The Leading Edge Of Where The Market Is Going To Go
The Daily Camera reports from Colorado. “More Boulder County residents defaulted on their home loans in October than they have during any month in the past decade. The 107 foreclosures reported by the Boulder County Public Trustee’s Office even bested August’s 103 filings, which previously held the dubious 10-year high honor. Only 10 months into the year, 2007 already is Boulder County’s worst year in reported foreclosures since the late 1980s.”
“The Boulder area, often countercyclical to national trends, started feeling the pinch before other regions out-of-state, said veteran mortgage lender Lou Barnes, adding he has noticed the supply of ‘bad mortgage ideas’ has been choked off and new construction came to a bit of a halt this year.”
“‘We were early to the party, and with any luck, we’ll be early to leave it,’ he said. ‘But I’m afraid that the Front Range of Colorado is a good predictor for what’s ahead’ in places such as California, New York, Arizona and Washington, D.C.”
“Excessive land subdivision has helped fuel the foreclosure glut in the Front Range, said Barnes, noting this has occurred particularly in the area he calls the ‘foreclosure belt,’ near the Interstate-25 North corridor that includes counties such as Weld, Adams and Arapahoe.”
“The effects from the subdivisions are ‘going to be with us for a long time, and will tend to inhibit future appreciation,’ Barnes said.”
The Tribune from Colorado. “Northern Colorado already is almost two years into a housing slump, and the list of casualties keeps growing. Home construction loans are down 48 percent at one local bank. Building permits for remodels and new construction in the region also are down about 50 percent. Sales taxes for Greeley building permits are down about half.”
“‘This downturn is by far the worst I’ve seen in … 43 years,’ said Jim Pask, northern Colorado Market Manager a lumberyard in Greeley.”
“The feverish pace of home building since 2000 created an oversupply on the market in recent years. That market, however, couldn’t sustain after three years of record numbers of bankruptcies and foreclosures and layoffs. The most recent crash of the sub-prime market put the brakes on a lot of home lending, making loans for first-time buyers hard to come by.”
“Summer 2006 seemed to make the downturn more of a reality when Lennar, a national home builder, left the northern Colorado market. That’s also when the city of Greeley started seeing the building permit numbers plummet. Numbers continue to slide.”
“‘Most everyone pulled their projects in and saw the writing on the wall,’ said Tim Swanson, chief building official for Greeley. ‘Most of the home builders have just not been throwing them in the ground the way they were. We issued 14 single-family dwelling permits in October. We projected that we’d do 175 for the year and we’re still on track. But, in 2005, we did 750.’”
“‘Up here, construction is a big deal,’ said Larry Wood, president of Union Colony Bank in Greeley, where construction loans are down 48 percent.”
“‘Construction lending is something that rolls fairly rapidly,’ Wood explained. ‘Every six months a house is built and paid off. Then you do another one, and you collect loan fees. So that churn helps the income. And the churn isn’t there anymore.’”
“The proverbial storm may be a long one. Industry officials initially looked toward 2008 to be the turn-around year, but now all thoughts are moving to 2009.”
“‘(Next year) is going to be a tougher year,’ Wood added. ‘But I do think it could be a good absorption year, not necessarily bring in a lot of profit, but with the opening of new business and hiring people that will absorb that excess inventory, by 2009, we’ll start building houses again.’”
The Arizona Republic. “The once-sizzling market for high-rise downtown Phoenix condos has cooled. Phoenix leaders have touted condo dwellers as a crucial part of downtown’s resurgence, saying residents would help sustain nearby shops and their foot traffic would inject the neighborhood with 24-7 vitality.”
“Now, plans to attract those condo dwellers have questions marks. Developers say condo sales have slowed to a trickle. Countywide, condos sales are down 37 percent compared with the market peak in 2005, when more than 19,000 condos were sold.”
“The condo market has supply-and-demand problems, experts say. On the supply side, there has been a tide of downtown Phoenix condo projects. Since 2005, city figures show, 383 condos and townhouses have been built in the downtown core. More than 2,000 more are under construction or are in the pipeline.”
“Attorney Marshall Meyer is trying to sell his family’s midtown luxury condo and is considering where to buy his next one. To Meyers, the downtown condos, which range from the high $300,000s to beyond $1 million, seem overpriced.”
“He admitted he may not have to make that decision anytime soon. ‘The market as, you know, is not great,’ Meyers said. ‘I am not expecting a fast sell.’”
“Doug Duncan, the Mortgage Bankers Association’s economist, said he sees the condo market as a bellwether for the overall housing market. His mortgage-bankers group predicted the overall housing slump because of the price trend in condos. Now, the industry is keeping an eye on condos for signs of recovery.”
“‘I always watch condos as the leading edge of where the market is going to go,’ Duncan said.”
Independent Newspapers on Arizona. “Every news source across the nation says the housing market is in the toilet, but an Apache Junction Realtor is beginning to see positive changes in AJ. ‘I think it is crazy to have all this doom and gloom in the media’ concerning the real estate market,’ Dale Gorny, owner of Arizona Prime Estates in Apache Junction, said.”
“Ms. Gorny said she is seeing dismal numbers, but ’summer is always a slow (time of year) even in the hottest of markets.’”
“A Nov. 1 study conducted by Dr. Jay Q. Butler, at Arizona State University’s Polytechnic campus, concluded Pinal County’s resale housing market will continue to see a declining trend.”
“According to Dr. Butler’s study, the new home has become a strong competitive and attractive alternative to the resale home in Pinal County due to its attractive long-term investment opportunity. Dr. Butler attributes the decline to ‘higher gasoline prices, more congested highways and limited employment opportunities.’”
