The Ballooning Of Easy Credit Has Come Back To Roost
The Daily Herald reports from Illinois. “Andy Starck thinks it’s time to bust some real estate myths. Starck is CEO of Palatine-based Starck Realtors and has been in the industry in the suburbs almost 40 years. Here’s the way he sees things. Home prices might have dropped a little, but not precipitously. Anyone who buys a home now has little chance of suffering a loss. Sellers are becoming realistic and are dropping their asking prices. Buyers are not going to ’steal’ homes.”
“While trying to sell a house for a quick profit in a year or so would be a real gamble in this market, anyone who thinks they will be in a home for a few years should go ahead and buy, Starck said. ‘There are values out there,’ he said. ‘Be smart, find them. Let your Realtor help you find them.’”
“Starck offers all the usual reasons: The economy is broad based and expanding, Chicago is a transportation hub and there isn’t enough housing for the continuing demand. ‘It is not that Chicago is bulletproof, but we do have an overall lack of housing stock over time,’ Starck said.”
“Sellers are not going to take crazy offers, he said. Starck has seen offers $250,000 below the asking price on a $500,000 home.”
“‘It’s just not going to happen,’ he said. ‘Sellers are not desperate. They are reasonable and want to sell their homes and move on to the next ones.’”
“Starck said it is important to realize that what people say about the real estate market could be true in one area like Florida, but might not apply to Chicago. ‘It’s a great time to get a good value,’ he said. ‘And there are plenty of them and you can get the house you want. Three years ago, you had to take what was available and had to move real fast.’”
The Chicago Journal from Illinois. “The number of housing foreclosures in Chicago is steadily increasing and financial experts say the situation will get worse before it gets better.”
“The Chicago Department of Housing reports that foreclosures in the city in the first half of 2007 are up 35 percent from the same time period last year, increasing from 4,695 to 6,329.”
“Molly Sullivan, director of communications for the Chicago Department of Housing said foreclosures are most common in low-income communities with those who face catastrophic financial problems.”
“‘However, we’re also seeing in some of the higher end communities where people have just overextended themselves,’ she said. ‘They’re either purchasing investment properties, thought they could take advantage of the hot market, which is now cooling and they are no longer able to leverage everything they have and keep all the balls in the air.’”
“Michael vanZalingen, with the Neighborhood Housing Services of Chicago, said that while neighborhoods like the South and West Loops are not being hard-hit by foreclosures now, they could be in the future. In the those neighborhoods, he said, many condo and townhome owners purchased their units with adjustable rate mortgages, interest only mortgages and payment option arms.”
“He said many came in thinking they would sell their property within a few years of purchasing it and make when the principal came due. Many thought the market would continue to go up, he said.”
“‘And as we’ve seen over the last six months in Chicago, and I think we’re going to see over the next few years, housing appreciation is flatly declining and the markets are very soft,’ he said. ‘For those who had expected to sell or refinance … there is going to be a shortage of qualified buyers for their condos at the price they are looking for.’”
“He said because of the cooling market and so many defaults on loans, lenders also are tightening their underwriting standards. ‘Even if someone wanted to buy a condo, they are going to have trouble getting a loan even if they have very good credit,’ he said.”
The Sun Times from Illinois. “In what authorities say is a symptom of the excesses in the subprime mortgage market, 15 people are charged with fraud involving at least nine homes valued at more than $4 million.”
“The scam — led by a mortgage broker and a real-estate agent — involved ’straw buyers’ taking out mortgages on homes for more than the asking price, officials said.”
“Lenders offered the loans for 100 percent of a home’s price. To get the high-interest loans, borrowers only had to verify they had a job, but did not have to verify their income. Straw buyers…falsified their incomes and employment on loan applications, officials said.”
“The victims were the lenders and neighbors, whose property taxes could rise because of the inflated values, officials said. Most of the homes were in the South Loop, and many have fallen into foreclosure.”
The Evening News from Michigan. “Although the Eastern Upper Peninsula is viewed as a ’stable’ housing market, Chippewa County Register of Deeds Sharon Kennedy indicated there is no denying that times are less than good in real estate these days.”
“Kennedy said foreclosure filings so far in 2007 are about twice the average from recent years, with 81 on record so far this year. That is up dramatically from the 67 registered all last year and a recent average of about 40 repossessions per year dating back to 2001.”
“Foreclosures are just one side of an overall real estate market that has seen better days, according to realtor Garth MacMaster. He accounted for an apparent glut in properties for sale as the product of several factors.”
“MacMaster acknowledged the so-called ’sub-par mortgage crisis’ afflicting most of the country has rippled through the EUP as well. But a dramatically tighter credit market for real estate is just one of several trends he sees in the local market.”
“‘Different ones want to move up, but there are more people selling than buying,’ he said of the local situation.”
“A specialist in property both in Sault Ste. Marie and the Paradise area, MacMaster sees other trends making for a blizzard of ‘For Sale’ signs. One of those is a glut of seasonal property, caused in part by hard times downstate.’
“Speaking of the Paradise area, he said that advancing age has also inspired other part-time owners to sell. The upshot is a local glut in available properties and a drop in overall value. ‘Property values in the Paradise area have gone down because of the glut,’ he said.”
“The realtor said the local market is not immune to nationwide trends. He noted the ballooning of easy credit loans made a few years ago has come back to roost here, as it has across the country.”
“He said especially young new homeowners fell heavily for the 100-percent financing offered by lenders a few years ago. Heavily invested in adjustable rate loans, many of those new owners found the uptick in interest rates and job losses left them unable to make payments.”
“He said new owners with essentially no equity in a property have little incentive to hold onto the property. ‘They treat the house like a rental and walk away from it,’ he said. ‘They have no equity at stake.’”
“He said that nowadays, one to three people show interest in an average property. Not long ago, that number of 20-30 per available house, he said. ‘Prices have leveled off or dropped. They’re not appreciating, that’s for sure,’ MacMaster said.”
The Oakland Press from Michigan. “There is more bad news for Oakland County homeowners - but good news for those looking to buy. The median price of homes sold in November fell from $184,000 a year ago to $167,500.”
“RealComp reported 845 homes sold in Oakland County for the month of November, down from the 995 homes sold in November, 2006.”
“‘My position is that there has never ever been a better time to buy a home,’ said Marcia Dyer, presidentelect of the North Oakland County Board of Realtors in Waterford Township. ‘Michigan has always been a strong market, and what goes down will indeed come up.’”
“University of Michigan Professor Don Grimes annually contributes to a study on Oakland County’s economic outlook released each spring. ‘It’s taken a little bigger hit than we expected, at least in terms of sales,’ Grimes said of housing sales for the year.”
“‘My gut says it has gotten worse than we were expecting last spring,’ Grimes said. ‘We knew it was going to be bad; we just didn’t know how bad it would get. The big question is when will it turn around. I don’t know.’”
“‘Brokers may stabilize in 2009, but construction will go down because they have to get rid of the inventory of unsold homes,’ he said.”
The Journal Sentinel from Wisconsin. “Foreclosures were up 28.7% in Wisconsin during the first 11 months of the year as the resetting of adjustable-rate mortgages pushed increasing numbers of homeowners over a financial cliff, according to a report.”
“Many of those in foreclosure ‘bought a home they probably shouldn’t have bought,’ said Michael Holloway, owner of a real estate agency in Milwaukee that represents only purchasers. ‘I remember writing a newsletter three years ago that if you can’t afford a house on a 30-year mortgage, you shouldn’t be buying a house.’”
