A Tremendous Price Problem
A report from the Arizona Republic. “The 3,050 recorded sales in September 2007 heralds in the local resale housing market’s traditional period of doldrums. The activity of September followed August 2007 at 4,240 sales and was below last year’s 4,875 transactions. The month of September brought the year-to-date total to 40,800 sales, which is well below the 52,390 for 2006 year to date and 88,750 sales for 2005 year to date, according to real estate experts for Arizona State University.”
“‘Even in an uninspiring market, there are potential buyers that cannot get the needed financing due to tighter mortgage underwriting guidelines,’ said Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness.”
“The combination of large inventories and low interest rates have enabled people to purchase more expensive homes, which is one reason the county median price has remained fairly stable. However, continuing concerns in the nonconforming mortgage market (mortgages above $417,000) have begun to adversely impact the move-up market.”
“Foreclosures and new homes are providing a competitive alternative to the resale home in many areas of the market. New home builders have been aggressively pursuing buyers through incentives such as specially priced up-grades, free pools and gift cards.”
“‘Because of these tactics, the 2007 resale housing market is showing signs of increasing weaknesses that could drive it below the expectations of even a few months ago,’ said Butler.”
“‘Brutal’ and ‘perfect storm’ are some of the descriptions local economists now use to describe economic conditions in Maricopa County.”
“I think this will be a brutal year,’ said Dennis Hoffman,an Arizona State University economist who helps guide sales tax forecasts for the state.”
“In an interview, he said ‘I think it has a lot to do with the fact that our local sales tax revenues are tied to this new house-new car phenonomen, decorating the house, doing maintenance and repairs and adding new carpeting, furniture and fixtures.’”
“‘It is kind of humorous when you walk on the (auto) lot. You are treated like the messiah returning,’ Hoffman said. ‘The deals are incredible. It’s a great time to be buying an automobile.’”
“Economist Elliott Pollack reiterated that the housing market is a serious worry because there are so many houses on the market and lending standards have become tougher. Also the housing slump could slow migration into the state because homeowners in other states can’t sell their houses to move here, he said.”
“‘We especially have a perfect storm in the housing market,’ he said.”
“Jay Butler, director of Realty Studies at ASU, said some housing prices are improving in some areas, such as east Mesa, and falling in others, such as Surprise and Queen Creek.”
“Apartment rents are stalling to fall, in part because of competition from apartments that were going to be converted to condos that are now reverting to apartments.”
“‘The housing market is structurally about where it should be,’ he said. ‘We have got to get the overhang down where it should be. That is going to take several years.’”
“The Southeast Valley’s housing market continued its slump. The Mesa ZIP codes 85213 and 85215 posted slight gains while the rest of the Valley’s home values fell.”
“‘There’s a gigantic inventory out there,’ said Cindi Dewine-Barebo, a real estate agent who specializes in the Southeast Valley. Dewine-Barebo estimated there are 56,000 homes for sale in the Valley right now.”
“‘In the heyday (2005), there were 7,000 homes,’ she said.”
“Dewine-Barebo said falling values represent an overdue market correction. But she tells sellers that they need to be realistic and not ‘get hung up’ on an asking price that doesn’t reflect today’s market.”
From Builder Online. “Ashton Wood Homes, the industry’s 37th-largest builder last year, reported yesterday that its orders, closings, and net income were hit hard during the three months ended August 31.”
“Like many builders, Ashton Woods finds itself in a bind, where it can’t sell homes without discounting, but where discounting only encourages buyers to think that lower prices are around the corner.”
“‘[T]he demand for new homes has declined as consumers continue to see home prices adjust downward, which has contributed to the weakening of consumer confidence,’ states Tom Krobat, Ashton Woods’ CEO.”
“During the quarter, the average sales price of this builder’s homes fell 7.9 percent, to $270,000, with the biggest dip - 33.3 percent - in the Phoenix market, to $305,000. ‘Phoenix is one of the more depressed [housing] markets, with a tremendous price problem,’ Krobat told BUILDER during an interview.”
The East Valley Tribune from Arizona. “Developers of the planned Gilbert Esplanade have sold the property, becoming the second builder of a major retail center to announce an ownership change in less than a month.”
“Officials with Phoenix-based De Rito Partners said they decided to sell the site at Gilbert Road and the Loop 202 Santan Freeway to an Ohio-based firm when it was unable to fill an anchor space.”
“Dawn McLaren, a research economist at Arizona State University in Tempe, said retail developers are feeling the new realities in the housing market. ‘Things have changed in Arizona,’ she said.”
The Review Journal from Nevada. “The Silver State had the country’s highest foreclosure rate for the ninth consecutive month in September. Monthly single-family home sales are falling dramatically against a staggering inventory of unsold properties.”
“The MLS has more than 30,000 single-family homes, condos and townhouses for sale in the Las Vegas Valley. Rick Brenkus, co-owner of two local Keller Williams Realty offices, sees uncertainty in both buyers and sellers sitting on the sidelines, holding out for a better deal.”
“Some potential buyers think this 18-month inventory of homes warrants a 20- to 30-percent price plunge, he said.”
