Well Into The Nation’s Housing Bust
The State Journal reports from Kentucky. “Pat Layton isn’t ready to launch a career in blues singing yet. But she’s beginning to feel she could supply B.B. King with some new and true lyrics…if the real estate market doesn’t improve in 2008. A prominent real estate agent in Frankfort, Layton has been selling houses for 16 years, ‘and this has been my worst year, by far,’ she says. ‘I understand it was worse back when interest rates went to 18 to 20 percent. But this is as slow as I’ve ever seen it.’”
“Jack McDonald, a former builder and real estate agent who now produces a meticulous real estate market report for Franklin County, says the local market is down a little this year.”
“‘Like a lot of other places, we have had a great real estate market the last several years,’ McDonald says. ‘Being down a little bit this year shouldn’t be surprising. Practically everybody who thought they might want to buy a house has already bought one. At some point in time, it has to be a natural reaction.’”
“Charlie Jones, Franklin County master commissioner and an attorney for developers, says all sectors of the real estate market “are having a bit of a downturn. Master commissioner sales ‘mostly related to foreclosures’ have increased in November and December this year, Jones says.”
“He says a lot of those sales, ‘I think, are due to change in the mortgage situation,’ with interest rates being bumped up. ‘I’m sure some people bought houses they truly couldn’t afford.’”
The Columbus Dispatch from Ohio. “The ‘for lease’ signs are going up at central Ohio condominium complexes, to the chagrin of owners who paid full price to buy there. Developers who have been trying to sell condos in a weak real-estate market now are offering to lease them with the option to purchase, while slashing prices.”
“MAS Cos. began offering the unsold condos for lease with the option to purchase. About a week ago, the company cut prices again, taking up to $70,000 off the original asking price of about $200,000. That left condo owner Andy Ballog feeling as though someone shut a trap door on him. He fears that the price cuts are devaluing his property. ‘We’re kind of stuck now,’ he said.”
“‘Who would buy now? In two years, they only sold two and now they’re leasing? Who in their right mind would buy in a place where they’re leasing?’ he said.”
The News Democrat from Illinois. “The latest local housing sales figures are lower than the year before, but analysts believe the metro-east market is still holding its own. ‘All real estate is local, and national trends do not always reflect local market conditions,’ Realtor Association of Southwestern Illinois President Tari Jacobs said.”
“Gateway Association of Realtors Executive Director Al Suguitan said the home prices are adjusting according to the market. ‘They’re just going to have to consider adjusting prices on homes,’ Suguitan said. ‘Many builders are clearing or reducing inventory and giving themselves some breathing room, and hopefully getting some buyers into brand new houses.’”
The Rockford Register Star from Illinois. “Thanks to the sudden slowdown in the Rock River Valley housing market in 2007, at least five area home builders are offering a variety of incentives to sell either finished properties or to generate housing starts for 2008.”
“‘You’ll hear people say at open houses, ‘This is the worst time to buy,’ said Dianna Dianovsky of Howlett Homes. Howlett is offering free upgrades or reduced prices at selected houses in four subdivisions. ‘This is actually the best time in 20 years. The prices you can find right now are unbelievable.’”
“‘You keep reading about a housing slump. Well, we are in a slump here,’ Rachel Nicolosi of Buckley Homes said. ‘A big thing we are hearing is, people are worried about having two mortgage payments if they can’t sell their house.’”
The Daily Herald from Illinois. “Amid signs of booming development, Lake County is quickly catching up to its neighbors on another, darker front, foreclosures. Lake County saw a 36 percent increase from 2005 to 2006, according to the Chicago-based Woodstock Institute.”
“Rapid growth in population, a building frenzy and high taxes have defined this area as well as many others around Chicago. These factors, along with bad sub-prime loans, unemployment and others have bombarded the suburban region with some of the highest foreclosure numbers in recent years.”
“Hainesville Mayor Ted Mueller shakes his head when he hears that roughly 100 of his residents went into foreclosure proceedings last year. ‘Do you really want to know what I think?’ he said. ‘I blame it on the developers because they were quick to build and sell. And I blame it on the banks because they were quick to give loans to people with credit ratings who shouldn’t have been able to borrow.’”
“Mueller said he bought his first home with 20 percent down many years ago. ‘And I wouldn’t even think of walking away from that,’ he said.”
“Today, his two grandchildren each bought homes with no money down. While he describes them as responsible adults, the no-money-down policy for others could be worrisome. ‘People are entitled to affordable housing. But today, it’s gone beyond that and many people are getting unaffordable housing,’ Mueller said.”
The Detroit News from Michigan. “Just a few years ago, agents driving the hard sell of urban condominiums to suburban dwellers might have courted 10 lookers for each buyer. Nowadays, they’re parading 30 or 40 potential customers through units before getting an offer, if they’re lucky enough to get one at all.”
“‘They’re definitely getting harder to sell,’ said Andy Gutman, chief financial officer of the Farbman Group, one of Metro Detroit’s largest developers of residential condominiums. ‘We’re having to get more creative. We’re having to prove why someone would want to live in a Detroit condo.’”