“Dr. Butler said the ‘key issue facing Apache Junction is that investors were drawn to the inexpensive housing in Pinal County, (but) higher prices have limited their role in the local housing market.’”
“According to Ms. Gorny, the housing market’s ‘actual dollar amount value has only gone down 8 percent.’ Ms. Gorny said she has ‘a gut feeling that by the end of next year things are going to start recovering.’”
“Ms. Gorny explains ‘Arizona is still the destination (state)’ and ‘what I think is going to happen is sellers (are going to) need to be more flexible. It is definitely a buyers market.’”
The Daily Courier from Arizona. “Prescott Valley: A sharp drop in sales tax revenues has town officials looking into ways to cut expenses. William Kauppi, director of management services, said sales tax revenues are down approximately 16 percent in the first quarter of the 2007-08 fiscal year.”
“The construction sector is down 40.7 percent and Kauppi said that slumping sector is responsible for the lion’s share of the downturn.”
“‘We didn’t anticipate this kind of decrease in construction,’ he said. ‘We’re going to consider this is the fiscal trend for the year.’ Unless the town’s economy suddenly turns around, Kauppi said it means town coffers will accrue about $2 million less.”
“‘It is what it is,’ said Councilwoman Lora Lee Nye. ‘Every economy is adjusting and we’re no different than anyone else.’”
From KVBC in Nevada. “It’s the upside of the slump in housing prices. If you’re ready to buy a new home, this is a really good time. More than 20 new subdivisions in southern Nevada are selling homes for under $200,000.”
“Homes we visited near Nellis and Hacienda at Hacienda Park are going for $230,000, but the prices have been slashed to try to sell the remaining homes in the subdivision.”
“At least 25 new subdivisions in southern Nevada are reportedly selling homes for under $200,000. That’s more than $100,000 less than the median price for a Las Vegas home.”
“‘We have not seen that price point in some time,’ Monica Caruso with Southern Nevada Home Builders Association told News 3. ‘These are brand new homes with all of the other amenities and conveniences.’”
“But these prices may not be around too long. With the opening of major new Strip resorts like The Palazzo later this year, experts say our population and the number of jobs will continue to grow. And that is setting the scene for a housing shortage as early as 2009.”
“And the Southern Nevada Home Builders Association says when you have a housing shortage the immediate impact is rising prices. Experts believe that prices have probably fallen to about as low as they’re going to go.”
The Deseret News from Utah. “Utah’s homebuilders are entering uncertain times. ‘The market is definitely going through some changes,’ said Eric Allen, director Utah/Idaho region for market research firm MetroStudy. ‘We’re getting back into what we consider a more normal market.’”
“He added the area is coming off record years in the number of homes constructed and sold, but now the market has come to a point where those homes need to be absorbed. Along the Wasatch Front, the inventory of newly constructed finished vacant homes is around 32 percent. He said 20-25 percent is typically considered healthy.”
“In response to the notion that many potential homebuyers are waiting to find out if housing prices will fall, homebuilder Paul Magleby said, ‘That’s human nature, they’re going to pull back to see if they can get a better deal.’”
“‘But the best deal might be right now,’ he said because homebuilders can capitalize on lower lumber prices and better rates from their contractors needing work right now.”
The Salt Lake Tribune from Utah. “For years, the positive news has flowed about the Salt Lake City area’s booming residential real estate market. For months, Utah Realtors have been trying to get across the message that the Wasatch Front’s home-sale market is relatively immune to the deep and troublesome downturn plaguing housing nationally.”
“But in recent weeks, reports about the downside of the Wasatch Front market are starting to surface.”
“Mark Zandi, chief economist with Moody’s Economy.com, conducted (an) analysis for Fortune and offers up this sobering forecast: A home in the Salt Lake area worth $464,000 in June 2007 could be worth only $360,000 in five years.”
“‘At the very least, the Salt Lake real estate market will go from boom to something uncomfortable over the next couple of years,’ Zandi said.”
“Zandi’s analysis is based on the fact that home prices and rents historically track each other. But in recent years, home prices have risen much faster than rents in the Salt Lake area, putting that relationship out of whack. The only way to restore that relationship is for rents to rise and home prices to fall.”
“Jim Bringhurst, president of the Utah Association of Realtors, doesn’t buy the prediction of falling prices. Utah and Salt Lake City have strong economies, strong employment rates and a steady flow of people moving in from other states. All those factors, along with historically low mortgage rates, bode well for the area’s residential real estate market, Bringhurst said.”
“Zandi…cites the example of Las Vegas, which is suffering through huge inventories of homes for sale and declining prices. ‘Just two years ago, Nevada had one of the top rates of job growth,’ he said. Today, the Las Vegas market is hurting big-time, along with Phoenix, Los Angeles and other Western cities, because bloated inventories are contributing to selling-price declines.”
“Zandi said in the Salt Lake area, higher-priced homes…may be the most vulnerable because ‘it’s part of the market that was most infected by investors and speculation.’ But he believes the downturn probably will be felt in all price ranges.”
“Economist Kelly Matthews of Wells Fargo Bank in Salt Lake City said he wouldn’t be surprised to see selling-price declines. Earlier this year, he examined the disparity between income gains and housing price increases and has been delivering the unpopular message that the Salt Lake area has a real affordability problem, even with strong job growth and low interest rates.”
“He worries that prices of some homes may have to drop by double-digit percentages before demand kicks up yet again. ‘Nobody wants to lose money, but we’re caught in a situation where we can’t sell all these homes on the market without discounting their prices.’”
“‘I don’t think anyone knows how far or fast prices have to fall before we can move some of the homes that are sitting on the market and we can start building homes again. But clearly our market is out of whack,’ Kelly said.”