“‘You have to get rid of that inventory before any real recovery can take place,’ said Dennis Smith of Home Builders Research. Yet at some auctions lenders have been unwilling to discount foreclosed properties more than 20 percent or 25 percent from listed prices, he wrote.”
“But Guy Deiro, president of a local real estate brokerage, auction and liquidation company, said he recently has seen more lenders and individual sellers willing to compromise. In the past month, he said, about 80 percent of the sellers accepted final bids at his auctions.”
“‘Lenders are starting to figure it out, what the story is in terms of where they have to go down to,’ Deiro said. ‘As the month goes on, everyone seems to get more realistic.’”
“Smith suggested lenders follow the example of home builders that have aggressively unloaded their inventory and move on.”
“The new home market has a much leaner inventory than the resale home market, about one to two months’ worth, McCormick said. Area builders sold 1,970 new homes in August, about double the number of building permits issued that month.”
“Presold properties have long been a mainstay for Astoria Homes. Nonetheless, the company was caught off guard when it lost about 25 percent of its buyers because of the subprime crisis.”
“‘These are people who had bought from us and told us they had a loan, and the lender went broke, so the buyer never closed,’ McCormick said. ‘That is why we had a sudden burst of inventory.’”
“Astoria Homes bolstered its financing promotions with other incentives, including lot premiums, customized upgrades and discounts that created savings upward of 15 percent off the sales price, he said. The builder expects to sell its remaining homes, which totaled about 60 early this month, by the end of the year.”
“The Greater Las Vegas Association of Realtors reported 990 single-family home sales in September, down 24.8 percent from the previous month and down 43.1 percent from September 2006.”
“As a sign of the times, Brenkus, with 22 years in the business, estimates that 20 percent of the properties his offices handles are foreclosures or short sales, up from about 7 percent a year ago.”
“The stumbling housing market has tentacles that could reach into every household in the Silver State.”
“From thousands of lost jobs to widespread housing depreciation to a dip in the revenue flowing into state and county coffers, the fiscal fallout of a lagging housing sector is settling across Nevada’s economy.”
“‘All sectors are feeling the effects of (greater delinquencies and dropping home prices),’ said Brian Gordon, a principal in the economic research firm of Applied Analysis. ‘It’s impacting the willingness of consumers to spend on discretionary purchases ranging from automobiles to dining out to gaming, and everything in between.’”
“Clark County’s construction sector shed more than 4,100 jobs between the first quarter of 2006 and the first quarter of 2007, according to the state’s Department of Employment, Training & Rehabilitation.”
“Pile on job contractions in real estate-related fields such as title insurance, mortgage banking and property appraisals, and the effect on consumer spending becomes more acute.”
“More than a fifth of loans made in Nevada in 2006 were interest-only mortgages with payments that will rise in coming months and years, according to LoanPerformance. Another 17 percent of the loans made here last year were option-ARM mortgages.”
“Falling home prices are also vaporizing assets: Every 1 percent drop in the median single-family home price costs Clark County homeowners $800 million in household wealth, said Jeremy Aguero, another principal at Applied Analysis. Toss in condominiums and town homes, and the impact approaches $1 billion, Aguero said.”
“The median price of an existing home in Las Vegas was $270,000 in August, down 6.6 percent from $289,028 in August 2006, according to SalesTraq.”
“Nevada’s revenue from taxable sales has declined three months in a row, falling 2.6 percent in July when compared with July 2006, and 0.3 percent in June when compared with the same month in 2006. May’s 3.6 percent slide in year-over-year revenue was the biggest drop since December 2001.”
“Tyler Corder, (a) car dealer’s chief financial officer, knows of a ‘fair number’ of consumers who plan to avoid auto purchases until they can sell their homes.”
“‘They’ll say, ‘My house has been sitting on the market for 90 days and I haven’t had any offers on it,’ Corder said. ‘I know of a few people who bought second homes as speculative properties, and they’re having difficulty renting out their homes or unloading them.’”
‘Outright fraud was partly responsible for the foreclosure crisis…That’s the consensus among three Las Vegas policemen from the department’s financial crimes section who spoke to the Review-Journal about a rising tide of mortgage-related crimes, including identity thefts costing as much as six figures per crime.’
‘In late September Sebby’s men were chasing a perpetrator who used the identity of a 9-year-old California girl to take out a second mortgage on the house where he apparently lived in Las Vegas.’
‘He didn’t own the house, but got the lender’s money anyway. The crime wouldn’t have been discovered any time soon except that the girl’s parents tried to open a bank account in her name, which led the bank to run a credit check.’
‘A leaked memo shows a plan by Governor Jim Gibbon’s office to cut state budgets and reduce services by five to six-percent. It also includes a hiring freeze that would start immediately. The governor’s office had no comment today. But Budget Director Andrew Clinger tells Eyewitness News the snowball effect on sales still has to do with the nation-wide housing crisis.’
Why are prices sticky? Because of people and advice like this:
‘Michel Maalouf remembers when homes in the Las Vegas Valley were going for $50,000 to $60,000. It was about 16 years ago, and he and his wife, Mirna, started snapping them up. Today, they own more than 40 residential properties, many of them fully paid for, all of them rentals.’
