What Will Happen After New Years Day?
Readers sugested a topic on the spring housing market. “Speculating on what will happen after the New Year. I think we’ll see some real capitulation and 2008 will be the year that was. Of course, elections will play into all this. Can ‘they’ (TPTB) keep it all gamed until the elections are a done deal? Can capitulation be staved off until after the elections?”
One picked a date. “As we all know, everything will be just fine when Super Bowl Sunday comes and goes…. Have a cookie and you’ll feel right as rain….’
Another posted, “Hope will be way up there for the first few months - waiting for the spring selling season. A lot of people here have talked about a dead cat bounce on home sales. Anyone think it is up for this spring, or is it too early?”
One points at inventory. “In the past month inventory in my town went down from 121 to 98 this morning. I’m predicting come Spring the inventory will see highs like never before. The quantity of houses that sell won’t matter to me so long as the prices go down.”
One concurs, “I’m seeing the same change in inventory almost everywhere. The inventory is still up a net 30% since 2/27/07 though.”
Another adds, “Same here in the Mid-Lands of South Carolina, the used house pitch books in the grocery stores are much thinner. I certainly see a flood of ‘new’ listings come spring. Just about everyone around here buys into the RE BS lock, stock & barrel.”
One noted the time of year, “I’m also seeing a decline in inventory. Some is probably the ‘holiday effect.’ But I’m seeing a lot of homes in the MLS are also for rent on Craigslist, so I presume a lot of the ‘dropped inventory’ went to rentals. Anecdotally I’ve seen a lot of people who can afford their house and don’t have to sell are taking them off the market, some until spring, some indefinitely.”
One saw this fallout, “So, let them take it off the market for the ’spring sale.’ All it means is they have the carrying costs for 3 or four extra months before they try again…just increases the financial pressure to unload that sucker. It’s all good.”
One cited cause and effect, “IMO, sales will pick up when prices stop falling.”
Another added, “Sales will pick up when we come off the insane fantasy prices by another 40-50%.”
One thinks it will take longer, “I think, with all the candidates promising in one form or another to keep house prices propped up (an obscene notion, in my opinion), it won’t be ’til 2009 that the correction intensifies.”
US News & World Report. “Until a few weeks ago, the relentless whack, whack, whack of the construction crews down the street from Randy and Lacy Sullivan’s Colorado home was a constant reminder of the competition the father and daughter face as they try to sell her three-bedroom house before the bank forecloses on it.”
“‘Why are you people still building?’ Randy asked the construction supervisor for Richmond American Homes recently. ‘You’ve already got all these houses on the market.’”
“Lacy paid $312,000 last year for the home in the 12,000-lot Reunion development northeast of Denver. Brand-new versions of the same house now sell for about $280,000— ‘and that’s with the finished basement and the granite countertops,’ says Randy.”
“Unable to make the $2,200-a-month payments, he and his daughter had to lower their asking price to $255,000. ‘I told them, ‘You’re nuts! You’re just cutting your own throats in the end!’”
“With few prospects for the undeveloped land that builders hold, ‘the only way to stay in business is to build a house on it, then sell it at cost,’ says mortgage banker Lou Barnes.”
“Upwards of 10 percent of homeowners in the Reunion area now face foreclosure and eviction. That introduces an even lower priced competitor into the market: banks desperate to unload foreclosed homes for whatever they can get.”
“The result, as in similar developments across the nation, is a trail of empty houses, unkempt yards, and abandoned lots, along with a corrosive database of depressed ‘comps’ that drag down property values even further and force those who remain, from equity-deprived neighbors to increasingly property-tax-poor local governments, to prepare for the worst.”
“One builder, Lennar, sold a dozen houses in Reunion to a single investor. This month, it also signed a deal to sell thousands of undeveloped lots in Colorado and elsewhere to Morgan Stanley Real Estate at 40 cents on the dollar, infuriating neighbors and competitors alike.”
“Doreen Jaress, an entrepreneur and real-estate investor from California, figured she and her husband would live for a while in the Tuscan-style home she bought last year for $1.6 million, then sell at a profit. But her ‘city boy’ husband ‘could never get his arms around living out here,’ Jaress says.”
“She put the house on the market in August—plenty of time before her three-year-option adjustable-rate mortgage resets.”
“Unfortunately, that was shortly after Jaress’s other next-door neighbor tried to short-sell the 6,500-square-foot home he had bought for $1.8 million. Meanwhile, a builder down the street listed a comparable home for just $1.17 million.”
