‘A Glut Of Unsold Homes’ In The Denver Area
The Rocky Mountain News reports on the big changes in Denvers’ housing market. “Rising interest rates, a glut of unsold homes on the market and falling home prices in some submarkets drove up Denver-area real estate foreclosures by more than 30 percent in the first quarter of this year compared with the first three months of 2005. The 31.5 percent jump is the largest year-over-year percentage increase for a quarter in almost two years.”
“The jump to 4,764 foreclosures compared with 3,624 in the first three months of 2005 took some experts by surprise. Public trustee offices in Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson counties estimated the number of foreclosures they expect to open this month. ‘That is disturbing,’ said economist Patty Silverstein of the soaring number of foreclosures.”
“She said that a main culprit appears to be interest-only and other variable-rate loans that homeowners have taken out in huge numbers in recent years to reduce their monthly mortgage payments. ‘A lot of people have taken out these different types of mortgage products during the past couple of years, and now people are discovering that their payments are starting to ratchet upward with rising interest rates,’ Silverstein said.”
“(Broker) Sean Healey said he was not surprised by the number of foreclosures and believes the market has a couple of years of pain ahead. ‘What I see is not pretty,’ said Healey.”
“He said the number of unsold homes on the market has been growing by an average of 2.5 percent a week. The increasing supply is putting downward pressure on sale prices, especially for the lower-priced homes most likely to go into foreclosure.”
“That’s a vicious cycle because it forces more sellers to lower their prices, driving even more houses into foreclosure, Healey said. ‘Primarily, I see a huge glut of homes priced under $300,000,’ Healey said. ‘Under $200,000, it is just a blood bath, a path of devastation. It is just ugly.’”
“In some areas of Adams County, sellers of lower-priced homes are finding that the market value of their home is down 15 percent to 17 percent from what they paid a couple of years ago, Healey said. When the mortgage is worth more than the home and the owner is forced to sell, it is almost inevitable they will end up defaulting on their mortgage and lose the home to their lender, he said.”
“Healey said some people have lived in homes for six to 12 months without making a payment before the lender forecloses.”
“Economist Tucker Hart Adams said she recently was a guest on Healey’s radio show and received a call from a woman who said she and her husband have good-paying jobs but are in danger of losing their home because they had borrowed all of the equity from the house and their credit cards are maxed out. She wanted advice from Adams. ‘I guess you just have to spend less on everything else’ in order to keep the house, Adams said.”
This situation has been in place since early last year, yet the big media seems to ignore it.
The media’s decision to frequently turn a blind eye to bad financial news until it is overwhelmingly bad is one reason the landing will be hard, not soft.
Amen brother.
David
Bubble Meter Blog
And this is just the beginning, Ben. We’re only on the leading edge of the ARM-reset wave, and we’re already hearing terms like “bloodbath”.
My guess is that as Spring wears on and more speculators come to realize that there’s no big buying frenzy materializing to bail them out, we’ll see some sharp price adjustments. They know that if they don’t sell the property the couple of months, they’ll likely be stuck with it (and the negative cash flow) for another year.
Amen brother
when has denver been a sellers market ? 2000-2003 ?
if that
Article kind of confirms what I see around me in Boulder-Longmont area of Metro Denver.
(Also shuts up the argument that it can not get any worse as the
market was never booming in last 5 years)
Denver area saw decent appreciation between 1996 to 2001 (10+ % YOY)
After that market flatlined/went down marginally.
There were more than 3 times homes for sale last year compared to
2001. I can only imagine what it will be like by end of this summer.
Ben,
You’re killing me! Is there any major metro area in the USA which does not have a ‘glut of unsold homes’ at this point?
My area, SF Peninsula (Burlingame, San Mateo, Belmont and San Carlos) are nowhere near a ‘glut’. I’ve said it before… People here are truly and completely insane.
“Google money will save us all!!”
Dude, we have GOOG money and we’re not going to be saving anyones ass.
The Bay Area lost it’s grip on reality a long time ago (I used to live in San Mateo. People are paying $600-700K to live in those 50-year old run down shacks that border 101 just north of 3rd Ave, or that run along the El Camino Real (that sold for under $200K a few years ago). And for what? It not like it’s a nice area. Paying top dollar for a beater in Los Gatos or Hillsborough is one thing, but in that part of the Peninsula???
