There Is An Oversupply, And Demand Is Just Not There
The Columbus Dispatch reports from Ohio. “C.V. Perry & Co. spent the better part of six decades turning the fruits of its customers’ labors and good fortune into dream homes. That was yesterday. Today, the company is gone. Some of the homes that bear the company’s stamp still stand, barely, unfinished shells looking more like ruins than residences. Elsewhere in McCammon Chase and other developments across central Ohio, there are 25 other homes that C.V. Perry & Co. started but never finished. Now, it’s a coin flip whether they’ll ever be completed.”
“Home builders of all sizes are struggling as sales plunge and the inventory of homes on the market soars. ‘Nobody’s doing well,’ said Greg Smith, a Century 21 agent. ‘To talk a client into doing a new build is very difficult. I wouldn’t put my money there, that’s for sure.’”
The Sandusky Register from Ohio. “The American dream is quickly becoming the American nightmare for Erie County homeowners. The Erie County Sheriff’s office recorded fewer than 90 properties foreclosed in 1991, and the number is expected to reach 400 this year.”
“Perkins Township resident Joe Harvey lost four properties to foreclosure after he failed to make mortgage payments. Harvey, who had never missed a payment in more than 10 years, felt the mortgage squeeze late last year when his home loan interest rates rocketed to 11 percent. He tried to work with the banks, but they couldn’t reach an agreement.”
“‘I felt real bad because I lost a lot of money,’ he said. ‘I definitely tried several times to get a fixed rate, and they wouldn’t budge. I was losing more than I was making, so it was time to bail out.’”
The Bowling Green Daily News from Kentucky. “A pair of builders who were once a driving force in the local speculative housing market say they’re being driven out of business, and they blame declining demand in the face of a saturated supply of homes here and elsewhere.”
“‘You can’t make somebody buy a house if they’re scared by what they’re seeing and hearing,’ said Mike Henson said. ‘There is an oversupply, and demand is just not there.’”
The Journal Gazette from Indiana. “The county issued 53 home construction permits last month, according to the Home Builders Association of Fort Wayne. That fell from 105 permits issued in October 2006.”
“Existing Allen County home sales last month dropped nearly 23 percent in this environment, according to the Fort Wayne Area Association of Realtors’ MLS.”
“‘It’s perceived that this is not a good market, said Sharon White, president of Premier Inc. Realtors, ‘but it’s an exceptional market if you’re a buyer.’”
The Chicago Tribune from Illinois. “Speaking at two events at the trade group’s annual convention here, Lawrence Yun, chief economist for the National Association of Realtors, forecast the first year-over-year home price decline since the Great Depression.”
“Yun said that in addition to the nation’s overall economic stability, two factors — buyers wearying of waiting around for sellers’ asking prices to bottom out and a gradual return to stability in the mortgage market — would fall into place at some point next year to set sales back on a positive track.”
“Yun said that the housing meltdown resulted from a ‘period of greed’ and blamed mortgage lenders looking for big commissions, global investors seeking ‘juicy returns’ and bond-ratings agencies turning a blind eye to risk.”
“‘In the greedy environment we encountered, some people, in my view, were misled into entering home ownership too early,’ he said.”
“Yun said some of his optimism was based on regional improvement. He said the Midwest’s housing market, for example, was a bright spot. ‘There is absolutely no bubble in that region,’ Yun said. ‘It is perhaps underpriced.’”
The Bloomington Pantagraph from Illinois. “Renters hold the key to unlocking the domino effect of home sales in the Twin Cities. A renter who buys a house frees up a seller to buy another house, which will then allow another homeowner to move, said Greg Zavitz, a real estate agent in Bloomington.”
“‘A renter is able to pull the trigger and make that offer while a homeowner — until their home sells — is a looker,’ Zavitz said.”
“Because of a slowdown in the national housing market, homeowners now think twice before buying without selling their homes first, Zavitz said. But renters never have to worry about making a sale before they can buy, a fact that might be even more to their advantage now.”
“Central Illinois renters can find good opportunities to move from rent to own in a buyer’s market where price reductions are common.”
“Plus, renters appeal to sellers because they don’t have a home to sell first, Haas Riley said. A home seller won’t worry about an offer falling through because the potential buyer can’t sell his or her home — or that a sale will fall through for the potential buyer, she said.”
“With first-time homebuyer programs, buyers can have very small out-of-pocket costs similar to an apartment’s security deposit, Haas Oliver said. And homeowners will be able to build their own equity, she said.”
“‘Now you just bought an asset as opposed to paying your landlord’s mortgage,’ Haas Oliver said.”
From ABC News in Michigan. “A depressed Michigan economy hasn’t helped car dealer Michael Thiede, whose income is based on sales. His income has decreased by 30 percent in the last year. With a new baby, Thiede sees selling the family’s house as the only way to avoid financial ruin.”
“But the task has been more difficult than the family expected. ‘It’s been a real struggle,’ said Michael, of Macomb Township, Mich. ‘Foreclosures have really increased dramatically in our area specifically.’”
“Dozens of houses in the Thiedes’ neighborhood, including his next-door neighbor’s home, are for sale. Even area real estate agents said it’s the toughest market they’ve ever seen.”
“‘I’ve been in the business 41 years, and this market is probably the worst it’s ever been in my career,’ said one agent.”
“Michael had his price set at $389,900. But in a tough market, when creative selling tactics don’t work, sellers should be prepared to lower their asking price, especially before the holiday season begins.”