“Last month, Jaress planted a ‘for sale by owner’ sign in her front yard and offered owner financing. ‘I don’t believe discounting is the answer,’ she says of her $1.7 million asking price. ‘It’s the terms.’”
“With few prospects for the undeveloped land that builders hold, ‘the only way to stay in business is to build a house on it, then sell it at cost,’ says mortgage banker Lou Barnes.”
It’s like a game of poker…
The builders have thrown an awful lot of money in the pot, and all the cards have been dealt and they are sitting on a pair of 3’s, and 3 other players are still betting~
They should fold their hand, but can’t see the forest for the trees…
Actually, I think the builders are holding two pairs - aces and eights. Jack McCall is sitting across the table.
nice
‘but can’t see the forest for the trees…’
What forest? It’s gone. They razed it, so they could put up more McShiteboxes.
‘The builders have thrown an awful lot of money in the pot’
I think the JoeJuan Poker network calls it ‘All In’.
They can’t fold, because most of their money’s in the pot, and they don’t have enough left to play another hand.
“Last month, Jaress planted a ‘for sale by owner’ sign in her front yard and offered owner financing. ‘I don’t believe discounting is the answer,’ she says of her $1.7 million asking price. ‘It’s the terms.’”
Holding her ground, permanently.
Where do you even start when it comes to making fun of this stupid jerk? She may as well plant that FSBO sign straight up her a$$.
‘It’s not the price, it’s the terms!’
No room for the FSBO sign - that’s where her head is.
That is funny.
‘It’s not the price, it’s the terms!’
Right. OK… here are MY terms:
$1/year for 1,700,000 years.
SOLD!!
I enjoy stories like this one. FSBO-$1.6 million. Sure.
It’ll sit for a while, and she has the winter carrying costs, then in the spring, if one of her neighbors hasn’t undercut her and lowered the comps first, she may grudging lower the price say 50k. Then sit and wait again. As the market worsens, she may finally decide to get serious and try to unload this,or not.
This sort of self-described “investor” is the entertainment in this bust.
She bought for 2006…yeah, that’s one shrewd, market-savvy “investor”.
A year from now, this thing will go for 800 or 850K, at best,
and who would want to sink real money into that kind of white elephant?
Hey I might be tempted to come to the Open House if she bends over in the front yard and plants the sign in her arse and waves it around…
LOL, I loved this one too. Let’s see $1.1 Mil or $1.7 Mil (creative financing ….hmmmm -10% interest rate) - ROFL
LOL, I loved this one too. Let’s see $1.1 Mil or $1.7 Mil (creative owner financing ….hmmmm -10% interest rate -so she can say she booked a $1.7 Mil sale) - ROFL
I sort of sympathise with her position…. For her it was not the price, it was the terms — “Low teaser rate for 5 years”. What else could have driven the bubble to these heights?
Teasing?
Teasers?
Teased?
Tease.
“I don’t believe discounting is the answer. It’s the terms.”
– Calif RE “investor” Doreen Jackass
Okay Doreen, I’ll pay your price ($1.7 mil), here are the terms:
100 years, 0% interest, my monthly payment is $1417/mo.
Unfortunately that leaves me with about $2000/mo of property tax to pay. Oh well, I probably couldn’t rent a 6500-sf house for less than $3500/mo anyway. So I’ll buy it on the terms just stated. (Oops, just realized we are talking CO not CA, I don’t know what the prop tax deal is. Oh well.)
Doreen - “Entrepreneur and real-estate investor” or Flipper (FB) in trouble. It’s funny, you get these houswives that suddenly think they are the investment experts and blurt our “glass is half full” forecasts.
Ya I thought that comment was just classic. I’ve come to realize that there is a whole group of people that when confronted with a reality they just can’t accept, they create a new one in their own minds. They sincerely believe it, its not like they’re just trying to be clever to trick everyone else.
Average correction is 46 months, i think ‘09 will be the bottom.
Nothing average about this correction. Greedy flippers and dumba$$ politicians will keep this thing going far longer. 2012 bottom.
IMO, the bottom is farther out than that in N AZ. It’s the overbuilding and the mismatch of housing stock to incomes that worries me. Too many McMansions. That should translate into prices much lower than cost-to-build, which could ding the resale market.
The local paper reported a shift off the MLS and into rentals. As a result, the rental market is flooded and those prices should begin to work their way down.