Thoroughly agree. People are paying more like $800k today for those same run down shacks. We think more and more every day of taking our money and running.
Better move fast, while the money is good.
Our money is cash or cash equivalent mostly. It was looking for a home in real estate but any way you slice it, RE here makes no sense at all.
i left Belmont in 2003 because of the insanity of those around me that were buying homes. sure, i would loved to have bought a home in the hills of Belmont, but every home we looked through was old (40+ years) and required at least 30K in renovations (electrical, plumbing, roof, etc.) and they were fetching over 600K. absolutely insane. and check this out: the mayor of San Carlos (at the time i was living in that area) was living with his parents in San Carlos because he couldn’t buy!!!!
Same goes for Oakland/Berkeley. Houses taking a little longer to sell than 6 months ago, but still not a lot on the market by historical standards.
No glut, but some signs, e.g., a new luxury downtown San Mateo Condo project (prices starting at $700K) offered HOA fees paid for a year and $5K toward closing costs for units purchased during the Grand Opening. An attendee at the opening also reported hearing offers of a $30K discount on purchases that day, but that was not on the fliers.
Seattle has yet to have a glut
Burbank/Glendale/Pasadena - no glut.
I remember, back in the early 90s when there were 7 houses for sale just on one block on our street. I counted up all the houses for sale on the entire street last week and there were only 3.
Healey said. ‘Primarily, I see a huge glut of homes priced under $300,000,’ Healey said. ‘Under $200,000, it is just a blood bath, a path of devastation. It is just ugly.
A year from now this blurb will be said nationwide- Welcome to 1990.
I’m hearing a lot of former-boaster/flippers these days saying ‘I’ll just walk away from my house if it gets upside down.’ I guess these morons never did their homework on the new BK laws.
I hear ya, bottom.
New phrases for our collection:
“Bloodbath.”
“Just plain ugly.”
“Years of pain ahead.”
“A vicious cycle.”
OT, but the Corp of Asset Price Management Engineers appears to have made a decision to let a bit of extra water through the Old River structure which regulates the long bond market’s levee system…
http://tinyurl.com/nlfwp
D@mn! Sure wish I could have foreseen the measured pace of increases in the long-bond yield before I put dough into the Vanguard Long-term Treasury fund last month!
The DJIA seems to have sat up and taken notice of the sudden spike in the long-bond yield. So much for that extra shot of bourbon in the morning glass of OJ which led to the jump up on the opening bell…
http://www.marketwatch.com/tools/quotes/quotes.asp?siteid=mktw&sid=1643
At 11am, the DJIA drank the rest of the bottle…
The U.S. markets’ straight-up move at exactly 11 AM coincides exactly with the close of the German stock market, which had its own reverse-on-a-dime, straight-up-to-the-close buying panic in its last hour. An eye-opening PPT intervention, seamless in time across two continents.
It is truly amazing how the longs have bought into the wall Street Kool-aide of PPT….Yes every disaster of bad news event is met with sharp over night selling only to have a reversal in play by the opening bell….Back in the good ole days before 9/11…this was a well known distribution technique…..Now it is government intervention the banks are in play……”bonds crapping out”, “housing crapping out”, multi trillion derivatives unaccounted for, Carribian bankers only buying our Treas. Auctions, oil just 4 dollars off 8 month ago Intervention peak..and all the while 2 tons worth of shorts in GOLD (sold 250 points ago) is choking the PPT with real money versus the Fiat money slop(expanding @ 15% YOY .. Do you think its time for the chimps to press the button for another banana? Have they learned their lesson (buy the dips Aka Japan?) If so? its time to shake that apple tree and harvest the little peoples broker balances before all those home foreclosures leave them scott free & bankrupt?.
Or do you think another round of of trying to get the NASDAQ up to say “1/2 of what it was in 2000″, will turn every thing around?
I blame inefficient bubble-marketing tactics on the part of the Denver-area realty establishment. Apparently, they failed to properly get out the message that all wealthy retirees would be flocking to Denver to retire near the mountains.
