There’s No Sense Of Urgency Whatsoever
The Daily Press reports from Virginia. “When the developers of City Center at Oyster Point were putting together condo plans a few years ago, builders could pre-sell half the units before they were done. Now the first 54 condos will go on sale at The Point at City Center in January amid a very uncertain market where pre-selling a condo is a miracle.”
“The City Center developers are confident in their product and the long-term trends, but they are holding off on a planned 18-story condominium tower called The Meridian as credit markets have fizzled.”
“The desire for Peninsula buyers to move into condos rather than buy a home or rent will be severely tested in 2008. The second half of the year has brought a growing deterioration in both median price and number sold, and a new slate of supply will be joining the City Center condos on the Peninsula next year.”
“‘Most people feel we’re going to have to struggle through another tough three to six months,’ said William Hudgins, the president of the development arm at Harvey Lindsay, one of City Center’s developers.”
“The slowing condo sales market prompted Beco Asset Management’s request to turn 168 of the 254 condos into high-end apartments in the Windy Knolls subdivision in Denbigh.”
“The city of Newport News is fighting the request. City Council members chided the developer for wanting to change a plan that was already approved, and nearby residents raised the specter of public housing — despite the fact that the condos would sell for up to $300,000.”
“Jeff Miller, Beco’s director of development, is even more pessimistic about the 2008 market than Hudgins. ‘I don’t see the condo market recovering this coming year,’ said Miller. ‘At best, it’ll be 2009.’”
The Virginia Pilot. “It seemed like the perfect opportunity: a home mortgage lender that required no proof of income, wealth or employment from its borrowers. For Cary McEntee and his company, CM Development, Long Beach Mortgage’s ‘no doc’ loans made it much easier to tap other people’s credit to buy houses.”
“It was 2004, and soon other national subprime lenders were vying for the company’s business. CM Development and its investors received more than $19 million in loans from more than 20 banks over the next 2-1/2 years.”
“But by March of this year, more than half of the roughly 250 properties controlled by the company sat vacant and efforts to renovate many had stalled. The company has since been forced into bankruptcy.”
“McEntee has testified that the company falsified about 80 percent of these documents. CM Development’s case highlights a lesser-known problem: Subprime loans made housing fraud a whole lot easier.”
“Earlier this year, a Fitch study of subprime mortgagebacked securities found that roughly a quarter of recent subprime loans were some type of fraud. Other experts say the international credit rating agency’s findings are low, and estimate cases of fraud at closer to 50 percent.”
“As the real estate market heated up and house values appreciated, the company resold its properties repeatedly between investors - squeezing out more equity and taking on larger loans each time. This continued even though most of these borrowers were not equipped to shoulder so much debt.”
“One investor, for example, couldn’t afford to buy a home for himself but qualified for nearly $350,000 in loans through the company. A 28-year-old teacher received $722,000 in mortgages on five properties. Two brothers qualified for more than $4.5 million in loans on more than 50 properties, many of which were uninhabitable.”
“And a CM Development employee received nearly $700,000 in mortgages while in the Virginia Beach jail on drug charges.”
“‘The two words everyone forgot was ‘due diligence,’ said Anthony Sanders, professor of finance at Arizona State University. ‘And now, as soon as the party’s over, you say, ‘Gosh, I wish we’d been monitoring this all along.’ There’s going to be hell to pay.’”
“McEntee said the banks weren’t particularly concerned about the specifics of the company’s sales. ‘They didn’t care where the money came from,’ he testified at a federal bankruptcy hearing last month. ‘There was such a big push on for the money, they were doing whatever they could to sell those loans.’”
The Herald Mail from Maryland. “It had been a year and four months since Gary and Maggie Schweitzer put their house near Hagerstown up for sale, and they were ready for a break. So they packed the car and headed toward the mountains of New Mexico, where they had long hoped to retire.”
“Late morning on the third day, their cell phone rang. It was their Realtor calling with incredible news: Two offers had come in, simultaneously! ‘It was very unexpected, certainly,’ said Gary Schweitzer.”
“Pumped by easy loans, and big city builders and commuters discovering rural communities, area land and house prices had risen rapidly since 2000. But in 2005, a stall kicked in as loan interest rates suddenly jumped, credit standards tightened, (and) foreclosure became a household word.”