“‘At the very least, the Salt Lake real estate market will go from boom to something uncomfortable over the next couple of years,’ Zandi said.”
Booms have always led to bust historically, but this one is different, because it will merely lead to ’something uncomfortable.’ Yeah right…
I think Zandi sees the Joshua Trees a comin’!
At least the attitudes around SLC are changing. Six months ago you’d comment on a RE article and explain SLC would end up just like Vegas or Phoenix and 9 out of 10 people would dismiss you as an idiot. Now most people think otherwise, its only those who’s lively hood depends on RE and RE values staying high that still think things are different here.
It takes a massive preponderance of empirical evidence to change a Utah Mormon’s faith.
You could say that about anyone. It takes more energy to unconvince people than convince them.
Not so. Some people’s convictions are far stronger than others, and Utah Mormon convictions are unusually strong, as any shard of doubt that is allowed to creep into their thinking might lead them to question the reasonableness of the whole faith.
Is that why they don’t watch Southpark there? “Dumb dumb dumb dumb dumb!”
Per WSJ Utah has the highest percentage of neg-am loans and the highest rate of BK in the country, so look out below when that second big bump of resets happens. (Where is my favorite Credit Suisse chart?)
Once all the out-of-state infestors crawl away and the continuous construction along the Wasatch Front dies, Utah is going to retreat to being the backwater it was only 10 years ago.
However, it’s not going to be a faith-shaker because Mormons are all about supporting each other thru crises. If anything I bet a lot of people “come home” so to speak.
I personally don’t find any Mormons saying that the market won’t drop. As a matter of fact they don’t seem to talk about it at all.
However, living here in SoUtah and my exposure to Salt Lake has shown me that most of the “nobubblehere” types in this State are usually newly arrived transplants from some other State. Most of them seem to believe much more in their “investment” than any organized form of religion.
If anyone is interested St George is on the edge. I drove up around Foremaster Ridge this weekend. Two roads on ether side of this plateau were connected about a year ago and the plan was to develop the area with $1,000,000.00+ homes.
Building was brisk but then stopped. About 12 homes now sit unfinished and for sale. I am assuming that the goal is to get someone to buy with the idea being that the “buyer” can then pick the flooring and appliances.
It is really strange to walk thru these homes. The walls are painted and the cabinets are in place. However, the floors are bare and the fixtures (other than lights, which are painted and in place) aren’t there. A layer of dirt (no front doors) and debris covers everything. The tile install was sometimes stopped in mid-apply.
Two of the homes (that appear to be finished) in Foremaster belong to a developer that has about 15-20 homes for sale in another area near Sandhollow State Park (lake). About another 20+ homes are in various states of building there. The plan is for almost 5000 homes to be built in this “resort” area. This whole Community will be directly under the flight path when (if) the new Airport comes on line.
I’m fighting a new development near my neighborhood(north of St George). Some of us fought and lost against a similar development 3 years ago. We told our local City Council that the DEV would fail. They didn’t care. We were lectured about tax bases and told to go screw ourselves.
I’m using the failed three year old development to fight this newest one. Some numbers: Over 25% of the “investers” who bought into this Community (lots) haven’t paid their 06 property taxes (what tax base?).
Five homes have been built so far (two on spec). Three of these five didn’t pay 06 taxes. One of these homeowners has three liens against the property that total almost $80,000.00. Another has a lien for about a thousand. Half of the development is for sale.
One other thing. The Realestate guy who was shilling this development (his name was on the signage and magizine ads) bought a lot there for $300,000.00 using his wife’s name on the property. He (and his co-invester wife) is one of the people who declinded to pay his Property taxes last year ($2000.00+).
Why anyone would think any lot in St George is worth $300,000 is beyond me. Yet I know people are still asking over $400,000 for half an acre in that area. Can’t these people see that there is nothing but empty land for hundreds of miles in any direction? It may be a nice location for St George but come on, its not like there is any shortage of land down there.
Keep fighting SteadyKat! I was in a tussel with the City of Fruita (in Colorado) over a golf course next to my farm last year. I didn’t accomplish ANYTHING, but economics sure as heck did. They quietly quit this year and the property is back on the open market. Even in western Colorado subdivisions and golf courses aren’t an automatic success anymore…so fight the good fight!
Funny thing is here in Salt Lake County there are more non Mormons than Mormons and of the 40 something percent that are LDS only 30-40% of those are active and living there religion. I’m active LDS (from California) and have seen the housing train wreck coming to SLC for over 2 years. I have talked to many LDS and non LDS/inactive LDS over the last couple of years about this subject and have found there really hasn’t been much difference in their opinions on housing. If anything the active LDS were more receptive to the notion that there were problems even if they didn’t realize how bad those problems were.
I know you were just trying to make a joke but I think it was in bad taste. Your comment suggests the stereotypical Mormon is a blind follower of their faith when most of the time the exact opposite is true. In today’s society (even in Utah) it takes great conviction, not blind faith to live ones religion. I understand where this misconception comes from, its easier to believe those following their faith are dim witted or gullible then to believe they have well thought out and logical reasons (that can be very hard to explain) for what they believe.
Hey BFFB I would be curious to see a map of where locals “invested” vs outsiders. My understanding is that the locals drove up places like Eagle Mountain and Heber while the out of town people were buying sight unseen in high-end, ie the Avenues and Park City.
I’m certain that the RE mania in Utah had nothing to do with religion. There are probably families who did scam properties back and forth to one another, but that was pretty much epidemic everywhere. BMIT has documented some great examples in So. Cal.
