The Boom Times Ended With A Thud
The Rocky Mountain News reports from Colorado. “The note left on the door to the house on Fulton Street was a plea to owners who no longer live there. ‘Please repair the garage door,’ read the note, dated Oct. 18. ‘Please remove all outdoor storage, trash and debris from the alley.’ It was written by a city code enforcement officer who tries to keep neighborhoods tidy. The property, an eyesore for months, was cleaned up shortly before Christmas.”
“But others like it remain unkempt, dragging down property values in neighborhoods across the metro area. The foreclosed house is in the Del Mar neighborhood, one of the hardest hit by foreclosures. Through September, 82 of 100 houses sold in the previous 12 months in the neighborhood were either foreclosed properties or short sales, according to data compiled by Your Castle Real Estate.”
“In Aurora, there were 3,387 foreclosures the first six months of this year, the city’s Community Development Division reported.”
“Through November, Aurora used a contractor more than 2,115 times to remove trash, weeds and do other needed fixes on properties, said Nancy Sheffield, director of neighborhood services.”
“That’s almost triple the number of such jobs - known as abatements - done in 2004, and 770 more than last year. While not all of the properties are foreclosed houses, the numbers have ‘been increasing primarily because of the foreclosures,’ Sheffield said.”
“The vast number of foreclosures and the volume of paperwork that goes with them have overwhelmed lenders, whose first priority is reselling the homes, said Sunny Banka, a broker who owns Metro Brokers Sunny Homes.”
“The drawn-out process to foreclose a home may also be a factor in why lenders don’t maintain the houses they take back, said Chris Holbert, president of the Colorado Mortgage Lender Association.”
“Holbert said sometimes lenders do not have ownership of the property - and the legal authority to do any maintenance - until weeks or months after the previous owner has left.”
“‘It’s not their invoice to pay,’ Holbert said about lenders. ‘I guess it would be similar to if a dealership was to repossess a car, would they be responsible for parking tickets on that car?’”
MSNBC reports on Colorado. “The head of one of the nation’s largest homebuilders made headlines early this year by bucking his industry peers’ projections of a housing turnaround by spring and instead predicting the market would ’suck, all 12 months of the calendar year.’”
“Boy did he get it right. The housing market has gone from a ‘correction’ to a ’slump,’ and as 2007 comes to a close, there are signs 2008 will get worse.”
“Amid the predictions, sellers are sitting on the sidelines, hoping 2008 will bring more traffic, while potential home buyers try to time the bottom of the market.”
“Cliff and Erika Stice of Castle Rock, Colo. have had their two-year-old stucco and stone ranch home on and off the market since February 2006. They’ve had 30 showings, just a handful of repeat lookers and no offers, despite cutting the price to $1.255 million from $1.35 million.”
“‘We really thought we would sell the house fairly quickly,’ said Cliff Stice, a retired telecommunications and cable executive.”
“Fortunately, the Stices are in no rush to sell. They won’t buy another house until theirs is under contract.”
“‘Our realtors think 2008 is going to be much better than 2007. If people are less scared to make a commitment then the market will start taking off again,’ Stice said. ‘Until then, it’s not a bad place to hang out.’”
The Arizona Republic. “As bad news goes, May 2006 initially seemed like a hiccup for the construction industry in Arizona. Up to then, the contracting industry was posting gaudy monthly sales growth, recording 30 percent more business for six straight months compared with the same time a year earlier.”
“That May, the number slowed to 24 percent - a hiccup, surely.”
“The same month, David Schweikert, Maricopa County treasurer at the time, declared the county’s fiscal health ‘the best I’ve probably seen it in my lifetime…Right now, the money is really flowing in.’”
“But looking back, Arizona’s financial outlook already was changing.”
“The tax-collection picture reflected in Arizona Department of Revenue records shows the summer of 2006 as the pivotal time when the state’s economy downshifted from boom to its more troubled present. Construction growth saw a small rebound in June but had slowed to a trickle by December.”
“The fate of a project like Elevation Chandler may have offered warning signs of the trouble to come. On May 9, 2006, the construction crane at the planned 10-story condominium near Chandler Fashion Center was removed from the unfinished site. Work there had stopped abruptly three weeks before.”
“Today, 19 months later, it remains a hulking skeleton of concrete and steel.”
“But, overall, single-family residential housing is the largest source of contracting revenue in Arizona, and its slowdown has been more dramatic. In the first nine months of this year, contracting sales on residential housing fell 10 percent. It represented a $675 million drop in business for contractors.”
“‘The market is flat stagnant,’ said David Jones, president of the Arizona Contractors Association. ‘We’re hoping the residential sector will perk up in the third quarter of 2008.’”