“Settlement prices in Washington County have fallen from $248,904 for the average home in November 2006 to $207,827 last month, according to Metropolitan Regional Information Systems Inc.”
“When they listed the house at $380,000 in late June 2006, they knew the timing wasn’t the best. ‘We figured selling it would take several months — certainly by October, I thought,’ Gary said.”
“But by October, even after several showings, there were no offers, he said. So, working with Realtor SuZanne Glocker, they cut the price by $10,000. Still, nothing.”
“As Christmas neared, ‘we were still optimistic,” he said. The months passed and the couple dropped the price repeatedly, but the only offer - about $270,000 — ‘was so lowball that we didn’t even respond,’ he said.”
“‘…So, I think, hopes began to fade in late spring or early summer.’ The asking price was $330,000 in late October.”
“The leading offer came from Tim and Ursula Mauro, a young couple who have two children and were renting a townhouse in Frederick, Md. Ursula Mauro thought Realtor Eric Verdi was lost when he turned into Brightwood Acres East and she saw the big lots and big houses.”
“‘I was like, ‘We can’t afford anything in this neighborhood,’ she recalled. ‘Like, ‘Did he make a wrong turn?’”
“Verdi knew what he was doing. Housing prices have been falling since reaching record heights two years ago.”
“The Mauros made an offer. The Schweitzers faxed a counteroffer from New Mexico and, within a week, they had a deal: The price was reduced to $319,600 and the Schweitzers would pay more than $9,000 in closing costs, Verdi said.”
“The contract, signed Dec. 7, gave the Schweitzers $70,000 less than they’d originally been asking, but they were truly delighted, Gary Schweitzer said. It will enable them to build their dream retirement home next spring.”
“‘We love the West, and if there’s a price to be paid for that, then, certainly, yes, we’re willing to pay that,’ he said. ‘Plus, it looks like things (in real estate) will certainly get worse for the near term.’”
From The Record in New Jersey. “While builders can make profits of 20 percent or more during good times, that’s far from a sure thing these days. Demand for new homes has dropped…tighter mortgage lending standards have locked many would-be buyers out of the market. Other potential buyers, seeing the market slowdown, are waiting for deals.”
“Many developers, including Hovnanian, Pulte and Tarragon Corp., continue to offer discounts or incentives, such as help with a buyer’s closing costs or monthly condo fees.”
“There have been dramatic price cuts. In Norwood, a subdivision of three new houses went on the market earlier this year for $1.2 million to $1.4 million. Two of the three sold for more than $300,000 off the original asking price; the third is on the market for more than $400,000 off the initial price.”
“‘There are great deals out there, in my opinion,’ said real estate agent Ann Murad in Woodcliff Lake. ‘It’s definitely a buyers’ market.’”
“Still, many potential buyers aren’t taking the bait yet. Many believe that prices may have further to fall; or, at the very least, that they won’t rise much for a while.”
“‘Now, there’s so much supply that buyers are saying, ‘It’s a nice house, I really like it, but I don’t know, I’ll wait and see,’ said Richie Wells, president of the Builders and Remodelers Association of Northern New Jersey.”
“‘There’s no sense of urgency whatsoever,’ said Murad. ‘That’s the new market right now.’”
“Tarragon is repositioning two residential buildings in Hoboken, from condos to rentals, said Tarragon President William J. Rosato.”
“Tarragon also is trying to get creative with marketing. The company recently allowed an art gallery to host a reception and art show in one of its model units at a new, 16-story condo building in Edgewater.”
“‘It’s a way to bring people to the building,’ Rosato said.”
“How much would a buyer pay for a new house in Ramsey, with three bedrooms, 3½ bathrooms, a stone facade and high-end finishes such as crown molding and stainless steel appliances?”
“Mike Karvellas, who built the house, used to think the answer was $759,000. But after the house sat on the market for months, Karvellas cut the price again and again. He finally sold it for $659,000, a price that wiped out his profit. But at least he will no longer be burdened by the property’s carrying costs, such as taxes and loan interest, of more than $5,800 a month.”
