This Time The Builders Are The Speculators
A report from the Arizona Republic. “A Chandler man slashed his price by $60,000 to sell his home so he and his wife could move to Ahwatukee. An east Mesa women accepted about $25,000 less than her original asking price even after installing carpet, remodeling a bathroom, upgrading the swimming pool and adding a $7,000 hot tub and a $2,000 shed.”
“Their tactics weren’t extraordinary in the ongoing housing downturn, where prices are falling by double-digit percentages in some cases. ‘Realtors need to have a discussion with sellers because appraisal value and market value are two different things now,’ said Debi Gotlieb, a residential-real-estate agent.”
“In nearly every ZIP code in the Southeast Valley, median home prices fell on a percentage basis over the past year, according to Information Market. The biggest percentage drop was 19.4 percent in the 85297 ZIP code in Gilbert. Another Gilbert ZIP, 85296, saw a 15.2 percent drop.”
“Susan Estes, an east Mesa resident, was among those in 85208 who saw her home value fall by 8.1 percent over the past year in her area, making it hard for Estes and her husband to sell their 1,589-square-foot, four-bedroom, two-bath home.”
“Estes and her husband put their home on the market in December, took it off for one day in June and put it back on the next day. It was expected to close Friday, 270 days after it went on the market.”
“She originally asked $255,000 for it, dropped the price to $240,000 and sold it for $229,500.”
“The deal came after Estes sunk $7,000 into a hot tub, $2,000 into a shed and thousands more into remodeling. ‘And we’re making $5,000 off the sale,’ she said.”
“Some real estate agents argue that home prices have been inflated for so long that a market correction is overdue. ‘I had a family that couldn’t accept an offer, but as the market continues to decline a little bit, they probably wish they had,’ said Cindi Dewine-Barebo, a residential real estate agent specializing in the Southeast Valley.”
“For Gary Brown, selling his two-story home in Chandler was a chore that he and his wife were anxious to finish. They put their 3,000-square-foot home near Ray and Rural roads on the market last Octoberfor $520,000 and sold it, twice.”
“The first deal fell through because it was contingent on the buyers selling their home, and that sale fell apart. After nine months of agent showings and open houses, the Browns sold the home in July for $60,000 less than their original asking price.”
“Brown blames himself for not following the advice of his real estate agent, Gotlieb, who urged him to price the house at $480,000. ‘You know, you get delusions of grandeur,’ he said.”
The Arizona Daily Star. “The slowdown in Tucson’s new-home market is far from over and may not turn around until 2010, a major local developer said at a conference.”
“‘We’re going to have to forget about 2008,’ said Don Diamond, chairman of Diamond Ventures. ‘I think 2009 will show the bottom, but not come up from the bottom.’”
“Steve Betts, president and CEO of Tempe-based SunCor Development Co and Diamond said builders were partly at fault for the overproduction of housing, and they expect lenders will shy away from providing builders with funding for large-scale developments. Builders will instead have to work with local development experts to plan future projects, they said.”
“‘We’ve had a lot of corrections because of speculation in the market, and that’s not good,’ Diamond said. ‘This time the builders are the speculators.’”
In Business Las Vegas from Nevada. “The median price of a Las Vegas home in September fell to its lowest point since January 2005 and recorded the biggest one-month decline at nearly 5 percent since the market peaked 15 months ago.”
“The $14,240 price drop to $285,750 in September is $29,250 below the peak of the market of $315,000 in June 2006, according to the latest statistics from the Greater Las Vegas Association of Realtors.”
“‘The price drops are a concern because we have a situation where buyers are very cautious, and sellers are forced, with as much competition as there is out there, to do what they can to move their property,’ said Devin Reiss, the Realtors’ president. ‘It’s typical until buyers feel more confident and there is less competition out there. This is a reality right now.’”
“There were 990 homes sold in September, a drop of nearly 25 percent from August and a 43 percent decline from September 2006. The median price of townhomes and condos also tumbled in September, dropping 8 percent to $175,000.”
“That’s 12.5 percent below the price in September 2006. The number of sales in September fell 25 percent from August and 51 percent from September 2006.”
“The negative numbers reflect the credit crunch taking hold and preventing a large number of buyers from obtaining financing to purchase a home. ‘Without money, this market is going into a freefall,’ said Chris Thornberg, a Los Angeles-based economist who tracks the Las Vegas housing market.”
“Given the foreclosure and high inventory, prices should continue to fall, said Brian Gordon, a principal of Applied Analysis, which tracks the housing market for the Nevada Association of Realtors.”
“‘I think it will continue until there is more of a balance,’ he said. ‘And when you have 40 foreclosures per day, it is difficult not to have downward pressure on prices.’”