“Holloway said that he is as busy now as he has ever been in 23 years representing buyers. Sellers are willing to negotiate prices, he said.”
“‘What I see is a terrific time to buy if you don’t have to sell a house,’ Holloway said. Mortgage ‘rates are still low. You can buy a house for a fair value, but I don’t see people grabbing on to that. If you have to sell to buy it is a little tougher.’”
The Star Tribune from Minnesota. “Winter came early to the Twin Cities housing market. Closed and pending sales were both down about 20 percent for November, while prices posted their deepest year-over-year decline of 2007.”
“The number of closed home sales in the metro area was 19.3 percent lower than in November 2006, according to the Minneapolis Area Association of Realtors. The number of pending sales was down 21 percent. The median price of closed sales was $216,500, down 5.1 percent from November 2006.”
“At the end of the month, a record 30,126 homes were for sale, 32.6 percent more than two years ago.”
“With so many sellers competing for buyers, prices are dropping at an accelerated pace. In November, sellers on average received 92.4 percent of their original list price, down from 95.2 percent in 2006 and 97.2 percent in 2005.”
“The only encouraging signs for sellers are that affordability continues to improve and that certain segments and locations of the housing market are doing much better than others. A family with the median income for the area now has 141 percent of the income necessary to buy a median-priced home, assuming a 30-year fixed mortgage and a 20 percent down payment.”
“Steve Hyland, president of the Saint Paul Area Association of Realtors, said that he’s hopeful that falling prices will mean a stronger market come spring. ‘The market is slowing and will continue to slow down a little more during the winter months,’ he said.”
The Pioneer Press from Minnesota. “The selection is huge, the interest rates are low and eager sellers are paring their asking prices. And still, would-be homebuyers are about as enthusiastic as 10-year-olds at a gallery opening.”
“Would-be buyers are a little less willing to strike when they see their purchase might lose value in the short run.”
“Homes continue to sell, of course, as any agent will tell you. Take one gem on Lake Como. It sold last week after just 40 days - and after the $1.1 million asking price was dropped to $899,900. Realtors Mary and Jim Sommerfeld, who sold the house, won’t say what the Twin Cities couple who bought the home paid.”
“‘People have the feeling from looking at the headlines that homes aren’t selling. That’s really not true. If houses are priced according to the market, well prepared and decluttered, they’re selling,’ Mary Sommerfeld said.”
“Additionally, tighter financing hasn’t choked off sales. The jumbo loan is far from dead, mortgage lenders just aren’t able to bundle them for sale as mortgage-backed securities to investors as they used to, and the terms are less generous.”
From Minnesota Public Radio. “Bob and Joan Campbell love their cozy two-bedroom townhome near the Mississippi River on the south side of Brainerd. But for all this home’s charm, the Campbell’s needed more space to better accommodate their visiting children, grandchildren and great grandchildren.”
“They bought a four-bedroom condo in the spring in the nearby town of Baxter and put this place on the market.”
“‘When we bought the place over there we thought things were fairly good. And about the time we concluded the deal everything went to pot, so our timing was not good,’ Bob Campbell says.”
“At first the Campbell’s listed their home for nearly $180,000. After a few months they dropped the price to $169,000. Just a few days ago, their townhome finally sold after six months on the market. The winning offer came up short of what the Campbells asked for, but they’re happy with how things turned out.”
“Rona Karasik (who) heads up the gerontology program at St. Cloud State University…says even if a retiree’s house sells for tens of thousands of dollars less than it would have two years ago, it is still worth many times more than they paid.”
“‘If they’ve owned a home for a very long time, it’s probably still appreciated even in this softening market. But how much it’s appreciated has probably shifted downward in the last few years. So if they were planning to have $300,000 they may have less than that,’ Karasik says.”
“Karasik agrees with real estate officials who say older folks ready to sell their home should probably wait a year or so while the market sorts itself out.”
“Local real estate broker Kevin Goedker has dealt with more retirees selling their homes over the last year. He thinks one reason they feel pressure to sell now is because no one is sure how low the market will actually go. ‘If you’ve got a stock that’s going down, it’s probably better to get rid of it sooner rather than later. Because you never know when the bottom is,’ Goedker says.”
Buyers are not going to ’steal’ homes.”
Oh my. Have we entered the “anger” phase?
Buyers might not “steal” them, but they might get some hefty discounts.
Friends of mine just closed on their home sale this week, selling due to a job move way back in the summer, and they really, really wanted to get out. They bought (DC ‘burbs) about 2 years ago — ouch! At least they had the sense to know that it’s price that moves the house, not gimmicks like free cars or waiting for the dream buyer.
They didn’t even want to say what the sales price was (I’ll look it up later!), but if they sold at their latest listed full-asking-price, then they’ve lost right at about $100k in the deal.
Whoa boy, that works out to $4k per month in lost capital gains, plus their mortgage payment and maintenance costs. And buying is better than renting? Well, they still think so — they’ve already picked out their next house to flip in their new city!!
Buyers may get some much heftier discounts by waiting than by buying now, because at this point, the really big price drops already implicit in the precipitous drop in the rate at which homes are selling has not shown up in the comps, and is hence not priced in.
The scary part is not just how much you might lose by buying now but it’s what are you buying? It’s way too early to tell what the demographics of the neighborhood will be. Will you have any neighbors? Will it turn into a ghetto? Will the houses start falling apart? Will it all be section 8 housing? Etc. I don’t need to catch the bottom, it’ll be there for quite a while; I want a quality neighborhood, a quality house, a quality and dynamic city with good weather, amenities, medical, and outdoor activities, and transportation system as I get older.
Salinasron,
Well said, and one of my biggest fears. Leave price out of it for a minute, o.k? There was a great article about a young gal in LV that had “time” her sprint to get the paper before the gangbanger neighbors pit-bull chased her back inside! This mind you in a f-o-r-m-e-r-l-y “gated community”.
I’m at a point where I’m willing to consider a houseboat! Neighbors suck? ( Just pull up anchor… )
Don’t they have Animal Control in LV?
Here’s the dumbest part about Realtors trying to push people into buying now versus later. You can time the bottom. All you do is wait until the prices start trending upwards again. That isn’t the bottom, but it’s better than guessing.
Realtors are more like fearmongers anyway. Chicago? you can have it. Perhaps there is a “limited supply” of homes, but I can think of about several other cities where you don’t freeze your ass off or cook in the summer in which to live that don’t have this so-called supply problem.
You’ll know the bottom is in when median prices PLUNGE.
That will mean the low end of the market is finally clearing and the bottom part of the pricing pyramid is beginning to stabilize. Until the median really drops you’ll still have higher priced properties (those less sensitive to pricing by higher income buyers) tilting the median balance to the high side.
“Chicago? you can have it. Perhaps there is a “limited supply” of homes, but I can think of about several other cities where you don’t freeze your ass off or cook in the summer in which to live that don’t have this so-called supply problem.”
That’s exactly why I like Chicago. The weather keeps the soft-coasters out!
“I think that’s how Chicago got started. A bunch of people in New York said, ‘Gee, I’m enjoying the crime and the poverty, but it just isn’t cold enough, let’s go west.’”
-Richard Jeni
Nova:
I have friends that have done similar things and I do not understand it at all- why not just rent for a year and get the lay of the land?