“There are 25 other homes for sale in the Thiedes’ neighborhood, and 12 of those are foreclosures. Some of them are priced as much as $50,000 less than the Thiedes’ asking price.”
“‘Good Morning America’ real estate contributor Wendy Bounds said sellers shouldn’t ask questions like, ‘How much is my house worth?’ or ‘How much profit can I make?’ Instead they should think ‘How much can I afford to lose?’ and ‘How long can I live here and pay the mortgage without risking foreclosure?’”
The Pioneer Press from Minnesota. “An intensifying housing recession is zapping community banks across the Twin Cities - not with belly-up mortgages, but with failing construction loans for the housing behind them.”
“Since homebuyers slammed on the brakes, developers, builders and families across the region have been defaulting on construction loans for all manner of new housing, leaving community banks holding the bag.”
“Six of the 20 most-exposed banks in the country, ranked by the percent of overall bank assets that are in nonperforming construction loans, are based in the Twin Cities, according to TheStreet.com Ratings. Nonperforming means the loans are unlikely to be repaid.”
“Failing construction loans at the six Twin Cities community banks ranged between 3.6 percent to 5.2 percent of the banks’ total assets in the second quarter, according to Philip van Doorn, TheStreet.com Ratings bank analyst. By comparison, the ratio of nonperforming construction loans to total assets for all banks nationally was 0.06 percent in the second quarter.”
“‘I’ve been in the business 40 years, and I’ve not seen it like this,’ said Gene Haberman, president of Citizens State Bank in Hudson, which has $201 million in assets and nearly $10 million in construction loans unlikely to be repaid. ‘It was like a line was drawn in the sand, and all the building stopped. No one was prepared for that.’”
“‘Is it concerning to us? Obviously. Is it an issue of solvency? Absolutely not,’ Haberman said. ‘The good news is it is real estate, and it ain’t going away. We have collateral.’”
“Haberman and Marshall MacKay, CEO of the Independent Community Bankers of Minnesota, say banks may have become too casual with their real estate underwriting.”
“‘I guess the obvious answer has to be yes, because if we knew what we now know, we would have put bigger margins in,’ Haberman said. ‘We followed traditional guidelines.’”
The Star Tribune from Minnesota. “The number of Twin Citians who put their houses on the market last month was up modestly from a year ago, while the median price fetched by homes that sold was down, according to Twin Cities-area Realtor groups.”
“‘It’s opportunity time out there for buyers. We’ve been shouting this from the mountaintop for some time, and smart buyers are beginning to take notice,’ said Deb Greene, president of the Minneapolis Area Association of Realtors. ‘Sellers are motivated, there’s an excellent inventory of well-priced, high-quality homes to choose from, and mortgage rates are phenomenal.’”
“Still, the market remains clearly in correction mode. Closed sales were down 17.7 percent in October compared with October 2006. For the first 10 months of 2007, sales are almost 16 percent lower than last year at this time.”
“Just how motivated were sellers last month? The Minneapolis Area Association of Realtors said sellers received only 93.1 percent of their original list price, down significantly from two years ago when sellers were getting on average 97.7 percent of their asking price.”
“John Murphy, sales agent and a specialist in the western suburbs, said that given the level of inventory, prices could come down even more. ‘It doesn’t necessarily mean prices have to come down a lot,’ he said. ‘But 5 to 10 percent off the current asking price seems reasonable. Whether or not that will get buyers back into the game is hard to know.’”
“He added that there are still plenty of buyers, but many are being patient and are waiting for listings to ‘age,’ or to sit on the market until a seller makes a price reduction or gets desperate.”
“‘Buyers are still looking for deals,’ he said. ‘And most sellers aren’t willing to give them the deals buyers are looking for.’”
Central Illinois is in Minnesota?
I got them out of order. Fixed.
““With first-time homebuyer programs, buyers can have very small out-of-pocket costs similar to an apartment’s security deposit,”
Er, renters count on getting that security deposit back.
But look here, if the amount is that small, why not chip in out of your commission?
“With first-time homebuyer programs, buyers can have very small out-of-pocket costs similar to an apartment’s security deposit, Haas Oliver said. And homeowners will be able to build their own equity, she said.”
I just don’t get this shizzle. I mean, how is it that lenders are able to count on someone with apparently an $800 deposit to pay back a $150,000 loan? I know we are supposed to be an ownership society and all that, but I just don’t get how this is even possible. Beyond that, I feel bad for my friends who bought right out of college. They’re slaves to their mortgages while some of us who bounce around a bit more are enjoying what might be the best years of our lives and even saving some along the way (at least in my case). Maybe I’m being too judgmental.
No, you’re not being too judgmental. I didn’t own a house during my twenties for two reasons:
1. I couldn’t afford one.
2. I did a lot of traveling.
I did not buy a house in my thirties. I traveled and partied all over the world. I also have my retirement paid up first, then saved up for a house which I will buy for cash when the market tanks in 08 or 09. This blog will save me money. Thank you HBBr
Don’t buy your house for cash. Paying off a house isn’t the smartest thing. Buy say 50% of it, then put the rest into stocks and investments. I was planning on doing exactly what you are thinking, but after looking at financials, it makes more since to pay off part of a loan and invest the rest.