“As 2007 ends, the economy is teetering on recession, if not fully immersed in one, depending on which economist you believe.”
“The Southeast Valley is no exception, feeling the heat of the housing market meltdown and the credit crunch. In nearly every ZIP code in the Southeast Valley, the median home price fell on a percentage basis over the past year, according to Information Market. Among the hardest hit were Gilbert and Ahwatukee.”
“Meanwhile, the number of Valley homeowners who lost their homes to foreclosure grew by 566 percent, a result of the housing market’s slowdown and rising interest rates on risky so-called sub-prime mortgages. In the Southeast Valley alone, lenders foreclosed on 1,543 homes.”
The Las Vegas Sun from Nevada. “The winner of the latest installment of the reality TV show ‘The Apprentice,’ Stefanie Schaeffer, is facing a challenge that surpasses anything made for television.”
“Schaeffer was recently installed as marketing director overseeing sales for Donald Trump’s Vegas condo and hotel, set to soon open its first 64-story, 1,282-unit luxury tower. But real estate agents and analysts here say the timing couldn’t be worse.”
“High-rise luxury condo prices are way down in Las Vegas, reflecting local and national housing trends. The boom times of the past few years, when developers flamboyantly announced one high-rise project after another and talked of Las Vegas as the next Manhattan, ended with a thud this year.”
“Local observers say that as Trump pushes to close on units, a reckoning may come for the still fairly new concept of luxury Vegas high-rises.”
“The answer will hinge on whether the people who put down $10,000 deposits during the boom years will now be able to come up with financing for the units, priced from $700,000 to $7 million.”
“‘I’m worried about how many of those things are going to go up for sale, and are they going to linger out there, and are we going to get bad press,’ said Realtor Don Kuhl. ‘Hopefully we don’t have a huge number of people in there trying to flip units because we don’t have a strong enough market for that at the moment.’”
“Condo buyers aren’t allowed to put their units up for sale until they close, and that can’t happen until the building’s opening, which is set for the spring but could happen as early as February.”
“Kuhl and other local agents who deal in luxury condos report that an informal list of Trump reservers trying to unload units is already floating around - some estimate it reflects 30 percent of the tower. These agents believe many of the sellers won’t be able to get the price they committed to paying for the unit and some may have to walk away from their deposits.”
“‘They thought they were going to flip them, and they don’t want to be paying mortgage payments,’ said Realtor Paul Murad, author of ‘Manhattanizing Las Vegas.’ ‘Some of these investors are not going to be able to close.’”
“Murad estimates that 20 percent of potential buyers citywide are walking away from luxury condo deposits these days.”
“According to a report released Friday by Restrepo Consulting, high- and midrise luxury condo sales through the first three quarters of 2007 were outpacing 2006 in the number of units sold, but median prices have fallen from about $1.03 million to $860,000, a drop of about 17 percent.”
“Median hotel-condo unit prices were down in 2007 from $670,000 to $537,500, a nearly 20 percent drop.”
“Restrepo Consulting also found that units were languishing for months on the resale market. MGM’s condo-hotel, for example, had 124 units - 10 percent of its inventory - on the market an average of 117 days. Panorama Towers, a high-rise luxury condo project just west of the Strip, opened its second tower less than three months ago and is trying to resell about 10 percent of that, according to sales director Tony Preus.”
“Five Panorama units are currently in foreclosure, according to RealtyTrac, each now worth several hundred thousand dollars less than what the owners paid for them.”
“According to a recent report by Applied Analysis, 13,000 luxury condos are in planning or under construction in the Las Vegas Valley, including 8,400 under construction on or around the Strip.”
“‘It’s cyclical,’ said Preus, of the Panorama. ‘You can’t panic. People who invest are pretty savvy, and they understand that things go up, they go back down, and they go back up again. What they have is a piece of property that is very, very valuable.’”
In Business Las Vegas from Nevada. “More midrise condo projects in Las Vegas have been postponed as part of the continuing shakeout of the housing industry.”
“The number of condo units suspended jumped 21 percent in the third quarter from 3,877 to 4,688, according to the latest numbers released by Applied Analysis.”
“With financing harder to come by for developers, there were more than 20,000 units suspended or canceled through the end of the third quarter. There were more than 14,000 units postponed or canceled at the end of the first quarter.”
“Most of the attention over the past year has been on the cancellation of high-rise projects on the Strip, but more affordable midrise projects of four to nine stories away from the glamour of Las Vegas Boulevard were supposed to play a greater role because of the high cost of land and need for greater densities.”
“The fourth-quarter report is expected to show additional cancellations and the suspension of midrise projects such as Spa Lofts, 147 units planned in the southwest valley, analysts said.”