“Detroit’s condominium-building blitz, driven largely by a combination of warehouse loft conversions, apartment building renovations and modern new construction, began in 1999, when 34 building permits for attached condos were issued in the city. In 2003, 223 such permits were issued, the most of any year on record with the Southeast Michigan Council of Governments.”
“Through October this year, 105 condo permits have been issued in Detroit, an increase from the 46 issued in all of 2006, but below the boom years of 2003-05.”
The Detroit Free Press. “From the well-heeled streets of the Pointes to the desolate neighborhoods of Detroit, thousands of people are facing foreclosure of their properties because they haven’t paid taxes for at least two years.”
“In 121 printed pages of the Sunday Free Press, Wayne County Treasurer Raymond Wojtowicz listed more than 18,000 properties across Wayne County facing foreclosure. Notices sent to homeowners since March have whittled the list from 161,000 properties that had been delinquent on tax payment.”
“In Oakland County, 8,300 properties are facing foreclosure because of delinquent taxes. ‘That’s the largest number of tax foreclosures we’ve had,’ Oakland County Treasurer Patrick Dohany said.”
The Leelanau Enterprise from Michigan. “Tony Brakel of Brakel Construction in Cedar says he’s like many homebuilding contractors in Leelanau County – he’s diversifying and working harder just to stay in business.”
“New home starts in Leelanau County are down more than 32 percent from this time last year. ‘I hadn’t taken a bathroom remodeling job in 10 years because I was too busy building houses,’ Brakel said. ‘But things have slowed down so much that I’m happy to hear from customers who have smaller projects for me to do.’”
The Herald Argus from Wisconsin. “Homebuilding has been hard hit, but it hasn’t come to a complete halt. Just about everything in the housing market that could go wrong has gone wrong since the nation’s 2001-05 boom busted.”
“‘There’s been a lot of pressure to let staff go and reduce overhead, or lower (profit) margins, a very difficult decision,’ said Bruce A. Johnson, president of the Milwaukee area’s Metropolitan Builders Association. ‘Builder profit margins are already really low.’”
“Meanwhile, ‘If you want extra attention, now’s the time,’ said Matt Moroney, the association’s executive director.”
The Pioneer Press from Minnesota. “The Twin Cities are now well into the nation’s housing bust, with foreclosures numbering far above last year’s recent record. At least 10,521 homes across the Twin Cities have been auctioned off in sheriff’s foreclosure sales and are on their way back to the bank as of the end of October, according to a Pioneer Press count of sheriff’s records.”
“Statewide, an estimated 20,000 Minnesotans may lose their homes this year alone.”
“Housing pros are watching the suburbs, concerned a second round of resets and payment shock will hit between 2008 and 2012, including ‘Alt A’ adjustable-rate mortgages made to people whose credit was just south of great. Many Alt A loans were ARMS with optional payments and are due for major resets after five years.”
“‘We’re actively working to see when and where resets are going to be hitting,’ said Richard Todd, a VP working on the issue at the Federal Reserve Bank of Minneapolis. ‘It’s pretty darn likely you’ll find those Alt A resets more geographically spread,’ said Prentiss Cox, a consumer protection law.”
“In the Jordan area of North Minneapolis, banks are repossessing homes at a rate of about 200 per half-square mile. About half the foreclosures in Hennepin County are investor-owned, according to Carolyn Olson, president of the Greater Metropolitan Housing Corp. That number rises as high as 70 percent in pockets of North Minneapolis, she said.”
“‘A lot of people looked at late-night TV, thought they could be an investor and bought,’ said Olson.”
“A developer who once hoped to build luxury condominiums along the Mississippi River in Hastings has canceled any plans for the downtown waterfront.”
“‘The condo market fell apart, and the whole plan kind of collapsed on its own,’ Hastings Mayor Paul Hicks said. ‘They were kind of high-priced condos … but it would not have been easy to develop the area there.’”
“Not far from downtown, a condo project behind the Schoolhouse Square center at East 10th and Vermillion streets also has failed to find legs. Plans once called for 57 condos, but the concept was retooled into a proposed senior-housing cooperative. That project, too, is on hold.”
The St Cloud Times from Minnesota. “Single-family home sales dropped 16 percent in the St. Cloud area from the third quarter of 2006 to the third quarter of this year, according to the most recent data from the St. Cloud Area Association of Realtors.”
“To Paul Elwell, executive of the association, the news is not as bad as it seems. The difference between the years is about 100 homes, he said, and that’s not surprising given the current real estate market.”
“‘The reality is that we have increased inventory. There’s no doubt about it,’ he said.”
“Financial institutions tightened lending standards in the credit crunch that hit in August. A few years ago a home buyer didn’t need much of a down payment or other qualifications to buy a home, but now a person must have 10, 15 or even 20 percent for a down payment, he said. On a $200,000 home, that’s a lot of money. ‘Who’s got $40,000?’ Elwell said.”