That’s an opinion, but it doesn’t account for risk. If you pay off a mortgage at 5.5 - 6.5 percent then you save that percentage 100 percent of the time. If you invest in stocks then the average market rate of return is around 12 percent in the long run. 6 percent spread right? Well not quite. The OP said he had his retirement taken care of, so I’m guessing he’s taking advantage of all of his tax sheltered investments that could possibly bring 12% (muni’s and junk don’t bring enough to be worth the conversation), so he’s going to realistically get a 4-5 percent spread after taxes with some risk. If the OP is not taking full advantage of IRA and 401k investments then I would suggest investigating prepaying all of the mortgage all he can, then putting the money he doesn’t spend on his monthly mortgage and put it into his IRA/401k tax sheltered accounts. Again, a one size fits all approach either way doesn’t fit everyone. A good calculator goes a long way :).
Also owning a home outright to me has other advantages. I know that I could have a catastrophe, the stock market could sink, and the dollar could crash, layoffs could happen, but I could make enough money to pay taxes/insurance/food and live to fight another day.
My paid for first starter home I purchased now gets me about 18 percent a year ROI as a rent house after expenses, and if I have to let it sit empty for half a year to get the right renter in there then I’m not wigging out about some stupid mortgage and accepting the first squatter that comes along with a rubber check for the deposit.
SOOOO much stupidity, so little time to comment upon all. I choose this one:
“A pair of builders who were once a driving force in the local speculative housing market say they’re being driven out of business, and they blame declining demand in the face of a saturated supply of homes here and elsewhere.”
“‘You can’t make somebody buy a house if they’re scared by what they’re seeing and hearing,’ said Mike Henson said. ‘There is an oversupply, and demand is just not there.’”
OK, so you built spec houses, which by definition means you built it w/o a buyer in mind. Spec. homes ARE NOT BUILT TO ORDER!!!
And now you are complaining that there is no market for spec. homes? And that there is an oversupply? An oversupply that YOU were partly to blame for?
Pot, meet black kettle…
Jeez!
Or have some of the buyers who were previously committed to buying end up backing out?
I have a friend who did just that. He and his wife were due to buy a house in Frisco, Texas — lovely, bland far-north Dallas exurb. Well, to make a long story short, he and his wife changed their minds and didn’t want to commit to the expense of a new house.
Normally, they’d be stuck in their contract, but their contract also included a clause for financing. If financing is not available (within some range of rates, I suppose), then they get out of the deal and keep their up-front money.
As it turns out, his wife just left her burn-out nursing job, at least for a while. And so like a good boy, he called the mortgage company to “ask them if this change in the financial situation matters to the mortgage”. You can guess the answer to that! Mortgage paperwork halts, no mortgage for you, my friend!
The builder was absolutely livid!
“Why in he11 did you call the bank and tell them THAT?!?!?”
Well, because I was supposed to?
“You’re just trying to get out of buying the house!!!!”
Uh, no, actually, the papers here says that I have to inform them of any material change in my financial situation…
My friend got his deposit back, and the builder was left with a house. I do feel a little bit for the builder, though. That house was almost finished.
Your friend did the right thing. This is not about helping an over extended builder out. If she wanted to quit her job, thats her biz.
That often happens unintentionally. After the buyer qualified and the closing was set, dumb a** would buy a new car, or something and the Bank typically checks your credit report the day before or the day of closing.
All of a sudden dumb a** is unqualified. The builder knows the lenders do that anyway.
It wouldn’ t quite matter if the buyers backed out. The project was started w/o one, therefore there is an inherent risk in sinking your money in a project that you have no client to buy it yet.
I get the feeling that these are builders who started their own company to take advantage of the opportunities available in the last few years.
Yeah, no kidding. If you’re building a house with a fair market value, you should be able to finish it and sell it to someone else. Unless you were overcharging in the first place…
I’ve heard of couples filing divorce papers to do the same thing. They get remarried later.
I do volunteer work with a fellow who tired of living in a student ghetto neighborhood near the University of Arizona. Being a relatively young, unattached sorta guy, he decided that Downtown Tucson held more appeal for him.
So he moved into one of those old buildings that’s been converted into condos. As far as I know, he hasn’t sold the student ghetto house yet, but I’ve heard that the condo is an absolute disaster. As in, if you practice construction defect law in Tucson, have I got a client for you.
Several, in fact. He’s not the only guy in the building who’s having problems. Last I heard, he was trying to force the condo developer to buy him out. And he may even move back to the student ghetto from which he was trying to escape.
On the Brokers Outpost comedy website, which is always good for a laugh with some of the (now starving) carpet bagger brokers saying stuff like, “Hang in there my brothers. Things will get better soon,” a carpet bagger broker actually posted, “I doubt very much if we will see any improvement in California until 2010.” Translation in real terms: “I doubt if we will see much improvement in California until 2015 and there will be so many new laws in place, brokers will have joined the do-do bird. Extinct.
As for Lawrence Yun of ther NAR. Don’t let this moron rattle your chains. He’s a shill - that’s all. A 100% shill like the guy before him. Crap out - crap in. Truth is, he doesn’t even believe his own b.s. In fact, I predict Lawrence Yun is getting a lot of e-mails from disgruntled realtorwhores who have had to hand back their Lexus and Mercedes SUV’s to the dealer and are looking for a cheaper hairdresser and nail painter as well as cancelling that face lift and nose job they had planned. I saw a picture of one Beverly Hills realtor the other day and I tell you, if I woke up next to her in the morning after a night of drinking and she was sleeping on my arm, I would naw it off so I could silently escape - and head straight to AA and take the 12 steps program.
Hey, after reading exeter’s story yesterday about some guy he knows waking up, after a night at the bar, with a condom hanging out of his ass, you can’t scare me with an ugly realtor story.