I read a report yesterday about how the great majority of people stay put when they retire. The second home phenomenon was largely speculation, and as some predicted, now that appreciation has disappeared, many owners have discovered they can do without that extra house and are trying to sell.
I can understand the desire to stay put. By retirement age most people have a stronge sense of belonging and community in the area where they live. Starting over in a new place is often not easy. Of the baby boomers I know who are considering relocating after retirement, what I hear the most is that they want to live closer to their grandkids.
Having lived on Cape Cod for a few years, I would have to say that it depends on the locality. My particular neighborhood was all retirees and Brazilians.
I wonder if 9/11 made people want to stay closer to their families. It was a major reason why we left the Cape. No family there for us.
I don’t know about second homes being merely speculation. I’ve been watching Naples, Florida for 25 years and there are a ton of snowbirds down there. I think it is Socio-economic.
If people can comfortably “afford” a second home, they will have one. For a certain segment of the population, a second home is part of retirement life. It is not about “investment”.
I agree, a second home can be a way of life for people who can truly afford it. That will always be the case. I think the point now is that lately, second homes have also been serving a different (speculative) function that is simply not sustainable.
I agree that there has been a speculative component to the second home market that was not present in previous decades. I also believe that affluent boomers will absorb the oversupply. It may take ten years though.
There is a big difference between comfortably affording a second home in the Naples area about three years ago when you could buy one for less than 200K and stay locked in your prop taxes. The high prices (double) now, coupled with the associated higher prop taxes have eliminated a huge number of people that may have considered those second homes. They are not affordable anymore. That is why inventory is going up at the current bubble, unsustainable prices.
Ben,
During the last week, I heard of three couples who have sold their second homes or have put them on the market. (one in Texas and 2 in Phoenix area.) Owning a second home is much like they always say about boat ownership– The best 2 days are the day you buy and the day you sell.
As you know, Ben, I live in a very speculative 2nd home market…and it’s a big “surprise” that recent retirees are not interested in buying a 500K house in a community where there are young families, big new school bonds, and behind the curve health care. In fact, the retirees that landed here in the early 90s are now headed for assisted living, and their huge McMansions are lanquishing on the market. They bought them when they were still playing golf and enjoying the good life here, that was touted in many national publications as “the” place to retire. Now the kids are paying the tax bills and praying that they can unload the house in order to pay the nursing home bills.
I always wondered what would happen to those stucco wonders when Ma and Pa got older.
Catherine, which area are you referring to?
Prescott, AZ
I always wonder why empty nesters needed the sprawling homes. In-laws in 1800 sf condo have neighbors like g granddaughter of a former president and former elite prep school attendees w/long, prestigious bios. It seems old money that didn’t have the need to shove it under people’s noses should be watched and followed more closely.
Can anyone tell us more about the market in Prescott, AZ? I’m very curious.
Prescott: Much like Phx, lots of inventory, very few sales, many many homes just sitting, particularly the >$500-1M homes. Prescott has great appeal, but has suffered in recent years due to rapid growth and poor planning for infrastructure…some significant traffic issues, water will become an increasing problem, unhealthy (bark beetle and overgrowth) National Forest around city that is way overdue for a burn. Prescott was a magnet to CA. buyers for the past few years, but that has pretty much stopped. Like many other “mini-bubble” communities, there are far too many contractors, agents, etc…the local economy will take a hit big time when the numbers continue to deteriorate.
Thanks. Prescott is so off-the-beaten-path that a bubble there kind of boggles my mind.
and Denver proper is more like 50% over last year according to the stats at the bottom of the article…
Denver 2005 851
Denver 2006 1,241
and yet there are still folks on CraigsList hocking 1 BR lofts for 400k in lodo.
“I guess you just have to spend less on everything else’ in order to keep the house, Adams said.”
………….oh no……..dear god!…….that can’t be an option, can it? How friggin’ un-American!
Give me a break. How about just go suck on the tailpipe of her car? As if you could spend yourself into a position like that and expect to get bailed out by majic wisdom from a radio show.
“Healey said some people have lived in homes for six to 12 months without making a payment before the lender forecloses.”
This kinda pisses me off. Just let a renter try this. We need a new BK law that forces creditors to foreclose. This would get the ball rolling faster and be better in the long run.