Another local trend that may show up in other places this spring: condos and condo conversions. Even though the markets tanked, these guys are apparently going to finish the build out. I guess once they have financing they might as well. But it is like gasoline on a fire. Now these projects openly market as for-sale and for-rent at the same time! This will probably kill the older apartment market.
All of this is why I am no fan of overbuilding. It is destablizing to the economy and empty houses just degrade. I’m thinking 2010-2011 around here.
So all bottoms are local?
Well, we had a national and even global housing bubble, but the various areas weren’t at the same stages at the same times. Plus some went up more than others and some have more overbuilding.
For instance, even though Massachusetts started down sooner, Florida has raced down faster, IMO due to overbuilding and higher levels of specualtion, fraud and crazy lending. FL is probably closer to a bottom. That doesn’t mean MA won’t get just as low.
True, bubble areas will take far longer to recover.
Rental prices are sky high in SF right now. Me thinks people are trying desperately to make those mighty mortgage payments by filling with renters. Just saw a 2 bedroom. They were asking $3995/mo in rent. And they’re getting very creative with their descriptive enticements. This one was labeled as “vintage”. Yes, that’s right, a “vintage apartment”. Ummmm… it SF. Almost everything’s vintage here. Duh.
I think it’s only a matter of time before rental prices come down. If people can’t pay $4000/mo in mortgage, how could they possibly pay that in rent? And why would anyone want to? So, as you said, the market will soon be filled with more and more places to rent, bringing the prices down.
on craigslist, there’s a 3/2 apartment in presidio heights for $8500/mo. WTF?
There’s a nice house in the Bluffs neighborhood of Newport Beach that I know was being offered for rent for $2,200/mo in 2005.
It’s now being listed for $4,000/mo.
The Realtor flacking the rental, one Ms. Sally Shipley, says there has already been a full-price offer received.
I’m skeptical, of course.
I was basing this off of starts, longest was 83 months (’84-’91). Bubble areas might take until 2013 to fully recover.
For those who bought at the top - 2017 - at least - and not one day before.
(From she who called the real estate bubble in 2002)
Depends on where you are at, the midwest didn’t run up as much. (except Chicago and some of the pricier ‘burbs)
What? Minnesota was forming a bubble in 1998. They ran up way too far. I bet you can say the same about Wisconsin and some of the other Midwestern states. BUBBLICIOUS was the Land of 10,000 Lakes.
Minnesota? That’s the Great White North, might as well be in Canada.
WTF Matt? Do you live in Ecuador or Peru?
Joliet Jakes’ home town, just north of Elwood.
http://en.wikipedia.org/wiki/Joliet_Prison
I’ve said this before:
There are those who bought in 05 and 06 who will not see their home valued at the price they bought it for in their lifetime.
You can be 1 mile south of the Canadian border in Minnesota (or anywhere else in the U.S. ) and you still have more in common with a randomly-selected name from an Alabama phone book than you do with the people living 2 miles north of you.
“There are those who bought in 05 and 06 who will not see their home valued at the price they bought it for in their lifetime.”
I made a similar comment in front of a couple RE koolade drinkers. I said; We will not see 2005 inflation adjusted prices in our lifetime.
There was dead silence.
I’m with edhopper. We won’t see these prices again in our lifetimes, adjusting for inflation.
People forget that the Baby Boomers will be retiring and passing away, leaving a much smaller population of domestically-born Americans. At the same time, pension funds, social security & other retirement funds will likely get decimated by the bursting of the credit bubble, so people will have even less money. Everyone who wants a house has one by now (even if you’re in a rental, it still counts as housing), so where’s the demand going to come from?
I see deflation. Lots and lots of deflation.
Of course, the Chinese might come over and drive prices up, but who knows?
Ultimately, it’s the credit bubble that caused prices to run up like they did. Without another credit bubble to take its place, we aren’t likely to see these prices again, IMHO.
With a peak in mortgage loan reset in 2008 followed by a larger peak in 2010/11, the second with option ARMs, a recovery before 2012 seems unlikely. I would argue for later than 2012 as the impacts of the bursting credit/debt/housing bubbles spread through the broader economy.
I did come across an an interesting book earlier this week on the worldwide debt/credit bubble of the 1920’s:
http://www.mises.org/books/bubbleworld.pdf
It was written in 1932 and was originally a series of articles in the Saturday Evening Post that was compiled into the book. It runs over 180 pages, but the first 30-40 are enough to gain the flavor. If you change the names of the players and some of the terminology, there are some striking similarities between what was happening then and what is happening now. Considering the outcome then, it’s more than a little disturbing.