“‘I’d rather get rid of it and get out from underneath my investment,’ Karvellas said.”
“‘There’s no sense of urgency whatsoever,’ said Murad. ‘That’s the new market right now.’”
It will be interesting to see how the spin will come out in 2008, to try and create a “senese of urgency”, among buyers. My felling is that it will be a lot of “It’s never been a better time to buy”. Creating a sense of urgency, is the only way to suspend peoples better judgment, to get them to make a rash decision and over pay on a house. Creating a sense of urgency is one the oldest sales tactics and a basic principal in the Dale Carnegie methods.
“Creating a sense of urgency is one the oldest sales tactics and a basic principal in the Dale Carnegie methods.”
This is why I believe the Fed will try to the best of its ability to restart housing price inflation — I mean, home equity wealth appreciation — over the next couple of years. A deflating housing market generates no sense of urgency, and by extension, no residential construction demand. Further, it is hard to extract home equity wealth to fuel consumption spending out of a falling knife asset.
How do you think they will do this? Since Wall Street no longer wants the paper, wont banks require 80% max LTVs and an expectation that they will get paid back regardless of what happens to interest rates? Are you thinking it will be indirectly triggered via wage inflation?
I did not say I thought they would do this. I merely suggested I thought they would try.
“How do you think they will do this? Since Wall Street no longer wants the paper……”
The FED will take the paper. They are already giving banks “sub-prime” rates on worthless paper by the 10’s of Billions to bolster the markets.
They are trying to turn Fannie Mae and Freddie into holders, also, in addition to increasing loan amounts for “jumbo loans”, that’s of course from an “affordable housing” corporate entity.
The FED controls the paper printing. They will paper over this problem and destroy our savings even more. There’s a long tradition of this since 1913. You can pay for anything with more paper.
Actually the first attempts came from the Continental Congress….it didn’t work out well then either, but then who’s really keeping track??
“Actually the first attempts came from the Continental Congress….it didn’t work out well then either, but then who’s really keeping track??”
Not worth a
ContinentalBernanke.‘The FED will take the paper. They are already giving banks “sub-prime” rates on worthless paper by the 10’s of Billions to bolster the markets.’
Reference, please? Sounds as though the Fed has expanded the scope of its mandate to include ‘Subprime Lender of Last Resort.’
As von Mises pointed out years ago, you can’t reinflate the bubble after it had burst.
NASDAQ is still 45% off its high of 2,000 in nominal dollars and Nikkei is still of by … eh, 75% off its 1989 top.
General inflation is, of course, easy to create for a central bank but one could quickly experience the Weimar Republic also.
Important footnote: Only nominal gains in home prices are necessary to unfreeze the home equity wealth extraction regime.
After using suicide financing and over paying for the ranch, FB Bernie Berserker now has a strong sense of URGENCY to SELL.
‘The Mauros made an offer. The Schweitzers faxed a counteroffer from New Mexico and, within a week, they had a deal: The price was reduced to $319,600 and the Schweitzers would pay more than $9,000 in closing costs, Verdi said.’
‘The contract, signed Dec. 7, gave the Schweitzers $70,000 less than they’d originally been asking, but they were truly delighted, Gary Schweitzer said. It will enable them to build their dream retirement home next spring.’
‘We love the West, and if there’s a price to be paid for that, then, certainly, yes, we’re willing to pay that,’ he said. ‘Plus, it looks like things (in real estate) will certainly get worse for the near term.’
So they leave a young FB couple behind and head off to overpay in New Mexico. And the bubble rolls on…
“‘Most people feel we’re going to have to struggle through another tough three to six months,’ said William Hudgins, the president of the development arm at Harvey Lindsay, one of City Center’s developers.”
What exactly is going to happen in three to six months? Everyone is supposed to forget prices dont always go up and Wall Street is going to regain its appetite for mortgaged backed securites and demand that more funny money loans be made? Can anyone point to a single specific known or expected factor that would make demand spike in the next few years? I would like to hear just one. The mindset of nation on housing has already shifted. Next stop end game. Perhaps he meant that his company is expected to have a 3 to 6 month lifespan, at which point the struggle will end and they will rest in peace.