In some states (like MA) renters can find ways to get away with things like this too…at least if the rules haven’t changed in last 5 years.
Yep, just don’t pay your rent and don’t talk to the landlord. It will take several months for the owner to get the proper paperwork and have the sheriff kick you out. Landlords have a tough time kicking out deadbeats in California.
I am a Loan Officer (30 years in finance). Last night I was at a bank presentation ~200 LO’s from various companies were present. I mention this because last night, the green peas are still convinced that “house prices only go up” and do not see anything wrong with NegAms. My primary business was OK for the last 4 years, but not spectacular like the recent LO’s who sold the NegAms etc. - I did not buy or lease a new Mercedes. My specialty is formerly good credit now with current derogatories including foreclosure notice. As of today, I have more business than I can handle. Recently the State of Illinois made a valiant effort to try to protect consumers from predatory lending. The scary part is in the past, I could solve 75% of the problem loans. Now as a result of these new laws designed to protect the consumer, I can no longer help 2/3rd’s of these F’d borrowers. They will have no choice but to lose their homes.
BRING ON THE PAIN! THESE MUTS DESERVE IT.
I’m wondering if you were offering a solution or just giving them a way to put off the pain. If they were just pushing out their debt that’s taking away from future income….just putting off the pain unless there’s some major promotion or inheritance that appears onscene.
I tried (and in many cases succeeeded) to establish a semi permanent solution. There are many well meaning individuals who get injured at work, lose there job, outsourced etc. who are to proud to seek help early. These individuals go into preforeclosure and if they are lucky they get referred to someone like me. If they are working either new or ? and qualify full document - I can place them in a new loan that they will have to be in for 12 months (no prepay penalty, but the penalty for going into preforeclosure). The interest rate is extremely high currently 16.5% for Wisconsin. If they pay for one year their credit is reestablished and I or any LO can place the borrower with a lower interest rate.
My primary business was OK for the last 4 years, but not spectacular like the recent LO’s who sold the NegAms etc.
Interestingly, I am setting up a consulting business based on my knowledge of the racketeering game of mortgage oringinators and real estate agents acting in collusion to use specific number hitting, “play-ball” type appraisers in order to do their deals, screwing myriads of financially unsophisticated people in the process.
When I get done explaining the conflict-of-interest racket, to FB’s I hope these “green peas” have used some of their loot to buy a set of body armour.
Hi, How the new law is different, if you would add, some of us can learn from it. Please post if you can. Thanks
There are two new laws in Illinois. The first loan HB4050 is targeted to specific zip codes in the city of Chicago - this law is so bad I do not know any responsible LO who will originate a loan in these areas. The second law which really impacts my business deals with “high interest loans”. If the borrower lost his/her job and went into default on his/her loan, then got a job that qualified for a refinance out of foreclosure (full doc), The borrower was able to save their house. The new law does not allow high interest loans in Illinois. Banks are not willing to lend money at lower rates to high risk individuals. The current rate for foreclosure loans without prepay penalties and with the ability to refinance to a higher quality loan in a year is 16.5%. In the past 75% of preforeclosure borrowers were able to salvage the house by either selling or paying the new loan with ~25% ending up in the same mess they started with. This is no longer a viable option in Illinois, with the possible exception of “hard money lenders” at significantly higher rates.
How does a fed funds rate of 5.5% sound to those ARM holding morons. Starting to look real possible. That might shake a few apples out of the tree.
I dont know if you would call it a major metropolitan area, but Salt Lake City inventory has been going down since I started tracking in June 2005. Inventory is 40% lower than it was in June 05. There is no “glut” in Salt Lake City. At least not yet.
I know someone form my office cashing out of So. California and moving out to Saltlake city , UTAH.
The reason it appears is price advantage. Also you can feel , other reason for them may be too much undocmented immigration crowding out civic facilities..and the future it indicates to.
the “pain” will be felt by ALL excpt gov workers and bk lawyers
No, the gov workers won’t be exempt: the homeowners won’t/can’t pay their taxes and the appraisals will start coming down (i.e., lower property taxes). With the home ATM shut, less sales tax, too. Less tax income means layoffs galore!