“‘Once buyers adjust to the more realistic qualifications for buying a property, the market will continue on. This is not the first time this has happened,’ he said.”
‘Detroit’s condominium-building blitz’
OK, you Michigan and Ohio, etc, bubble deniers have to be throwing in the towel by now. Constant references to the recent ‘boom’, failed condo project left and right. The Kentucky article even has someone still doing a half-million dollar spec house! In Kentucky!
Folks, the condos especially prove that the housing bubble was just about everywhere. Miami, to Massachusetts to the Great Lakes to Vegas, Arizona to the west coast. There can’t be any doubting it by now, IMO.
Everybody wanted to get in on the bubble and people seldom stray too far from home, when buying “investment” properties…
i.e. new condos in Ohio?
The main-stream media still hasn’t woken up and recognized that the new paradim ‘urban living’ fad was simply a by-product of the housing bubble, much like McMansions. As I have said often, a lot of this stuff only makes sense when viewed in the context of a financial mania in the national and global real estate markets.
Why else did almost every major (or even minor) city suddenly see an explosion in downtown condos?
asheville,lubbock,madison
flakey indeed
could it have had something to do with condos being a tax revenue cash cow for city govts..
Bingo!
And that’s why these muni gov’ts better start worrying right now. They have already spent years worth of property tax revenue “projections”.
Ben Jones, what are you saying? My Bakersfield, CA condo “city” isn’t hip?
The downtown condo craze definitely went bust in Columbus. Actually, “craze” overstates it quite a bit because it was a late-in-the-game initiative in Columbus. Here, the condos were marketed to young professionals (who might want to enjoy the martini-bar nightclubs and Arena District nightlife) and retirees (who might want to “downsize” their living space and also take advantage of some of that nightlife).
One of the problems with this marketing is that downtown living in Columbus is decidely not user-friendly. If the condo is strictly downtown (and not in the Short North area, just north of downtown and south of the Ohio State University campus), there are few amenities within walking distance. Want to go grocery shopping? Great, hop in your car and go. Need a dry cleaner? Awesome, you’ll be driving there. All in all, when you look at the price per square foot, the Columbus condos are just not competitive.
The Columbus Dispatch, in which the one story appeared, is one company of The Dispatch Group, which holds downtown real estate. As such, they have a huge incentive to talk-up the downtown real estate market and cheerlead downtown development, which they’ve consistently done over the last number of years. The Dispatch story on this blog describes what most every other thinking person in this area already knows; the Dispatch is merely admitting the obvious.
The locust would stray far from home to buy investment property and there was a time where many properties were sold sight unseen on the web . I remember 21/2 to 3 years ago the MSM advertisers would publish the latest great investment place to buy real estate where they would claim the RE was undervalued or the RE was getting hot .The RE investment scheme was pushed Nation wide .
The Days of the Locust
I don’t know about a lot of OH, but where I live in the southernmost part of NE OH, condos have never been a good investment. They sell last, there’s always a lot of vacancies, and at one time about 8 years ago banks wouldn’t even loan on them until the development was 2/3’s done and the condo association was in the hands of the owners. I wouldn’t ever consider buying one, because they take forever to sell, even in a good market. But builders continued to put them up and many of the developments have seas of for sale signs.
Also I had a realtor friend send me listings in my area, just for curiousity. From when I was a realtor in 2000 until now, a lot of the same houses have come up for sale again. I did some calculations and they’ve gone up about 18% in 7 years. (Remember I live 25 miles south of Youngstown, and they have one of the lowest housing prices in the nation). That said, prices haven’t bubbled crazy, but there was a lot of overbuilding, nothing is moving, according to the days on the market numbers. A lot of the people I know who are realtors now, including my friend with 30 years, say this is the worst market ever, including the early 80’s. One difference then was that interest rates were sky high and people just couldn’t afford the payments, but they had good credit. Back then they sold lots of purchase contract and land contract with notes held by the seller. This time around everyone’s credit is so bad, no one wants to sell to them and hold a note. Plus the volume of houses for sale is astronomical compared to back then. We were looking in the early 80’s and there weren’t that may houses for sale. Most people knew they couldn’t sell with rates 18-21%, so they just stayed put.
I think that condos are a particularly interesting reflection of the bubble mania because they possess two general characteristics that cause them to fluctuate most wildly in rising and falling markets.
Then: They were a flipper’s sweet dream — buy pre-construction, if you can, send a check to the lender each month while you watch the value of your unit rise, and forget all about lawn care, bug-spraying, sprinklers and all that — there is someone else to take care of it. What real estate other than vacant land can be easier to hold?
Now: They are a flipper’s really bad dream. There are only three types of long-term owners for condos. First, certainly here in Florida, are retirees — they like the no-responsibilities lifestyle. Second are dinks in urban areas and city centers, for whom the convenience of commuting and no weekend work is worth it. I think those two make up 90% of the long-termers. The third are people rich enough to own a “spare” place to two to use for vacations or to loan out to relatives or friends. Condos rarely appeal to families with children at home, whether they be rug rats or teenagers and that, IMO, is their downfall in a declining market. The flippers are gone — or stuck. Who is there to sell to? Especially in the parts of middle America described in this thread.