Bwahahahaha. Still laughing over that one!
heh heh
I still want to know if the condom-up-the-you-know-where guy did good carpentry for the person who posted his story.
Like I said. He does good work, is never late, can follow instructions etc.
“‘Now you just bought an asset as opposed to paying your landlord’s mortgage,’
Now you’ve just bought a liability. Cut, that’s not right, try again.
Now you’ve just caught a falling knife. Cut! Take three.
Now you’ve just bought an albatross. I can’t say it…guess I will stay a bitter renter.
“‘Now you just bought an asset as opposed to paying your landlord’s mortgage,’ Haas Oliver said.”
I’ve got a better idea. How about I let the landlord pay my rent.
Remember that it’s supposed to take five years just to break even if you buy a place? Or is that some outmoded old saying?
This rule, much like the rule that renovations add, at most, 90% of their cost in value to your home, are outdated rules that don’t apply to the new economy.
Don’t get priced out! Instant equity! They aren’t making more land! Am I missing any?
hilarious AND ironic that the very class of people (bitter renters)that the NAR has ridiculed for so long, is now being openly courted as salvation to the system.
Like the average church going boring bland but nice reliable guy that was ignored by the former prom queen high school cheerleaders, these guys are suddenly in hot demand!!
AYE Yai Yaiii What happan Lucy? Mr. Bad Boy Harley riding ARM mortgage use & abuse you like a cheap hooker!? Awww thats a shame . .. . now kiss my arse, bitch! Got me a betty crocker wife that bakes a mean set ‘o brownies,has great cup cakes, and while she is not a (shallow) beauty queen, she’s always there when I need her. Great mother to our kids, too!
Back on topic, as a former ” bitter renter” myself, I would be very, very, VERY cautious about seriously looking at houses to buy, and I tell ya what, would enjoy the table-turning advantage of offering a low-ball bid.
I’d openly relish, savor, enjoy, and delight in every twist of the knife to the real estate industry as I prepared to feast on the festering stucco carcasses.
Personally, my opinion is the Real Estate Industry can eat shyt n die for all I care. Azzholes !
but thats just me.
That was rich!
Aqius? Aqius? Tell me, do you have an opinion on the subject of the NAR? Because if so, I just can’t tell what it is.
Haw.
Mmmm, brownies…
“‘Good Morning America’ real estate contributor Wendy Bounds said sellers shouldn’t ask questions like, ‘How much is my house worth?’ or ‘How much profit can I make?’ Instead they should think ‘How much can I afford to lose?’ and ‘How long can I live here and pay the mortgage without risking foreclosure?’”
I think they might have some angry viewers on their hands. Personally I think that Wendy has hit the nail on the head, though if people ask these questions and are honest with themselves they may just start walking.
She hit the nail on the head with her last comment, all the advice before that is a total waste of time.
$389,900 in Macomb Twp.?? What a joke.
It’s not funny but if you go to the article one of the pieces of advice she gives is for Michael to start a blog tracking the progress of his house. I clicked on a linked to his blog and it is apparently in violation of Blogger’s Terms of Service. Whoops.
i did the same and got the same.. i backtracked to the home page and it seems that the problem here is i’ve turned cookies off for that blog’s domain.
But if nobody can get in, it might be something else.
Harvey, who had never missed a payment in more than 10 years, felt the mortgage squeeze late last year when his home loan interest rates rocketed to 11 percent.
If he didn’t miss a payment in over 10 years, then why didn’t he have a nice fixed rate loan instead of taking on an ARM with high rates. Surely he would have had enough equity to refinance a few years ago during the great rates, unless …
Because the greedy bastard, now turned victim, was going to cash in when the RE appreciated 25 to 30 % in 24 months.
Instead of doing one he did several so he could really multiply his profit!
As far as an arm, who cares? With the appreciation, he would pay it off or refi before it adjusted.
Now, poor little Harvey is a “victim” of those bad lenders/brokers/appraisers.
I think he would prefer a condom up his a**.
I’m pretty familiar with Erie County, Ohio (in-laws live there). The heart of the county is Sandusky, a resort town on shore of Lake Erie and the islands, and home to Cedar Point, one of the biggest amusement parks in the world.
Anyway, the city has no commercial activity apart from declining Ford plant and a Delphi plant. apart from that it’s all tourism (lots of people from Columbus and Cleveland have condos there and keep boats there). So the only jobs available are minimum wage jobs. The population has been declining except for the people buying week-end condos on the lake. Furthermore, the city is very poor, with something like 60% of the inhabitants being renters. The school system has the lowest rating in the Ohio rating system.
Prices have not gone up in recent years on property. Given that, the city is rapidly sinking into Ghetto status (there are a few good neighborhoods left, but not many).
I doubt this was a case of someone refinancing serially or someone using houses as an ATM.
This guy probably tried to make his money from owning run-down rental property. There is so much run-down rental property, that he could not attract acceptable renters, if any at all. With the cost of maintenance, taxes, insurance, and rehabbing after each renter, the business model was probably not workable, even with a fixed rate mortgage.
“Yun said that the housing meltdown resulted from a ‘period of greed’ and blamed mortgage lenders looking for big commissions, global investors seeking ‘juicy returns’ and bond-ratings agencies turning a blind eye to risk.”
“‘In the greedy environment we encountered, some people, in my view, were misled into entering home ownership too early,’ he said.”
You left out another group Ying Yang REALTORS!!