“‘There is a lot of competition in the marketplace, and it is difficult for buyers to be willing to pay the premium for a project when there are 27,000 resale units on the market today,’ Applied Analysis Principal Brian Gordon said.”
“The numbers don’t reflect the the demise of the midrise condo market in Las Vegas but simply a delay of what will become a more important part of the housing market, said Steve Bottfeld, executive VP of Marketing Solutions.”
“Bottfeld said the suspensions and cancellations were prompted by ill-advised projects that were overpriced, by lousy floor plans that were either too small or didn’t offer upscale features and by developers who couldn’t retain prospective buyers before contracts were written. Developers need to sell 50 percent to 70 percent of their units to obtain construction loans.”
“‘You add in problems with (the credit crunch), foreclosures and consumer confidence, and you have a recipe for a tough time,’ Bottfeld said. ‘Somewhere along the line people will say there is not enough demand or the market is not ready for it, but that’s not the case.’”
“At the end of the third quarter, there were 854 luxury condos on the market, up 19 percent from the second quarter. The units had an average asking price of $830,800.”
“Forty-six percent of those units are high-rise residential, 36.4 percent were condo-hotel units and 17.3 percent were midrise residential.”
‘Bottfeld said. ‘Somewhere along the line people will say there is not enough demand or the market is not ready for it, but that’s not the case.’
This guy was saying about the same thing back when there were 90,000 units planned. He and most of these other Vegas analysts have been wrong the entire time I have had this blog. Looks like those foolish enough to continue with this LV condo madness are going to get what they deserve.
Ben,
Happy Holidays! You had a piece regarding the Texas Teachers Pension Fund in a thread a while back. Can you point me to the date? I’m originally from there, and the topic came up with much interest in this information…..
The date was December 20th and I’ve posted the section of the Bloomberg article pertaining to TX. We discussed this topic at length on another list (which contains a lot of Texans, some of them teachers) which is why I saved it. There was also a Dallas Morning News article on the subject on Dec. 11th, downplaying the problem, with different info from the Bloomberg article. Hope this is helpful.
From Bloomberg:
“Jose Sepulveda worked 34 years as a reading teacher and elementary school principal in southern Texas towns along the banks of the Rio Grande. Now retired, he says he thought he was as far as he could be from the mortgage crisis roiling markets in New York, London and Tokyo.”
“He wasn’t far enough. The Austin-based Teacher Retirement System of Texas, the manager of Sepulveda’s retirement money, holds $6 billion of securities backed by assets that include subprime mortgages, most of it rated AAA, according to a report on the fund’s Web site.”
“‘How could anyone think that investments backed by subprime loans were safe?’ Sepulveda says.”
From the Dallas Morning News:
“The $112 billion Teacher Retirement System of Texas has slightly more than $1 billion in stocks and bonds of Countrywide, Washington Mutual and Citigroup, three companies reeling from the subprime mortgage defaults.
“The Texas system actually has more of its portfolio tied up in real estate equity and mortgage backed securities — 10 percent — than the California Public Employees’ Retirement System, which invested 9 percent of its $260 billion in those items.
“However, TRS spokesman Howard Goldman said the fund is secure and its 265,000 retirement recipients need not worry.
‘”The TRS portfolio is positioned to easily withstand the current market environment, which, so far, is not particularly unusual or problematic,” Mr. Goldman said. “The teachers’ trust has no short-term issues and has no need to sell virtually anything.”‘
You had a piece regarding the Texas Teachers Pension Fund in a thread a while back. Can you point me to the date?
No need to sell? Not exactly reassuring.
Which probably means it is all “For Sale”. Virtually speaking.
So the average is 1M per retiree? This is a rich pension!
Ben,
the problem now is you got builders building mcmansions or condos….nothing mid priced. It has always been a problem in NJ. And the state loves it since they maximise on revenue. I would love to see a builder in nj build new construction for around 300 or less. i will take a smaller footprint as well.
Hey Ben, or anybody, do you have a “time-line” from the past year or so regarding comments and the accuracy of them? It’s frustrating, for me, to be able to look back and say “I have no reason to belive you.
You said that In the first quarter of ‘07 this will happen……… and were wrong -> then you said that 2nd quarter of ‘07 this will happen……… and were wrong -> then 3rd quarter of ‘07 ….. and were wrong and on and on and on…
So Mr Yun (example) - Great prediction but looking back at what you have been saying for the past 6-12 month’s why should I, or anybody believe you now??
You’re exactly right, Ben. I live in Vegas and this Bottfeld guy has been way overly optimistic for the past few years. He predicted 25% appreciation for 2005, which came in at about 5%. He also predicted we’d actually have appreciation in 2007… and so far we’re down about 10%. I have no idea why the local press continues to quote him.