Some acquaintances of mine rented for a year after moving from Florida to Massachusetts. It is my understanding that they took a bath on the Florida sale and the husband was pretty averse to buying again during the bubble. However, I think the wife dug in her heels because they ended up buying another home in Massachusetts. I believe they may be moving again so they may be selling that too. So, long story short- probably bought and sold 3 homes in the last 5 years and probably lost cash on each.
As an aside, I just received a mailer from some mother/daughter RE team here in Nova (”the #1 mother/daughter team”)- it was truly a great laugh. “You only want to hire RE professionals with an interest in maintaining the value of your home!”
“You only want to hire RE professionals with an interest in maintaining the value of your home!”
Will you call mom/daughter and ask how they intend to “maintain the value of your home”?
“I have friends that have done similar things and I do not understand it at all- why not just rent for a year and get the lay of the land?”
When the house brings in (used to anyway) a third income, why would you want to give that up for a year?
People are only now just starting to realize that the house has given up on looking for work and is spending all night every night drinking beer and using the computer, giving various “entertainment” sites the family credit card number. Pep talks aren’t working, and any disturbances before noon are now met with threats of violence. Everybody says it’s just a rough patch and with enough love and understanding he’ll be back on his feet in no time. Everything always works out in the end, right? After all, he’s family.
Former, stop it. You’re making me laugh so hard that I’m about to lose…
…excuse me, I’ll be right back.
That was funny. Thanks.
brilliant
Hey Ostriches,
You’re right, they shouldn’t buy right away. But he’s been working in the Boston suburbs for… 7 months now? Something like that. Enough to where he THINKS he knows the lay of the land. Perhaps so, yet IMHO here they bought one of the best houses in in a mediocre neighbourhood with bad schools, so they might repeat that again. Or maybe they learned a lesson.
Yet even if I give them that, what they really aren’t getting isn’t the lay of the land but whole the economic landscape. That’s probably because they cannot imagine themselves as renters, ever. And so they will pay the price for that inflexibility, I think.
Good thing he earns a lot of money to cover his house buying habits. Used to be that the house flipping supplemented his income; now it’s going the other way, big time.
“Buyers are not going to ’steal’ homes.””
At least in my local market, sellers are unable to ’steal’ cash from buyers (although there are still some occasions). As buyers with actual down payments and a good credit history, well, we “aren’t just going to give it away”.
Excellent point. Why wasn’t it called “stealing” from buyers on the way up?
I had a co-worker put his house on the market late last year. Knowing I was recently married and make a decent salary (for Florida), he and his wife apparently had targeted me as a potential buyer, because he made a beeline for my office only to leave chagrined when I showed no interest whatsoever. Since that time, the house still has not sold and he’s dropped the price by $80,000.
Every time I see him I think “he tried to steal $80,000 from me.”
Heck, why isn’t it considered ’stealing’ from the bank when you fake your income to get a loan for way over what you can afford, then walk away from the house when it resets?
“Heck, why isn’t it considered ’stealing’ from the bank when you fake your income to get a loan for way over what you can afford, then walk away from the house when it resets.”
It is considered stealing. It’s called mortgage fraud and is a serious criminal offense.
However, it needs to be pursued and prosecuted. Under the “free Market” philosophies of the current administration, precious little was done to reign this in.
we need many more prosecutions. That’s when it stops, when people are going to jail.
since they are going to let most of the crack addicts out of jail, maybe they will fill those empty slots with frauds. Maybe the crack addicts will just squat in the fraudsters foreclosed home. win win both
Speaking of mortgage fraud, there’s an attorney’s blog that has been quite active of late. See:
http://www.mortgagefraudblog.com/
*spit take*
Nice.
Oh come on. There’s nothing new about mortgage fraud, straw-buyers or fluffed up appraisals. It’s almost impossible to establish a case where there isn’t a TON of activity and a cast of thousands. Isolated, individual cases go on all the time in all kinds of economies and administrations.
Besides (there’s safety in numbers!)
This is not stealing. This is buyers practicing the art of negotiation that businesses do all the time: “A vendor has cashflow problem? I’m sorry to hear it. No, I think I will pay my invoice on a due day… Oh yes, I know it is 90 days away. Oh, you are asking me what would it take for me to wire the money today? Let me think. Ok, 30% discount and you can have the money today. Deal?”
why oh why when prices were ratching upwards beyod reason, common sense, the ability of buyers to actually pay and any relationship of rental earnings to price didn’t realtors say to sellers -
“you are not going to over-charge and gouge the buyer for your house”
That paper must be a joke, right? Take one slick RE jerk and give him an entire article and a picture of him in pinstripes by the fire?
No other references?
Deborah Donovan… another lost jornalist ruining a once-proud profession. Of course her publisher put her editor in the predicament to write stories on those who advertise, and forget about truth or fairness. Just milk those banner ad bucks.
Sad.
Daily Herald is good for sports (especially Hockey), and it also is good for the poop chute cleaning.
…and it also is good for the poop chute cleaning.
Very few newspapers are worthy of touching a rectum.
‘…and it also is good for the poop chute cleaning.’
I thought he meant he ate it. Like a really big metamucil tablet with words in it.
It’s better than the Tribune (which is pretty easy to do), and usually more substantial than the Sun-Times. The Sun-Times doesn’t care about the suburbs, either, so the Daily Herald has some value.
We have entered the anger phase, here is some interesting information from Bloomberg:
The housing market collapse has been anything but the “soft landing” that Federal Reserve Bank of San Francisco President Janet Yellen and David Lereah, former chief economist at the National Association of Realtors in Chicago, predicted for real estate at the start of 2007.
See, most people who have a Bloomberg aren’t financial morons.
RE: Sellers are not going to take crazy offers, he said. Starck has seen offers $250,000 below the asking price on a $500,000 home.”
Sorry Mr. Seller-the shoe’s on the other foot now.
You’re not callin’ the shots anymore.
And who are you to determine whether is a CRAZY offer or not.
Economy ain’t getting any better. First offer is usually the best offer.
The writing’s on the wall….40/50% value declines…as noted on this blog 2 years ago.
“Sellers are not going to take crazy offers, he said. Starck has seen offers $250,000 below the asking price on a $500,000 home.”
I’d like to buy that buyer a drink. Its nice to see the Chicago realtors sweating a bit… the next media article will feature this guy saying he has urged sellers to lower their prices and will not take unrealistic listings, etc.
We’re getting back to reality… slowly but surely.
And just to show the ‘Come Back to Roost’ isn’t confined to the US,
http://www.theaustralian.news.com.au/story/0,25197,2290990-16942,00.html
Long time readers of this blog may recall I ranted a couple of times back in 05/06 about Oz property and construction companies leaping into the US/UK markets at what I considered the worst possible time.
I just hope Centro’s financial woes don’t spill over to their management arm, ‘cos I have a few dollars invested in one of their (Australian) single-centre funds.
(* mutters obscenities about public access machines with cut/paste disabled *)
http://www.theaustralian.news.com.au/story/0,25197,22920990-16942,00.html
“Home prices might have dropped a little, but not precipitously.”
No, the precipitous drops are for next year, so buy now before it’s too late (for us to make the big commissions)
I’m beginning to think it might play out like this –
assumption: people are now buying houses and living in them only a year or two before moving on
say some seller has an average 3/2 house on the market for $400k in a place where rent/incomes support it at $225k. it sits on the market and finally the seller accepts a “low-ball” at $340k. The next seller needs to move in two years and again the house sits on the market and he accepts a “low-ball” at $300k. With five years inflation, we should be back in the ball-park of affordability…by 2012.