Excluded in my definition of condos are “resort” condos that allow short-term rentals — those are just a form of hotel.
You can’t mean that. I was told EVERYONE was going to retire to Florida and we could expect all these new condos would be occupied very soon.
The Realtors ™ told me I had to buy right away or someone else would buy the place out from under me. Hurry they said. Or, “you’ll be priced out forever”.
“The Realtors ™ told me I had to buy right away or someone else would buy the place out from under me. Hurry they said. Or, “you’ll be priced out forever”.
They’re still floating that “these prices won’t last forever, so you better buy now” BS hard on radio and TV advertising. Yeah, these prices won’t last, because next week they’ll drop even more. With rates so low, and inventory at historically high levels, there’s never been a better time to buy, well except for in 2010.
If there is any doubt, some genius almost built condos in Hastings MN, a quaint, sleepy, LITTLE town.
Good night Irene!
Leigh
We have a dozen luxury condos in tiny Pullman, WA that have been sitting on the market for a year. Only two have sold, and are listed for rent but unoccupied. Brand new building with all the granite and bling, but not a single person living there. And this was supposed to be phase I of a larger development.
But don’t look now, another development group is currently breaking ground on a downtown retail/condo complex. They just… can’t… stop… building!
In Downtown Dallas, the buildings just keep getting converted. Like Ben said a long time ago, I guess you have to do something w/ these empty office buildings, but loading them up w/ stainless and granite isn’t going to produce any revenue any time in the foreseeable future. Free luxury condos for everyone in Big “D”. No bubble here because compared to New York and San Fran these places are so cheap. Oh yeah, I forgot, compared to New York, San Fran, LA, etc. this is Dallas (aka $hithole w/ lots of big hair, big Hummers and high balances on the plastic.
“Today, his two grandchildren each bought homes with no money down. While he describes them as responsible adults, the no-money-down policy for others could be worrisome. ‘People are entitled to affordable housing. But today, it’s gone beyond that and many people are getting unaffordable housing,’ Mueller said.”
All grandchildren are local. My grandchildren are different. LOL!
“People are entitled to affordable housing.”
“People are entitled.”
This phrase sums up much of America’s problem.
Borrowers are entitled to apply for a loan without prejudice ,and that’s about it . I think people confuse redlining with borrowers right to purchase property (if they qualify ).Redlining is when lenders use to refuse to go lend in areas that had a high buyer default rate or had problems related to lender ethnic prejudice ,or property problems ,or even health and safety risks ,(such as lenders refusal to make loans near airports ).
A younger friend I know just told me yesterday that the State of California will give up to 75k in down payment incentives for low income borrowers . The problem with those handout programs are that the investors always think of ways of getting in on them by straw buyers or using children or some other scheme .
Just when I think NY has to be the worst, along comes a post on California…handing out 75k in downpayments? On whose dime? The taxpayers? Man, if I lived in that state, I would be so gone, so fast.
“handing out 75k in downpayments”
Don’t those handouts come with a bunch of stipulations?
“had problems related to lender ethnic prejudice”
That has been shown to be a false accusation. So-called “red-lining” often involved districts that were predominately “minority-owned” properties.
The truth is they DID have a much higher default rate, but thought it was an unfair way to access the applicant. The reality is that certain “minorities” do in fact default at a much higher rate, and based on their credit history they have been denied credit.
Because this has led to higher percentage of minority denials of credit, the system is considered “racist”, which it never was. Lenders are interested in making loans. They are concerned with safety of collateral. But when data is skewed racially, the charge is always made that it is “institutional racism”. The truth is different races ACT differently, as shown by statistical data.
diogenes …..I agree with you that the lenders were just refusing to make loans based on default rates and bad credit risks ,but the lenders were sued right and left based on minority denial of credit . The lenders just got to the point where they would push the lending in spite of it being risky .
There is plenty of affordable housing. It just isn’t located in places like SoCal or DC. Now I can understand that someone who grew up somewhere like SoCal might not want to move, because of family reasons, etc. But when faced with the choice of buying a tiny, zero lined stucco shack for 500K (or more) vs. buying a nicer house in another state for only 200K, and choosing the 500K house, then they shouldn’t complain.
Like when Nissan relocated from SoCal to Nashville. At the time I suggested to a friend on the automotive corporate side that smart money would sell whatever they owned in SoCal and take the Tenn lifestyle, to get out of the way of the housing wave. About half, or slightly less, took that option.
Totally agree. We didn’t leave California because of the housing differences between Colorado and California, but we find ourselves not returning to California because of the housing differences between Colorado and California.
housing, healthcare, retirement
double bingo
The word “affordable” has no objective, quantifiable meaning. You might just as well say people are entitled to whatever they want.