‘I don’t care if it makes money on a daily basis. My concern is the long term,’ he says. ‘We buy only good deals.’ Their latest buy is a two-bedroom, two-bathroom condo near South Eastern Avenue and East Flamingo Road. ‘The guy needed to sell, we offered him cash,’ Maalouf says. ‘We got it for $30,000 or $40,000 less than it was appraised.’
‘Homeowners who do not need to move should reconsider placing their properties on the market. And even sellers who must move should consider renting their homes rather than listing them in a down market, agents say. Sure, with thousands of investment properties on the market, competition could make it difficult to set rent high enough to recoup mortgage, title insurance and property-tax costs. But covering even some monthly expenses might pencil out better than letting a home sit vacant for months.’
‘Tallying equity is key to determining whether renting is a smarter option than selling, West says. A person who owes $50,000 more on the mortgage than the home is worth might need to rent for two to three years before the home’s value has increased enough or before he or she has built up enough equity to pay off the bank and break even. If the owner rents the home, he or she might lose $300 or $400 a month. But even over three years, the loss on rent would total roughly $7,000 to $15,000, considerably less than the loss the owner would sustain if he or she sold now.’
‘Renting at such a monthly loss makes less sense for the homeowner who is upside down on his mortgage by $10,000 or less, West says.’
9 year olds as strawgirl buyers?
Financial pedophilia.
So what, Like this nine year old had a 770 score and 4 revolving accounts all paid withing 30 days?!?? Forget the perpetrator let Sebby’s men chase the loan company that approved the second!
I was thinking the same thing. If they only looked at the birthdate, they would know something was wrong, Ergo, the loan company was IN ON THE FRAUD
Our privacy laws may facilitate this. If there is no master “info” they probably went along with what _he wrote_ was the birthdate.
If a bank could easily lookup by something line SSN# and get all your info - then it would have been flagged.
There are multiple issues at work. The bank is clearly at fault as they consider all lending risk free and Uncle Sam is going to insure them
Ah renting, the pancea for the unwitting. Sure you can write off that $500 monthly loss on your taxes but when you sell you get to pay depreciation payback so you’d better hope the home went up in value or you still get to lose thousands.
And consider the depreciation of a new home that’s been rented out to 5 construction workers.
Theres a reason I don’t rent to groups of young men or young women for that matter.
Around the University of Arizona are quite a few houses that have been purchased as “investments” during the past few years. The idea is to get Junior or Ashley into something “nicer” to live in. As in, “nicer” than those awful dorms.
The reason why I’m using the quotes is because these houses are anything but nice. So, when it comes time to sell, I think there are going to be some very unhappy “investors.” Fixing up a student dump isn’t exactly cheap, and that can really bite into the resale profits. If there are any.
We have them here too Slim. I call them Daddy houses.
As a matter of fact the Streng I rent was a Daddy house for our dear LL’s precious son who trashed it and flunked out of UCD. The LL couldn’t sell it in 1990 to 1999 and not take a huge loss so they hung onto it rented it to yet more students who trashed it even more.
We got it cheap and the LL is thrilled have someone there who can do basic maintenance. That’s why we stay.
We’ve done a ton of work on it most because I can’t stand watching a mid-century home die.
The LL then leveraged their way into 2 more properties in 01 & 02. Both the homes are slowly being killed by students. The LL has talked about getting of these rentals each year and then they look out how much the out of pocket would be for repairs so they give up. They want top $ so no AS IS sale would work. They are retiring in 3 years so they are hoping we’ll stay until then as they they have no intention of holding property past retirement age.
Frankly, they might gave gotten 600K for it in 05 but they were too lazy and too cheap and that price isn’t going to be coming back around.
‘The MLS has more than 30,000 single-family homes, condos and townhouses for sale in the Las Vegas Valley. ‘You have to get rid of that inventory before any real recovery can take place,’ said Dennis Smith of Home Builders Research.’
‘The new home market has a much leaner inventory than the resale home market, about one to two months’ worth, McCormick said. Area builders sold 1,970 new homes in August, about double the number of building permits issued that month.’
This helps to make my point from the previous thread about how artificially high prices encourage the continued overproduction of housing, even into the face of a market killing glut.
The only way to get rid of that kind of inventory is the way they did it in Texas during the last bubble- with bulldozers.
Sadly, I must agree. We will have to bulldoze quite a bit of inventory in many states. But that will leave quite a bit of cleared land on otherwise empty roads ready to be built into decent homes. But how much does it cost to demolish a foundation in order to have a decent size yard?
Got popcorn?
Neil
That would be an interesting topic. I have no idea what demo costs are. Do they do it by sq.ft?
I’d love to bulldoze one of the small 900 sqft trashed Daddy houses and put a beautiful modern prefab on the lot. http://www.dwell.com
They’ll turn them into Section 8 ghettos before they demolish them. The last thing the crooks in charge want is affordable, modest, well-built houses on decent lots where people can raise their family, play in the yard, and maybe grow a garden in peace. If people have that, they won’t be as likely to feel angry or as if something is missing in life, so it will be harder to control them or convince them to buy more crap they don’t need (and get deeper into debt to do so).