A lot depends on what happens in the economy. A recession means capitulation, because some people will have to sell, and others will have to concede that they will not be able to get their wishing price for years.
Here in NY, much depends on the finance sector, or which the stock market is the final pillar.
If I recall correctly, after a year of uncertainty at the top (like 2007) in 2000, didn’t the stock market tank in January 2001? And didn’t Greenspan put in an emergency, between meeting rate cut prompting a rally that later fizzled? I seem to remember a newspaper or magazine cover with Greenspan smiling with the news the market had jumped, temporarily it seems.
I wonder if Santa Claus will turn Grinch some time in early January.
‘A recession means capitulation’
Great point, because a slowdown is something that hasn’t been present throughout most of this bubble, and certainly not the peak years. I saw news this morning of more late payments on car loans, etc.
We’re seeing that BKs have crept up into the relatively well-off who got caught with their hands in the housing cookie jar. People that own multiple properties and earn northward of $100k. It’s interesting because if they cannot qualify for a Chapter 7 (total wipeout), they may not qualify for a Chapter 13 (individual 5 year debt consolidation) because their debt exceeds the allowed limits (~$1.1 mill secured debt, ~$330k unsecured debt). These people who exceed the limits would have to file a Chapter 11. So now, some individuals have to go the way of Enron! These people are not used to their debt being a problem and still in the denial stage.
Tall trees attract lightning strikes…
(or, how the rich got eaten)
All bloggers that believe $100,000 is still a high family income please raise your hands. NYCityBoy’s hands are firmly planted in his lap. I don’t think a family qualifies as “wealthy” any more with a six-figure income. Double that number and I might agree.
In Syracuse NY only 2.54 % make over $100,000 and only .90 % make over $200,000
This is from Truila.com
http://www.trulia.com/real_estate/Syracuse-New_York/
So much depends on assets, too. If you have a paid-off house, a grandfathered tax basis, grown-up kids, and your $100K/yr is “unearned,” then it’s quite a lot. If you have a negative net worth then $100K/yr isn’t very much, and you have to work hard to receive it, and you have to worry about how long you will keep receiving it.
Exactly. I see a lot of families of four that think they are rich because they now have a combined income of $100,000. That is nothing if you have two little kids and little net worth. But there appears to be an assumption that everybody making over $100,000 is wealthy. It is an assumption to which I do not agree. A family making $100,000 should probably not even buy at 2.5 times their annual income. Prices are truly out of whack with today’s America.
Well… let’s remember that location and salary are very related. I’m also in NYC — and for NYC I’d obviously have to agree. But that doesn’t mean there aren’t people making 100k that aren’t living comfortably elsewhere in the US.
Yep.
We make that much before we start working and have 7 figures of real worth… still doesn’t feel “wealthy”. We sure don’t live in any mansion. There was an article some time back about it takes about 7 times a mil to just equal the “millionaire” on Gilligan’s Isle – which is what most still think it means. Today that’s just slightly better off – not rich.
The fact that most the houses they were building started at half a mil ought to tell ya something (not that they could afford them, but we’re talking the assumption that sort nice – McMansion crud – I.E. expensive trac home required between 200k & 250k… that gives one an idea of what a mil is worth today).
100k is basically a middle-class income- use the proverbial nurse married to a cop.
Although in one of the recent Dem debates they agreed that if you make north of 95k you are no longer middle class. Apparently the police officer and RN are now among the carriage trade. They certainly are in the sites of the AMT, and well in the sites of the proposed fed tax increases.
Incidentally, wondering how those proposed tax increases on these wealthy folks jibe with the caring government wanting to make houses more affordable.
NYCBoy, $100,000 is a lot of money in certain locations and if you have a high net worth. I would be perfectly content in a studio in Tucson and with a mountain bike. $350 per month rent last time I looked a year ago.
“100k is basically a middle-class income-”
By that measure, 75% of the population is poor.
I think you’re right.
Don’t know if this is a canary in the coal mine phonomenon but I’ve had more BK work in the past six months than in all of 2005 when everyone and his kid brother were racing to file before BAPCPA took effect. And yes, I am seeing plenty of “homeowners” who are upside down on their houses. Actually, they’re not the hardest cases. They’ll either reaffirm (rarely) or just walk away. Because the state in which I practice has some of the lowest exemptions in the country ($15,000 for real property/$30,000 if filed jointly), I get a good number of folks who have equity that they’ve built up that exceeds the exemption amount. Then I get to tell them that in effect they’ll have to pay the trustee the equity in excess of the exemption figure in order to keep their house.