“Nobody owes you anything.”
Politically, “affordable housing” means housing for those who cannot afford it.
Acutally the concept ot “affordable” in housing is quite easy to quantafiy. Any community needs people of vaarious skills to do the different jobs. Maybe a highly wealthy area imports the workforce for the day to man the shops, teach in the school and put out the fires but for most places it means having housing (be it houses or apartments) that those who work in a community can afford. If prices go up so high that a police officer can not live in the area, there is a problem.
It is generally called “workforce housing.” Now, allowing rampant over-priced developement to get to the point that the only option for those who staff the stores, teach in the schools or patrol the community is a 1 bedroom apartment or moving into subsidized apartments makes it worse. Those people providing essential services will leave sooner or later and the wealthy residents will get to pick up their own trash and put out their own fires.
So either housing policies focus on keeping or creating affordable housing for the workforce or those people leave or are crammed into tiny apartments.
Or would you self-righteous lot prefer that those who do the work but can not afford housing live under a bridge?
(BTW, one way to chase away developers who want to jam as much as possible into a space and sell at the highest price possible is for the local government to look at them and say ‘only if 50% of the development is prices do that those with 60% of median income to 110% of median income can afford it. We need EMTs and people to work in the local businesses - not upper 10% income households.’ The developers head out the door like the hounds of hell are at their heels and never come back.
..but even without “affordable housing”, cops do not live under bridges.. nor do grocery clerks or firemen. Why is that?
Could it be that the ‘problem’ of a lack of affordable housing is an invention without a need?
In areas like DC, local governments went to subsidizing mortgages about 5-10 years ago for teachers. police, fire etc.
In San Fran, a math teacher can not afford to rent a 1 bedroom apartment so she still lives at home with her parents - at age 32.
Try coming to my county and hiring emloyees to work in your business like retail or food service or anyother tourism related industry. Good luck. Rents start at $800 a month plus utilities. So how much will you pay your staff?
We are short on EMTs and even volunteer fireman right now. (Firefighters tend to be younger and not able to afford that median $410,000 house here.) The temporary solution has been to double up with other areas so coverage is very thin.
In many areas right now, people who do the lower paying work do one of 3 things:
(1) get the smallest and cheapest apartment they can find (kind of puts a crimp on raising a family)
(2) double up and share a house or apartment (again, not a great option with kids)
(3) commute considerable distances between where they work and where they can afford to live
The first two are quality-of-life issues which often cause people to leave an area. (Back to the problem of having enough people to do essential but lower paying work from police work to ringing up your groceries.)
The third option is having problems with sustainability. Given the rising fuel prices, the lower wage workers can not keep up with the cost of the commute.
If you are saying govt subsidies can artificially support an area, i agree. Subsidies support over-inflated costs and prices and offer a poor imitation of genuine health and growth.
Normally, if some city’s cost of living is too high, businesses move away. Services are strained or non-existant. That city’s overall desirability suffers but, as it’s economy declines, prices fall back into balance. This is the natural order, bound and controlled by market forces.
But when a business isn’t profitable enough to pay it’s workers enough to live in an area, a govt worker-housing subsidy subsidizes that unprofitable business… not the workers.
And since the various business/income/sales tax revenues from this type of thing support a government that is larger than it should be, the government is subsidizing itself… keeping itself fat. This whole scheme of artificial growth drives the cost of living ever higher.
Tax payers bear the burden of supporting failed business and greedy government.
So here i agree with PaulinJax: No subsidies, “keep your hands out of my pocket” and let that city either learn to use it’s resources more efficiently or let the city decline to the point of economic stability.
“So either housing policies focus on keeping or creating affordable housing for the workforce or those people leave or are crammed into tiny apartments.
“Or would you self-righteous lot prefer that those who do the work but can not afford housing live under a bridge?”
To be honest, I don’t care where people live. There is a market for labor and there is a market for housing. Figure it out, apply your human capital and budget constraints to the problem, and keep your hands out of my pocket.
Well you will pay for it one way or another. You can ante up in taxes to fund subsidized housing or mortgages, or you will pay more for your goods and services. You can’t have it both ways - cheap goods and services and letting people be near homeless or unable to take a job beacuse they can’t find housing.
Not everything can be outsourced or transported. When you walk into that grocery store, people have to staff it - and they have to live somewhere. Ditto that restuarant.
Um, this is why they invented “suburbs?”
The wealthy tend to send their (far fewer) kids to private schools, and public schools are by and large there for the children of the service class anyway. Police are stationed all over the county regardless of where they reside, and please spare us the “poor” firemen/EMT thing, okay? Six figures for 3 days work a week is a scam, pure and simple. Affordable housing is just another government entitlement for government employees.
I’m guessing you work in Sacramento?
Beautiful observation Ann Scott. And I love the ” Hounds From Hell ” analogy.