“Las Vegas Valley homebuilders have been forced to slash their prices to lure buyers, and the credit crunch has worsened the problem as evidenced by an increasing cancellation rate.” “But the question is, if that’s the case, why don’t builders shut their operations down and wait for the market to rebound?”
“According to some of the analysts monitoring the Las Vegas housing market, builders have essentially done that. Builders are on pace to construct fewer than 21,000 homes by the end of the year, which is 46 percent off a high of 38,782 in 2005. They are also on pace to take out fewer than 15,000 building permits, less than half of the 30,149 issued in 2005.”
“But why not cut back production even further?”
“‘Builders can’t close their doors when sales are going poorly as they need to sell homes even if they are not profitable, said John Burns, a national housing expert. ‘You have interest on loans to pay back and people you have to pay and you have expenses,’ Burns said. ‘They will bring in revenue. Whether they are making money or not, they have to recoup as much as they can to pay down their debt so they can be in great shape to buy land.’”
“An example of what’s happening in the market is with Las Vegas-based private builder Astoria Homes. The company is holding its first sale this weekend in its 12-year history by discounting homes as much as $200,000.”
“Astoria Homes President Tom McCormick said companies like his stand to gain little by shutting down their operations even if they save their supply of land for better conditions.”
“‘We have good people and for us to keep those people, we need to keep selling homes,’ McCormick said. ‘This market will turn around, and when it does, I need quality people.’”
“The bid to build a master-planned development in Jean has stalled as a result of Southern Nevada’s current real estate slump.”
“MGM Mirage and American Nevada Company are partnering to build what has been announced as a master-planned community of single-family homes, condominiums, retail and a locals-style casino on a 166-acre site.”
“‘Very candidly, we’re struggling with what exactly to do there,’ MGM Mirage President Jim Murren said in a recent interview.”
“‘The economics of a lot of the residential development are not there right now,’ Murren said. ‘We’re fortunate that we’re not sitting on inventory like homebuilders are currently. But the pricing umbrella and the cost of construction have created a difficult environment to make residential pencil out right now.’”
The Lahontan Valley News from Nevada. “As local real estate agents wrestle with more homes being on the market because of fewer buyers, three subdivisions in Fallon have had their final plans approved.”
“When Diamond Creek Subdivision, Bighorn Ranch and a condominium complex in north Fallon are completed, the housing market in the city will be more flooded.”
“Bob Getto, of Prudential, Ferguson, & Getto Inc., said Fallon once was once able to attract home buyers from people selling their homes in other areas. The high number of foreclosures and people being unable to sell their homes have stopped prospective buyers from moving to Fallon.”
“‘Buyers generally have to stay where they are at because they cannot sale,’ he said. ‘It’s the law of economics. The more homes that become available results in lower prices.’”
“Getto said he is well aware of the three subdivisions in Fallon where construction has yet to begin. ‘I do not think the time is right,’ he said, mentioning there are already 235 homes on the market. ‘Now is not the time to do new developments.’”
lol !! day by day I see sellers and builders getting more and more desperate.. lol !! I like it..
“And we’re making $5,000 off the sale,’ she said”
I’d love to see the real numbers… closing costs, interest and whatnot; you’d see how much they’re “making.”
Right, the AR can’t work up the effort to ask about carrying costs for almost a year.
Which reminds me, now that values are dropping, there is no other way to look at a loan other than “renting money” from a bank.
That sucks.
The word “homeowner” is dishonest and misguided. Reading an article about the bill to forgive “phantom income” this morning I saw the word “homeowner” used over and over. It should have read “mortgage holder”. That would be far more accurate.
–
Come’n, are you implying that propaganda must be stopped?
Good luck.
And we have a govt. of the People, by the People, and for the People?
Jas
Even people who can put 20% down will be under water by 2009.
Jerry, gotta say I’d be thinking long and hard about putting 20% down in an area where few had done so. Need to wait and see what areas are going to have the best potential coming off the bottom.
“‘We have good people and for us to keep those people, we need to keep selling homes,’ McCormick said. ‘This market will turn around, and when it does, I need quality people.’”
I envy this guy his optimism, wish I had a good dose of it…wait, maybe it’s denial??
It’s interesting to see the builder that bails and the one who pushes on. Builders really are th eultimate speculators and have now turned on recent buyers and undercut them. People I know in the biz said this would never happen, but oh well.
The only thing that stops most builders is when the money runs out. That is the only time reality sets in. One local builder, DBA as, Heritage Homes, T-con, and Hertige Partners LLC, was finaly shut down last week, a notice of a sheriff sale of his remaining properties at Elk Grove and Antelope hills near Bozeman. About four months ago he was promising a sub-contractor that he had stiffed, “just what till the end of summer, I have all these projects lined up, I will pay you then.” “In fact you can do the floors all of the custom houses I will be building.” “You can make even more money.”