Let me tell you putz shill, I had to endure 2 years of looking at over priced houses with these leeches and everyone of them did not warn of this mania and just promoted buy buy buy at any price.
Go to hell Shill.
Modern U.S. definitions:
Rich: Anyone that makes more than me.
Responsible for problems: Everyone except for me.
Is this guy for real. He then says:
“‘In the greedy environment we encountered, some people, in my view, were misled into entering home ownership too early,’ he said.”
Yea, by you asswipe!! How many times did Yun, clone of Lereah, call bottom? How many times did he say it was a great time to buy? His days are numbered too.
“Yun said some of his optimism was based on regional improvement. He said the Midwest’s housing market, for example, was a bright spot. ‘There is absolutely no bubble in that region,’ Yun said. ‘It is perhaps underpriced.’”
Anyone from the midwest care to take exception to Yun’s comment?
He’s trying to cherrypick his b.s. He wants everyone to see the Midwest as a bright spot - but at the same time he can’t bear the thought of anyone rushing to judgement based on the very real carnage in CA, FL, NV, etc.
Anyone from the midwest care to take exception to Yun’s comment?
(Laugh.)
Not only would NAR not hestitate to put lipstick on a pig, they’d try to put a positive spin on the next coming of the bubonic plague. (”So we had a little pestilence — now’s a great time to buy! “)
“Anyone from the midwest care to take exception to Yun’s comment?”
I’m in norhtern MI - lower penninsula. This is an area which is nicknamed “The Gold Coast” with an enormousnumber of mega-summer homes.
Foreclosure rate is 1 out of 92 of all homes and 1 out of 58 summer homes.
It is the 2nd home people who are 99% of the foreclosures.
They are going down for defaults of $285,000, $475,000 , $590,000…….up to $1,750,000. And that is just the past couple months.
All out-of-area lenders like WaMu, Countrywide, OptionOne etc. Loans made in 2003 - 2007. Lots of them showing that the ARM reset.
“Midwest” encompasses a lot of territory . . . just moved here from Northern Colorado and the market is relatively strong. Here’s an excerpt from an article in today’s Wichita Eagle:
Bernie Markstein was happy to be in Wichita instead of on one of the coasts on Tuesday.
Markstein, director of forecasting and senior economist for the National Association of Home Builders, was one of the experts who spoke during the Wichita Area Builders Association’s 2008 economic forecast at the Wichita Marriott.
“This is fun talking to you guys,” he said. “Imagine trying to pump up the people in Sacramento.”
While housing markets have slowed on the coasts, Wichita remains poised for growth, both in new home construction and in housing sales.
“Wichita is one of the good areas,” he said.
The area’s aviation-driven manufacturing economy is growing, assuring a slow and steady growth in new and existing home sales.
Reasons for strength . . . no national builders (yet), limited spec building, limited use of toxic loans, affordable prices, strong and diverse employment base. As long as we don’t get stupid or too complacent, we’ll be okay IMO. We’ll never have runaway appreciation, but hopefully no big slumps either.
I live in a small town in Wisconsin, renting in a new subdivision. You would NOT believe the for sale signs here. Just in my small neighborhood within 4 blocks or so, at least 16-20. Lots of foreclosures, and quite a few people I know have ARMS or IO loans. Less buyers will happen everywhere because of so few people qualifying for mortgages, so RE is going down nationwide IMO
Also, I have seen a lot of listings reduced 15% or a little more, and still sitting on the market. Some for over a year. New construction, or flipped out houses.
“Anyone from the midwest care to take exception to Yun’s comment?”
Me. I live in the Twin Cities. We are getting hit fairly hard so far, and I fully expect it to get worse. Two data points: driving through suburban East Metro yesterday, almost every street I drove down had both ‘for sale’ signs and foreclosure notices on homes. I commented to my mother that we never saw foreclosure notices during the 80s-era bubble here. Boy, are they commonplace now.
Second point: I have a coworker who’s been listening to me about the bubble and has been holding off on a house buy.
Well, her mom died recently, so this coworker then had her mom’s house in Wisconsin to sell. I advised her to use the estate lawyer instead of a realtor to handle the sale, to get a market appraisal and price it 10-20% below market to move it fast. Her mom bought the house thirty years ago, so she’ll still make a nice profit. The lawyer then gave her the same advice. Result: she found a buyer in just one week. Anyway, she intends to use the proceeds as a down payment on a house she’ll buy here no sooner than next summer. I told her to start tracking the local market, in particular following short sales offers to watch the trend. She called a realtor friend who didn’t even let her start talking - just started telling her about all these great short sales properties she could start showing this woman.
This coworker is now convinced I’m an economic oracle.
“‘Now you just bought an asset as opposed to paying your landlord’s mortgage,’ Haas Oliver said.”
Now you just leveraged a depreciating asset that may leave you exposed to substantial liability - far exceeding even the considerable inconvenience to you if you live in one of those tenant-adverse states where renters can be blindsided by the foreclosure sale and fast-track sheriff’s notice/eviction. (Yep, like mine. California renters: you is lucky SOBs.)
Aside to MacAttack: I remember many a resale home flyers that loudly touted the builder - well, the ones with stronger reputations, even if they were long since out-of-business. Guess that has gotten outmoded, as well.
“Yun said some of his optimism was based on regional improvement. He said the Midwest’s housing market, for example, was a bright spot. ‘There is absolutely no bubble in that region,’ Yun said. ‘It is perhaps underpriced.’”
A duplex in Detroit sold last month in a competitive auction setting, for just 400,000 Cents…
So yes, the midwest is undervalued.