I would be interested in seeing that map as well. I think you’re probably right about the demographics that bought in the different areas. I know a lot of long time residents that sold a couple of years ago to move into a bigger house in a new development while where I live (SE edge of Sugarhouse) there are empty and empty for sale houses everywhere.
There has been several articles in the local papers and on TV where several fraud rings have been taken down. People are finally understanding that all that appreciation they saw the last couple of years probably wasn’t as good as they thought it was.
Looks like my last post got eaten. I think you’re right about where natives and non natives bought houses. I know several longtime Utah residents that have moved into those communities after selling there house that was closer to town. In my neighborhood (SE corner of Sugarhouse) there are a lot of empty and empty for sale homes that wreak of out of state investor.
I realize that BFFB is merely trying to defend his faith when he/she writes, “well thought out and logical reasons (that can be very hard to explain) for what they believe”. But logic is the very thing that is the enemy of faith and usually very simple rather than hard to explain (think Occam’s Razor).
How logical is it that Jesus was born of a virgin, or the Moses saw god in a burning bush or that a talking newt handed some guy a bunch of golden tablets? It may have happened. I wasn’t there. But it’s certainly not logical for it to have happened that way.
How logical is it that Jews can’t eat meat and milk in the same meal or sweet… juicy… pork (with today’s knowledge about health), or that Catholics couldn’t let the host touch their teeth (or that transubstantiation is “real” for that matter) or that LDS adherents shouldn’t booze it up (and have watery beer in the whole state). Fine to believe and practice these rituals, but not logical at all.
These rules and practices and beliefs are either given from a god or purely made up. I am not debating which of these is correct. Just that there is no logic involved. It may seem like logic, but when the answer is known a priori, it’s not really logic. Believe what you want to believe. Just don’t confuse it with logic or science.
MrBubble
PS: We’ve heard from he LDS camp. I represent the LSD camp!
I have a freind back in CA who invested in spec homes outside of SLC with the idea that Utah would be bubble proof because it didn’t go up in value like CA. I was afraid he would be wrong.
speaking of those people who depend on real estate for income … just got back from driving around town here Sacramento area investigating some mortgage app financials …. called/visited some instittuions and HOLY COW do these loan officers have bad attitudes!
I had to get up, bite my tongue & walk out of the office from one azzhole upstairs @ River City Bank on Sunrise Blvd before I planted a joshua tree up inside. Combatitive attitude to max !! Another rep @ Golden One was pissy as hell, surly tone, rude, etc.
I told another nicer rep later that these people dont need to take out their vinegar on me; I personally didnt create the current mortagage mess but I can bring em some LEGIT ez bidness if they just get off their high horse!
geeez talk about ‘tudes … and oh by the way, most of the real estate financial staffs have already left for thanksgivingholidays - took the entire week off. What a cushy job … and thats one reason why they are pissy; they see an end to their loafing jobs & dont like it - not one bit nosirree, lawds no, M-O-O-N spells unemployment !!!
“M-O-O-N spells unemployment !!!”
Love it, Aqius. Great reference from The Stand.
One of King’s better books.
I am not in the RE business (or mortgage or anything related), but I have been working with Sale Lake’s largest RE brokerage company since January 2007. And I’m here to tell you that _no one_ in that organization ever talked like the local real estate was going to continue crazy up forever. In fact, managers and agents alike simply said the run-up of the past 18-24 months (check it out) was just catching up a bit from what the rest of the nation had done in the past 4-6 years. SLC trailed for many years.
That said, in the last 12 months there has been a huge oversupply of $1mm+ homes built on spec. It is those people who will fall the hardest. I am familiar with one area near Ft. Union that has five unsold spec homes built (up to $1.6mm), and three more nearby nearing completion, adding to the wild oversupply. I almost feel bad for those greedy rats.
And, no, before any of you religion-haters smartly reply, I am not, never have been and never will be Mormon.
’something uncomfortable
Hmm, what kind of pain will be inflicted on the Sat lake area? The pain of choice is still up in the air, but not for long!
“cites the example of Las Vegas, which is suffering through huge inventories of homes for sale and declining prices. ‘Just two years ago, Nevada had one of the top rates of job growth”
Remember just a year or so ago…how many people were we told were moving to Las Vegas each day, causing forever increasing house prices? something like one trillion per day, or something like that?
Hey, wait a minute. Weren’t those people supposed to be moving to Arizona? Or Florida? Or?
Or?… Second time I’ve read a good many folks are packing up and heading to other Countries.
Here’s an interesting trend: 1.5 million U.S. households are preparing to move out of the U.S. A poll by Zogby Intl. of 115,000 Americans estimated that:
1.6 million U.S. households have already made the decision to leave
1.8 million are seriously considering and likely to leave
7.7 million are somewhat serious about leaving and may do so
3.0 million are seriously considering purchase of non-U.S. property
10.0 million are somewhat serious about purchase of non-U.S. property.
Hope this poll wasn’t paid for by “Press TV”, an arm of the Iranian government, like Zogby’s poll of 9-11 was.
If you add up the first three numbers, you get 11.1 million, about the estimated number (on the lower end) of illegal immigrants living here. Hum. Do you think the poll was conducted in English?
“But these prices may not be around too long. With the opening of major new Strip resorts like The Palazzo later this year, experts say our population and the number of jobs will continue to grow. And that is setting the scene for a housing shortage as early as 2009.”
Scare tactics in full swing in Vegas. Will the sheeple ever learn?
As for FNM, Prof. Bear, I think it is safe to say that your friends at the PPT have decided to let things go just a tad. dang, wish I had shorted the heck out of that thing. 25% down.
Also, anyone notice the tanman? Shares are down to $9. WOWZERS! It is only a matter of time before the windows are boarded up at Doublefried!