“The winner of the latest installment of the reality TV show ‘The Apprentice,’ Stefanie Schaeffer… was recently installed as marketing director overseeing sales for Donald Trump’s Vegas condo and hotel, set to soon open its first 64-story, 1,282-unit luxury tower.
Wow, if she’s the “winner”, I’d hate to see what they did to the losers.
Another victim of the greed business of real estate. I’ll be greedy in a few years when I scoop up a luxury Vegas or Phoenix condo or loft for a huge discount (50 cents on the dollar? 40 cents?). Either place is great for me as a base address since I’m almost always traveling for my job hundreds of miles away. The airports are very good in both locations. Also the weather is good for flying.
You got a pair bud making snarky comments about “tycoons”.
sorry. But I keep getting snarky comments about low expense mutual funds and dollar cost averaging myself.
dollar cost averaging myself
Doesn’t that hurt??
LOL
Perhaps 25 cents on the dollar or lower. The “demand” in LV for luxury condo towers was artificial from the get-go, and they already have all the supply they’ll ever need.
Personally, I don’t see WHY anyone would purchase a condo for potential appreciation. Appreciation only happens when demand increases… & if that happens…. builders just put up more crappy condo towers… until the market has drowned in supply.
After all.. THEY AREN’T BUILDING ANYMORE LAND…. BUT THEY ARE BUILDING MORE SKY… ALL THE TIME.
There was a Trump condo tower in progress when I was in Waikiki last month. Is that one of his deals or just one he lent his name to?
I’m amazed at the construction in Hawaii. Every island. Kauai will never be the same. While this is a six month old observation… its too obvious that the islands are being built past demand.
Got popcorn?
Neil
I just got back the Big Island three weeks ago. While I did see quite a bit of new construction near the extreme tourist sectors, by and large the areas beyond the tourist area limits were by and large rural, which was surprising to me. Also- as a Californian, I couldn’t believe the enormous disparity in prices from homes within the tourist/aka-prominently white retired mainlanders and the areas outside those areas. Homes in ‘less attractive’ areas like Hilo were anywhere from 150-200k while homes in the Tourist parts of Kaluhua were California prices, as in 600-800k. Also interesting was that in the more expensive areas, triple or even quadruple the number of homes were for sale over other areas.
I’m not as knowledgeable of what the economy is like in Hawaii, but it bowled me over that you could buy a home for under 200k there in a beautiful area that in my opinion is way the hell nicer than California. That said- there seemed to be some grumbling going on while I was there. Sort of a unspoken war going on between native long time residents and some of the more affluent newcomers. Interesting state. I could definitely live there.
Do understand, some of those lower cost areas are the ‘red soil’ areas. You never get the dust out of your home…
That said, due to the ‘grumbling,’ there are some invisible lines. Also, the amount of speculation is amazing. The ranger at Volcano national park noted with some sarcasm that the largest development in the USA was going up in the shadow of an active volcano. Could be interesting!
Got popcorn?
Neil
Well… I rew up in TN with red clay… which would ruin your clothes and carpet if you tracked it in. Seems like a silly reason for homes to be 50% less. I will say this though: In some areas on the Big Island, we did not feel welcome. It seemed like many of the old-school inhabitants didn’t like the idea of outsiders trumping through their stomping grounds. More than one person mentioned the area that he lived in as being somewhat…”unpoliced” whatever that means.
But interestingly enough, the backwoods parts reminded me of where I grew up. So ironically I felt more at home there than in the more touristy areas. The stupid thing I saw was in Kaluha. The homes were built lower and close to the ocean. The whole island is apparently prone to massive tsunamis that have wreaked havoc on towns there like Hilo. In Most older areas, the homes were way up above the ocean. Some were 1,000 feet up or higher. But not the newer developments. Could be interesting if another Tsunami comes sweeping through…
We got rock bound when we lived on Maui. Only so far you can go……………
I’ve read that well over 50% of people who move to Hawaii from the mainland move back in 5 years or less. Nice place to vacation, but there are serious problems if you want to live there.
Why would anyone pay 800K for a luxury condo? Isn’t like a regular condo but with stainless appliances and granite countertop? I guess that LV was not build on winners but on morons. I guess the winnings from the casino should pay for the mortgage…
Las Vegas has become a mecca for foreigners from all over the world. I guess they figure those will be the buyers and many of the buyers figure it’s a good place to park their money. We shall see….
LV seems to have products for all prices. I’ve seen 150K “condotels” with E-Z financing (for converted dumps WAY off the strip!) But wanna-be Donald Trumps from neighboring states think these are their tickets to wealth!
They have no where better to go to?
