he want s to help them.
HOW, oh HOW, is locking them into a house that they owe way more for than it is about to be worth, doing them a favor?
Hello! If they owe $250K on a house that will soon be worth $150K, then keeping them in the house is NOT doing them a favor.
Refi-ing them to an FHA loan simply lets the current bond holder off the hook for the bad loan.
NO!!!! No bailout for the idiots that made these loans!
Tin Foil Hat Moment….. then off to see the Rockies beat up the Dodgers again.
Door #1 - US Gov. does you a favor. They lock you in at $250K, you & if necessary, your family can never leave the house. Don’t have a job? Don’t worry, we’ve got one driving a Humvee from Green Zone to the Bagdad Airport or you can swab the deck of a carrier in the Persian Gulf. Pick one, we have three of ‘em there. (Believe me, I am not taking a swipe at our nations fighting forces, the politicos that put them there, another story) Better yet, you can paint toys in a factory for just a bit more $$$ than we pay violent incarcerated felons, three meals a day not included, in one of the new factories that we helped one of our Fortune 500 company friends move back for Asia. You love that house.
Door #2 - You go into foreclosure and bankruptcy. Start the race over on your own, but this time wearing the scarlet letter on your chest. Good luck getting a job with that. There is always Door #1.
Test
CIT to sell subprime portfolio to Freddie Mac
CIT Group, a leading US commercial finance company, said on Wednesday it would sell its subprime loan portfolio to Freddie Mac in a move to quit the home-lending business, triggering a sharp rally in its shares.
CIT, the largest independent finance company in the US, has been badly hit by the turmoil in the credit markets and by the shake-out in the subprime sector.
The company said it planned to sell between $3.5bn and $4.2bn of triple-A rated securities backed by $6bn of residential mortgages. The announcement came on the same day that Fannie Mae and Freddie Mac, the US government-sponsored mortgage lenders, welcomed a regulatory decision to allow them to buy more home loans.
http://tinyurl.com/2w9mm7
Freddie Mac= bail out bagholder lender =easier to bail out defaults with taxpayers funds .
Fears of dollar collapse as Saudis take fright
Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.
“This is a very dangerous situation for the dollar,” said Hans Redeker, currency chief at BNP Paribas.
http://tinyurl.com/33z3hz
Cramer just said on his TV show that “the interest rate cut is good for stocks “. This is what he said after someone questioned him on how the cut would be good for housing .So ,what was all this crying for cuts because 7 milliom people would lose their home by Cramer . I said it all along that Cramer was just looking for a bull run in stocks ,most likely so his show wouldn’t be cancelled .Shows like Cramer’s look stupid during bear markets .
““‘If your home is not selling, serious sellers need to consider how much it is costing them to keep the home,’ Ms. Londo adds. ‘If it’s a $1,000 per month, consider dropping the price by what it would cost to maintain the home for a year.’””
Why not consider dropping the price by what it would cost to maintain the home for the next 5 years? Or 10 years?
Do I the taxpayer own Freddie Mac? If I do can I vote and say no to CIT’s offer?