Hopefully now that we have the entire country brainwashed into thinking moving every 2 years is “normal” I think you’re right. And… the more the turn-over, the quicker this should happen!
If we’re going to use the adjective ‘precipitous’, I would reserve that for 2009. Or is that when one should just switch to four letter words?
Got popcorn?
Neil
I’ve heard radio ads warning homeowners that declining prices are rapidly erasing their equity so they’d better hurry and cash out their equity (borrow against it) while they still have some.
LOL.
“Starck said it is important to realize that what people say about the real estate market could be true in one area like Florida, but might not apply to Chicago.
‘It’s a great time to get a good value,’ he said. ‘And there are plenty of…..
LOL!
If Californina sneeze’s the Midwest catches the flu and gets slapped silly.
It woul dbe interesting to see what Chicago’s inventory of homes is as compared YOY to 2006 and 2005. Me thinks the “bullitproof” Chicage market is in the same boat.
No doubt there are worse places, but thats like saying “Hey, Florida is more dead than we are!” I mean if you’re dead, your’re dead. There are no degrees of “Dead”.
Thats like being “slightly” pregnant.
if you believe the housingtracker site, our inventory has been taking a dive since July. We are still up from last year, in 10-07 for example it looks like we were about 69K this year vs 64K in 06. High, yes, but for a 9 million population area not tragic. We’ll see what ‘08 brings…
But that doesn’t tell the whole story. people who are really stuck nowadays are the ones who bought condos in the city and are trying to sell–there are so many new condos up that they can’t compete with price. Buddy bought condo in Rogers Park (sort of an up-and-coming cheaper type place, but still with bad areas in it) 4 years ago. Tried to sell for a 33% jump. Nobody. New condos down the block were about 20-30K under him. He ended up taking it off the market after a few 5% declines in price. I’d really be worried as heck trying to sell condos right now.
Rogers Park sucks. I think it’s been “up and coming” since the 1920s, ever since that pink building was built and they finished Lake Shore Drive.
Every Chicago neighborhood is now in direct competition with each other for capital. For the past decade or so developers never heard anything close to the word no. Only now (late 2007) are real world market forces putting a lid on condo building here and from here forward it will get dicey.
The result is that vast swaths of our city have been turned into nothing more than entertainment districts for young professionals. Read the Tribune or its Red Eye trash rag to see how this is marketed.
If layoffs come to downtown Chicago’s banks and other financial institutions the local condo market will fall off a cliff. These condos are only affordable (and appealing) to a relatively narrow slice of the region’s populace. Once that demographic buckles under the oncoming recession there will be no replacement buyers at current prices. Wage inflation is absent this cycle and new jobs will not pay for a $400k “apartment” with $500 plus HOA and who knows how high property taxes.
In Chicago the notion of an “urban wonderland” will be tested - this much is certain. How it survives this test is unknown to anyone - but those that paid $400k for an apartment in some marginal neighborhood - or on some busy street - should be very nervous right now.
I drove through downtown Chicago last year and wondered aloud if there were enough attorneys, physicians and investment bankers to buy all the ritzy new condominiums I saw. The funniest thing, though, was a McMansion development in the far exurbs — so far, in fact, that it was surrounded by cornfields. There was nothing for miles.
If you think Chicago is bad you have not seen Philadelphia.
I figure Chicago is still 30% or so overpriced relative to rents. Not as bad as some places, but I do the math every few weeks and it still don’t work. This is for downtown/Gold Coast/Lincoln Park, or if you prefer, 60606/10/11/14 type zips. I don’t give a crap about the south loop, who the hell wants to live there.
I haven’t checked the overall listing numbers lately, which certainly could be going down — who but the housing-desperate goes out house-looking during a Chicago (or Milwaukee, or Detroit, or Minneapolis) winter? And who these days is housing-desperate, except the clueless, the reckless, and the chromosomally damaged?
As Steve mentioned, there is plenty of new construction still going up everywhere in the city. Some of the development has the air of desperation about it — there have been construction guys working out in the open through sleet and snow to finish the last building in a development behind me.
Seems like developers know they’re super-screwed if they don’t have units online in time for the spring thaw in ‘08.
A good explanation as to why the listings go down is because it’s winter, which is the time that many take the house off the market. I’ve been watching Nashville for awhile now and the supply is still very high, but dropped markedly after Labor day. I expect to see that supply jump as soon as Spring comes around.
I said this on another thread too: I follow the Chicago NW ‘Burbs market. Inventory is down according to Housingtracker. Season accounts for some of it, but scanning through Craigslist, the volume of houses that have been turned into rentals after failing to sell is endless.
Inventory in Chicago has come down a bit- but it’s that time of the year. I agree with everything that has been said about the downtown condo buildings. I don’t know how the prices will hold with all that is on the market and the sheer number of buildings that will be closing in the next year or two.
There were at least 30% investors in these buildings. Maybe more. There are so many people trying to flip, I can’t even keep up. And that includes people trying to flip in mid-rises up in Edgewater. Edgewater! (No offense Edgewater John, as I happen to like your neighborhood- but not to flip.)
I also don’t see how there are enough 20 or 30-somethings to buy up all the $400,000 condos that are being built right now. But the rental deals are fantastic.
You can live in one of the luxury downtown towers for at least 30% less than buying the same unit- and the landlords are pretty desperate. You can get free parking, cable, heat, and subzero and viking appliances. Whoo-hoo!
For renters, it’s a good time to be in Chicago.
I actually think all the building is great for the city, but they have gotten ahead of themselves. And they’ve built too much on the luxury end. How many $500,000 or higher one bedroom condos do they think are going to sell? Chicago doesn’t have the market for that.
At least five downtown condo towers have closed in the last three or four months. I’m tracking sales in those buildings. Flippers have been lucky to sell a handfull (out of maybe 150 flips that have come on the market.)
But I don’t see it getting any better come the spring. Another five or six condo towers are slated to close by the summer- adding to their competition.
There will be lots of nervous investors come the spring.
What’s worse, a Used Car Salesman or a Realtor?
They both make me sick.
….A mortgage broker and lying appraiser. I am a RE Broker and a Mort Broker and I’m starting to make myself sick.
Fortunatly, I did not and do not list or sell residential and write residential morgages so I did not contribute to this mess.
RE agent easy. At least with the used car salesman, everyone knows who is doing what. RealtoRs on the other hand, like for buyers to believe they are working in your best interest, when in most cases they are obligated to work in the best interest of the seller. Add to that the fact that they do such a good job of making people believe that, and it’s especially sickening.
Just yesterday, I went to get my hair cut. I like to have the same girl cut my hair. Anyway she mentioned she was maybe going to start looking for a house (she’s fairly young and this is her first house). The housing thing is sensitive for most people and I try not to but in with the “you should wait a year” speech, but I did explain to her that realtors are working for the seller regardless of what they claim and that anything they tell her she needs to take with a large grain of salt.
Last one out please turn out the lights. This is just another pathetic cry of the has been used house salesman, going down for the third count. The media keeps printing it though.
“Sellers are not going to take crazy offers, he said. Starck has seen offers $250,000 below the asking price on a $500,000 home.”
“‘It’s just not going to happen,’ he said.
Then, “It’s just not going to sell.” Simple, really.
““‘It’s just not going to happen,’ he said.”
I’m ok with that. Seller doesn’t sell… buyer doesn’t buy.
Munch munch munch. Its not like my cash flow is bothering me! The best part is when they try to scare with ‘30% down payments are going to be required.’ When I yell back “GOOD” it does surprise a few people.