“I think it is safe to say that your friends at the PPT have decided to let things go just a tad.”
It looks like they have decided to throw a few bodies overboard to the sharks in order to help keep the ship afloat.
They can’t borrow enough money to prop it up.
They just assume that if they build more casinos then more
gamblerscustomers will come. In that case they should just pave over all of Nevada with Casinos, right? I’m sure that billions of paying customers will materialize out of the ether.Don’t you mean the “Pazillow?’
And all those new hotel maids will keep home prices up I’m sure
“The Boulder area, often countercyclical to national trends, started feeling the pinch before other regions out-of-state, said veteran mortgage lender Lou Barnes, adding he has noticed the supply of ‘bad mortgage ideas’ has been choked off and new construction came to a bit of a halt this year.”
Since more people in Boulder Co, live outside of Boulder than in it (Longmont, etc.), Boulder Co. will definitely feel the brunt of this bust. I wouldn’t underestimate the revenge of the Helocs in Buolder city either. Not everyone in Boulder is stinking rich.
“Excessive land subdivision has helped fuel the foreclosure glut in the Front Range, said Barnes, noting this has occurred particularly in the area he calls the ‘foreclosure belt,’ near the Interstate-25 North corridor that includes counties such as Weld, Adams and Arapahoe.”
Where lots of Denver commuters bought their homes, because they were cheaper than in the northern end of the metro area.
Hey - In Crested Butte - lots are now down to $120K. Just a few months ago, one lot was bid to $109K on ebay. I wrote the guy who won and he indicated the seller would not sell at that price b/c it did not reflect market fundamentals.
The times are a changing.
I just looked Crested Butte up on the map. Jeepers, its in the middle of nowhere! Talk about inaccessible! I wouldn’t pay 10K for a lot unless it was walking distance from a ski lift.
“Remember just a year or so ago…how many people were we told were moving to Las Vegas each day, causing forever increasing house prices? something like one trillion per day, or something like that?”
I live in Vegas and anyone that believes that these homes were ever worth anything close to 2005 values is insane. There’s so much land here it’s ridiculous.
““But these prices may not be around too long. With the opening of major new Strip resorts like The Palazzo later this year, experts say our population and the number of jobs will continue to grow. And that is setting the scene for a housing shortage as early as 2009.””
I’ll take that bet.
The Arizona Republic. “The once-sizzling market for high-rise downtown Phoenix condos has cooled. Phoenix leaders have touted condo dwellers as a crucial part of downtown’s resurgence, saying residents would help sustain nearby shops and their foot traffic would inject the neighborhood with 24-7 vitality.”
——————
It’s strange to me that public planners consider people walking around at 3AM a crucial part of the “vitality” of an area - usually the kind of people out at that hour are not really welcome by the people that actually live in a community. This is another sad example of the “let’s be like NYC” mentality that seems to have affected every OTHER city across the US. Most cities, and Phoenix in particular, will NEVER be like NY, and shouldn’t try. All those 40 story condo tower plans will be scaled back to 15 stories tops, and will sell for maybe 50% of original price projections. And a few more Starbucks will have regular customers in the area, but those “nearby shops” will never materialize.
On another note - I looked at three identical houses in a nice Chandler neighborhood yesterday - my tour guide was the listing agent for one of them. I’d be happy in any of them (after about $20k in renovations to my taste), and let the agent know this. But they are all priced near $500k, and that’s about 35% high. If/when I get the follow up call, I’m going to tell her flat out that I’m a buyer at $330, but just a looker right now. And all three are vacant - one a long-time owner who just seems greedy, the other two 2005 purchases with foreclousure right around the corner I’m sure.
It’s going to be real ugly for a few years in Phoenix.
You should make an offer at $330k. The REALTARD(r) obligated to present it. They wont accept but it will give the FBs a taste of what is in store for them.
I’ll probably just wait until the banks own 2 of the 3, then deal with an unemotional account manager. The third guy who has owned for 13 years will just ride the market down wondering where all his “retirement equity” went. I actually like his house the most, and would buy it today for the right price.
We have plenty of people here in Balti-morgue, Murderland who wander the city around at 3 am. They’re the ones you hear about in the news the next day… “Two Baltimore men were shot in the early morning hours at the corner of Murderstreet and Deadhead Lane. Police have no suspects, but it is believed that drugs/gangs were the cause…” Yep, that is “vibrant” for sure!
When I read many comments from longtime (over 20 years) real estate industry veterens remarking that this current downturn is the worse ever seen, I pay close attention to what they have to say, why it’s said, and the possible outcomes of the remarks.
Anyone who wont listen, and I’m not saying to blindly follow, but just consider, what a person with a lot of experience has to say, is just an effin fool who deserves no sympathy for their refusal to face reality.
here in southwest colorado, durango just reported its highest-ever median home sales price: $460,000. not sure about inventory.
we have long since passed any traditional measures of affordability. i rent a house for $750 that is on the market for $350k. it is a little annoying, but with the low rents i’m really able to save.
That sounds a lot like Bozeman, MT. Housing prices were absurd, but rent was dirt cheap. We rented a small 2/1 in an historic home 7 blocks from campus for $425/mo for several years, then “moved up” to a 3/2 duplex unit with nice yard, still walking distance to campus, for $700/mo. That same duplex would have easily sold for $600k (both units). Price/rent ratio over 400 !
This is a really interesting dynamic. It seems to have happened to places that were, a couple of years ago, total nowheresville with dirt cheap rents and dirt cheap housing prices to match their lackluster economies. I think the low rents reflect low wages and not much happening in the local economies, and the sky high prices are perhaps a figment of the imagination of some distant investor or retiree.