“sub-contractor that he had stiffed”
So does that make the sub the bag-holder, or just he just stiff his workers too?
I haven’t heard any stories from workers, yet. I know two sub’s that worked for him. Both only got half the money that was owed them.
At least they got half, that’s not bad!
Sign by the side of the road, in Durham, NC…”Skilled carpenter needs work”.
Around here, the skilled worker are in-fact the subs. Guys like Tim, contract them to do most of the work. The contractor’s crew is often a bunch laborers who are meth-heads from Belgrade or Four Corners.
So there are finally some bankruptcies in the Gallatin Valley? Given what I saw in late August, it is amazing that there haven’t been more… fields and fields of developments with scattered houses. Fields and fields of empty houses. 5-10 years of inventory I’d guess, depending upon how many construction workers leave town it could be much worse. But these guys got loans to keep building long after the market tanked.
Check this out, http://www.free-eco.org/articleDisplay.php?id579
Sorry, made an error, try this, http://www.free-eco.org/articleDisplay.php?id=579 This one few truthfull editorials about Bozeman’s market.
–
‘This time the builders are the speculators.’
They were making money hands over fist. They were meeting what turned out to be, and some of us knew all along, speculative demand fueled by over-speculative bankers’ desire to make fast money. When bankers turn into speculators the outcome is never in doubt.
Bankers were the source of speculation down the line – builders and “investors.”
Jas
I don’t think the builders have the vaguest idea of what they’re doing in vegas…
–
“There were 990 homes sold in September, a drop of nearly 25 percent from August and a 43 percent decline from September 2006.”
In Santa Clara Co. the SFH sales were down 25%, YoY, two months ago, then 35% a month ago, and now they are tracking down more than 40%. From the peak sales are down 60% in most parts of CA as opposed to 30% nationally.
Jas
I think your 30% drop in national sale is optimistic. Here in Bozeman, Montana anecdotes suggest that it is 50% or greater. Realtor offices on Saturday/
–
I juts look at the available data and the data, thus far, says sales down roughly 30% from the Peak in 2005Q3. It might change in the future and I do expect it to be down more than 60%, nationally.
Jas
By the way, Cinch, I saw that the Gallatin Valley “Realty Times” has finally admitted that they have a “buyer’s market” with declining prices. Things must be really, REALLY bad if even the Realty Times admits prices are dropping.
Also about bankrutcies, there is a developer who’s building a condo in Cinch’s neighborhood, 3-4 million in debt, only 3 condo unit sales in the last three months.
“The only sure thing about luck is that it will change.”
Bret Harte
“A Chandler man slashed his price by $60,000 to sell his home so he and his wife could move to Ahwatukee.”
Relative to what? If his starting price was $150K, then we’re seeing some real progress. This kind of reporting reminds me of that stupid old joke: “We have a partial score — Philadelphia 6.”
..even after installing carpet, remodeling a bathroom, upgrading the swimming pool and adding a $7,000 hot tub and a $2,000 shed.”
NAR aint stupid .. tell them to add a bunch of junk and so keep the sales price (meaning agent’s commission) as high as possible.. And, whatever you do, do not drop your price, Mr. Seller.
“An east Mesa women accepted about $25,000 less than her original asking price even after installing carpet, remodeling a bathroom, upgrading the swimming pool and adding a $7,000 hot tub and a $2,000 shed.”
Throwing good money after bad.
not if you’re the buyer
it’s like she’s a pledge at a sorority. I make the mess and you be nice enough to pick it up. you want to sell your house, no?
“Getto said he is well aware of the three subdivisions in Fallon where construction has yet to begin. ‘I do not think the time is right,’ he said, mentioning there are already 235 homes on the market. ‘Now is not the time to do new developments.’”
Ode to the King…
As liquidity dies
On a cold and gray Fallon mornin’
A poor little development is stillborn
In the Getto
And a blogger cries
‘Cause if there’s one more thing we don’t need
Is another empty house’s deed
In the Getto
People, don’t you understand
This housing bubble really got out of hand
In the Getto
http://www.youtube.com/watch?v=zmVFnhO3A98
“Bob Getto, of Prudential, Ferguson, & Getto Inc., said Fallon once was once able to attract home buyers from people selling their homes in other areas.”
Hey Bob ‘Ghetto’……..anybody ever tell ya nota good name to have in this busy mess (business)….or ya just ’slumming’ it?
Aladin : btw, I appreciate your custom’d lyrics. They make a cynical old b****** like me, smile.
Fallon is THE garden spot of northern Nevada! Why, you’ve got Stockman’s casino AND The Nugget! What else could be better than that? Oh, the sheep. I forgot about the sheep……
You got to be a complete moron to be buying at 15% off of inflated asking prices. What dopes.