This is exactly why we are going to see people walking away from properties even if they can make the monthly payment. No one is going to rent a home at a loss of “$300-$400″ a month. That number, if it is based on anything, doesn’t take into account the other expenses of being a landlord other than the mortgage. The mortgage holder is better walking away and taking the credit hit.
I think we’ve seen that people will rent at a loss, for a while, anyway, as long as they have expectations of a future profit and their finances hold out. But eventually, they tire of the losses and bail.
And now, with those expectations dropping by the day, that cycle will continue to shorten, IMO.
But eventually, they tire of the losses and bail.
My lease ends in October, the landord (purchased 2005), has no idea what she wants to do with the house, sell, rent, bail, etc. We are just going to go month to month as long as we can and move when we have to.
That last article makes the assumption that the property will return to the price at which thay bought it (the top) and then appreciate enough to cover losses in rent and maintainance over the next two to three years. Why do they print that stuff?! In two to three years we might (bigtime maybe) reach the bottom of this market. Tack on another 5 to 7 years for the home to appreciate back to ‘05 levels. Now, that’s using a typical 10-year housing cycle into consideration. This is the bubble of all bubbles, so all bets are off. In 10 years that investor is going to be, not tens of thousands of dollars in the hole, but hundreds of thousands of dallars in the hole. (the article also makes no consideration for the vacancy factor. Houses in NNV are taking up to 12 months or more to rent. It takes forever here for “for rent” signs to come down. I was talking to my property manager the other day, and she said in the 25 years in the biz, she’s never seen the glut of rentals we have currently)
Truly idiotic advice from LVRJ.
That last article makes the assumption that the property will return to the price at which thay bought it (the top) and then appreciate enough to cover losses in rent and maintainance over the next two to three years. Why do they print that stuff?!
Because that’s what their real estate advertisers want them to print?
I used to work for the REIC propaganda machine. A significant portion of the Phila. Inquirer’s ad revenues came from real estate related businesses. But besides the advertising angle, I believe that not one editor or writer on the LVRJ paper truly comprehends the scope of this debacle.
When it looks as if there’s no recourse but to parrot some of the reality-based news coming out of the major mainstream news outlets, the LVRJ may start to print something closer to the truth, just to save face.
But I’m willing to bet no one on their editorial staff has crunched the numbers or even done even the most perfunctory research on historical real estate cycles. It’s hard for me to believe that they recognize this as the “bubble of all bubbles”, as you accurately describe it.
hah - we have investment property that we’re renting out. i’d never rent at a loss unless i knew 100% i could sell it for a tidy profit at anytime. renting at a loss while you’re upside down? that’s insane in the membrane. you’re stuck in a lease, your hands are tied. plus what happens if the boiler goes out - do you have $3 grand lying around to spend on that? totally nuts!
“I used to work for the REIC propaganda machine. A significant portion of the Phila. Inquirer’s ad revenues came from real estate related businesses.”
As is the case with the San Jose Mercury News. Up to the point builders started to cut back and then we started to see cases of Mortgage and Realtor Fraud….
Since 1999… RE has been the Boom industry in the land of HiTech…
Here is a great example of the stupidity I see in the central valley.
http://sacramento.craigslist.org/apa/451024563.html
This house has been for rent since last Dec. The original asking rate was $2400 month. As far as we can tell, there is someone there now to make sure squatters don’t come in.
Earlier in this year a home a couple of doors down, slightly smaller, rented out for $1550 (was 1600 but the tenants got it reduced because they had no pets and no children)
So whoever owns the place is renting it out at a huge loss while hoping for a smaller loss later on. It’s completely nuts.
I agree, house prices may be the same in 2020 as they were in 2005. Very likely, the price in 2015 will be no higher than 2005.
Given dramatically changing demographics, skyrocketing energy costs, and an almost guaranteed lowering of general American living standards… well, you might *never* see 2005 prices again.
–
There was a “Price Problem” on the way up that didn’t bother most and now there is a “Price Problem” that is much hard to come to terms with.
Jas
“‘Even in an uninspiring market, there are potential buyers that cannot get the needed financing due to tighter mortgage underwriting guidelines,’ said Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness.”
I was schooled by d’ Morrison…
http://www.youtube.com/watch?v=9o8imhSKXzk
I’ve said it before…
The “appreciation” from 2004 to 2005 was what did Arizona in - some houses went up in “value” by 50%. So the $200k house was $300k in 12 months.
If we are EVER going to get back to a “normal” market here, that imaginary appreciation will have to be taken out of every single house. In my older ‘hood, I saw about a 25% jump 2004-2005, and now it’s gone. South Chandler is where the 40% to 50% craziness happened over that period, and now all those $500k houses are going to have to get back to the realistic value of $280k to $300k, in line with the steady long-term 5% to 6% that this area can support. New houses priced at 2005+inflation just need a flat out 50% price cut.
There are really tons of buyers out there, just not at crazy prices. Realtors - do your job and make a market! If the sellers are delusional, refuse their business. Isn’t that what all the training and “education” you get at Century 21 academy is for?
“Some potential buyers think this 18-month inventory of homes warrants a 20- to 30-percent price plunge, he said.”