(Note: I still think 25% down will be the norm during the darkest days of this downturn.)
Let’s put it this way… I’m taking time off work to ski. How many FB’s can do that without a HELOC?
Got popcorn?
Neil
Sip sip sip.
Sold my McMansion last year. Moving to the US Virgin Islands in a couple of weeks — from Colorado.
Got rum?
Mike
Way to toss that dripping red meat to the wolves early in the day, Ben! LOL
“It is not that Chicago is bulletproof, but we do have an overall lack of housing stock over time”
I don’t know a lot about the Chicago area…is it an island, or does it have “the sea on one side and the mountains on the other”, or are all areas withing 30 miles built out already, or is it “surrounded by BLM land so it’s effectively an island”? All reasons why it “can’t be built out”, and all reasons other areas have used to why *their* prices were immune, right before their prices fell.
when times get tough for the feds, they sell that precious BLM land to developers. don’t ever count on BLM land staying “wild”
The “old-timers” in SoUtah refer to BLM land as “buildlotsmore”. BLM land out here gets passed along and traded out constantly.
One example, some local “guy” found several desert turtles on the property he was planning to develope in St George. The Federal government traded him a beautiful parcel near my Community which he (along with an Idaho developer) then screwed up with a twenty seven lot development.
Over 50% of those lots have been for sale since their original purchase. Four homes have been built there in the last three years. Two houses ($1.7 mil, $1 mil) have sat unsold for over a year. The builders are renting them out until the “market comes back”. About 40% of the lot owners (some local and some from CA, IL, NV, MN, etc.) aren’t paying their property taxes. This includes the local realtor (3 years of no taxes payed on his lot) who was in charge of “sales” for this mess. There are various leans on properties including one on a home (finished 5 months ago) that an owner is actually living in. This particular individual has three leans on their new property which total over $80,000.00.
One of my neighbors, who had lived here since the seventies, showed me a letter from our Senator (Orin Hatch) that he received years ago. In this letter Hatch stated, in response to my neighbor’s concern about the local BLM land surrounding our Community, that he (Hatch) would make sure that these areas (including the one with 27 lots) would “always remain untouched by man”.
Newbees in this Community don’t know about the BLM land-swaping (or the other problem here, blue clay) and some of the local realtors here are more than happy to take advantage of their ignorance. I openly laughed at a realtor at last years Parade of Homes who was trying to sell a $3.5 milllion dollar “American Dream” to what appeared to be outofstaters with the “and that’s BLM land there in the back, they’ll never build on that” line.
There’s tons of land to the west and south, and downtown everyone is trying to build up, up, up. Google Chicago Giant Dildo, er I mean Chicago Spire.
There’s no lack of housing stock in Chicago, period.
We’re swimmin’ in ugly-ass condos and “bring the suburbs to the city” townhomes.
That’s right! There are condos everywhere - conversions, new construction. In every single neighborhood, even those clearly in the early stages of disinvestment and those that have barely recovered from it.
If you haven’t checked out arroyogrande’s site, please do so. We have a real talent in our midst.
I have seen it and it is some fantastic work
Just saw it… WOW! Gorgeous.
Some of those are down right beautiful.
Every time I fly back for a visit it’s funny to watch people scramble for their seat and gather their belongings just b/c they start to see houses after miles and miles of corn fields!
Dude… we got another 45 minutes. Chill.
…it’s funny to watch people scramble for their seat and gather their belongings just b/c they start to see houses after miles and miles of corn fields!
I remember in 2001 when I rode Amtrak from Los Angeles to Chicago it seemed Plano was at the fringe of the built-up area surrounding CHI. The train still kept on speeding along for quite a while before we reached the metro area.
Not another Palatinian conflict?
“Andy Starck thinks it’s time to bust some real estate myths. Starck is CEO of Palatine-based Starck Realtors and has been in the industry in the suburbs almost 40 years. Here’s the way he sees things. Home prices might have dropped a little, but not precipitously. Anyone who buys a home now has little chance of suffering a loss. Sellers are becoming realistic and are dropping their asking prices. Buyers are not going to ’steal’ homes.”
Wanna bet
“Anyone who buys a home now has little chance of suffering a loss.”
40 years in RE, and this guy is still clueless. So, Starck, put your money where your mouth is…want to put in writing that you will personally make up any losses that your buyers suffer in the next few years when they have to sell? No? Then shut up.
“Anyone who buys a home now has little chance of suffering a loss.”
Okay, realtorwhore Starck, I’ll buy as house on one condition. We draw up a contract with a clause that states, if the property is worth less in 2 years you will pay me the difference plus costs.
This quote is stunning.
Little chance of suffering a loss if what…they don’t have to sell for 12 years?
I’ll do you one better. I’ll buy now, and you (the agent) can have 100% of any gain over the next two years as long as you pay 100% of any loss.
The western suburbs of Chicago are essentially Dallas or Atlanta or Phoenix. All sorts of available land to build bajillions of undistinctive identical McCrapboxes on.
He has been in the business for 40 YEARS and doesn’t remember 1987/88 and what happened after that for the next few years???
I was there - we had to sell to move to help the in-laws. It was ugly out there.
“Buyers are not going to ’steal’ homes.”
But, potential buyers don’t won’t to buy unless they can steal it. Hey, I can hold my cards longer than they can.
“want” not “won’t”. Please excuse the typo.
“anyone who thinks they will be in a home for a few years should go ahead and buy” - Says realtor Starck
That statement right there should be your clue that those in the RE industry are never on your side.
Never purchase a place if you only plan on living there a few years.
The “dont worry, you can just refinance before the loan resets” people can never be trusted in any way shape or form.
You left out the snide, raunchy wink that they also give you when they say “it will be OK… We’ll just refi you before the reset…”wink” “wink”.
Sickening.
..
definition of few years please
#1. “No sign of inflation.” Baghdad Ben Bernanke.
#2.”Sub prime problem not my fault.” Mr. Magoo.
#3. “Now is a great time to buy.” Any realtorwhore.
#4. “Pssst! Wanna buy a house?” Mortgage broker to bum.
#5. “Unemployment is low and wages are good.” Bush.
#6. “I did not have sex with that woman.” Clinton.
#7. “Mission accomplished.” Bush.
#8. “You won’t be able to steal homes.” Starck/realtor.
#9. “Sub prime is contained.” Godfather Paulson.
The sound of truth from our politicians and those in the financial community. (lol)
I see a Catastrophic 5 Hurricane, bearing down on the 2nd City…
“Molly Sullivan, director of communications for the Chicago Department of Housing said foreclosures are most common in low-income communities with those who face catastrophic financial problems.”
“Andy Starck thinks it’s time to bust some real estate myths. Starck is CEO of Palatine-based Starck Realtors and has been in the industry in the suburbs almost 40 years. Here’s the way he sees things. Home prices might have dropped a little, but not precipitously.”
Here is a good myth to bust:
Realtors are experts on the subject of economics.
“Michigan has always been a strong market”….
I missed that memo, apparently.
“‘My position is that there has never ever been a better time to buy a home,’ said Marcia Dyer, presidentelect of the North Oakland County Board of Realtors in Waterford Township. ‘Michigan has always been a strong market, and what goes down will indeed come up.’”
Oakland is a suburb county of DETROIT!