Maybe the reporter accidentally left the zeros off. Should have read “30 to 60 months.”
I live near city center. Its a lame attempt to try and mimic VA Beach’s “Town Center”, which happened to be lucky enough to ride the front side of the bubble. Except in NN, they built all the condos first, figuring the “contemporary, mixed-use, urban life style, RE buzzword of the day” will just magically appear. Heck in Va Beach they got builder outfit to build the “culture” for them, Sandler Center. Same group that wants to build YAC (yet another condo) by filling in wetlands in Chicks Beach. Great, so some chain Restaurants and an off broadway rendition of Cats is all it takes nowdays. Nice…
Got Culture?
Your 100% right. There will be no demand spike, we will never return to giving anyone with a pulse an 100% liar loan, and no one will be convinced they can buy a house for 500k and sell it for 600k in 6 months for a long, long time.
http://www.youtube.com/watch?v=upyewL0oaWA
Washington D.C. yuppies tempted by Hagerstown’s “bargain” housing prices take note: The place is the embodiment of IDIOCRACY. You can tell by the fine old German architecture that Hagerstown hit its high-water mark in about 1901, and it’s been downhill ever since. Drive or walk the streets, and you’ll see chromosomal disasters everywhere you look. Seriously, I’ve never seen a better advertisement for eugenics than Hagerstown and the surrounding area.
Hagerstown is smack dab in the mountainous country that links Pennsylvania, a small part of Maryland, West Virginia, and the eastern part of Kentucky. That part of PA is called “Pennsyltucky.”
The following was written during the Civil War by a Confederate general on the march into Pennsylvania prior to the Battle of Gettysburg.
“This is a most magnificent country to look at; but the most miserable people. I have yet to see a nice looking lady…Their dwelling houses are large & comfortable looking…but such louts that live in them.”
For a more serious and sobering look at “devolution” read “The Bell Curve”. One of the most clear eyed and vilified (by the PC crowd) books ever published.
“…read “The Bell Curve”. One of the most clear eyed and vilified (by the PC crowd) books ever published.”
Sorry, no. ‘The Bell Curve’ is rightly vilified for misstating statistics and claiming things that have no factual basis in reality.
Don’t waste your time. Read ‘Secrets of the Temple’ or ‘Manias, Panics & Crashes: A History of Financial Crises’ if you want relevant information regarding our current situation.
“And a CM Development employee received nearly $700,000 in mortgages while in the Virginia Beach jail on drug charges.”
I as many have, long believed the depth and breadth of the fraud and swindling of the financial system is so enormous that it has no choice but to be flushed out.
There was plenty of fraud and swindling to go around, but it unclear if the majority was “of the financial system” or “by the financial” system. Yes some lied to banks, but many times the banks didnt require due diligence and the fraud was in mark-to-market, disclosure and ratings process with respect to the trust certificates representing interests in these worthless mortgages.
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“But at least he will no longer be burdened by the property’s carrying costs, such as taxes and loan interest, of more than $5,800 a month.”
That is what is missing from many sellers’ calculation. They need to cut price and sell AQAP. I don’t understand people who have a house on the market for more than a year that is empty. I think that we haven’t yet reached the threshold of pain, a necessary condition before any kind of bottom in prices is reached.
Jas
As you know, I’m surrounded by Bernie Berserkers here in FL. Some are not purposely keeping the home on the market. They simply don’t have the power to lower the price. It’s no longer their decision. Price is now being negotiated between buyers and loan servicers. Some of the servicers are taking forever to respond to offers.
FB Bernie Berserker is an onlooker in the selling process. In fact, he doesn’t care about the final sales price. Bernie just wants to get out of the mess. He wants a new start.
Please advise how much does it cost to put a new carpet(berber) and new paint in a 4 BD/FR/LR house with a nice foyer. And how much does it cost to finish the basement?
Like most things it depends on quality, you could carpet a whole 3000 sq foot house for less than 5k with decent carpet, and could probably do it for a few thousand with cheaper carpet. Paint is almost free, so if you are painting it yourself a few hundred or less. Basements should run 10k to 100k depending how much you want it tricked out (i.e., if you are just putting in walls and plumbing and electrical are already in place you could do it for around 15k with cheap doors, basic bathroom, etc. If you need to do all the electrical, rerun the plumbing and install a fancy media room, and top of the line bathroom, etc, you could go up to 75k or more, nice leather seats, top of the line electronics, etc.).