Yet another Condominium to Apartment conversion, tale of woe…
“The ‘for lease’ signs are going up at central Ohio condominium complexes, to the chagrin of owners who paid full price to buy there. Developers who have been trying to sell condos in a weak real-estate market now are offering to lease them with the option to purchase, while slashing prices.”
“‘Who would buy now? In two years, they only sold two and now they’re leasing? Who in their right mind would buy in a place where they’re leasing?’ he said.”
“The ‘for lease’ signs are going up at central Ohio condominium complexes, to the chagrin of owners who paid full price to buy there. Developers who have been trying to sell condos in a weak real-estate market now are offering to lease them with the option to purchase, while slashing prices.”
I know we’ve covered this topic several times, but whenever I see comments like this in the MSM, I think it bears repeating: the glut of unsold condos and McMansions will put pressure on existing apartment leases.
Ben has a link this morning to an article in the Washingtonpost on how renters in DC are sitting pretty right now since their rents have held steady over the last few years, while the cost to own a house has gone up 2x to 3x in several areas of the country.
I know a few people here in Arlington, VA who purchased a condo during the boom, and every one of them is experiencing buyers remorse b/c they’re living next door to renters whose monthly payments are 1/2 or 1/3 their payment.
What is “MSM” again? I forget these things… =)
(M)ain (S)tream (M)edia
I visited a friend this summer who had bought a condo in Arlington,VA during the early stages boom. $300K+ bought them a very firmly middle class townhouse that needs updating in a major way. (Includes semi-non functioning toilet!!) She made a comment how it would be nice to be renting right now.
“‘Once buyers adjust to the more realistic qualifications for buying a property, the market will continue on. This is not the first time this has happened,’ he said.”
- Yes, the ‘market will continue on’ at pre ‘9-11′ levels when the market had correct demand levels (when you needed a cash downpayment, actual job, decent credit, balanced debt to income level, etc.)
For now, this is the beginning of Juan Sixpack losing everything that he bought on credit.
Is the housing market looking glass, half empty or half full?
“‘You’ll hear people say at open houses, ‘This is the worst time to buy,’ said Dianna Dianovsky of Howlett Homes. Howlett is offering free upgrades or reduced prices at selected houses in four subdivisions. ‘This is actually the best time in 20 years. The prices you can find right now are unbelievable.’”
‘This is actually the best time in 20 years. The prices you can find right now are unbelievable.’”
Yeah, and next year it’s going to be unbelievable to these people that they paid 20% too much.
Yes, Dianna, prices have been “unbelievable” for about 5 years now.
We’ll be hearing that this is the best time to buy in x number of years because the prices are unbelievable for the next decade or so.
I have been waiting for these crazy prices to come down a bit (a lot actually) and they’re so darn sticky on their way down. I live in the San Jose area. Funny that Livermore is cracking faster then Fremont, I would have expected the reverse. Large layoffs in the mortgage industry, E Loan being a biggie. I also hear of problems at LLNL.
“‘A lot of people looked at late-night TV, thought they could be an investor and bought,’ said Olson.”
Come to think of it I haven’t seen the Carleton Sheets no-money-down infomercial in quite a while. Is he another victim of the housing bust?
Just for my own curiosity, does anyone have a number for “real” inflation? That includes the balance of all services and goods with food etc, etc…
Unemployment and underemployment? I really don’t buy all the rosy stats the gov puts out.
Try shadowstats.com.
“Practically everybody who thought they might want to buy a house has already bought one.”
I think of this whenever I hear some forecast that people in X (state) are going to be moving to Y. OK. And what is it that they are going to do with the house they own in X? Even here in Florida (arguably a “Y”), people cannot move within the state because there are no buyers for the houses they need to get rid of. I think these immobilizing handcuffs of ownership continue to be ignored by media and industry pep-talkers who want to make it appear that mass migration is just a heartbeat away.
I have a friend in suburban Houston and I spoke with him yesterday. I told him of a couple I know in Dallas who can’t sell their old house (they moved and bought a new one before they sold the old one). He expressed great surprise at this, saying that new houses in his neighborhood are still selling quickly and at a higher price than he paid last year. I told him to check the fine print on this year’s new houses. I told him that they are probably throwing in lots a free upgrades that he didn’t get last year, and that they are doing this to close out the development before incentives stop working.
My sister and husband would like to move to North Carolina. They are stuck for the moment because she can’t sell her house. Thank goodness they have more sense (at least for the moment) than to go before getting rid of it.
Congratulations to them on their good sense. However, as to the “for the moment” note, I don’t think it will be that transitory. Best they not put off the new roof, so to speak.
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Lady, you understand wrong. It’s worse now than back then. I purchased rental SFR when mortgage rates were pushing 15% and there was a large selection on the RE markets but I remember that the price declines in the late 1970s were not anything like what we are seeing now. Not close. In the late 1970s house prices for a 4bdrm 2stry SFR was ~ $100,000 and a decline of $10,000 was significant and has no similarity to the subprime fraud caused decline.
You are right rex . What you say is how I remember past down cycles verses today . In fact, it is mind-blowing to me how huge the price declines have been and will continue to be.