…..and they would be correct, short term. Long term warrants 40 to 50 percent price plunge.
My sister’s place went nowhere for 9 years, then rose 150% in less than 3. Given the massive overbuilding during that same period, 50% off isn’t nearly enough.
Right, I read somewhere that in one quarter of 2004 or 2005 the median went up 44% in Phoenix.
Also, Mr Butler, higher home prices aren’t an ‘improvement’ and it’s that kind of Californication of RE in this state that we are beginning to pay for now.
I think that was Q2 of 2005 - houses selling in hours, contracts written on hoods of cars, etc. I remember getting 3 or 4 pieces of junk mail a day for cash-out refis, “equity liberation”, and so on, and 3 or 4 realtor cards stuck in my front door every week - “Do you want to sell this house?”. At one point there were 4000 active listings in the entire metro area (now 60,000 plus)!
I want to buy a larger house, and so far not a SINGLE seller has priced reasonably. Did EVERY ONE of them do a cash-out refi or HELOC, or is the force of greed just too strong? I can wait.
5% to 6% is typical for Arizona? Wow…I should move there, based on the assumption that my wage will increase 5 to 6% annually. I can’t think of an industry where wages increase 5 to 6% long term (15 to 20 years).
I was thinking the same thing… Someone would have to show me hard numbers before I believe the historical mean housing price appreciation rate in Phoenix is truly 5 to 6 percent. More likely 2 to 3 percent, and it will become long-term depreciation if and when the water crisis kicks into high gear.
I realize that this comes from a realtor website, but I’ve seen similar charts elsewhere, showing a decent 5% annual rate from 1994 to 2004 before things blew up. I think most buyers would be willing to pay pre-2004 prices + 5% annual for an existing “close in” house in the Phoenix metro; unfortunately the sellers still want to include the crazy 2004-2005 jump. Now we’ll need several years of -5% or more to revert to the mean.
http://www.phoenixrealestateguy.com/arizona-home-appreciation-historical-chart/463
About that impending water crisis in AZ - how come we’re ok and Atlanta is 2 months from completely running out? The key is to understand that as AZ farmland is converted to housing/businesses, the water use per acre acually decreases for that specific land. Now, once all the farmland is gone and the growth is exclusively on native desert, things could change.
Sure, wages will go up 5 to 6% annually; once B2 (Ben Bernanke) is done trashing the dollar, we’ll have inflation running at 20%+ per year if we’re lucky and don’t go straight to hyperinflation!
“I can’t think of an industry where wages increase 5 to 6% long term (15 to 20 years).”
Try baseball and basketball players. I personally think they are way overpaid.
Vegas is always on the brink of a bust good or bad, the base of the economy is very weak, to many small business owners and then you have that gaming industry just what you want in life , your whole world gone forward or backward based on a roll of a dice from hotel casino’s that they will have a profit at the end of the week?
How is the “gaming industry” AKA Gambling doing in LV? When times are tough, is there more or less gambling? I would guess more business at Bars & liquor stores.
In FY 2007 (7/06 to 6/07), Vegas recorded about $10.7 billion in gaming revenue (net amount won), a 5% increase over the previous FY. Overall, gaming revenue can be somewhat cyclical but it tends to be correlated to tourism. Vegas does have one unique advantage in that SoCal and its 20 million people are only a few hours drive away.
Current numbers are posted monthly. I wouldn’t read too much into short term trends; there can be a lot of different explanations for why one month’s revenue is higher or lower. Major events, holidays, weather, even the calendar (determines number of weekends in the month).
I was there after 911. They laid off thousands of people at the drop of a hat. There is no job security in gaming, none.
Not much security within the casinos, after 9/11 either…
We were at the Rio a year ago, and watched as one person after another wheeled their suitcases/bags on the carpet right through the casino, to the elevators, to get them to their rooms.
A total psych 101 move, having it like that pre 9/11 showing em’ the casino, but dreadfully stupid after 9/11, and it never got fixed, because it was “unfixable”.
Now just about anything could have been in those bags, and who would know?
I have to take off my shoes at the airport, and this is allowed?
What discount??? The price of the homes being discounted were raised to unreal numbers during the boom another smoke and mirrors. Example:
New homes go to trailer>> price from 400k to 550k two weeks later same homes from 600k to 850k, now the builders are discounting from the 600k and up how about you dicount from the 400k and up?
Yep, we’ve just encountered “we’re being reasonable, we’re willing to meet halfway” thing first hand. Offered $60k for a lot listed at $80k, they countered at $71… and justified this price with a couple of comps from this past spring (not many lots available in this older neighborhood). So if the comps say $70 is a reasonable price, why the heck were you starting at $80k? The market has gone DOWN since the spring, this lot has been on the market for a year, and even $71k is above the best comp.
To be honest, we should have done a bit more homework before offering $60k. This is a nice “in fill” lot in a great neighborhood, but given the glut of high end homes and lots it will probably sell for substantially less than $60k in a year or two.
So counter lower. Offer 55k.
“Some potential buyers think this 18-month inventory of homes warrants a 20- to 30-percent price plunge, he said.”