There’s no bubble because prices are already in collapse mode. Some bright spot.
It is this Yun guy just a vomit factory or what? No bubble in the Midwest? Relative to where, the coasts? If all RE is local, as Mr. Yun so habitually repeats, then why make the comparison at all? Which is it Mr. Yun? If you say CA’s numbers shouldn’t be used to paint a bleak nationwide picture - then the Midwest’s numbers shouldn’t be used to paint a rosy one!
There IS absolutely a bubble in the MidWest… a building bubble that resulted in oversupply of homes.
“‘You can’t make somebody buy a house if they’re scared by what they’re seeing and hearing,’ said Mike Henson said. ‘There is an oversupply, and demand is just not there.’”
Demand depends on income and credit availability versus offer price (the reservation price at which sellers are willing to sell a home). Credit availability in turn depends upon lenders either being able to offload default risk or else underwriting to avoid risk not covered by the interest rate they can charge. Given the conundrum of low risk premiums and the recent impactment of the subprime-securitization bowels, it looks like it is up to underwriting to control credit risk going forward. There is the additional risk to lenders due to declining collateral values since the bubble popped. And another problem for would-be buyers and those who would lend to them of very low income growth relative to housing price inflation since 1998.
Absent govt interventions to further encourage lenders to make loans which will never be repaid, this means no more loans to people without verifiable income, or loans made with no downpayment, or loans made at ratios of ten times income — i.e., subprime is dead going forward, absent govt intervention.
All factors considered above point to a decrease in demand (think of the econ 101 demand curve shifting to the left, implying lower equilibrium price and quantity of homes sold). If sellers are still counting on getting 2005 bubble-era prices for homes when the demand is not there, the result is an adjustment process that starts off with a large decline in the volume of sales coupled with rising for-sale inventory (as has already occurred pretty much everywhere homes are sold) followed by an equilibrium adjustment to lower sales price up to the point where the latent supply (think builders holding new home inventory off the market and banks holding REO they need to sell) has finally moved through the market and prices have adjusted to re-equilibrate the flow of supply and demand at levels that reflect post-bubble economic reality.
‘It’s been a real struggle,’ said Michael, of Macomb Township, Mich. ‘Foreclosures have really increased dramatically in our area specifically.’
It’s different there..
Unless he gets lucky and reels in a knife catcher, he is so screwed IMHO.
Yep, that McMansionville grew out of farmland in the past 10 years. Just about everyone is underwater on what they paid and a good many on the mortgage. MI’s version of the IE.
Fear and Loaning and Lost Wages, or the Savage Pursuit of the American Dream…
“The American dream is quickly becoming the American nightmare for Erie County homeowners. The Erie County Sheriff’s office recorded fewer than 90 properties foreclosed in 1991, and the number is expected to reach 400 this year.”
We $trong like Bull (hopefully not ML)
“If people would look at the strength of our economy, they’d realize why, you know, I believe that the dollar will be stronger,” Bush told the Fox Business Network.”
“We have a strong dollar policy, and it’s important for the world to know that. We also believe it’s important for the market to set the value of the dollar relative to other currencies,” the president said.”
http://english.pravda.ru/business/finance/14-11-2007/100848-strong_dollar-0
President Bush should do the world a big favor and keep his mouth shut.
Then why don’t you have your puppets over at the FED increase rates ?
Because the banks pull his strings, then he pulls helibens’ strings, and the bank don’t want rates raised.
French industrial output fell 1.1pc in September. It is becoming ever clearer that Europe will suffer as much from America’s housing crash as America itself, and perhaps more so.
The world has barely begun to feel the impact of the latest dollar slide - to $2.11 against sterling, $1.47 against the euro, and 75.45 on the dollar index, the lowest since the Bretton Woods system collapsed. This will make itself felt over the next two years in countless ways, whether it be Volkswagen switching plant to the US, or the repatriation of software offices from India , where IT salaries have rocketed to $18 an hour.
As much as i hate to quote Pravda, they got almost everything right.. but “that Europe will suffer as much…as America itself, and perhaps more so.” can do without the “perhaps”.
I have an email in front of me saying that Chrysler is shipping a bunch of jobs to India next month….the people that process requisitions and get people paid. Figures. And what a crappy time to have that happen if you’re one of them that’s losing it.
We’ve been advised to deliver and invoice everything we can before the 2nd week of December. After that, good luck.
these things take time.. give it 12 or 18 months at least.
in fact, there may be something to say about preparing for it, if a person has some gamble in them.
For instance:
First pick an industry that has suffered a lot of outsourcing.
Then pick an area where outsourcing has particuarly hurt a local economy.
Next, buy property, or invest in that area, in anticipation of the return of those outsourced jobs within a year or two or three. It’s economy will improve and it’ll be kinda like gaining sweat-equity, but without the sweat.
Not sure what your first sentence is getting at, but per the memo, these jobs are gone next month, not a year down the road.
Outsourcing is killing this area, but no way would I buy property here with the idea of those jobs or the market coming back in a few years. IMHO I highly doubt the jobs I mention will be coming back.
read the pravda story.. the weak dollar is killing foreign industries.. their labor and production costs are rising while our import costs also rise, and they lose us as a customer.. no doubt their largest customer. The weak dollar is hammering them.
So, outsourcing is slated to reverse direction.
But it’s just now starting to happen, a lot of stuff (like your stuff) is already in the pipeline and it will take time to gel, which explains my first sentence.
joey, Are you going way far out on a thin limb and suggesting countries outside the US are outsourcing their jobs to us and the 30 year spiral course downward is over?