That is an overly broad question. Saying 4/2 is kind of meaningless. Are the bedrooms 9 x 10 or 15 x 15? How many other rooms? Family, living room, den????It can not be answered without the following information:
(1) sq ft to be covered by carpet.
(2) how many sq ft of walls to be painted (add up wall lengths in each room, multiply by wall height and then deduct sq footage of doors and windows) To figure out how many gallons of paint, divide the wall sq footage by 300. That is one coat. If you need 2 coats, double it.
(3) Finishing a basement?? WOW - you need a LOT more info. How many sq ft in the basement? Do you have to do some insulating of the walls? Finish the walls with gypsum wallboard? Put down flooring or a subfloor? Install a finished ceiling over the floor joists above? Lighting? Heat runs?
And the big question. Are you going to install the carpet which is really not difficult at all? Are you going to paint the walls yourself -an easy project? Are you going to do the work in the basement in all or in part?
The cost is a LOT different if you pickup the paint brush rather than paying someone else to do it.
BTW: the ‘nice foyer’ is irrelevant to every single one of these costs.
I bet “nice foyer” is newspeak for knife catcher
“Tarragon is repositioning two residential buildings in Hoboken, from condos to rentals, said Tarragon President William J. Rosato.”
I got a rare treat last week. I was riding in a car. I took the PATH to Hoboken and then got picked up at the PATH station. It was work related. My boss drove and gave a tour of Hoboken. The amount of building is just mind-boggling.
Hoboken is one mile by one mile but the entire square mile now seems filled with condos. All of the old factories are converted into condos. As we drove through the narrow streets I witnessed a parking purgatory. Anybody with a car has got to hate life. There were “for sale” signs everywhere. I also have inside information that nothing is selling in Hoboken. Builders and developers are getting very nervous. Their former cash cow has dried up teats.
People forget that every unit in Hoboken, Jersey City, Brooklyn, etc. should be considered a New York City housing unit. It is all tied together. The only reason Jersey and the boroughs has risen in price is because of this island upon which we now live. This means NYC inventory is rising higher and higher. The developments proliferating around me will have a hard time being sold.
People can keep yapping about the foreigners saving New York City. The fundamentals are a disaster. There has been far too much inventory built that has nothing in common with people’s true financial situation. Not everybody racks up that Goldman Sachs money. It will not be a Happy New Year for housing in NYC. 2008 should be the year that pulls back the curtain.
Add on top of that that ppl on Wall Street are very nervous about losing their jobs as thousands were involved in the securitization business that is now frozen. The write downs will continue. Most of the freeze occured in the fourth quarter, so year end financials wont paint the whole picture. 2008 will be a disaster. Many investment banking firms have said no new deals until they get their mark-to-market and balance sheets problems fixed. This wont be soon. They never intended to be in the business of holding these mortgage on their books. They were in the business to cut them up, market and sell them, taking huge fees and profitable residuals as they feeded the world’s desire for weekly floaters or more exotic products.
…..”.Under my administration more people have become homeowners than at anytime in the history of America…” -George Bush, the “ownership” president.
Thanks for the easy money George. You’re a genius.
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Thanks for easy debt, W. You are a dumbya. Do you even know the difference between homeowners and home-debtors?
Jas
And let’s not forget, he brought anarchy, er, democracy, to Iraq.
OT… Unleash cultural revolution…
http://news.yahoo.com/s/afp/20071225/ts_afp/uschinasingaporeuaefinancepolitics_071225032501
My neighbors on Wall Street will sell us out to the highest bidder in a heartbeat. The fact that the Stock Exchange has a huge American flag on its front seems wrong on so many levels. Will it soon be a Chinese flag flying from that old structure?
“My neighbors on Wall Street will sell us out to the highest bidder in a heartbeat”.
I don’t doubt that for a split second! Open the doors wide to anyone one with big money, because “Greed is Good”.