How DARE they!! Stupid greedy bottom-feeders! (*stamps feet, huffs & puffs*) Mommeeeee….!!! Why aren’t they buying?!? I tool a whole 6% off!
“‘You have to get rid of that inventory before any real recovery can take place,’ said Dennis Smith of Home Builders Research. Yet at some auctions lenders have been unwilling to discount foreclosed properties more than 20 percent or 25 percent from listed prices, he wrote.”
Funny how a simple recognition of the blindingly obvious (sellers must actually accept the winning bid in order to move product) can seem like such a revelation in this absurdly rigged game known as the RE ‘auction’ world.
Resale houses in The O.C. are right on track for a 30+ percent plunge in one year’s time (median off 11 percent from June 07 through Sept 07 — can’t wait to see the Case Shiller S&P numbers…).
Jumboliar Loan, Bayou?
“The combination of large inventories and low interest rates have enabled people to purchase more expensive homes, which is one reason the county median price has remained fairly stable. However, continuing concerns in the nonconforming mortgage market (mortgages above $417,000) have begun to adversely impact the move-up market.”
OT
First good news day for Intel in so long.
My Intel crop got “joshed” years ago.
Been hanging on. Holding.
Oh up 78
Im going to buy that new sony lens.
Maybe.
Some of intel’s “growth” comes from the lower US $. Buying multinational companies like intel can help offset the US $ risk.
And some of their growth and profit is because they make the chips in China and exported those chips to the Euro nations.
The Yuan is down 3% to the Euro.
Intel fabs (nanotech) the wafers in CA and NM (USA), Ireland and Israel, chip packaging (low tech and labor intensive) is in Malaysia, China, and soon Vietnam. Packaging and testing are a minor proportion of cost. Intel is building a chipset plant in Dalien China but that won’t be online until 2009. Intel is a BUY. target $30 by Jan.
“Intel’s cooperation with local industries endorsed the company’s commitment to Chinese market. Since its entry into China in 1985, Intel has over 6,000 employees on assembly and test research and development and sales and marketing in 16 cities in Mainland China including Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Chongqing, Shenyang, Jinan, Fuzhou, Nanjing, Xi’an, Harbin, Zhengzhou, Kunming, Urumqi and Wuhan.”
Established in 1996, Intel Products (Shanghai) Ltd. is Intel’s first assembly and testing facility in China which is located in Waigaoqiao Free Trade Zone of Shanghai Pudong New Area. In 2005, a R&D facility Intel Technology Development (SH) Ltd setup in the same campus, which further demonstrate Intel’s commitment to support local technology development.
There are three factories in Pudong, namely flash memory device, chipset and CPU factory. The facility provides the world’s top assembly and testing services for flash memory chips, chipsets, Pentium® 4 processors and the most advanced Due Core microprocessor with 65 nanometer technology and other high performance chips that are used all over the world. The Shanghai facility is now handling 300mm wafers for the first time in China and is assembling and testing products constructed with Intel’s leading edge 65 nanometer technology. By now, the facility has over 3,500 employees, and has cultivated a great number of knowledge workers that master the world-class chip assembly and test technology. The facility also becomes one of the most valued export bases (in dollars) in Shanghai. The R&D groups are doing some technology development, focusing on Flash silicon design, Chip package development, and Digital Home system development.
From Intel.com
You should do research before investing.
Packaging is assembly and test. Nowhere in the above says otherwise. Intel sends 300mm 65nm processed wafers to China to be sliced and diced..in compliance with US export rules. I think I know Intel.
I’ve made millions and lost millions playing INTC.
“There is one testing facility and one assembly development facility inside the U.S.”
Intel.com
I have neither invested in Intel nor wish to invest in Intel, it does not match my type of investment criteria.
And the wafers are as you pointed out made in the US. The rest of the jobs are being exported or have been exported.
I lost 1.5M one day and have never ever let myself get caught in crap positions again. Since then :>)
And eventually, all the jobs (Intel and otherwise) will be exported. The only job left will be fat-cat executive and other-people’s-money Wall Street high roller. That will be the America of the future.
Santa Clara County CA aka Silicon Valley hasent seen chip production by Intel AMD or anyone for nearly 15-20 years … not since 1988 or so … the high prices back in the 80s forced many to relocate production overseas … with mfg gone since the many decades ago.. Intel and many others have for the past 5 years moving out SV in R&D to other states and as noted above … China and Vietnam… heck why pay $120K plus benefits when you get the same with out govermental regulation for 1/10 the cost. Yes folks engineers cost only 12K in the 3rd world.
“all the jobs (Intel and otherwise) will be exported”
Thats has already happened for the past 20 years here.. and is continuing to happen today…
All the clowns who purchased $120K homes and bid them up to $1M over the past 10 years are real idiots….
The more I think about this situation, the more I shake my head.
Many people are walking away from their homes. Where are they going?
Car sales are in the dumps, food and energy are rising.
Those that are barely hanging on will have little incentive to do so if costs continue to spiral above what they can afford.
Federal, state and local goverments are losing tax base at record levels.
This mess is larger than I can wrap my head around–sigh.
The best thing about messes is that they eventually end and things eventually improve.
You’re a sweetie.