Seems like they stick the “luxury” tag on anything these days figuring it will justify a high price. I say some really depressing human beehives being built yesterday with that large “luxury” banner on it. The luxury in San Jose comes from being able to afford housing at all at these inflated prices, not moldings and raised panel doors.
If you are “guaranteed” a 10-20% annual return, the higher the purchase price, the greater the return.
Seems like they stick the “luxury” tag on anything these days figuring it will justify a high price.
Of course. “Luxury” apartments? Sky-high rent. “Luxury” homes? Sky-high asking prices. Regardless of where they’re built.
I wonder, how much were those townhomes that were built behind Sunny Ct near the old Precious cheese factory?
Amen to that. I was on my way back from the mountains last week and drove through Dublin/Pleasanton. Right before you hit the 280/680 split, there’s this HUGE condo development. From afar, it looks like some sort of experimental communist blok housing project. I don’t think you could pay me to actually live in one of these. It’ll be interesting to see what happens to projects like these that were built without regard to comfort. Will they turn into condo ghettos?
My thinking exactly. I don’t care if you are some foreigner with billions, paying 830K for some cheesy LV condo is just pure wasted money. You will never get a good return on that “investment.” Heck, if you want to give away money, throw some to some of us here on the blog, starting w/Ben.
Cheesh, people will pay any amount for anything, if they are stupid enough!
830K, my ar$e!!!!!!!!!!!!!!!! More like 830 degrees in the shade in the December at midnight in LV!
The Euro vs Dollar conversion makes these Las Vegas Hi Rise Condos 50% off. If Vegas is still attactive enough to the Europeans, and they do extensive marketing in Europe, these Strip locations might sell out.
And these strip locations MIGHT not.
European zone are going through their own RE bust in UK, Ireland, Spain, Eastern Europe just to get started.
The credit drought will not be confined to US. It ‘may’ be attractive at an ROE but nobody is able or willing to lend to them.
Also, also it is a pig, I don’t think the dollar will dive into the dirt forever. Pounds and Euro’s aren’t that safe. It is just that Merica is the world leaders, albeit down the fiscal toilet in it’s question for depreciation.
Call me crazy, but…
Why not just rent a hotel room for a week or 2, in lieu of laying out 800 Large?
Same goes for big motor homes IMO. Why not just drive a good road car and rent a hotel room? I never got the motor home thing. Esp a motor home with a boat on top, bicycles strapped on and dragging a car behind.
I saw this TV show a few weeks back. It was one of those stupid programs that showcases what people with lots of money buy. Some of these RVs had hot tubs, a garage that slid out of the bottom for their porches ( I kid you not) exterior bigscreen TV’s, and hot tubs. Cost: 1.5 Million.
Also- what’s up with people like those in these shows? The guys almost always look like big Assholes with their bimbo-esque type wives. Guess I’m just bitter since I can’t get a tricked out school bus with a hot tub.
I saw this TV show a few weeks back. It was one of those stupid programs that showcases what people with lots of money buy. Some of these RVs had hot tubs, a garage that slid out of the bottom for their porches ( I kid you not) exterior bigscreen TV’s, and hot tubs. Cost: 1.5 Million.
I’m not so sure people with “Lots of money’ buy those. Every I know with a lot of money takes vacations by flying to places and getting a nice hotel room.
I think people with “lots of credit” buy those.
Motor homes never pencil out. We figured out that we could buy a nice tent new and throw it away at the end of each season for a decade and still not pay the price of a used pop-up camper. Nightly rental for a “real” RV and all hook ups is close to the cost of a Super 8 in most parts of the country.
We stay at private campgrounds in tents for comfort reasons. (quiet and clean) From casual observation, it appears the attraction of RVing is to recreate the suburbs someplace else. It’s funny and sad all at the same time.
I am a 43 yo upper mid class and have wide hobbies- I roadrace motorcycles, have a small plane, I like to garden, hunt, I scuba dive here in FL fish when I can. I spent 6 mo backpacking thru east asia and Europe and consider myself pretty well travelled (we all have our vices yes?) and I love motor homes for the right vaction. The main advantage is adaptability. The freedom and mobility was great—dont like your planned vacation??, do somthing else….just start heading in a new direction… no daily packing and unpacking you and the wifes stuff(Not to mention kids if you have) I have only rented them in AZ on the North side of the canyon yellowstone and in Alaska but I think it is great. Get the smallest you can find (big vann really) and just go. If you find a place you like –stay if not wander around. All while keeping mandatory supplies at hand (Good Beer, wine steaks etc.) I always end the trip wih a night or two in a Luxury hotel for the wife. I like motorhomes for a trip out west. I must be old
I was in a 2,000 square foot one in Marina Del rey. They paid $875k for it. To me, it was worth it. Very nice layout, large balcony, etc. However HOA dues were horrendous.