Where were the howls of national security issues when the trillions of us dollars were sold to China, India, Saudi Arabia and others the past several years? These were the years when the assets of the U.S. were pledged, not now; Now is when the pledges are called in to be honored; Now is when the US dollars are to be traded for US assets.
Posters here call HELOCers and other home equity cash-outers FBs because they turned their equity into cash and then blew the cash. Well it looks like we, as a country, did something similar. We borrowed trillions of dollars from others countries to throw a big party, pledging our assets to do so. Now we citizens, just as the real estate FBs, either have to buy back the trillions of dollars we borrowed (plus the interest these trillions earned) or forfeit the collateral that backed these trillions.
Oh, wait, these weren’t REAL dollars; these were fiat dollars! These were dollars created out of “thin air” so they don’t count for anything because they are not backed by anything. These dollars are deemed to be “worthless”.
Problem is these worthless fiat thin air dollars are being converted to some very worthwhile tangible solid
US assets.
As the patriotic saying goes: Buy American.
Here’s the apocalytic view of the credit crunch.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/23/cccrisis123.xml
Great article and nice “Wanted Dead or Alive” poster of 3 gangsters.
That’s not apocalyptic. It’s reality.
EVERYONE IS MISSING THE BASIC ISSUE
The key issue as that the income of the American Family is declining. Both in relative and absolute terms.
At the same time costs exploded all around them. The higher costs benefitted those that were able to pass them on……and for about five years it was a lot of people.
How? Debt Debt and more Debt. The problem with debt is it effectively digs the hole deeper and deeper until the day of reckoning when its cut off and has to be paid off.
Well that day came about six months ago and the situation has been getting worse since.
THE PROBLEM NOW IS THAT FURTHER DETERIORATION IS GOING TO LEAD TO FURTHER WAGE REDUCTIONS.
We are seeing it everywhere. What point is the bottom? Who knows. But it surely is not close to where we are now until the system washes 30 years of excess out.
Merry Christmas and good luck to all.
I am looking to buy a place for my kids to live while they go to college. The bubble hasn’t been as big here as in other places. The house we own and live in was built for us in 95 at a total cost of 400,000. In 2005 it probably would have sold for over 700. Now it might be worth 650 or a little less. I am in good shape as our original mortgage was about 60k and we are two years away from pay off. Things really aren’t moving here very well but the Air Force base keep things more stable in the under 250k dollar range. I have a friend who is a realtor. I don’t think she understands how bad things are going to get. We had a conversation yesterday about the town where I want to purchase. She told me there was a new development and for the first time rather than flat pricing the developers were considering offers. She said that they wanted only 134 thousand for a three bedroom condo. (Last year these would have been in the 160-175k range) I told her that I was planning on paying no more than 120k with my long term goal to buy a foreclosure under 100k She said ” I don’t think they will go that low” I said. “Probably not now, but around Christmas next year, they will.” I have all the time in the world. We only live 50 miles away and if I can’t get a good lease for my kids,they can commute until the prices are where I want them to be. I have the feeling that a lot of people bought with the no money down adjustable a couple of years ago and my boss who is also in the market for housing for his kid has been offered two places where they just want him to assume the payments. Not a deal he and I are willing to make unless the pricing is about what you would have paid in 2000. Right now in the paper there are over a 60 unfurnished apartments still being advertised for rent. I don’t know how many have given up advertising because Laramie is way over built. K
The whole trend of buying a place for kids to live in while they go to college was fueled by the bubble. It doesn’t make sense to buy real estate that short term (4 years at most and some colleges prefer freshmen to live in dorms so they can have advisors keep an eye on them for their first year) unless you are in a market where prices are going up substantially or total ownership carrying costs are way under rental costs. Also, please note that new developments that don’t sell enough units are going to have maintenance problems going forward.
Please reexamine your assumption that you should buy someplace for your kids to live in during college. Your premises may be fundamentally flawed.