That always makes for a fun day.
We’re seeing that BKs have crept up into the relatively well-off who got caught with their hands in the housing cookie jar.
They were Capitalists on the way up. Are those people socialists (Hillary/Obama voters) on the way down?
Right! If ou look at this as a giant slow moving landslide, the further it travels, the more mass and momentum it will gain, dragging in what had previously been considered safe land… I noticed after a very busy black friday (during which I stayed home) driven by some really enticing sales, stores are all but dead. I have heard car sales are also extremely slow. All these things matter. Personally though I am really rooting for another tech bubble given the Feds current reaction to the crisis
Here in Southern California, my husband has been with a Toyota Dealership for 18 years, Since he was a kid. He is now a manager and come January 1 they are laying off 15 employees. some of which have been there for decades. The business is also dropping its entire wholesale department starting January 1. They just are not busy. This will have a direct impact on our family income because of his commision pay. We tightened our belt years ago and I have a government job that pays well but there are many not so lucky.
Sorry to hear about that Shannon. A bit surprised, as I thought Toyota (and Honda) would be least affected. Didn’t think it would happens so soon. Good thing you have a more stable job.
Best of luck to you!
Minyville has a great chart on Greenscams’ rate cut rallies. The djx “rallied” from 11,400 all the way down to 7,400. Assuming 14,200 was the top, that would put the dow at about 9200 in a couple of years.
boys and girls:
The hard landing is clearly manifesting itself. The 25bps rate cut and a 300pt market sell off is just the beginning. I said some time back that the moves by the FED (lowering rates) would begin to have the opposite effect of market surging. The Global Central Banks will continue the coordinated effort to prop the equities markets by lowering rates, but these efforts only re-inforce the markets efforts to flush the ficticious capital from the system. As the moves indicate a serious “get out in front” of the disaster logic.
Why would the CB’s cut in the face of surging inflation? Because inflation is the necessary evil to support the credit market expansion all while credit implosion continues unabated.
Inflation will continue to surge, but in all the bad places… food and energy, throw in insurance to get the full flavor of painful contraction.
Once we get the inflation surging to critical levels, the wheels fall off the wagon as the bond rally is not only over, but crushed with spiking longer term rates. This all the while housing price implosion accelerates.
Insiders are net sellers in this market, and each surge up gives them ample excuses to sell into the rally.
What I am looking for:
1. Huge gaps down on high volume days.
2. Coordinated intervention by Global Central Banks.
3. Unbelievable inflationary surges in critical must have inputs.
4. Desperation moves in the mortgage markets.
5. GLOBAL RECOUPLING…. when the US hard landing arrives, it drags in all of Europe, UK, and China…. the red dragon will rear its ugly head and will crash the dollar creating a currency war and Nationalism across all Soverigns…..
All will be touched by the unfolding disaster…. from the coal miners in China to Wall Street Hedge Fund managers…
The possibility of a violent excess production crisis in China, and perhaps in India and all of SE Asia. Chinas´ investment is more than 45% of GDP and growing. That´s on top of a more than 10% annual growing GDP. I see terrible potential for an explosion there. And a terrible self reinforcing circle.
the Great Fall of China.
Inflation in many areas. But when will the U.S. get wage inflation? I raised my hourly rate by 6% but hadn’t had a raise in two years since my increase in early October.
“Unfortunately, that was shortly after Jaress’s other next-door neighbor tried to short-sell the 6,500-square-foot home he had bought for $1.8 million. Meanwhile, a builder down the street listed a comparable home for just $1.17 million.”
“Last month, Jaress planted a ‘for sale by owner’ sign in her front yard and offered owner financing. ‘I don’t believe discounting is the answer,’ she says of her $1.7 million asking price. ‘It’s the terms.’”
Just keep on saying “its the terms” as the days pass and the ARM resets……. and then the nice bankruptcy judge or foreclosure auctioneer will explain to you that
“terms” = price plus financing costs.
Doesn’t matter if the interest rate is 0 if the price is more than it is worth and neither the price nor the interest rate matter if there are not enough buyers to buy all the properties in that kind of price range (real simple thing about supply matching the demand which means a willing buyer with the bucks.)