Thanks,
Leigh
I agree Prof G. S. Bear somehow, some way we will muddle through this mess and end up stronger.
maybe we could lose some gov programs
my county has a dept of womans affairs, seems vital
Hoz,
I value your views on this mess.
Realistically…………just how bad will things likely get?
Luvs_footie,
I am personally skeptical of my own views. I do my own research, I do my own graphs and charts, I do my own number crunching and I try to be lazy.
My views make the most pessimistic views on the HBB look like a cake walk. God, I hope I am wrong. I look at the same data points the Federal Reserve looks at, I get different results. (I do not care about M1, M2, M3 - they are canards.) The Federal Reserve controls $45B or so, there are $13.5T in loans outstanding that have nothing to do with the Fed Funds rate. As far as the US economy is concerned the Federal Reserve has become powerless. There are no impediments to banks creating moneys.
The US is technically bankrupt. An incredibly hard thought to grasp with so much apparent wealth within a stones throw. The easiest way to envision the entire economy is as a single individual “check kiting” to cover sundry purchases. There is no real moneys in the account just playing the float.
We are all aware that manufacturing jobs have been exported. The standard economic reply has been “The US excels in financial industry and that picks up the slack”. This may have been true for a while. But since 2003, the US has been a net exporter of financial jobs. So the mantra in todays financial world is “Go where the money is”! Asia
And the money is not in the average Americans pay check. The average American’s pay when adjusted to CPI inflation has been cut at a time when all “real items” are rising in price. By extrapolating job losses, salary and wages, cost of “real items” and CPI inflation, I attempt to get a glimmer of economic health for an area, region, city or industry. It is by no means perfect.
This imperfect scenario shows that the US has been in a crappy economy for the last 7 years and it is getting worse. I regard the last 7 years as a recession - falling incomes, loss of higher paying jobs, GDP growth non existent. The US had a chance in the bubble market collapse in March of 2000 to let the excesses wash out of the system. It may have meant a Recession lasting 2-3 years. Now we all have to pay the piper. We created a debt that is nay impossible or likely to ever get paid.
Bankruptcy. Loss of jobs. Falling asset prices. Corporate failures. (I am of the inflation/hyperinflation persuasion, I can also argue the deflation side - time will tell).
When I was a child, I asked my father who he was going to vote for. His response was “the people in office”. I asked ‘why’ and he said, “when they are through stealing what they need, they will provide good government”. Today there is no end to the thievery in every aspect of government. In Texas the judges offices are elected and I believe in the last election two candidates spent $3M each for a position that paid 50K/yr. Campaign contributions are legal income and the candidates received 10M each in contributions. Prepaid bribes? I laughingly remember Mr. Mike Royko writing that Chicago’s motto was “Where’s mine”, now it is the nations motto and unfortunately the many persons that believe there is a free lunch.
Agree with you Hoz. I also have fond memories of reading Royko with my grandfather. My grandfather calls the current economy a “high-class” depression, and I agree with him. He came of age in the first depression, so I trust his judgement.
btw - Got my PhD from UW-Madison (hence the handle). I really loved Madison, and if there were jobs in my field there, I probably would have stayed.
Right there with you, Hoz. I don’t predict a depression lightly, but it’s not like the evidence isn’t there and mounting daily.
It’s difficult to describe to people for many reason, but I find the biggest is this: There’s no one thing to point to — no “smoking gun”. Instead, it’s one of those “overwhelming circumstantial evidence” kind of things, and that just isn’t that easy to grasp when you’re talking macroeconomics.
A close second is simply psychology. Mass psychology works just as effectively to exacerbate a bust as it does to amplify a boom, yet somehow people assume rationality will prevail in the future.
Dare I even mention the all-powerful “they won’t let it happen” mantra?
And we don’t even have a state budget in Wisconsin yet! (Only 3 months late.)
And we don’t have our September installment of our property tax bills here in Cook County IL because the state is just figuring our the homestead exemption rules.
nor a state budget. Nor a county budget.
I read up on that Hoz…it’s not looking good.
On Monday, the Senate passed Doyle’s proposal, but the Assembly rejected it on a 53-44 vote that crossed party lines.
And the longer it takes, the further into the hidey-hole evader’s decend. For the love of Jeesh.
Ya just can’t make this stuff up!
Leigh
Fortunately our state still has to print every official document in German so that those of us in the hinterland can still try to understand how we’ve been reamed.
True.
With plenty of brats n’ beer, Packers and deer hunting, joe6pack has little need of a state budget until the frigging State declares Total Bankruptcy and closes the Bars
Where are they going? Well, Sun Communities, a company that runs about 100 trailer parks just had a blowout quarter, business is booming. The American dream is being downsized a bit.
“‘Even in an uninspiring market, there are potential buyers that cannot get the needed financing due to tighter mortgage underwriting guidelines,’ said Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness.”
He has it backwards. The GFs who drove prices through the roof circa 2005 cannot get financing due to tighter mortgage underwriting guidelines. Hence the market has ‘lost its inspiration.’
Brutal? Perfect storm? What happened to “soufflé” ?
Brutal? Perfect storm? What happened to “soufflé” ?