Old: Battle of Hastings 1066
New: Battle of Hastings 2007
“‘The condo market fell apart, and the whole plan kind of collapsed on its own,’ Hastings Mayor Paul Hicks said. ‘They were kind of high-priced condos … but it would not have been easy to develop the area there.’”
“The Leelanau Enterprise from Michigan. “Tony Brakel of Brakel Construction in Cedar says he’s like many homebuilding contractors in Leelanau County – he’s diversifying and working harder just to stay in business.”
“New home starts in Leelanau County are down more than 32 percent from this time last year. ‘I hadn’t taken a bathroom remodeling job in 10 years because I was too busy building houses,’ Brakel said. ‘But things have slowed down so much that I’m happy to hear from customers who have smaller projects for me to do.’”
That is my county! 21,000+ people year round, 1.5-1.8 million tourists in the summer and 36%+ of the homes are 2nd summer homes whose owner are defaulting at the rate of 1::58.
The 2nd home defaults are were made between 2003 and now; the lenders were Countrywide, WaMu, OptionOne and the others; the interest rates on the defaults shown as currently accruing are usually 8-10%; and the amounts owed are enormous.
Aw gee…..they can’t pay for their $600,000 condo they use a few weeks of the year or that $800,000 1000 sq ft 1960’s ranch…..
The locals are just thrilled to death to see them defaulting. No love lost between the 2nd home people and those who live here. The permanent population with a median household income of $47,000 was not amused by median listing prices of $500-700K.
The 2nd home defaults and the sales of desperation right before sliding into foreclosure are bringing prices down nicely. The Leelanau Enterprise (nicknamed the ‘all the gossip you already heard around town put in print’) didn’t mention the downward price slide. Since July ‘07 alone, it has been a 31% drop in prices. The only things that have really been selling are the homes that the permanent residents can afford (after a 31% cut from the prices of spring ‘07) plus a very few upper bracket summer homes (again after a 31% cut in their prices.)
Here the prices are falling starting at the top rather than at the bottom.
Most of the permanent residents are not caught up in the weird mortgages as they all stuck with their little local banks who actively discouraged such things as ARMs.
In 2 little developments in my village (both with currently about 15 houses each), those who bought will be seriously upside down. In the first, the lots are .11 - .17 acres and they paid $200 - 260K for 1100-1500 sq ft houses with no garage and gravel drives - ultra New Urbanist design with repro early 20th century houses. It is within rock-throwing distance of the 2nd group of houses - .4 acres, 2000 -2500 sq ft, 2 -2 1/2 car garage with paved drives whose owners paid $340 - 430K (depending upon the view.) In July one of the .4 acre owners got desperate and slasked their asking price all the way down to $309 from the start of $430. It did sell -for $292. The funny part is the houses on either side of it were (and still are) for sale. Those had started at $430 and $380 and are now $399 (100 sq ft smaller) and $343 (same size.) Since the house that is ‘the’ appraisal comp is right between them, one can definitely say the owners are screwed big time.
The 2nd batch of houses on .11-.17 acres are literally right next door. 4 out of the 15 are for sale and the owners gave up selling a 5th and stayed put. Don’t think they are going to get $229 - 284K for 1/4 the land with a house that is smaller by 700 -1100 sq ft and no garage and a gravel drive rather than a paved drive.
It is ever so much fun to watch. My bankers (who thought the ARMs, 2/28s, option ARMs and 40-50 year mortgages completely insane) and I gossip endlessly about the falling market.
Most of our contractors (or at least the ones I know) are doing okay. They are doing remodelling and other projects. None of the local builders were stupid enough to get into spec houses and all are diversified with snowplowing in the winter and home maintenance services in the summer for the ’summer’ people.
It just amazes me how so many people were willing to buy second homes that will hardly ever get used.
My husband and I were amazed at how much time 1 house took. (Granted, it was a fixer-upper.) I am completely baffled by the whole “let’s buy a vacation house” scenario unless it was literally a shack in the woods that required no maintenance.
AnnScott - I hear you on the 2nd house phenomena. They are a total blight on the rural communities. Empty boxes that clutter the landscape and raise house prices for locals. VT already had an affordability/job problem before the boom. How is a local supposed to compete with a New Yorker that can slap a HELOC on their house and purchase a “vacation” home outright? The only good thing you can say about them is they increase the tax base without bringing kids, which is why the local governments are in love with them.
Ego ego ego is what it is all about. “so what are you doing for vacation” ….”oh, we are going to spend 4 weeks at our summer home on the lake (well, la di dah)
It certainly isn’t that they like the people who live here. The locals ignore them, are rude to them and charge them more for everything. Even my vet has two prices for everything -one for locals and one for tourists/2nd home people.
It is beautiful here. Here is why they come:
http://www.nps.gov/slbe/photosmultimedia/photogallery.htm
Tourists are okay - a necessary nuisance who come,bring money and leave. It is the ones who need to boost their ego by having a house here they only use a few weeks of the year that are the real infestation of pests.