Tell Country wide how geat it is - they are sitting on
14 in Farmington/Farmington Hills
24 in Pontiac
5 in Novi (including a $500K)
5 in Madison Height
13 in Oak Park
3 in Rochester/R hills
5 in Royal Oal
33 in Southfield
18 in Waterford
10 in West Bloomfield (up to $600K+)
And those are only a few out of the 54 towns that her ‘used house sales group’ covers.
“and what goes down will indeed come up.’”
Uh huh….. I watched areas that collapsed because of the loss of major manufacturing industries and it was exactly the same. 27 years later, their house prices are still among the lowest in the nation. S0 yeah, it might come back up in 50-75 years - maybe.
That’s why I found that comment so amazing as well. As has been posted here previously, Oakland assessed values, and therefore property taxes, are declining this year for the first time ever recorded.
Michigan is indeed a great market, as long as you ignore the recession that’s entering its fourth or fifth year here.
“it might come back up in 50-75 years - maybe”… exactly. Better have a loooooonnnnnnggggg timeline here.
Mr. Starck is going to be sitting on his listings until the cows come home.
I wonder what a reasonable time is to wait to sell your house for a “reasonable” price. Plenty in our area in NoVA have been on the market for a year or more. And these are at the low end. The “bottom has fallen out” of the low end here. Which is not surprising as we all know who supports the food chain.
What I have seen where I rent a TH outside of Old Town Alexandria is that up until August there was an attempt to sell frenzy. During that time there was always between 10 and 20 for sale signs on the various lawns- and, to my utter disbelief, people were actually buying the things. Today, there are probably between 5-10 for sale signs, which have been up for about six months to over a year, but not a one has moved and the signs keep changing between for sale and rent. The problem is that people think the damn things are worth between 450 and 600K- all for poorly built THs with no yard and which are situated in a flood plain between the beltway and the railroad tracks (guess what hear when you open your windows and/or try to sleep at night?).
There’s a lot for sale in my ‘hood, too. I have noticed two or three or four houses that, after sitting on the market for a year or more, sell with drastic price reduction. The “clearing price,” quick sale, appears to be in the mid-300 range. Asks anywhere from 4-600K just sit there until the listing expires.
Mid-300 is roughly (very roughly) consistent with 6% rental parity and not too far out of line w/incomes. I bet the “clearing price” drops with every tick upwards on rates.
you get 90% of the activity you’re going to get in 30 days at that price- folks like to wait
“MacMaster acknowledged the so-called ’sub-par mortgage crisis’ afflicting most of the country has rippled through the EUP as well.”
LOL. Considering that some houses in that area have doors at the second floor level to account for the customary head-high accumulations of winter snowfall, almost as amusing was the reporter’s reference to the “blizzard” of for sale signs.
I forgot to mention this yesterday. Talk about unlikely victims. Try Ciena (CIEN) one of my favorite stocks. Lost money in SIVs and it’s tanking the stock.
http://seekingalpha.com/article/57281-ciena-guidance-and-siv-exposure-not-as-serious-as-market-perception?source=yahoo
But now we have to forecast SIV exposure on a company by company basis? C’mon now. I said earlier this web of credit junk would spin into places we had no inkling of, but I certainly was thinking more along the lines of state governments, perhaps county governments, but not individual non financial companies. Ouch.
Ouch is right. Whisky tango foxtrot?!? Ciena!!! Its not like anyone is doing less web surfing… But hey, if a high profit company like (IIRC) Northern mineral is having cash flow problems or Smuckers (yes, the jam company), no reason why a tech company wouldn’t also ride the short bus.
I still think a bad recession. In other words, we won’t be chatting in the bread lines.
Got popcorn?
Neil
Ask not what your mortgage can do for you, ask what you can do for your mortgage…
“Kennedy said foreclosure filings so far in 2007 are about twice the average from recent years, with 81 on record so far this year. That is up dramatically from the 67 registered all last year and a recent average of about 40 repossessions per year dating back to 2001.”
Chippewa County in the UP is where a lot of the hourly workers from the auto plants had places. LOTS of subprime mortgages up there. Cross the Mackinac Bridge at it Mackinac Countty with 34%, Chippewa to the next to the north east with 41% and Luce to the northwest with 39%.
We are on the lower penninsula on Lake Michigan - the summer home place for Chicago, Cinncinnati, Wisconsin, and even a few from DC. Let’s put it this way - the price bracket for 2nd homes is such that the NYT mentioned the county as a “great 2nd home spot” calling the $500,000 - $3,000,000+ houses “affordable bargains.”
Our subprime rate is 17% - and some are going into foreclosure. Now, over 90+% of the foreclsoures are 2nd homes - and they have ARMs originated in 2004/2005 and have now reset
From 2005 through 2007 (today), the foreclosure rate has increased 186%.
Where you at over there, if I may ask??
Leelanau County - that is where Sleeping Bear Dunes National LakeShore is located.
(And, no contrary to the belief of the rest of the state, Leelanau permanent residents aren’t rich. Its the summer people with the mega-priced houses. It is getting ‘quiet scary’ around here - to use the words of a restaurant owner - with the drop in 2nd home people and less tourists.)
I for one know locals aren’t rich there, and I’ve been wondering when land prices over there might stop dropping.
Just asking ’cause I grew up on a farm north of Muskegon, maybe an hour south of Sleeping Bear. The land prices around there still seem really insane.
Been dropping like a rock this year.
Market went into a downward trend in 05.
Locked in place in 06 and sat there.
This past July 07, reality hit home for a few. There were very very few sales and only the ones where sellers desperately wanted it gone and took 28-32% off the 2006/early 2007 listing prices.
Lots of places that have been listed for 12 months, 18 months, and some even 2-3 years.
Lots of REOs coming back on market in Benzie County and Grand Traverse County. The listing doesn’t always say it is bank owned but come on, the places are empty. Not everyone voluntarily moved before selling.
Long time realtors are taking $9 an hour jobs in mail order customer service.
“Long time realtors are taking $9 an hour jobs in mail order customer service.”
Well that would explain why the Christmas cards I ordered on Thanksgiving Day from a certain WI company still haven’t shipped yet.
Leelanau County falls 225th out of the highest per cap incomes of all 3111 counties in the USA as of 2005; Only Midland, Washtenaw & Oakland counties in Michigan rank higher. It falls 241st out of 3111 for the highest median household income as of 2004. However, it falls at #2231 out of 3141 CCE for wages per job. I was unable to find a statistic for real estate value per capita, but it has to be extremely high. Couldn’t find estimates of net worth per capita, either. Maybe most Leelanau county residents ain’t rich, but somebody there’s making a lot.
Some other telling Leelanau County/State of Michigan ratios: 2004 Below-poverty rate: 7.2%/12.5%; 2000 Homeownership rate: 85%/74%; 2005 White persons % total pop 92%/78%;
You forgot about the killing property tax increases.
I almost lost, uh, how to say it politely, bodily control over another poster’s quip further up the thread, so Aladin, stop it! You’re making me laugh too hard.
Maybe we’ll see an end soon in the fall of property prices. Since so many homes and commercial properties are mortgaged and underwater, and so many US dollars exist in the central bank reserves of foreigners, maybe they’ll realize that the time is ripe to redeem all that capital for debt-burdened assets here.
We’ll get all our lovely dollars back which can be used to be loaned out even though they’re worthless, and the foreign central banks will kindly rent our houses and commercial real estate back to us in order to get back those dollars from us.
It’s a beautiful system, really. Our central bank and fractional reserve private bank system creates credit which is backed by foreign risk-takers, we take that credit and buy assets, then the foreign risk-takers own our assets and we get our money back in one lump and value-destroying sum.