And don’t forget the retirees: if their pensions are based on RE (like mortgage backed securities or REIT), their income will drop too.
Not a pretty sight…
The state of Nevada has layed off workers in the past. I think they will in the future. My husband works for the state. One more reason not to buy now.
A colleague was just in the Denver area for a conference regarding water resources, which is a huge problem in the region. Another observation was notable during the visit — an inordinate number of cars, trucks, motor homes, boats, snow mobiles, dirt bikes, etc., parked near the road’s edge bearing “for sale” signs.
Ben,
FYI I heard on the way in that the UCLA/Anderson group released a statement today about their prediction for loss of jobs in California over the next couple of years. I can’t find a link to it though.
Just found it:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/03/29/CALECON.TMP
Thornberg is even using the term “soft landing” now. Also:
“Rather than popping, the housing bubble will simply sag. UCLA predicted that appreciation will slow to 6 percent by year-end and will be flat next year, and that sales of existing homes will fall 26 percent, from 530,000 units now to 390,000 in 2007 — and even lower in 2008. “
LATimes this morning.
http://www.latimes.com/business/la-fi-uclaecon29mar29,1,2001776.story?coll=la-headlines-business
So… Housing starting to move away from fundamentals, then doubles from that point… but we are going to have a nice steady flat line for the next couple years…
This report has all the facts that support a meltdown, but then try’s to convince you with those nice soft words that we will all be ok…
Meant to put that housing started to move away from fundamentals in 2002….
Agreed, I think Thornberg has become a lot less pessimistic over the last year or so, and he seems to be the one quoted more than Leamer these days. I heard him a few months ago on a radio interview say “If you buy a house today for $700,000, it’ll be worth $700,000 in a few years, so don’t panic.” Of course he didn’t opine on what he thought prices would do in the intervening few years, but now he has by buying into the “soft landing” theory.
I am amazed that someone could be so confident about a complete flat-line…I wonder what the theory could be behind that…
any er nurse can explain what a “flat line ” means.
‘A lot of people have taken out these different types of mortgage products during the past couple of years, and now people are discovering that their payments are starting to ratchet upward with rising interest rates,’ Silverstein said.”
MR. SILVERSTEIN,
WELCOME TO AMERICA’S NIGHTMARE and the ensuing BURST of the housing bubble.
March 30, 2005:
‘Lenders started giving money to people, and it’s gotten out of hand,’ said Jeannie Reeser, public trustee of Adams County. ‘I am talking to people who have jobs, but their income doesn’t come anywhere close to matching their financing.’
Huh
As it turns out, I returned from Denver last night. I was visiting friends. It seems that every block in Denver had either houses for sale or for rent. It was actually quite striking. Funny coincidence that I return home to find this.
According to CBS Marketwatch author, the post-Fed-hike sell-off is overdone. It’s safe to buy those financial stocks you had your eye on. Crisis averted.
Yet when RE stats for Denver metro come out they will show YOY increases or some such foolishness. If some homes are down 15% over the last two years why hasn’t it shown up?
Because those stats are not same house sale stats. They only compare the “average” price of one year with the “average” of the last. Since new houses tend to be larger than older ones the “average” house keeps getting more “expensive”. Those numbers are only useful to realtors for predicting income, not for a buyer or seller trying to price their house.
“Denver” is a big city, but is not landlocked. Typically people will not deal with a cross town commute because there is no real need to.
Littleton was hit harder by the tech bust while the downtown area has more finance industry exposure. The Commerce City area still has oil refineries, and the new airport is impacting the North East. In general house prices are higher near the mountains and cheaper near the desert (plains).
Did that article say some experts were taken by surprise? How could that happen in this country! How could it! Say it isn’t so!
cause they didn’t sell-hense no record
“(Broker) Sean Healey said he was not surprised by the number of foreclosures and believes the market has a couple of years of pain ahead. ‘What I see is not pretty,’ said Healey.”
Why I just can’t believe that is true. I took my son to school this am and a local radio news parrot told me ” you don’t have to worry about the downturn is housing because it will be a soft landing. Why? Because the downturn in housing will create a loss of jobs thereby creating a soft landing…….ah yes, SF keep smoking what you’re smoking all the way to the welfare line.