“It certainly didn’t help his next-door neighbor, Doreen Jaress. An entrepreneur and real-estate investor from California”
Oooh, she is an “entrepreneur”. I guess that means she wasn’t qualified to do anything that can actually be described with real terms such as farmer, doctor or prostitute. She is a vague character with big visions and grand ideas. We should bow to her. WTF?
I have a picture in my head of this woman having been involved in Amway.
“Last month, Jaress planted a ‘for sale by owner’ sign in her front yard and offered owner financing. ‘I don’t believe discounting is the answer,’ she says of her $1.7 million asking price. ‘It’s the terms.’”
My terms are you pay me to live there for a few years while you wise up.
It meant a lot for the brahmins of big business to get through xmas and into bonus territory of 2008.
I don’t expect the charade to go on much longer, as things will start gaining momentum downhill and where she stops, nobody knows?
“‘Why are you people still building?’ Randy asked the construction supervisor for Richmond American Homes recently. ‘You’ve already got all these houses on the market.’”
Richmond American Homes = MDC Holdings (stock symbol MDC)
Their stock has held up better than any other builder. They have not recognized the level of write-downs that other builders have been putting forth. It seems to me they are using a mark-to-make-believe model like so many of the financial companies.
I’m sure the low-level construction crew & manager got a laugh out of some nut case neighbor ranting around on their jobsite about ” why are you buildingggg !??! ”
Like these workers have any policy-making authority. Or work will just stop dead in its tracks while the crew manager gets on the horn with HQ & demands a conference for the irate neighbor right there on the spot.
Ohh brother…. people have such tunnel vision when its in THEIR interest. The whole world must stop & cater to them when they demand it!
Hillaryious, actually.
Aquis,
if you read the piece, this irate chick bought her house while unemployed. She signed up for a 13% mortgage. And she has time to wonder what other people are doing?
Dissolve the Fed. Abolish the IRS. Forego the froth. RON PAUL FOR PRESIDENT!
Let’s burst these ridiculous bubbles once and for all!
Hey HBB’ers, don’t forget to donate to the next Ron Paul money bomb tomorrow. (www.teaparty07.com)
- MMAB
For Suffolk County, NY, sfh listings were up 8% in November over the same month last year. [14,373 vs. 13,313]. You may have read a different number, as gross listings include commercial and rentals. In this case, rentals dropped about 25%, yielding a misleading [low] inventory stat.
Months of inventory = 19.3, versus 12.9 last year.
Transactions were down 28%. [774 versus 1,023].
A stat I haven’t seen published is that contract prices are currently running 88% of listing price in Suffolk. During the boom, prices were appreciating over listing price. From my records of the last few years, 2007 is the first year contract price is breaking below asking price.
I believe listings will increase and the above ratio will show more erosion, as people are starting to make offers significantly below list price.
Also, the median house price in Suffolk was $143,000 in 1997. Market topped at $400k. Allowing for the normal ten-year appreciation of 50%, the bearish target is $214,500, or 46% off market high.
Even at an eventual median of $300k, that’s a 25% drop from high.
Every anecdotal story I hear out of Long Island is bad.
I would think so, the high end is looking at a 50% haircut.
“Allowing for the normal ten-year appreciation of 50%”
Please stop it. I can’t take it anymore. Call things what they are. “Appreciation” is govt. sponsored INFLATION. With non-fiat currencies, prices are stable.
Removing the gold standard resulted in asset inflation on average of 4% per year, initially. Now it is much higher. The “free money” policies of the FED made this much, much worse. The lack of lending restraints feed the beast.
Call things what they are: Price Inflation.
Realtwhores say “appreciation”.
You are correct, diogenes. For the most part, housing “appreciation” is just another way of saying “inflation.”
That being said, if during times of rather high inflation (past 50 years +/-) owning a house was a good investment; what does homeownership do during deflationary times?
I have a feeling deflationary times may last well past 2012.
“the co-owner of Brookline Homes poured his all into La Grande Cannoli, a $2.2 million, 8,750-square-foot”
That is one big effing cannoli. It sounds like Scott Carter substituted the cannoli for the Joshua Tree. How does that feel, jenius?
Now all he has to do is convince the city to let him subdivide it up into condo’s.
did anyone see this? looks like foreigners are catching a falling knife in housing and in our banks. at least they get a discount.
As loonie surges, Canadians snap up US homes
http://www.msnbc.msn.com/id/22262472/
The market has shifted totally in the buyer’s favor, especially those offering cash, said Jeff Russell of Alberta. Last month, Russell snapped up a patio home next to a golf course in Scottsdale with a $299,000 check. It was listed at $463,000.