HOA dues!
‘NUFF SAID!
I’m outta there!
Last night I was watching the movie “Casino” with the commentary on. At one point, the costume designer (or the editor?) said that Vegas was (paraphrase) “a city that, really, had no right to exist. It had no water, no way to grow food…how was it going to support all these people…”
I think she nailed it. But I guess nobody thinks in those terms.
You nailed it. With Peak Oil, I;d say unless we come up with some new tech or the next big oil find, you can kiss Vegas goodbye in 50 years, maybe sooner, for all but the very very wealthy.
Why?
Glad you asked.
Who in there right mind, if wages reamin stagnant is going to pay $5-10 gallon per gas in the future, esp. when casinos are sprouting up all over the country? For what? Wayne Newton? I don’t think so!
I’ve been to Vegas 5 times. Each and every time I usually can’t wait to leave after being there 2-3 days. I can’t imagine living there full time.
Def. agree. Can’t quite put my finger on it, but that place just doesn’t do anything for me. I guess being a non-gambler def. has a lot to do with. Also, I am more into substance than style, even though I do live here in South Orange County. Go figure.
LAS Vegas, the exit from route 10 for the NEVADA TEST SITE and YUCCA MOUNTAIN. The contamination from all the NUKE bomb testing will last thousands of years. Plus we will store Nuke power plant waste there that will be hot for thousands of years. Distance from LV airport to the test site enterance( Murcury Nevada) is about 55 miles.
YUP some one will be going through there after 50 years
Water will ruin Vegas long before peak oil. Oil will play a roll. In El Paso they are considering a very large desalinization plant. I can only imagine how much energy it will take to pull salt water from deep in the earth, then remove the salt and pump it to the people that want it.
I read recently that Palm Springs is sinking into the earth…..as they deplete the aquifer. Last spring I visited PS - water everywhere, in golf courses, fountains, lawns & landscaping, pools….. Coming home to the Bay Area, I’m listening to the news and they are talking about us needing to conserve water. I’m thinking, something here does not compute…..water all over the place in the desert, and having to conserve in Concord? What’s up with this?
“‘It’s not their invoice to pay,’ Holbert said about lenders. ‘I guess it would be similar to if a dealership was to repossess a car, would they be responsible for parking tickets on that car?’”
Well, no. It’s similar to the dealership cleaning up the car and removing the trash before reselling it.
ding ding ding,
the Captain has turned on the fasten seat belt sign.
“The Latest Macro and Financial News Strongly Signal Recession Ahead
Nouriel Roubini | Dec 27, 2007
The latest macro and financial news confirm that the US is headed towards a hard landing – specifically a serious recession - as a vicious circle of worsening real fundamentals is perversely interacting with severely worsening financial fundamentals and a severe liquidity and credit crunch…”
Ahead? Read the first AR story. This state has probably been in a recession for two quarters. Arizona will almost certainly struggle with what to do for employment. And if people start to leave to find work, look out below.
I remember a local political cartoon about a year and a half ago that depicted all the roads in town ending at a realtors office. Everybody pretty much knows we are over-reliant on RE, but absolutely nobody does anything about it. I suggest that the state begin selling off the hundreds of thousands of acres that sit out there vacant, at fire sale prices, and put these assets to work in the economy.
Aridzona has quite the drought going…
According to this website, our average precipitation in AZ is at least 120% of the average this year (although I admit we’ve been dry for a while).
http://www.wcc.nrcs.usda.gov/reports/SelectUpdateReport.html
Ben, only the speakwrite machine operators have not sounded the alarm, when the proponderance of evidence is stacked to the rafters of the mcmansions will we begin the healing process… the evidence is still mounting, and the bubble keeps deflating.
Making sense of the news is not the purpose of my post. The purpose, if any, is the promotion of the evidence to the choir in order to get the recession underway OFFICIALLY , only through the pain will the euphoria come back, and the pain isnt here yet.
Why? Confusion and Noise dominate the headlines, the pushing and shoving is about to commence.
But doing what ? We’ve all agreed that there is a plethora of Retail space filled with nebulous business plans. Housing is not an option. Building office or light manufacturing seems to be a bad bet also.
Slim checking in from Pennsylvania again.
I’m visiting my parents outside of Philadelphia, and, on the surface, all seems to be well. But my mother reports seeing an increasing number of “For Rent/For Sale” signs. I’m also noticing a lot of vacant retail space.
In fact, I’ve had to get my laptop repaired since I’ve been here, and there’s a defunct health club in the space next to the computer repair shop.