“I took my son to school this am and a local radio news parrot told me…. ”
Salinas Ron,
You got it- AMERICA is talking about the housing bubble on local radio stations, local news stations… and I am watching CNBC TV this morning and “housing”, housing bubble, interest rate hike, etc. etc. is a main theme in the reporting today.
REWIND a few months ago and these same parrots were talking “home prices soar” verbiage…
something has gone rotten, and now everyone is smelling it.
I buried it in another thread but yesterday on CNBC Power Lunch they had Peter Thiel (sf jack followed my post with clarification that he is the smart Stanford-educationed venture-capitalist current hedgefund manager and co-founder of Paypal) on who very clearly stated he expected housing to *tank* and cause a recession by year’s end. I didn’t catch the whole interview, but they seemed to take him seriously and look worried going to break (shit, that condo I just bought on the strip, and my two 4mil houses, he’d better be wrong man)…I think he was expected a mere 10-15% decrease in prices this year, but I think also he didn’t expect it to end with that…
just the week before on CNBC they had been playing realtor showing us what $1mil buys in a house in various markets. Maybe something about seeing shacks on the west coast versus 5000 sf places in Cleveland (hmm…how many of those does Cleveland really need anyway? I didn’t actually watch this lunchtime series cause it would have made me lose my appetite…) made people more willing to admit that the whole enterprise is a strange frenzied distraction from anything worth the economic activity!
cheers all…
Shel,
Good commentary. I saw portions of the CNBC Power Lunch you have referenced above…
Looks like there is no more “FREE LUNCH” for the flippers and speculators coming into this new economy.
Mellody Hobson, on Good Morning America in SEPTEMBER 2004, was saying she was worried about the gains in the housing market. I remember because we had just sold our house, and it was in escrow. I was worried the buyers would get wind of it and back out.
don’t timed it !
it popped here 7/4/05 N VA
form msn money
Timing the bubble “burst”
Thousands of apprehensive sellers and buyers have been playing this game since the late 1990s, trying to time their sale to either beat the “pop” and gain optimal profits, or to swoop in and pluck up cheap property after a burst. In almost all sections of the country, the bubble remains “intact.” For the most part, real estate bubbles don’t pop, they just slowly deflate and the market levels off then surges again in the near future. Always take the approach that real estate is a long-term investment.
How could the experts be surprised? I was formerly an expert, and I could see this coming 6 years ago, the market was overpriced then! I predicted the crash would have occured 3 years ago. Shows how damn smart I am. For what it’s worth:
Then (1980-82) and Now (2005-06) observations:
Then, real estate prices were driven by 10%+ annual inflation and investors trying to shelter ordinary income from taxation. Most of them were “buy and hold”, and paid attention to the “numbers”, i.e. cash flow, rent to value ratios, reasonable valuation modeling and forecasting. Then, investors had the option of long-term treasury investments at 10+% or long-term tax sheltered investments. The congress pulled the rug out from under them with the 1986 Tax Reform Act and wiped out billions of dollars in equities overnight, causing a real estate depression that lasted for 8 years. We relied on an MLS book to estimate the state of the market. If it was thick, there were more properties, and vice versa. There was no internet, just newspaper and tv. Information disseminated at a very slow pace.
Now, prices driven purely by easy money, herd-mentality speculation. No attention is paid to the numbers, and the investment term is short-term flips. Inflation is “low” and the taxation issue is entirely different. We have instant information (this blog among others) and in many respects, can see the current situation unfolding before our very eyes. Virtually every tv station and newspaper is now producing housing bubble news.
In light of the above, I disagree with the observations that the so-called “smart money” got out last year before the downturn in the market (July 2005). Many of the short-term flippers/investors/fixer-uppers have been in a state of mass denial and are quickly entering a new state of mass panic. They didn’t see it coming (the disappearance of buyers and increase in inventory). Because of denial and greed (typical human behavior), they got caught with their pants down. Real estate is not a highly liquid asset like stocks. It takes time to buy, fix, list, sell and close escrow. Phoenix has the potential to approach 100,000 to 120,000 properties on the market before year end. WAG on my part. We’ll see.
Bottom line: This is only the beginning folks. There are no precedents for what is happening now. Be patient.