“I was actually going to come down here and buy a seven-series BMW because cars are ridiculously cheap here,” he said. “But I discovered that, forget cars, houses are on deep discount. I could never get anything on a golf course as nice in Canada for this type of money.”
why pay cash? put down a hefty downpaymett and allow the appreciating loanie and hopefully your increasing oil patch salary to help pay the rest?
Do not pay attention to the delusional CEG (Canadian Equity Giants).
Their MO is exactly the same as the CEG (California Equity Giants) hence the same ticker.
They will both take huge haircuts before this is done.
Absolutely correct, I think one would be hard pressed to find a market in north america that has not been infected by funny money from California. The downside is that most of the time the locals don’t recognize it for what it is, nor can they understand that it’s gone now and it’s not coming back.
I predict 2008 will be a year of increasingly bizarre food/housing comparisons from Sean Snaith.
“It’s like Mahi-Mahi leftovers with a side of mango rice and plantains in a microwave, circling about for 3 minutes on the popcorn preset. Clearly we’ve reached bottom.”
LOL
I would seriously be suspect of the final quality all houses/product of any company in dire financial straits.
Its bad enough to have disgruntled,underpaid, overworked illegal crews doing shoddy work, but when you have the supervisors, knowing their own job future is bleak, you can rest assured that every & any corner WILL be cut to finish that house. After all, in bulk quantitites, a few missing pallets of materials here & there, amount to measurable savings, which can go right into Mr. Ford F-350 duallies back pocket to tide him over thru the winter of his discontent.
(The construction industries version of a white collar dude making off with office supplies in the last week of employment.)
I hope I never hear a Ford F-Series truck again after this bubble (I know, wishful thinking). That freakin’ incessant chirp…
Ben,
Let me recount a story from 1926 about the Great Florida Land Boom. It was the beginning of the end.
Taken from “xroads.virginia.edu.
“But by New Years Day of 1926 the suspicion was beginning to insinuate itself…………that the new buyers of land were no longer as plentiful as they had been in September and October, that a good many of those who held binders (think pre-construction condos and 100% financing purchases) were exceedingly anxious to dispose of their stake in the Most Richly Blessed Community…….and were NOT GOING TO BE ABLE, UNASSISTED, TO COMPLETE THE PAYMENTS ON LOTS (think condos). (emphasis mine). The influx of winter visitors had not been quite up to expectations. Perhaps the boom was due for a little “healthy breathing-time”. (how many times have we heard this recently).
As a matter of fact, it was due for a good deal more than that. It began to collapse in the Spring and Summer of 1926. People who held binders (think pre-construction condos) and had failed to get rid of them were defaulting left and right on their payments. One man who sold acreage in early 1925 for $12 per acre, and had cursed himself for his stupidity when it was re-sold later in the year for $17, and then $30, and then finally $60an acre, was surprised a year or two afterward to find that the entire series of subsequent purchases was in default, that he could not recover the money still due him, and that his only redress was to take his land back again. There were other cases in which the land not only came back to the original owner, but came back burdened with taxes and assessments which amounted to more than the cash he had received for it; and furthermore he found his land blighted with a half-completed development.
Just as it began to be clear that a wholesale DEFLATION was INEVITABLE, two hurricanes showed what a Soothing Tropical Wind could do when it got a running start from the West Indies.”
……Hitting the Gold Coast early in the morning on September 18, 1926, it piled the waters of Biscayne Bay into the lovely Venetian developments, deposited a 5-masted steel schooner high in the street at Coral Gables, tossed big steam yachts upon the avenues of Miami, picked up trees, lumber, pipes, tiles, debris and even small automobiles and sent them crashing into the houses………
……..By 1927, most of the elaborate real-estate offices on Flagler St. in Miami were either closed or practically empty.”
The article is an interesting re-make of the 1926-27 collapse of our first “big boom” here in Florida.
It’s said that history repeats itself. If this a flashback to the late 20’s, we are in for some serious problems.