One of the principals in the repair shop said that the health club recently changed hands, then it went under. Club has a hand-lettered sign on the door that advises paid-in-full members to seek out the previous owner for refunds. To which I said, “Good luck with that.” And the principal agreed with me.
Principal is not too happy about having an unoccupied storefront next to his business. Reason: It may take a while to lease, as has been the case before, and he doesn’t want his business to suffer.
Ephemeral: Of or pertaining to a temporary nature. Also see “Health Club.”
But doing what ? We’ve all agreed that there is a plethora of Retail space filled with nebulous business plans.
Make-your-own candle shops?
But doing what ?
IMO, the economy could return to growth if land prices dropped considerably.
I couldn’t agree more. I mentioned something to the effect of ” reverse communism” yesterday. I truly believe that the average US worker has become disenfranchised with the economy because if they are in a mortgage, then the amount they must pay for their home obliterates savings. For those who didn’t buy, prices are so high that in some cases working for what most assume is going towards a down payment is almost pointless. Hence- people do not have the pressure to be as industrious. In both cases, people are pushed up against nearly impossible odds. The single factor is cost and affordability. Return affordability and you return people’s ambitions and purpose. Otherwise expect a protracted recession.
“put these assets to work in the economy”…such as? I grew up in Arizona. There was copper, farming, and tourism. The copper mines are closed, the many farms are sold to real-estate developers, and the tourism is still there, of course.With the drought in progress, it;s hard to imagine what use such land can have. I nearly always agree with you, Ben, but here I think you are as clueless as the rest of us.
Merry christmas, BTW.
You’re the one that’s clueless. Listen, I only have time to give you one example. I know a businessman who is a microbrewer. Very successful and his product is so popular that he often tells me he sells everything he can produce and could sell considerably more. I finally asked him, why don’t you expand, it sounds like you are leaving money on the table? He gives me a long, long story that boiled down to the fact he couldn’t afford the land. Prices for all land is so high, due to the bubble, that all sorts of businesses like his are boxed in. They can’t make the numbers work.
And meanwhile, we are surrounded as far as the eye can see, by state-owned, vacant land being leased to ranchers, for less than it costs to keep the fences up.
So here’s a local business, that could hire more people, sell more beer and instead, those sales go somewhere else. And have you seen what land prices have done to the RV business? I see this in all sorts of things, here myself with my own eyes. So take a look around. Arizona’s future isn’t in strip mining or casinos. It’s the land.
Excellent point Ben that many have not even considered: the collateral damage done to existing business because of this bubble. That is something that galls me: the never ending cry that they aren’t building anymore land. Heck, years ago in Manhattan they dumped tons of landfill or whatever to widen the island (literally created more land in the river) right near the twin tower closer to the Hudson. So don’t give me that garbage about making more land.
You tell him Ben. For the record, I support any measure that makes more beer…or donuts— DOH!
yellow people with blue hair RULE!
Hordes of buyers are not waiting on the sidelines trying to time the market. There might be some Greater Fools trying to time the market but I get the feeling most people who would like to buy have either lost interest or are scared to make the move. They see homes which have run up 100% and sometimes 200% over the last several years, dropping 10% and 10% or 20% or 30% means nothing. They see people who are way in over their heads and they look twice at their own affordability factor. I think the majority have woken up. Even those with their head up their a*s most days, know about the massive inventory which is being added to each day by masses foreclosures and figure, “Why bother sitting around waiting for a train to arrive when it could take years before it pulls into the station.” Even the unaware can read the newspapers and internet and see what’s happening on tv.
Bottom line: A lot of wanna-be home buyers are not stepping up to the plate and all the propaganda by the NAR and the rest of the property selling shills is going to make little difference for several years. 2008 will get much worse as the recession, which has already taken root, starts to bite and creates even more worry for the would-be buyers.
As always, 100x the average rent is where these prices will eventually land give or take a few thousand dollars.
“Now is NOT a good time to buy”.
‘Hordes of buyers are not waiting on the sidelines trying to time the market’
- Thanks Mike! No kidding - even the dumbass’s are diving into the Fruher Bunker now. I’ve already been hunkered down there since 2003 and they are starting to bang on the door. Sadly, a whole generation on potential buyers screwed themselves listening to the media telling them ‘Buy Now, blah, blah etc.
- The only road to homeownership (except inheritance) is to slowly save money until the ratio works for them to service a fully amortized loan.
Unfortunately, in the Bay Area, it goes beyond that — given the high prices, not many can afford the property taxes now - and except for the inland areas, values are not dropping very much (yet).
Mike,
Exactly right. Speculators are either getting scared off or can no longer lie their way into a loan. (Ok, some of that is still out there, but its going to be killed off sometime in 2008. Yes, it will be back like some bad skin disease, but not before 2010.)