Polly, I know my real estate pretty well. My children are a little different. My son is returing from the military and he will be funding some of the costs. My daughter is also older and has been working part time while she works on her degree. My son wants to go to law school and there is no better place for it than paying in state tuition here. If I had only one kid for four years it would be a no brainer. Renting would always beat owning, but I acutally have three when I include my daughter’s boyfriend. Most people who have purchased before the bubble ( and I know people who have bought real estate in Laramie for the last 40 years) have at least broken even. The general trend has been good, break even or a little better. Thie biggest issue is the pets. I would like to get three cats and a dog out of my house and they may prove to be hard to do without buying a place. It would add considerable to my quality of life. My cousin owns two banks and I believe I can go through him and get exactly what I want at a price I am willing to pay. I don’t need a realtor, I have a law degree and do contract management for a living. K
Aha! The pet factor!
I’m feeling PO’d now because my parents didn’t buy me a place when I went back to college. Never thought of asking them.
When I was in college my parents bought a place. It served double duty since my mother was working on her masters in the summer. We paid 8000 dollars for a trailer in 1977. Sold it in 81 for the same amount. We were out lot rent and what 8000 would have earned in the market but all in all we came out ahead over renting or the dorms. I don’t know what is going on now but it seems to me the dorms are getting obscenely expensive compared to other costs in our state. This in turn has been driving the price or rentals up. I am sure what is expensive in Wyoming would be considered cheap in California but we don’t have the commensurate elevated income to keep up with the costs. My son would never ask me to buy him a place but he is a good kid who has always been a responsible family member. I think you can teach kids lessons about how to manage their finances buy giving them some help but putting some of the responsibility on them, You gradually withdraw the support as they learn to manage on their own. Some kids need tough love but I think in general the best thing you can do is keep your kids from coming out of college with debt that they have to spend the next 20 years working off.
Well, you’ll do whatever you can justify to yourself. Personally, I’d be cautious in this having sent a child to college myself.
And also, I have my own experiences in college life. I was one of the “good” persons (so to speak), graduated in the top 10% of my high school class, won a scholarship (football) to a name university (and kept it for 4 years), graduated (somehow or the other) with a degree in math of all things. HOWEVER, when I 1st saw Animal House my thought was wow! - did I live thru things exactly like that!!!
Be aware, thats all I can say.
Hazard, I am pretty aware and it won’t happen unless the price is exactly where I want it. If the rental market tanks that may be where we are headed. Over building in a college town cuts both ways, and destroys two different markets. It certainly won’t hurt for them to rent or commute for a while until I find out where the bottom is. Not low enough and I stay out no matter what. I was in college when Animal House came out.
K
Not only will you get one for under 100k, you will have a good selection to choose from.
100% correct in your thinking. I just posted something which explains where we are at (valuation-wise) and where we are going (valuation-wise). As for realtors “not understanding”. They live on commissions. I doubt if 1% of realtors will aknowledge just how bad it is and just how bad it’s going to get. If they did, they would be rushing out and picking up employment application forms for that job opening for a waitress at “Denny’s”.
By all means, buy the kids their own place during college. Contribute to their sense of entitlement and deny them the life experience, friendships, comraderie, and lessons learned that come from living in student housing.
I thought that whole idea of buying kids a place to live for school was something only home-equity losers from California did; it is amazing how parents nowadays think they have to give their kids everything: pay their entire tuition, pay for the wedding, pay for their first house, plus give them an inheritence. It seems to me that most parents either have no confidence in their children or don’t want them to learn the value of money. If kids hadn’t learned this since of entitlement from their Boomer parents, we probably would never be in the mess this country is in (or will be in soon enough).
They’ve been building a lot of 100K condos here, and that must be what’s going on because the patio-decks immediately filled up with the mandatory barbecue grills and mtn bikes hung from the ceiling or draped over the rail. Real class.
“‘I was like, ‘We can’t afford anything in this neighborhood,’ she recalled. ‘Like, ‘Did he make a wrong turn?’”
OMG! People who speak this way are now old enough to breed?
As an aside, Best Wishes to everyone for a Happy New Year!
Mike Karvellas wanted $759,00. He finally reduced to $659,000 and sold. Obviously to a greater fool. What is it these FB’s and GF’s don’t understand about the 100x average area rents “rule of thumb”? It’s the only way to value property. Especially when prices in the last 7 years are based on nothing more than fraudulent numbers concocted by realtors and brokers who blackmailed appraisers into going along with their “idea” of what a property was worth.