No kidding. Other than tourism, what industry is there in Durango?
I don’t live in Durango, but nearby. Rents in Durango are a little higher, maybe $1,200 on a $400,000 place. The economy? Well, there are some nice local businesses…I think Durango has something like 8 microbreweries (a town of less than 20,000 people, mind you) and some decent food co-ops. There is a nice local quilting store and some great local restaurants. These things make a nice community, but they certainly don’t support any industry that justifies the housing prices. And, honestly and though we love the local flavor, none of it would survive without the tourism. Some relatively high-paid public sector folks (read: me) might shop at the food co-op, but everyone else is shopping at the Wal-Mart with 45 minute lines. Most people work in the service sector, making $8-$12/hour.
I used to know a guy who built spec homes in Loveland and Fort Collins. Around 2002 he pulled up his stakes and moved to Durango. His claim was that it was easy to sell high end spec homes in Durango (unlike in Larimer County where they would just sit unsold). Never heard from him again.
Loveland and Fort Collins I may move there in a few years, this Phoenix heat and dirt is too much I won’t buy here. How do you like it?
When I went to college in Bozeman, my brother and I bought a duplex, rented out half and lived in the other, and wound up paying a little bit less than we would have just plain renting. Of course, we had a downpayment (thanks to a rich deceased grandfather) and worked jobs while at school. This was back in the early/mid 90s. When I heard what stuff was selling for NOW, I almost choked. Our duplex cost 110k. It was a pretty nice one, too. We put a new deck on, tore out the ceiling popcorn, textured and painted the walls ourselves, and put on a new roof. We sold it after he finished college for enough to cover our repairs and even pocket a couple of grand.
Of course, the rent we charged (we charged ourselves ‘rent’) covered the PITI + a repair budget. And we managed that charging slightly below market rent. If I could buy anything where the rent would be even CLOSE to the PITI, forget the repairs, I’d consider buying.
No chance.
next year you’ll pay $ 700 and it will still be for sale
that is just what might happen. we are checking out other places to rent when our lease runs up. we’ve seen a nicer 2BR (we have an old 3BR) for about $650. it is just my wife and i, so we don’t need the extra space. I figure we’ll say to the landlord, “we found a nicer place at $650. match it if you want to, we don’t care!”
Sounds like Intermountain West may be Ground Zero for the final buckets of money and boxes of stupid.
In case you’re wondering, “it’s different here” because all of the baby boomers want to retire here or the generally affluent want to buy second homes. Every mountain Town thinks they are the next Aspen, Vail, or Telluride.
Its funny how everyone across the board overestimates the number of rich people available for plucking.
Sorry if slightly-off-topic, but I have but one word to say about the leading edge of where FNM is going — WOW!…
Can anyone explain what is up behind the scenes to explain this sudden change from months in a holding pattern?
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=FNM&time=20&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
They admitted they were insovlent. At least Freddie did. They have to either :
A) Borrow a sh!tload of money
B) Sell a sh!tload of new shares to raise money.
C) Sell a sh!tload of their crappy assets at firesale prices.
Wallstreet share prices is the fan in this case. Retirement funds that are long Freddie and Fannie are the interestesing pollack-like spatter marks on the wall.
Institutional holdings of FNM are humongous. Someone has finally figured out this is not the place to be.
Yep. Whoever’s retirement funds were the first out of Freddie might actually have a retirement.
And Holy Smokes, look at the volume!
Panic!
“Institutional holdings of FNM are humongous. Someone has finally figured out this is not the place to be.”
The bag of tricks is empty. Game over!
Oh but if only they’d actually use the word “insolvent”.
It used to be that people didn’t want to use the word ‘bubble’. Now the big bad word is “insolvent”.
Bear Stearns, for example, is “insolvent”. They need to go “bankrupt”. But of course, we’ll hear neither. What we will hear is “They were acquired by another bank”. That way the precious brand name is spared the market perception (which would be 100% correct) that they imploded due to greed, stupidity and outright dishonesty.
In the case of Freddie, we’ll only hear that they need to raise some more capital. You know, sort of a bank that needs capital when its “insolvent”.
It’s obvious that the institutional investors figured out what they meant by their statement. Freddie said “We’re going to borrow a ton of money, destroying the dividend and devaluing the stock, or we’re going to issue a ton of stock, destorying the dividend and devaluing the stock, or we’re going to take a ton of losses on our crappy asset sales, destroying the dividend and devaluing the stock. Run, don’t walk, to the exits.”
This may start the next leg down - if the quasi-government entities are effectively bankrupt, where then do we turn? The complete unwinding and gradual collapse of the system is continuing, and this is another set of gears fall out of the crumbling machinery of the Ponzi economy.
We’ll need a few banks to fail (or effectively fail) before the situation reaches “blind panic” level, but the people higher up that see what is coming must be crapping themselves.
As for me, I’ll happy if “Goldchain Silverknife” gets taken to the woodshed. Goldman Sachs is the worst of the big banks, and the most brazen - betting against the investments they sold to their customers! Nice!
A movie for PB to watch:
“Dr. GSELove, or How I Learned to Stop Worrying and Love the Financial Bomb.”
Maybe this article sheds a bit of light on the matter. (Sorry again if OT, but I believe the GSE situation is highly indicative of the leading edge of the market…)
Fannie Mayhem
November 20, 2007; Page A18
Chuck Schumer is lucky Congress ignored him. We’re referring to the New York Senator’s idea, which he has loudly promoted for months, that Fannie Mae and Freddie Mac should ride to the rescue of the housing market by buying up unwanted mortgages and guaranteeing them. Now those two mortgage giants are themselves under scrutiny amid concerns that they’ll report big losses.
http://online.wsj.com/article/SB119552028786998586.html?mod=googlenews_wsj
Hopefully the news about Fannie and Freddie will be enough to thwart the assinine ideas of one Senator Schumer. He seems to be hellbent on tagging the taxpayer with the fallout of this debacle.