I wish they’d use old tired out phrases, in lieu of the ones they use now…
mix it up a bit
–
“‘We have good people and for us to keep those people, we need to keep selling homes,’ McCormick said. ‘This market will turn around, and when it does, I need quality people.’”
We know that Mr. McCormick would try to retain his ‘quality people’ all they way into bankruptcy.
Jas
“In nearly every ZIP code in the Southeast Valley, median home prices fell on a percentage basis over the past year, according to Information Market. The biggest percentage drop was 19.4 percent in the 85297 ZIP code in Gilbert. Another Gilbert ZIP, 85296, saw a 15.2 percent drop.”
Funny, Maricopa County just jacked up taxes about 12%. Anyone borderline on their payments just got pushed over the edge. This is after several years of 2 digit tax increases. The golden goose is getting killed.
If you enjoy listening to unrepentant shills at work in the real estate and mortgage biz, listen to these characters from 12noon to 2pm Arizona time (MST) on Saturdays.
http://kknt960.townhall.com/
If you are in Phoenix, the radio station is at 960 AM. They are a hoot. One guy was bragging last Saturday about how he convinced someone to turn his residence into a rental because it “would not sell” (at bubble prices) in the current market, and then helped the same guy to “take advantage” of great builder incentives to buy a new residence. I am sure that this customer will be grateful.
‘You know, you get delusions of grandeur,’ he said.”
“and then…it went dark.”
hey tucson hbb’ers, i’m in need of some advice. my mom’s in tucson. she hates her house (so do i) and has enough $$$ to pay cash on something new. i know the market’s going down down down, but she’d be so much happier in a nicer house in a better neighborhood. i checked listings and they seem to go on forever. anyone have any suggestions on a ‘hood with decent homes, trees and yard space for doggies? or do you think she should just wait it out in her current undesirable house?
Here’s the Plunge protection out in the open
http://news.yahoo.com/s/nm/20071013/bs_nm/usa_credit_sivs_dc;_ylt=AuiFnYcu_sXjDyCkTAEe_6Ws0NUE
The US government is going to take 1/3rd of the banks gambling losses as colateral on fresh cash. Unfkn believable. Banks can then take the cash and go back to the casino thus propping up the market and slowing the housing collapse.
Ben said we aren’t getting a bail out so I am not worrying.
how much equity does she have in old house ?
old house is totally paid for (which is about the only good thing i can say about the place)
if shes so unfamiliar with the areas, why not move and rent for a while .. get a feel for some potentially nice or interesting new area or neighborhood.
Renting the old house month to month will pay for it or most of it .. instead of burning that bridge by selling the house or using a long term lease.
Happiness is way underrated .. i’d do something soon regardless of the market… and certainly try to avoid catching a red hot knife.
sell old house before doing anything
Sell the old house, then help her find a nice rental house for a year or two. Landlords would love a nice, elderly tenant. Bank the proceeds from the old house, check out property tax rates in a year or two, and you’ll have your pick of houses…and pay cash.
Just keep the landlord from talking her into renting to own
Brownie, you’re a Greedeur of Habit…
“Brown blames himself for not following the advice of his real estate agent, Gotlieb, who urged him to price the house at $480,000. ‘You know, you get delusions of grandeur,’ he said.”
Think of the hot water you’ll be in, if it doesn’t sell?
“The deal came after Estes sunk $7,000 into a hot tub, $2,000 into a shed and thousands more into remodeling. ‘And we’re making $5,000 off the sale,’ she said.”
Pwned,
I looked at the Tucson multilist a lot cause we were thinking of getting a “condo” there for the winter. Prices seem to be coming down from the highs of 2 years ago. The multilist is easy to use - plug in “residential”, , click on SFH, enter zip code and price range.
Most of the listings have pretty good pix and a map of location.
Hope she can find something you all like!
“There were 990 homes sold in September”
WHERE DO THEY FIND THESE IDIOTS!!!
I’ve got a nice home in Tucson, in a good neighborhood with trees and room for dogs, that I’m looking to sell. I own it free and clear, having purchased it for cash some 14 years ago. I raised my kids there. I am realistic about the price. If mom would like to see it, e-mail me (roynmartin@yahoo.com).
I’m sure the sad stories of a few have us all thinking that losing their house is awful, but the sad truth also is that many of these flippers are getting everything that is deserved. The notion that they can ride the wave of builders and low balling sellers then turning around for huge profits and now crying the bules for Chrysler like bail outs is down right un American.
That is what i’m saying,in a capitalist society you take your chances and sometimes you win, sometimes you lose, but the Gov’t doesn’t come running when you lose?