As much as I don’t like have my hard earned cash being turned into wallpaper, it will make the numbers on outsourcing look much worse.
no.. i’m using the blog as a guinea pig to test reactions to various end-of-the-world plots for a fiction novel i’m writing.
there’s nothing to see here.. just move along people
I expected nothing less.
“We have a strong dollar policy, and it’s important for the world to know that.”
Yeah, he sure likes to say we have a strong dollar policy. It seems his minions received a different memo.
We have a strong dollar policy, and it’s important for the world to know that.”
So how’s that policy working out for you, bub?
Chase Bank’s nationwide computers have been down now for over an hour, going on two. That should make their customer base happy.
Ugh, and I only have enough change left for one Diet Coke!
Have a drink of water. It’s cheaper than Diet Coke. And better for you too.
Nice sales charts and spin detection at the Motley Fool.
http://tinyurl.com/yseewx
Dude, where’s my rally?
Where is the PPT at the end of the day anymore? They seem to be running out of gas (maybe it’s the high oil prices that are killing the market)?
Goldman is now short the market. I doubt Paulson will unleash the PPT anytime soon.
When Goldman goes long, you will see the PPT back in action.
Faded, the RMT was in the haus. Shopped the mar 40 on C, missed the open.
wonder what the tax implications are on a lot w foundation?
so much for any rebound
these guys supply both commercial and res
http://finance.yahoo.com/q?s=URI
off 30%
Cerberus could not get financing to complete the purchase. One of many LBOs that became toast this month. The Arbs took a big loss this month.
Gee, I’ll try to contain my grief.
“Yun said some of his optimism was based on regional improvement. He said the Midwest’s housing market, for example, was a bright spot. ‘There is absolutely no bubble in that region,’ Yun said. ‘It is perhaps underpriced.’”
Holy Cr@p this guy is an idiot! The Midwest “bubble” was that prices did not COLLAPSE BY 30% like they SHOULD HAVE over the past 5 years. A $200k house in 2002 in most of Michigan should be worth $140k at best now, not the “Fun-Yun No Bubble Here” price of $210k. The real economy of the Midwest is in freefall except for some aspects of Chicago, and as long as they keep doing the things they always do (re-electing tax-jacking liberal Canadian Democrats for Governor of MI for instance), they will continue to sink into the abyss.
I agree. Maybe Andrew Cuomo can haul this guy before Congress.
Has anyone heard from David Lereah lately?
Look at this.
http://www.reuters.com/article/bondsNews/idUSN2532083420071026
WASHINGTON, Oct 26 (Reuters) - Although six months have passed since the cheery chief economist of the nation’s top realty trade association resigned, the trade group still holds an uncommonly bright view of the battered homes market.
The National Association of Realtors’ upbeat outlook is seen in a prediction for home resales in 2008 that outpaces rival trade groups by over a million transactions. It can also be found in their search for a new top economist who is prepared to “disseminate positive comments about the U.S. real estate market.”
While any trade association might be expected to publicly boost its market, some say the Realtors became improper cheerleaders during the recent housing boom and through the current bust.
“The Realtors have every right and duty to produce a public awareness campaign,” said John Tuccillo, who served as the group’s chief economist from 1987 to 1997. “It gets a little dicey when you get into the research area and say ‘The numbers are down but that doesn’t mean anything.’”
Lawrence Yun, who is serving as the trade group’s top economist, defends his outlook by saying other prognosticators underestimate the power of today’s economy.
“I believe there is a pent-up demand that will be a stronger influence than other factors next year,” he said.
Still, the trade group’s steadfast optimism is in keeping with a tone set by David Lereah, the group’s former chief economist who directed the Realtors’ research while prodding consumers into the market with books like, “Are You Missing the Real Estate Boom?”
” …The Midwest’s housing market, for example, was a bright spot. ‘There is absolutely no bubble in that region,’ Yun said. ‘It is perhaps underpriced.’”
This guy is a moron. When I have a hard time finding a decent home in Missouri for under $200,000 you can bet yer butt there’s a bubble. But not to worry, the midwest bubble will pass like all the other bubbles.
Michigan’s “Gold Coast” up in the northern Sleeping Bear Dunes has taken a 31% drop in prices.
There is a bubble - caused by 2nd homebuyers who ‘took out the equity’ on their primary home to get the vacation home using an ARM.
How can the worst of the credit crisis be behind us when foreclosures keep accelerating?
Is Goldman Sachs short on mortgages from here on out?
LA times: SoCal down 8%:
http://www.latimes.com/business/la-fi-homes15nov15,0,5939595.story?coll=la-home-center
“Mr Bell said: ‘August took everyone by surprise. We did not see a way in which the sub-prime crisis would ripple throughout the markets of the world to affect a bank like Northern Rock.’”
“The main credit rating agencies have admitted to MPs that they failed to spot the looming credit crunch and that investors had taken their positive ratings as a ‘green light’ to buy opaque securities.
quotes from the wall Street thread
How is it these billion dollar organizations failed too see this stuff coming when ordinary working stiff amateur economists such as ourselves have been openly discussing it for years?
I’m asking…
Yun Thing
You make my heart sing
You make up everything
Come on, Jung Thing
Yun Thing, I think you amuse me
But I gotta know for sure
Come on and lie all night
Oh you amuse me…
Fellow HBB’s. You’re all doing it. Getting your knickers in a twist when Lawrence Yun makes a statement. Keep your blood pressure low by laughing at him. He’s nothing more than a used car salesman trying to sell packages of over-priced property crap which are out there.