It’s in the same barrel as “contained”
I also noticed a while back that the “staring contest between buyers and sellers” metaphor had been chucked.
“The 3,050 recorded sales in September 2007 heralds in the local resale housing market’s traditional period of doldrums.”
Holy cow!! I don’t call this the ‘doldrums’ I call it the height of insanity. Perhaps, 300 sales at the current pricing would be in the doldrums.
As for the great state of NV, you should be getting a state income tax sometime in 2008 to help support the infra structure costs incurred by the housing boom. You will need to suppor the schools, fire, police, libraries, etc.
You should consider the inventory.
‘Dewine-Barebo estimated there are 56,000 homes for sale in the Valley right now.’
And that’s not including FSBO, many new homes, nor FB’s renting at a loss.
Dream on. A personal state income tax in NV is a non-starter; witness the 2003 battle over the state budget and new business taxes. “No income tax” is a point of pride which attracts people from other states. Anyway, the state budget for the next 2 years is already done (passed in May).
Gaming taxes already cover an enormous amount of infrastructure. Local costs are additionally covered by county assessments at the DMV (registering a car in Vegas is incredibly expensive).
“A personal state income tax in NV is a non-starter”
Agreed - Nevadans can be really stubborn and most that I know consider not having state tax a point of honor. The only way to get something like that through is to have the state become peopled by Californians by 60% or better…. doh! that may have already happened.
“Tyler Corder, (a) car dealer’s chief financial officer, knows of a ‘fair number’ of consumers who plan to avoid auto purchases until they can sell their homes.”
“‘They’ll say, ‘My house has been sitting on the market for 90 days and I haven’t had any offers on it,’ Corder said. ‘I know of a few people who bought second homes as speculative properties, and they’re having difficulty renting out their homes or unloading them.’”
Great find Ben. Its showing that this problem is far from contained. Yesterday I took the day off (due to incredible hours required tonight) and went Christmas shopping. The jeweler noted that it was her worst year of business (she bought out the shop in early 2002).
When I received a business phone call, I walked around to find a quiet spot (too much stone flooring) and was shocked to see every salesperson looking at me with begging eyes to enter their shop. Quite bluntly, it scared me away.
A group of us met at our favorite “Yuppie burger joint” for lunch. Half empty. Whiskey Tango Foxtrot? Normally at a workday lunch there is a 20 minute wait (or more)!
This ain’t your fathers downturn.
Got popcorn?
Neil
Xmas shopping you SAY!!! Good grief Neil, I don’t even have my pumpkins butchered..Ooops carved yet
really ???
“Jay Butler, director of Realty Studies at ASU, said some housing prices are improving in some areas, such as east Mesa,
FL and NV Speculator Meltdown Alert!!
My friend who bought those 7 houses in FL and Vegas then sold the same multiple deals to friends, family and church is finally starting to panic this week. What’s amazing is how mad she is at me for telling her about this blog a year ago and what you guys were reporting as she was still buying. Total denial. Says it was impossible to predict the current situation and I am a coward for not investing too - just sitting on the sidelines reading blogs telling her what to do. She tried to get me to buy in 2005 in FL and I was researching and found this site.
She went from $400,000 in 2003 to $1.5 million and counting in debt today. Found out her source for info in FL was the builder’s daughter renting one of the houses she could not sell! She did not want anything to do with this blog. Said it sounded too negative…
Not the first nor will it be the last person that will take down their families and friends earned moneys. Sad for family and friends.
Had a post “eaten” late yesterday so I’ll post an encapsulated version. I had to drive into the San Fernando Valley area of Los Angeles yesterday. A litter strewn section, complete with abandoned sofas and soiled mattress’s and used diapers dumped on the side of the road along with beat up cars and mexican women dragging three or four kids behind them. This is an area which is basically low income older whites and a lot of mexicans. Many of them illegal.
At one point, I passed a line of people holding bulky trash bags. There was probably about 50 people. They were lining up at the scrap collection point to cash in the aluminum cans they had pulled from the trash.
A little further along, I saw a construction site with almost finished condos or townhouses. On each side, there were old shi*ty properties bordering on slums. Before I reached the part where they had a board quoting the prices along with the fancy name of the project, I took a guess at prices. I figured something crazy like $250,000 to $300,00 which, of course, they will NEVER get. Then I saw the board announcing the project and the prices.
Please sit down because you might get dizzy from shock. The cheapest property was $725,000!! Are these builders fooking nuts! Who would even want to live in a shi* hole area like that? I would think that 90% of the residents are renters. The area is crime ridden and it’s NOT safe to go out after 8 o/clock at night if you’re white. The whole area is made up of crappy apartment buildings built in the 50’s, in need of a good paint job and a LOT of repairs. The rents are in the $500 to $700 vicinity.
Conclusion: Get ready, people, The USA is going to be in for a very rough financial ride over the next few years and I think it will totally change the country to something most of us over the age of 50 never imagined and it will NOT be good.
Trash, both human and otherwise, everywhere… filth piled up by the road. Abandoned homes at insane prices that nobody would want even if free… no jobs… no hope.
Yep, this is the new America - the America our wonderful leaders and banker masters have created for us. How kind of them…