“We’re all renters now.”
How hard would/will it be to work in a rice paddy farm if they started up in the boggy areas of the Midwest? I’m sure that property will be sold cheap to our future overlords!
After the Money’s Gone
http://www.nytimes.com/2007/12/14/opinion/14krugman.html?_r=1&oref=slogin
Thanks for the link. What’s Mr. Krugman’s history with regards to opining on financial matters? Does he make forays into finance often? I ask only because his article is so good and it’s more persuasive than a lot of the financial authors I read. He colors the issue with a lay person/common sense writing style that makes his argument very compelling. I don’t see how anybody that can read and comprehend Mr. Krugman’s article can possibly not understand what we bloggers have been saying for years.
Tenured professor of economics and international affairs at Princeton.
Multiple widely used economics texts to his credit.
One of,if not the, most widely read living economist by those who are not professional economists.
Widely quoted and highly active in economic matters.
Check out Amazon for his book list.
Footnote: BB was dept chair at Princeton before assuming his current position.
Krugman has gotten a little cranky over BB’s conduct since he went to the Fed.
Here is an old column of his calling BB on his first Congressional appearance after becoming the chair about certain assertions:
http://select.nytimes.com/2006/02/27/opinion/27krugman.html
I like reading his economic stuff because he uses real numbers and data - not theories ladened with political overtones and thetoric
His blog is good too. Today’s lead post is about negative home equity. http://krugman.blogs.nytimes.com/
krugman must be aufully conflicted as he roots for the left and wishes a recession- same as bernstien on msnbc- they’ll still have jobs ,but their neighbors won’t……what fun
Recognizing REALITY is NOT “rooting” for anything.
Pretending something is not going to happen when the stark facts say it will is called “delusional” and “in denial” and, if kept up long enough, can land the person in a locked ward on psychotropic drugs.
“But for all this home’s charm, the Campbell’s needed more space to better accommodate their visiting children, grandchildren and great grandchildren.”
So they’re buying a more expensive place? Whatever happened to just putting them up at a motel?
Or maybe they could buy a 100 unit motel. Then when that hoard of brats isn’t visiting, they could rent out the rooms and get rich.
” older folks should wait to sell their homes” Let me clue you in, older folks may not have a year left in their life they want to enjoy a warm climate before they retire in a home that value means nothing, is their a subprime market six feet under?
‘…is there a subprime market six feet under?’
Jeeze. Maybe there is. I bet Hell’s got tons of subprime loan product available, and at least a million mortgage brokers ready to sign you up. (I understand they were all on loan from those environs, anyway.) And you know, speaking of ‘warm climate’, it’s got that too! Hey!
>> “‘It’s just not going to happen,’ he said. ‘Sellers are not desperate. They are reasonable and want to sell their homes and move on to the next ones.’”
We all want a lot of things.
That’s a ridiculous quote, period.
There are two sellers: those who want to sell, and those who need to sell. I know people in both groups, and neither are selling except those who have lived in their homes for 5+ years or those who put 20-30% down. The ones who can sell aren’t leaving with a big check after closing, either.
The other part of the quote that is irresponsible is the thought that people want to move on to the next home. If they’re sellers who want to sell, and can, they will likely move on to their next home and maybe get a better deal depending on the time-frame between selling and buying. Those who need to sell are likely not looking forward to owning again right now, and may not even be able to if they wanted to downsize.
An oddity I noticed in my own property management side gig: for the past 2 years, we’ve had problems renting two condos near O’hare Airport. Rents were down almost 30% between 2003 and 2005-2007. Last month, one of our units’ leases expired and the tenant moved out (back to Europe). We put an ad in the paper, and we had over 2 dozen people showing interest. Looks like the final rent will end up being 40% over 2005’s price, and about 10% over 2003. There are a few other vacant condos in that complex, but ours is furnished, and has a really high end kitchen and bathroom (for a
I want a pony.
“Buyers are not going to ’steal’ homes.”
Oh yes I will…
I’ll be mostly interested in homes and property that people bought pre-2000. forget about post-Y2K houses, as the owe-ners are stucco.
Old people! Don’t listen to that guy. Take what you can get while the getting’s good. If you bought your house for 50k and you can get 300k for it, why wouldn’t you?
“Sellers are not going to take crazy offers, he said. Starck has seen offers $250,000 below the asking price on a $500,000 home.”
“‘It’s just not going to happen,’ he said. ‘Sellers are not desperate. They are reasonable and want to sell their homes and move on to the next ones.’”
Coming soon: The STARCK and dreary days of listings, income, opportunity and reputation withered, rotting and frozen on the vine; like an unpicked Halloween pumpkin in an Illinois field in January.
““Starck offers all the usual reasons: The economy is broad based and expanding, Chicago is a transportation hub and there isn’t enough housing for the continuing demand. ‘It is not that Chicago is bulletproof, but we do have an overall lack of housing stock over time,’ Starck said.”
It’s not a demand problem, it’s a supply problem that threatens prices - a supply of funny money mortgage lending that is quickly drying up. Bernanke and company are doing everthing in their power right now to drop money into the credit markets, but all that is designed for it to keep the banks solvent. The idea that the fed can do anything to jump start private demand for securitized mortgages is crazy. That was nothing more than a temporary investing craze, like buying tech stocks or tulips, and likewise won’t ever come back. So you see, Mr. Stark, you’re not seeing the entire picture here. Having grown up in a neigborhood right around the corner from Palatine, I understand your demand statement. But don’t forget to recognize the elephant standing in your office which makes this time around truly different: the collapse of CDOs who had everything to do with funding the price increases. Remove that and I don’t care how many people want to live in Palatine, Elk Grove, Scaumburg, or Roselle, without the funny money and watch the prices implode…all the way to cash prices or nearly so.
Elk Grove, Ca. is a real estate disaster…
How does the Illinois version rank, in comparison?
It’s conveniently located under every major O’Hare flight path.
Bubbly and the rest of you, stop this. I can’t take much more of this thread. It’s making me laugh too hard.
It’s a Chicago thread with some especially juicy quotes, and a slow day (month, actually) at work. Sorry, it’s in my nature.
Sorry about hijacking the Chicago thread, San Bruno and South San Francisco, are conveniently located under some major SFO flight path, Millbrae and Burlingame, get the jet blast noise from the airplanes taking off from SFO. BTW, houses in these cities, go for 600,000 and up.
Cash price my thoughts exactly sitting on 125k of cash from my last house waiting for the bottom. I rent for 1/2 price and have plenty of time.
Neil they aren’t making anymore popcorn you know. Its all going for ethanol.
One part of the supply problem, that is never mentioned in the Chicago press, is that almost all of the new construction in the closer-in suburbs was “luxury” homes or condos. The glut of $900K and up McMansions is unbelievable.
There is no there, there.
“University of Michigan Professor Don Grimes annually contributes to a study on Oakland County’s economic outlook released each spring. ‘It’s taken a little bigger hit than we expected, at least in terms of sales,’ Grimes said of housing sales for the year.”
I don’t know. Sales there seem be doing okay. The foreclosure auction market is very busy with sales (back to the lender.)
Seldom does one get a chance to use a Gertrude Stein quote about Oakland, Ca., where it fits perfectly in another Oakland setting.
“My position is that there has never ever been a better time to buy a home,’ said Marcia Dyer, presidentelect of the North Oakland County Board of Realtors…”
——————————————————–
So then YOU go ahead and buy one, or two, or three. Otherwise STFU.