Fred, I totally agree with you but still hope for a “soft-landing” for not only my sake, but the economy in general.
12/31/86 I was a real estate lawyer. We worked until almost 2AM as investors sold rental properties before year-end. It was crazy.
As for today, I’m with you. I have been expecting a shift in the market since 2002 and have not bought since. Looks like it is time to buckle the seat-belt.
Va, unfortunately, we get what we deserve. The economy in general is on the precipice and housing is the match that lights the fire. I suspect the illegal immigration problem might solve itself when Americans have to compete with Mexicans for jobs that are left after the poop hits the fan.
Oh, I forgot to mention the Now: “creative financing”, ARMS/IO/NegAm, loan and appraisal frauds, and the doubling of prices in 3 to 5 years. The scope of what is happening today is mind-boggeling compared to the late 70’s and 80’s.
Minimal appraisal fraud in ‘86. Practioners, while unlicensed and unregulated were largely professionals drawn to the business from business/real estate educations and backgrounds.
2003-Legions of illiterate hacks with get rich quick mentalities pour into the profession as the result of easy licensing requirements by state regulatory agencies.
HS educated “trainees” earning $100k. Their taskmasters do half a mil.
Corrupt loan officers can now “pick” their appraisers.
The ones who hit the pre-determined number get the work.
The honest and ethical get flushed down the shitter.
There’s your “then” and “now”…
What did you miss the S & L clean-up. Same stuff going on then as it is now. Actually it was worse back then it was a lot easier to get away with corruption.
Right on. I was there. People marched in with guards and told everyone to leave. Couldn’t even pack up your desk until a week or two later. I was one of the ones chosen to “stay” and run the company thru bankruptcy. I think this was the “booby” prize. I left after about a month or so. I was supposed to manage hundreds of lawsuits by institutional mortgage buyers across the country- by myself, 2 years out of Law School and for 30K per annum. I ran from there!
“In light of the above, I disagree with the observations that the so-called “smart money” got out last year before the downturn in the market (July 2005).”
Polls have been taken of the “affluent” (those with something like $1 million or more in assets) and they significantly reduced their real estate investments in 2005. I think that is the smart money being referred to.
Flipper/day-traders are not the “smart” money unless they are currently walking away from deposits. No sense in putting good money after bad.
Judge’s wife that is herself a medical administrator sat in with waiting ballet Moms about 8 mos ago telling anyone that would listen to dump all exteranious real estate…..that things were going to be bad. Did notice a few “investor” Moms looking a little wide eyed! (Does anyone understand this stay at home Mom language? LOL Sorry after 9 years at home, professional jargon in the cobwebs! Hoping reading this blog can resurrect!)
“In light of the above, I disagree with the observations that the so-called “smart money” got out last year before the downturn in the market (July 2005). ”
Fred Hooper,
I agree with everything you said, except for the excerpt above. You MUST HAVE MEANT that you AGREE that Smart Money got out last year before the market turned…
I don’t consider indescriminate, foolish beginner FLIPPERS as part of the Smart Money class. This thing has been brewing for all to see for quite some time. Greed has pushed alot of “investors” into careless, unsensible situations. Yes, they ARE caught with their pants down around their ankles.
Mortgage applications “tick up” (1% from last week, hehehe). Down 15% YoY.
Let’s review. Mortgage applications down 15% at the very beginning of this bloodbath, inventory continues to rapidly rise. Mmmm…what could that mean? Anyone?
http://tinyurl.com/zj6ds
“Fortunately, “other parts of the economy are starting to recover. …There is strength in things like manufacturing, tourism, professional services. All that will help the economy,” he said.” from report cited for UCLA/Anderson
Mr. Anderson, you believe that housing will tank albeit softly, consumer spending will be reined in, yet manufacturing, tourism, and professional services are our safety parachute? Let’s see, ah, manufacturing base going overseas, professional services like the mortgage money market will be underwater, and in every major city in the USA all the flippers will be competing with the major hotel chains to lease their property to foreign tourists.
California is pretty lucky in a lot of ways because we have a more diverse economy than a lot of states.