The price of any property is made by comparing it to recent “comps” in the area. Over the past 7 years, realtors have been using comps which are totally FAKE. If the appraiser didn’t go along with the realtor’s (fake) valuation, that appraiser didn’t work for that realtor anymore and word soon got around the appraiser wasn’t very co-operative.
The only way to assess the TRUE value of a property is to go back to what the prices were, in any given area, 7 years ago before the mortgage broker and real estate industry became riddled with corruption. Well, more riddled than usual.
The golden rule of thumb is: 100x the average rents in the area. My rent has hardly moved in 6 years. New renters in the area are paying $2,000. My rent is now $1,800. $200 more than 7 years ago. Thus, we can assume the average rent is $2,000. Property values are now down in this area (2 years ago realtors said prices wouldn’t drop because Amgen and Countrywide are based here lol) from $725,000 to around $600,000 depending on condition and NOT selling.
So, using the golden rule of thumb, $2,000 x 100 = $200,000. Let us be REALLY generous and say $300,000. THAT is the TRUE value of the property when not using fraudulent numbers and THAT is where the eventual price will land. Anything more to back up the valuation? Yes. AFFORDABILITY. Wages are stagnant. A recession is already here unless you are dumb enough to believe Bahgdad Ben Bernanke and the phony Bush administration numbers. NOBODY (or at least very, very few) is going to buy at these prices with unemployment increasing, stagnant wages, inflation rising and a recession in the works.
Still, I suppose the world is full of greater fools who think that 10% off a fake price is a bargain.
My new slogan: “NOW IS NOT A GOOD TIME TO BUY. WAIT THREE OR FOUR YEARS.”
Actually the numbers will get so that ownership is cheaper than renting - because people will be shy of taking the risk of further depreciation, and so will prefer to rent then buy. The pendulum will swing all the other way. And choosing to own rather than rent will feel uncomfortable.
That is a scary thought as it would mean a 50% drop in values. In this scenario we are not talking cheaper housing, we are talking collapses of banks, wall street titans, insurers, massive unemployement, etc. It may be inevitable, but unfortunately even many of us would lose our jobs and see family members go bankrupt and fall below the poverty line. Thats why this thing was so dangerous.
Another number, is that the median house price will be about 3.5 * median household income. That’s how I quickly calculate “how low it can go”. So if median Hubby makes 50 and Median wifey make 25K, then the median house in that area should be priced at $262K.
Of course, if your in an HOA “gated community” infested area, you have to devalue the house by the monthly HOA fees.
(Hopefully we’ll see a lot of these private governments collapse during the housing crash)
I’m not a numbers guy, so I’m not questioning your overall logic, but I rented a place in Corona Del Mar, CA (our place was a 5 minute walk from the beach) for $2,100 4 years ago. The last time that place would have sold for $210,000 was probably in the early 80’s.
Mike,
I think you must live somewhere near the eastern edge of Ventura County. My wife and I lived west of you from 2001 until 2006. We eventually gave up on waiting for prices to decline and moved to another state.
As we were just getting started financially in 2001, we wanted to wait until our incomes rose some and we had a 20% down payment for a house. Over the next 5 years, we watched prices nearly triple. By the time we left, we just couldn’t see paying in the high $600ks for less than 2000 square feet of 1960’s construction on less than a quarter of an acre of land.
A couple of points concerning valuation that you may want to consider if you do plan on buying in California at some point. First, historically homes in the coastal Southern California counties have sold for between 5 and 6 times incomes. (This compares to 2.5 to 3 times for many other parts of the US.) I know in Thousand Oaks, for instance, median household income was right around $100k in 2004. Even if you assume wages have been stagnant since then, $500-600k for the median house is probably about right for Thousand Oaks. I’m quite sure this is very far from 100 times what one of these would fetch in monthly rent today. Things may overshoot some on the way down, but I think if you’re waiting for the median SFR to hit $300k in Thousand Oaks, you might be waiting for the invention of a time machine.
I would agree with you that waiting is definitely the prudent path. But, it could be a very long wait for the lowest inflation-adjusted prices in that area. (My guess is another 7-15 years.)
“Something is only worth what someone is willing to pay, he said.”
It really can’t be that simple, can it?