I agree that the tourists are totally okay - they are the life blood of many small VT towns and I’ve been one myself on more than 1 occasion.
It’s the mass of the upper middle class being able to have a “summer” home that causes the issues.
Hard to believe they have flippers invading Southern IL. That part of the country is dead economically. 17 years ago when I lived there the place was like hillbilly heaven; our neighborhood collectively had maybe two sets of teeth. Unemployment is probably around 20% in some of the rural areas and a high paying job is working as the manager at the Hardee’s. They also mentioned St. Cloud; St Cloud is nothing more than strip malls and gas stations. Not hillbilly paradise but pretty close.
Got Lube?
ROTFLMAO!!!
Actually Southern IL is where the toothbrush was invented……otherwise it would have been called the “teethbrush”
Southern Illinois is best thought of as the far Northern Ozarks.
Go Salukis!
Lake County, Illinois is my current “home county,” and all I see is a ton of “for sale” signs for the past 6 months, coupled with recent “Please help” signs in some houses that are surely dilapidated.
We purchased in Lake County many years ago, a nice home around $142,000. We lived there for 3 years, and sold it well over $200k. I believe the same home listed for nearly $300,000, and I can’t imagine anyone paying that much for what was basically a starter home. During the non-ownership period we rented ($700/month for 1100 square feet with pool, clubhouse, and a garage). I still owned my condos (rental income), but was in NO rush to buy again, especially with Lake County property taxes.
We finally pulled the trigger this year, purchasing a home for 1X our income, again in Lake County. I think we could have saved 30% had we waited, but there was a strong likelihood that we wouldn’t have purchased the exact house we wanted (and watched for 10 years). It’s one of the oldest homes in the county, with a large amount of land, and gorgeous old craftsman build quality. The street we live on, though, has 6 houses for sale (out of about 18). 2 more are for rent, and 2 are in a state of foreclosure but no for sale sign on them. 2 blocks away, there are 2 homes (nice ones, too) with all the windows boarded up. A block from those homes is a block with 3 foreclosures in a row.
Property values are skyrocketing downward. We paid about $30,000 below “appraised” price for our home, but the homeowners needed to exit, and our purchase price was their remaining mortgage amount. Easy enough.
From what I can tell, the cities will be in more trouble than anything, and I am thankful for that. I’ve considered running on the “Lock the doors and turn out the lights” Party ticket — basically a politician who would refuse to hire, sign paychecks, or even run any portion of the government’s business that I would oversee. I’ve received dozens of firm commitments if I ever decided to. The cities in Lake County are ridiculously overstaffed. Some have gone from 100 years of volunteer fire departments to overpaid, and underworked, fire departments.
The nail on the coffin for Lake County has been the city smoking bans, coupled with a soon-to-happen Statewide ban. My 3 favorite restaurants have gone from 7+ years of profit to 6 months of massive losses. Every bartender, and host, I’ve known has moved on. With the loss of restaurants pending (and I guarantee that 6 of my top 10 restaurants will go under within a year), the rest of the economy is plunging, too. Car dealers are dead. Without Gurnee Mills shopping complex, I’d say retail would be dead, too. I still try to buy locally, but the retailers all carry less and less of the quality I desire, or more and more of the quality I don’t.
The cities, so far, are refusing to budge much on property taxes. The city cops don’t do anything but write traffic tickets, even with some streets with heavy gang violence (nightly shootings). Some streets are so dangerous that the cops won’t even drive down them — but they’ll happily write tickets 2 blocks over.
It’s a mess, and I’m thankful for it. I’m very vocal at a few town meetings (the town I live in, and 2 towns I have businesses registered in), and the citizens are starting to agree with me — after years of condemning me as “anti-growth.” My biggest “enemy” at the town meetings recently lost his job, and I know from personal e-mails that he’ll lose his house, too. I offered to help him pawn all his goods on eBay at no charge, and reminded him that HIS policies of massive government growth is paying him back in a nice way.
The teachers are griping (the kids are all idiots, too), the police and fire want more money for less work, and the city planners are trying to figure out what to do with all the “For Lease” signs in the previously prosperous retail zones.
When it all comes tumbling down, I’ll happily trade my solid gold for land rights — strong ones. Lake County has so much to offer, but the governments (State, County, and Local) have destroyed the opportunity, pushing people north to Wisconsin and West to other counties.
What part of Lake County are you in? We used to live in Wadsworth until we retired and move east across the Lake and slightly to the north.
(And I loathed the Gurnee Mills and never set foot in it. I liked the area much better when yyou drove up Delany and Hunt Club road and there were no wall-to-wall houses only 10 feet apart.)
Thanks for that assessment of Lake County, A.B. Just last week the MSM was announcing sales were down but median prices were up, and “Yippee, its different here!” Still a lot of kool-ade drinkers in the area.
closer to God than thee
teachers, police officers and firefighters can now buy foreclosed houses at a discount under a federal program