PPT in the house! Heavy buying, market screaming back!
They took it over 13000 and held it there but look at gold, silver and oil! Man, oil up over $3 today….here comes $100 thanks to the PPT inflaters.
I’ll be this is just people buying at the 13k mark. 13k is a pretty big psychological ‘floor’, and we’ll bounce off it again. I’m betting we only get the two bounces before we head for 12k.
Huh?
I was saying I don’t think the rally is neccessarily ‘PPT’, but people ‘buying the dip’ at Dow 13k. And I think this is the second bounce off of 13k we’ll see, and it probably won’t be as strong as the first that went to 13.3k, and we’ll start down to 12k.
The timing of the move to 13K at the very end of the trading day is highly suggestive of intervention. There are way too many end-of-day corrections back up to psychologically reassuring levels to collectively explain them as due to the net effect of investment decisions made by individual traders.
C’mon Prof Bear, you’ve got to be kidding. How about all the days where the market is up until the last hour and then takes a 200 point dive? What about the recent days where it hasn’t quite reached back to 13k? Did the PPT take a siesta on those particular days?
If the PPT is real and you know what it’s going to do every day, then you must be making a killing!!!
I really enjoy this site and find it very entertaining, but everytime this PPT nonsense comes up if makes me question the maturity of some posters. It seems to me that many here are just as biased about the direction of the housing and stock markets as the very people they criticize. Sad, but true.
Substitute “computer driven mathematical models” for individual traders there, i suspect. Correct me if i’m wrong, but it’s been a while since individual traders were placing the majority of the actual orders.
I agree with Andrew. First rule of markets is that they are unpredictable at many levels. Even when you can predict them, you can’t predict them
I see no evidence of PPT in these wild moves. There is a lot of cash sitting out there and a lot of fear. The two are fighting it out. And the low USD may really be helping stock market, who knows what is really going on.
You will be lucky if in 50 years they figure out what was happening in 2007. Most likely several theories will exist.
TIMBER!!!
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=FRE&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=13&freq=1&startdate=&enddate=&hiddenTrue=&comp=fnm&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
CFC (countrywide financial) down as well because who will buy CFC’s crappy loans if FMNA is broke ?
any good banks
RF ? or ???
anyone on this bb would have required 10% down in 05 and moved away from toxics——-
there has to be some banks w rational management
No worries guys! Dow up 61 on the great news, as of 3:40 ET.
the stock market is so weird. i haven’t watched it all my life, but lately i wonder wth is it responding to?
Something very curious is up when the market magically corrects to above the psychologically-important 13K level in the last few minutes of trading. That was quite a photo finish there, wasn’t it PPT?
So, what happened to the PPT yesterday when it closed about 40 points below 13k? Amazing how the PPT can be so effective one day and yet so ineffective the previous.
Weird, huh?
Citybank falls over 2 months from 50 to 31.
At 31, Goldman Sacks lowers rating to ’sell’.
Thanks guys! You’re right on the ball again!
… and speaking of ratings …
Countrywide’s rating was cut by Fox-Pitt, Kelton analyst Howard Shapiro. He dropped it from “Outperform” to “In Line” — this after the stock went from $45.26 to $9.07 over the last 52 weeks.
“Outperform”, huh? That’s an 80% drop in one year, equal to what the Nasdaq did when the tech bubble imploded. Now, does anyone *really* believe that Mr. Shapiro believed that Countrywide would “outperform” (that’s ‘outperform the market’, by the way) a year ago? Mr. Shapiro, for the record, is the *former* Goldman Sachs analyst who got the boot after the tech bubble blew up, when it was discovered that he had taken numerous “gifts” from companies he was rating.
I wonder what bribery and graft stories we’ll hear after the dust settles from this asset bubble ….
(Oh, by the way, he had Freddie Mac rated as “overweight” and only changed it to “sell” after today’s announcement.)
Shapiro and five other analysts were let go from Goldman Sachs after the firm copped a $110 million settlement with the federal government securities regulators in December 2002 for conflicts of interest. He and others were shown the door in February 2003.
Looks like he’s back to his old tricks again ….
http://biz.yahoo.com/ap/071120/countrywide_financial.html
How is somebody publically fired for malfeasance given essentially the same job? Shouldn’t he be a fry cook somewhere?
“‘(Next year) is going to be a tougher year,’ Wood added. ‘But I do think it could be a good absorption year, not necessarily bring in a lot of profit, but with the opening of new business and hiring people that will absorb that excess inventory, by 2009, we’ll start building houses again.’”
Good “absorption year”? Short of a lot of burning or bulldozing, there’s still too much “absorption” that needs to happen in the financial markets before there’ll be “absorption” in housing supply. Not in 2008, maybe not in 2009.
You read my mind about an hour ago… I would not be shocked to see the “burning” part of your comment come about, in an organized way, in too many places at once to be coincidence… and eventually traced to a productive, but unsophisticated group of “real estate professionals”, who would smell like gasoline and have giddy grins on their faces. Simple research would reveal only the empty about-to-be-foreclosed-on properties as victims of the “Overhang Gang.”
There’ve been a couple of condo projects in the San Diego area,
one in the Midway area and a D.R. Horton project in Escondido, that have burned in the past year under as yet unexplained circumstances.
I’m not expecting a lot of “unexplained” fires, though there will be some. However, you’re not going to reduce inventory much through the current meager sales. To make a meaningful dent, you’d somehow have to remove existing inventory (burn, bulldoze, etc.).