Just do what most of you have been doing and watch the show for another few years. Up a little - down a bit more - up a little - down a bit further than last time. Up a bit - down even further than last time. The pattern is ALWAYS the same when a bubble bursts be it property, stocks or tulips as a support level is reached. Then Greater Fools who have been listening to the “experts” rush in to sign up because those “experts” (the ones who said the housing problems would not spill over into the economy l.o.l) yada-yada on about it’s a “Good time to buy.”
I had an interesting experience yesterday in Home Depot in Newbury Park, ca. As I was standing in line at the cashiers, I heard a couple of construction guys talking real estate. How they figured it was tough now but both agreed in the spring of 2008 it would re-bound because, there was “Pent up demand.” A sound bite they obviously heard on t.v from a realtorwhore shill like Lawrence Yun. However, not 20 miles away, there are several massive developments in Oxnard, ca. being built by DH Hortron and a few other big builders which are soooooo overpriced (by 75% +) that I was shocked these guys didn’t realize just how bad and serious the bursting of this bubble really is. I then flashed back to a conversation I had with my next door neighbor, a widow in her 70’s, about a year ago who was thinking of selling her house when it was $725,000 and buying something smaller. I told her, “Do it now or if not by tomorrow morning! The bubble has burst. Unload it.” She said she didn’t think, “In this area prices would drop too much.” They are now at $650,000 and dropping. The area is littered with FOR SALE signs.
It was then I realized that average Joe6pack and Jane6pack hasn’t got a clue what’s going on. Not a damn clue. Inflation running at 7% to 10%. Forget what that other shill, Bernanke, says about inflation being 2% and under control. He’s almost and probably a bigger clown than Lawrence Yun. Gas and health costs and food prices going thru the roof. American consumers maxed out on their credit cards and their house (fake) profits because they’ve used them as ATM’s. A big part of the California construction industry are out of work and they were making big bucks. That leaves us with a lot of people making $10.00 an hour instead of $80.00 + an hour which electricians, plumbers, masons, carpenters were getting in the 5 year boom. Obviously, unemployment in California rising (about 5.5% at the moment) but the figures they are using are FAKE. A good 25% of workers in the California building industry were illegals. They were/are beneath the radar when it comes to reporting the REAL unemployment numbers. There is almost a 100% chance of a DEEP recession (forget that Bernanke 50/50 b.s) in 2008.
So, don’t get antsy. A lot more downside to come over several years and a lot more pain for the Greater Fools.
“Renters hold the key to unlocking the domino effect of home sales in the Twin Cities. A renter who buys a house frees up a seller to buy another house, which will then allow another homeowner to move, said Greg Zavitz, a real estate agent in Bloomington.”
Except that it also means the unit that the renter was renting is available for rent or buy. Supply continues to exceed demand, and from what I remember, that means prices come down.
“Yun said that the housing meltdown resulted from a ‘period of greed’ and blamed mortgage lenders looking for big commissions, global investors seeking ‘juicy returns’ and bond-ratings agencies turning a blind eye to risk.”
Yun, you forgot to mention the greedy commision only realtors and the NAR who helped fuel this mess with all of the hype. Did you forget about all of the comments that were made by the NAR by David L.? You can place the blame on others, but the NAR cannot accept responsibility!!
“‘It’s perceived that this is not a good market, said Sharon White, president of Premier Inc. Realtors, ‘but it’s an exceptional market if you’re a buyer.’”
Sharon White, tell that to the thousands who have lost their homes because their manufacturing jobs were outsourced to China for cheap labor. The current jobs being created in Ft. Wayne area are not in-line with the low paying jobs being created. Let’s see how long your business lasts without buyers! Look at the damage done to the Ft. Wayne housing market when International Harvester left the area. This time it is much much larger and impacts everyone, including myself.
I too live in Fort Wayne. Median prices are now around 95K. The economy is pretty much flat. Very little, if any, job growth and we just lost 300 jobs at the airport transport hub. The Chicago Uno Pizzeria is even closing up it’s two locations in FW.
“Six of the 20 most-exposed banks in the country, ranked by the percent of overall bank assets that are in nonperforming construction loans, are based in the Twin Cities, according to TheStreet.com Ratings. Nonperforming means the loans are unlikely to be repaid.”
Help - I went to thestreet.com and could not find any info…does anyone know which banks are bad there? I want to avoid buying a cd from them. Or holding on to one I already have…..thanks.
http://www.thestreet.com/tsc/ratings/screener.html?src=ratingsindex&tab=3
try this link
“‘You can’t make somebody buy a house if they’re scared by what they’re seeing and hearing,’ said Mike Henson said. ‘There is an oversupply, and demand is just not there.’”
You have to buy a house. It’s the law. (It won’t be long before a desperate RE industry tries to get a law like that passed!) [sarcasm off]
‘It was like a line was drawn in the sand, and all the building stopped. No one was prepared for that.’
Someone please help me. I’ve also noticed that when the game ended that it ended abruptly. I’ve been trying to figure this out. What exactly was it that caused the bubble to burst almost overnight. Maybe when the interest rate went up from 5 to 6 percent, then the monthly payment becomes almost 20 percent higher and the bubble 20 percent increases were stolen by the interest rate hike and once you don’t have the 20 percent appreciation, then game over?
forecast the first year-over-year home price decline since the Great Depression
If it looks like a duck…