If I may, I’d like to make an analogy here. Being 5′2″, my bottom is closer to the floor than the bottom of someone who is 6′2″. If you drop something from the height of my bottom and at the same time from the height of the other 6′2″ bottom, the floor will be reached first from my bottom. So, maybe the housing bottom really isn’t the bottom after all, but only a reference point, and if you think of houses as proportional to height, as in a house that originally cost $1.5 million being ‘taller’ than a house that cost $600,00, the shorter house starts at a lower bottom and hits the floor (and does the dead cat bounce?) sooner. So, maybe it really is local, depending on how tall the house was to begin with. I’m sure there is a metaphor or proverb in here someplace, but all I can come up with is ‘what goes up must come down’. Unfortunately, that doesn’t apply to weight….
Don’t know if this will help, but think of it this way…
Me and my buddy both fall at the same rate when we sky dive. Weight matters little.
While the lower priced home has “less” to loose, the higher priced home is going negative in larger amounts. The result is it all tends to equalize. As in lets say we have a 300K house, a 600k house and a 1.2 mil house. They all had 100% financing (easier math). They all loose 5%. The 300k house is now only 15k upside down… The 600k house’s owner is upside down 30K while the 1.2 mil house is upside down 60k – which position would you rather hold if you had to be in one? For the 15k it’s actually more likely that they can figure out a way to hold on. For the 600k, it gets twice as difficult… for the 1.2 mil – what would the point be in even trying? Now, use the numbers you see out in the world and you’ll understand it’s actually more devastating to the higher priced homes…
got that, the question is, which one hits the floor first? Do they lose at the same % rate or the same $ rate? Which is tied to gravity, % or $? And is the floor measured in %, $, or simply that the house has no where else to go but up?
Here in San Diego, the bottom is hitting the bottom first, IMO. It was also the first to rise, and rose highest, percentage-wise, during the boom.
Just because it bottoms first, doesn’t necessarily mean it will pick up first, though. I think the flat period following the bust is longer in the lower-end homes, as their true value is rent = (or greater than) PITI.
In my market, the extreme high end (over $1 million but still well under - I’d guess - 4 mil)- is pretty far removed from the greater metro area average “value” of 100K or even he average “same zip code” value in the high 200s. Also pretty far removed from similarly priced homes in more expensive places. My landlord’s neighbor paid about $700/mo to water his landscaping last summer vs the average $40 bill for the hoi polloi, and that’s one of the smaller “estate homes”. It’s a kick to see one of these places to go up for rent - owners aspire just to have someone else foot the monster utilities and pay some token amount, as opposed to hiring a housesitter.
I’m on the maling list for local pseudo-auctions though and check the foreclosure notices from time to time, not seeing yet much high end activity as yet. The other side of comparative equity bleed is that on the low end, owners can’t easily deal with even a small loss or having to bring $ to the closing table - if average US citizen has zero savings, guessing average Memphian is well negative.
I did notice zillow had been dropping these estates faster than the rest of the market, will have to go back and see if that has changed. But there is still very little bubble acknowledgement anywhere here, to date - amazingly. Elsewhere closeby, entire crapdivisions (particularly newer builds, many stalled with half built homes or lots) are getting taken over by weeds and every other home abandoned or for rent…but we saw the same when we were shopping rentals here four years ago, so again, it’s not translating to any watershed event in peoples’ minds. Why should it?
After New Year’s Day - I dunno. My realtor acquaintances (who specialize mainly in coveted zip codes and/or new developments in less coveted ones) don’t look particularly strained, stressed or preoccupied. Not yet.
Maybe for some places it’s more like trying to hang onto a piece of shipwrecked ship and not drown, than skydiving. The fat guys and gals are ultimately doomed too, but they’re buoyant and slower to assume ocean temperature.
Will there even be a dead cat bounce? We are concerned because we have to sell our house in the spring. We made a somewhat impulsive decision to move overseas so we are forced to sell it, and my husband has mentioned renting it out until the market rebounds but frankly I am wondering if that will happen. We are in Boise and it seems some of the tech companies might be leaving soon. If that happens, Boise may become another Detroit or something. No jobs and dirt cheap houses. I’m banking on 2008 as being our best bet because of the election. After that all hell may or may not break loose but I don’t want to be a FB when we find out.
The market won’t rebound until affordability returns, meaning home prices in Boise will have to fall dramatically. Price it agressively and sell now. 10% below current comps will probably be better than you will see in next 10 years.
On the other hand, if you bought a while ago and can rent it out with positive cash flow (including PITI, maintenance, property management fees, etc….) you could just keep it as a rental for the next 20 years.
Agree!
I’m still seeing NEW HOMES going for $1.1 Million start near Porter Ranch and Topanga Canyon areas….seriously. Are these places ever going to come down?