‘We knew it was going to be bad; we just didn’t know how bad it would get. The big question is when will it turn around.
———————————————————–
When will it turn around? Just as soon as you stop trying to help the failed flippers stay in their fraudulently obtained investments, and drop the prices to help the next generation of buyers afford homes to live in.
Oh lord. Not a sob story, yet but it looks like the wife of a co-worker pushed for a refi to buy the piano of her dreams.
Yup, that’s my generation.
Oops
Don’t forget the re-fi for the house remodeling to get the piano to *fit*:
“As it turned out, she could afford it. Barely. Knize wouldn’t say how much she paid for her piano, but prices for Grotrian-Steinwegs can range into six figures. By refinancing their modest home, she and her husband, Wendell Holmes, soon had that Grotrian in their living room, which had to undergo some remodeling before the piano would fit.
And she can’t really even play the thing…
Methinks you dudes put up with way too much from us. But don’t let that get out..
People of all times have followed their one obsession wherever it led them. It is human, and she has only one life to live. As long as the grand piano stays her one obsession and is not replaced by other toys that have to be bought by other home loans, it doesn’t have to end badly for her. The book might even pay back a part of the loan.
What about all those whose one obsession is extravagant spending? They also have only one life to live.
…but it looks like the wife of a co-worker pushed for a refi to buy the piano of her dreams.
Good God. Were I unfortunate enough to be in that situation, my response to any nagging would have been, “Can you afford to buy it with money solely earned by you? If not, tough, ‘cuz there’s NOT going to be a refi just to buy toys.”
The sheeple have no clue:
One in 5 U.S. homeowners see house price drop-survey
That’s right the other 80% actually think prices will RISE!
http://tinyurl.com/2rf89g
(Sorry if this is a re-post)
Well a pretty fair number believe Elvis is still alive too.
“Local real estate broker Kevin Goedker has dealt with more retirees selling their homes over the last year. He thinks one reason they feel pressure to sell now is because no one is sure how low the market will actually go. ‘If you’ve got a stock that’s going down, it’s probably better to get rid of it sooner rather than later. Because you never know when the bottom is,’ Goedker says.”
Folks that bought way back when for a pittance, will be responsible for lowering the comps…
As they exit, stage left.
Have real estate brokers ever NOT said “this is the absolutely best time to buy! Because of..”(fill in with silly excuse)?
Didn’t think so.
Am out in western suburbs of Chicago (Oak Park.) Most of our appreciation seems to have been in incredibly expensive townhouses ($650K +) at which everyone was rolling their eyes at even before this(including the bank people.) Did have some flippers–someone tried to sell his almost-new 2-bedroom apartment-with-wooden-floors for $385K (marked down from $395K)–the rest of us just laughed our heads off. From what I gleaned, our price spike was really only for about six months. No one really felt comfortable at the higher prices and now they’ve all come back down into the $160K-260K range for condos. We still have $700K-1M+ houses right around here which I don’t see changing much. Most of them are either Victorians or Arts and Craft houses, Frank Lloyd Wright inspired, and we’ve got enough refugees from the Gold Coast to keep the price up.
“Rona Karasik (who) heads up the gerontology program at St. Cloud State University…says even if a retiree’s house sells for tens of thousands of dollars less than it would have two years ago, it is still worth many times more than they paid.”
“‘If they’ve owned a home for a very long time, it’s probably still appreciated even in this softening market. But how much it’s appreciated has probably shifted downward in the last few years. So if they were planning to have $300,000 they may have less than that,’ Karasik says.”
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I would have no problem buying most “retiree’s” houses from them for a nice normal compounded rate of appreciation - say 5% a year. If they bought a $50,000 house in 1978, maintainted it well and paid it off, they could reasonably expect a good solid $216k cash in their pocket.
But this makes assumptions of thrift, planning, and moderated greed that very few of the current crop of retirees or soon-to-be retired boomers embody. So instead they ask $500k for their 3/2 in some older neighborhood that’s only real value is proximity to jobs and the airport, and maybe some mature trees. Most obvious in California and the northeast.
Sorry folks, there’s no reason for the current generation of young homebuyers to pay many times more than you did relative to income for the same lifestyle. All those boomers whose retirement planning is based 99% on the inflated house value are going to have to come up with another plan.
All those boomers whose retirement planning is based 99% on the inflated house value are going to have to come up with another plan.
Well since very few people who are now 45-61, had the crystal ball in the 80s and 90s that would let them base their future plans on an unprecedented housing bubble, I seriously doubt that their retirement plans formulated back then included such a thing.
Unless forced into a positon of no choice, no one will willingly drop a price - particularly involving large sums of money - without a lot of evidence that the price is no longer supported by the market.
Age doesn’t matter on that. The ones hanging tough here are the 30-something crowd who thought they would turn a profit. The ones who have sold are the over 65 who just want out and said ’screw it -get it sold.’
Prices should be at 2.8ish times income in the neighborhood.
Prices should be in a postive earnings capacity in relation to rent.
Prices should be in a range where,with 20% down, the mortgage, taxes and insurance are not more than 28-30% of gross in the neighborhood.
Prices in a neighborhood DO GO up for other reasons than inflation. More jobs coming into an area, more amenities added such as parks or improved transportation links or better schools….. and then you will suck it up and pay more than the reate of inflation over 30 years for those things.
What? Mad at your mommy?
Uhhh, no.
But I am mad at the idea of being expected to bail out a bunch of grasshoppers now that their winter is here.
I was commenting on the article in terms of retirees “needing” a certain price on their home, as explained by Karasik. All the pricing “shoulds” you outlined are completely correct - now explain why some Bay Area houses in California are priced at 6 to 10 times neighborhood income? And what is “over the rate of inflation” mean to you - I used 5% compounded over 30 years?
You are totally right about many of the rah-rah speculators being idiot 20 and 30 somethings driving around in leased Hummers. But they are really few in number compared to the millions of boomers who just “have to” get many hundreds of thousands of dollars for their old houses so they can retire to the golf course (here in my home state of AZ in many cases).
Since you went personal, here’s one back at you:
“What, boomer with very little in retirement savings who needs to hook a gullible young family into overpaying for your used house in order to make up for decades of poor planning?”
I just emailed Andy to ask him if he would guarantee my price loss if I buy a house from him. I will post his answer if he does.
‘If you’ve got a stock that’s going down, it’s probably better to get rid of it sooner rather than later.
He actually meant to say:
‘If you’ve got a house that’s going down, it’s probably better to get rid of it sooner rather than later because prices will continue to fall for 3-5 years from now.
“‘However, we’re also seeing in some of the higher end communities where people have just overextended themselves,’ she said. ‘They’re either purchasing investment properties, thought they could take advantage of the hot market, which is now cooling and they are no longer able to leverage everything they have and keep all the balls in the air.’”
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It’s awfully hard to keep your balls in the air when they are in a vise.
“Anyone who buys a home now has little chance of suffering a loss.”
In Mr. Starck’s defense, I know a woman who was an agent in Downers Grove (a western Chicago suburb) for 30 years. She said she never saw price declines there (from the 1970s on.) What she did see was six or seven years where the prices were completely flat (didn’t go up) which she conceded meant a “decline” (against inflation.)
So, from Mr. Starck’s perspective, he probably really doesn’t think that single family home prices will fall. Of course, he hasn’t seen a boom like this one before in his life either.
Condos are a completely different matter, of course.