If you spend time in downtown LA and down at the LA/Long Beach ports, it’s amazing the amount of industry that is being created in import/export-type businesses. There is also a lot of financial stuff from companies not based here in the USA (like Asian banks, etc.) There is still quite a bit of manufacturing done in California, just not as much as there used to be.
Anyway, losing all those RE related jobs will be nasty, but it won’t be the end of the world. Other areas stand to be in a he** of a lot more hurt. (Like Phoenix and Las Vegas.)
i just checked in to “ocrenter” site “bubbletracking.blogspot.com” to update the inventory stats. Holy *%#@!! No way this doesn’t end bad! April begins soon and I believe that will shake out the last of the fence-sitters who have been waiting out what they thought was just a seasonal slow down. I noticed that some of the current numbers are very near record highs. I think we’ll be blowing the top off those records in less than 30 days. To those who commented above about your areas not seeing a glut yet, just wait. Ocrenter’s site tracks key bubble areas, and they are the first dominos in the line. The wave will hit you soon enough.
I agree…the folks that were waiting for the school year to end to sell will start listing their homes in April/May.
Add to the fact that we really haven’t had much of a spring yet. Lots of rain, cool weather. when the current weather cycle breaks, all hell will probably break out on inventory.
Out of San Diego,
I think you may have pointed out several weeks ago that the realtors still have Holidays they havent used yet (to explain the slowdown).
I think “Robinson’s May Sale” is NEXT…
nvmtgbroker: Hope you’re right. The SF Peninsula is blue chip. If it falls apart here the entire state of CA is f*cked.
I agree San Mateo Bitch!
100% financing w/ 0% down; rip-off closing costs and mortgage broker’s commission rolled into the finance package, plus $10k in seller concessions further skewing the sales price, all legitimized by a sleazebag number hitting appraiser in the hip pocket of the real estate agent.
F*ckin’ right it’s a bloodbath…FB’s everywhere.
I just bought a 2nd home……
A “Motor Home”……
Sort of a long story about our Denver situation:
My wife and I rent a house in a relatively nice part of town. We had been getting hints from the owner of our house that he may want to sell over the past couple of months… my response was always “do whatever you have to do, we’ll find another place” though we dread moving, I don’t want to see this guy hurt financially, he’s been a good landlord.
So yesterday he comes over in the morning and says “I’m selling, in fact I’m selling all my properties, including my own house”. Now this guy has done very well over the past few years as a mortgage broker. He’s about my age (mid 30’s) and has a handfull of properties around Denver including the house we live in (comps are high 400’s) and one twice the size he lives in up the street. A few more too, but I don’t know about them. I think he’s smart to bail now, but I wonder how many like him are out there?
So now we are looking for a rental. Last night we visit a house where a young woman is in a lease but she just closed on a house nearby so she’s trying to find someone to take over the lease. I didn’t tell her what I thought of the market in this part of town (somewhat bubblicious) because she’s already committed, but did get info from her about her experience.
She said she had bidding wars because construction companies were competing with her. She said they didn’t care about upping the price 5 or 10K. I think there could be some shills, but more likely it’s not the construction co. owner’s personal $ at stake, they are sheltered to some degree in an S Corp or LLC or something and are just trying to keep their jobs b/c that’s what they do (build) and to hell with the market ups and downs.
The status in our little corner of Denver (80209) is LOTS of houses for sale. Plus lots of renovations/scrape/pop about 50% of them with for sale signs in front (before they are even done). A few SOLD signs, there is still a market here. Some of that is def from CA (like the guy who bought the $1M house on the corner of our block). They see bargains here I guess… it is really nice, but I’m not sure it’s gonna be enough to keep the froth whipped up. There are huge new developments on the outskirts of town which are pressuring the closer in spots, and most of the houses around here are old and need work. Usually they end up slapping stucco over the brick, popping the top, and creating an ugly contraption to increase the sq footage of 1920’s brick bungalos. Or they scrape and put a McMansion on a small lot. This is taking the charm out of the ‘hood… and will ultimately make it less valuable IMO. I think it will come down by 10%, maybe more in the next 6-12 mos. Next 3 months will tell the tale.
Anyhow we are not buying into this insanity… fortunately for us, the place next door to our house is vacant and I think we will be able to rent it out. If not there are PLENTY of other available rentals around us.