The FT has a few choice words on the leading edge of where the Fed will go…
Fed downbeat on US economic growth
By Daniel Pimlott and Ben White in New York and Krishna Guha in Washington
Published: November 20 2007 15:13 | Last updated: November 20 2007 19:27
The US Federal Reserve no longer believes that the US economy can grow at much more than 2.5 per cent a year without generating rising inflation, it revealed on Tuesday.
The downbeat assessment means that the Fed is less likely to respond to lower growth with interest rate cuts.
http://www.ft.com/cms/s/1a5e1614-9779-11dc-9e08-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F1a5e1614-9779-11dc-9e08-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
“Ms. Gorny said “’summer is always a slow (time of year) even in the hottest of markets’” . . . Ms. Gorny said she has ‘a gut feeling that by the end of next year things are going to start recovering.’”
Is Ms. Gorny serious?
“Ms. Gorny explains ‘Arizona is still the destination (state)’
“…a gut feeling that by the end of next year things are going to start recovering.’
Amd Chertoff has a “gut feeling” there will be more terrorist attacks. Who needs rational analysis when you can just read entrails–your own–and predict the future.
“Who needs rational analysis when you can just read entrails–your own–and predict the future.”
BWAHAHAHAHA! Great statement, because that’s where it all seems to be leading. Oracles at Delphi. Anyone see the PBS documentary on the development of democracy in ancient Greece? Wow, was that ever an eye opener! Mixed in with this democracy, were some pretty crazy mystical rituals. I found out, for example, that my enthusiastic acknowledgement of “Testify!” is based on the ancient Greek democratic custom of holding bloody bull’s testicles in one’s hand while giving evidence or oratory before a tribunal. I’m not kidding.
Better than holding one’s own…
Recall all the discussions a year ago that revolved around - oh, the market will fall X% by 20__ . . . and then will resume its normal appreciation of inflation plus 2-3%. There wasn’t a whole lot of agreement about how far or how long but there sure were a lot of posters with the “inflation plus 2-3%” mantra. I always argued strongly against this idea and I’ve noticed you never see anybody posting that anymore. Why not?
I don’t think there’s any evidence that housing–with upkeep and taxes factored in–over the long term does anything other than track wages. They’ve had reliable housing data for very long periods of time. Of course, there may be some periods of time when some people “win” and beat inflation, but they’re always bracketed by equal and opposite losses.
I think the confusion lies with people mistaking median (or mean, not important) sales prices as a measure of the overall value of housing. The price that people are willing to pay is indeed a function of income, which is essentially GDP, and closely tracks the stock market, corporate profits, etc. and is in fact some low single-digit amount greater than inflation. (I would also argue that in the very long run, stock market returns can not outperform nominal GDP, but will leave that aside.)
But this is fundamentally different from the value of individual houses over time. Only sold houses are counted in data - besides the fact that people add a tremendous amount of actual and implied costs into the upkeep and improvement of houses, many houses (almost all, eventually) go to a value of zero and disappear as housing stock. This is not factored into housing price data.
So, besides the fact that we should expect below trend housing price appreciation over the next many years, the trend is also much lower than generally understood, I would argue.
Dont watch the day to day gyrations of the market. Everybody is waiting for that seminal movement. I bet we will see a lot of up and down days with the final result being the Dow at 11000 by next summer.
Chairman Bernanke is a fool ……..Jim Rogers
http://www.cnbc.com/id/15840232?video=597238697&play=1
That has to hurt…
BB is between Iraq and a hard place.
GS…….you’re on a roll today
“He doesn’t even understand economics.”
“Is there any one competent in the US?”
Jim rogers, “Yes, the head of the of the European Central Bank is doing a whole lot better job.”
Great comments Steadycat!!! You are in the know and speak from real experience.
Someone said- “If anything the active LDS were more receptive to the notion that there were problems even if they didn’t realize how bad those problems were.”
I’m not sure what you are implying. In Utah County there there are plenty of greedy active members.
Comment by Aqius
2007-11-20 13:47:24
… nosirree, lawds no, M-O-O-N spells unemployment !!!
Comment by palmetto
2007-11-20 14:23:05
“M-O-O-N spells unemployment !!!”
Love it, Aqius. Great reference from The Stand.
One of my favorite books, ever. The Stand. I accidentally memorized it, I paid such close attention. I’m hoping it’ll sparge the Book of Mormon out of my head. I memorized that one, too, when I was a wee lass, but I didn’t enjoy the process. Neither did anyone else, though. I like to share my views and always did. Even when I was just 4, and just learning about how fair and delightsome Moroni sailed over bringing wheat and sheep and grapes and forged metal implements to the Americas.
Haw! Ahawhawhaw!
Oh, Jeeze, those were good times!
Oh, wait…no. They weren’t.
Same here. “The Stand”, in the original extra-long version. Besides the “Prey” series, the most-re-read book ever for me.
This would not be the creepy-ass Sandford series?
Because if it is, let me know where you live right away, so I can be sure to not live there, depending on which character you like most.
After all, ‘the wise person is the one who doesn’t get chopped up in a decorative fashion by a crazy person who was wearing a chainsaw to go get the mail.’
That’s Levitcus, something, I believe.
I love the opening scene of the miniseries where everyone dies in the lab to “Don’t Fear the Reaper.”
Wheat, sheep, grapes, forged metal implements in the Americas? Hunh? I don’t remember this in my North American Prehistory classes!
Hey Abbott, It’s not the price on your glossy handout that makes them laugh, it’s your claim that you and your buddies “typically pay $1,500 to $6,000 to market a home”. What a joke that is!