The WSJ had an interesting observation today. Investors in mortgages are holding back until they see the housing market improving. They called it a ‘chicken and the egg’ scenario. Until the market improves, loans won’t be made available to make the market improve.
I find there is a mass of people out there willing to wait “one year.” Mostly as they cannot see out further than that.
But there simply are not enough qualified knife catchers to bail out even half of the speculators. Once the banks are forced to clear out their REO inventories… then we’ll see some discounts.
Our friends at the BBC report ‘mortgage approvals’ instead of ‘mortgage applications.’ Well, mortgages approvals are ‘weak.’
http://news.bbc.co.uk/2/hi/business/7161378.stm
Got popcorn?
Neil
Neil. love you stuff and yes I do have popcorn (and it is caramel this time of year!) Your comment about lying your way into a loan broght up the situation of an acquaintance of mine. She is a native Californian, who came out to the Rockies in about 1990 and started speculating in rental properties. Everything went well and she was way ahead and doing well until she started cashing in the rental properties in 94 to fund a half million dollar home construction. She cashed everything in, and then started drawing on the equity of the half million dollar home to fund unnecessary things. The final straw was the purchase of a property for flipping in about 2003 in Davis California. (She and her husband both went to school at Davis) Well she didlled around there for a couple of years doing deconstruction and going through a lengthy planning committee process in order to build (unnecessary)decks on the property. The last year and a half have been hard on the family with some medical issues and personal tragedies but the house in Davis should have been done and gone in 2005. Since 96 I think she has refied her residence here in the rockies about five times to keep up with the payments on the house in Davis and other unnecessary expenses. She called me a couple of weeks ago and asked if I would act as a reference for her as she was no longer able to obtain the 100k construction loan that she needed to actually finish the house is Davis on her word alone, in other words by “lying” I am thinking, if that bank is dumb enough to call me and ask if they should lend her money on a depreciating property I think I will be asking them why a look at her credit score is not enough to tell them whether or not they should make that loan. By the way, my prediction is that within 10 months, she loses both houses, and has to declare bankruptcy. It makes me wonder how many others might be in a similar position. K
Actually, I’m watching prices in Folsom, CA. There are some 4/3s approaching the price I sold for in 2003. I’d guess they’re going to bottom at 2002 prices in 2010. That’s equivalent to 8 years of losing ground to inflation.
With no more liar loan possibilities, no no-docs, no non-traditional (20/80) loans, there is not bailout or interest rate cut that can heal the real estate depression coming up over the next 5 years. Nothing Mr. Bush or Mr. Bernanke can do will reverse it unless wages increase drastically. But wait! Wage increases are inflationary! Can’t have that!
“Donald Trump’s Vegas condo and hotel, set to soon open its first 64-story, 1,282-unit luxury tower. But real estate agents and analysts here say the timing couldn’t be worse”.
Not to worry, The Donald can fly out to the Grand opening squint his eyes, purse his lips, comb up that comatose beaver on his head and tell the buyers they will buy or “Your fired” Problem solved.
“Meanwhile, the number of Valley homeowners who lost their homes to foreclosure grew by 566 percent.”
Time to drop these negative statistics. I’ll be the share of homeowners who didn’t lose their home to foreclosure last year is only down a few percent.
“‘Our realtors think 2008 is going to be much better than 2007. If people are less scared to make a commitment then the market will start taking off again,’ Stice said.
Good one Potsy. Keep listening to the shills and you’ll be darned lucky to get 900K.
By all means lets keep that dream of million dollar homes for everyone alive !
Good one. Guy can apparently afford a million dollar place and he’s taking financial advice from used house salesmen.
“‘Our realtors think 2008 is going to be much better than 2007. If people are less scared to make a commitment then the market will start taking off again,’ Stice said.
The same comment caught my eye.
Aren’t these the same financial wizards that assured everyone that real estate would go up in price 20% per year for the next 5 years, that a bust was impossible, and that if you didn’t buy NOW, you’d be priced out forever??
Yea, those folks. I’m sure I’ll get important financial advice and predictions from a group with such a fine track record. You’d get better advice from your local bartender.
“Gambling revenues on the Strip are up this year - way up in recent weeks. Despite higher energy prices, a volatile stock market, a slumping housing market and fears the economy may be heading into a recession, some of the city’s largest casinos are on pace for a record-setting year. In October alone, gambling revenues on the Las Vegas Strip were up 19.8 percent over the comparable month last year.”
“By contrast, casinos elsewhere are not proving so resilient. From the riverboats of the Midwest and tribal casinos scattered across the United States to gambling halls located in less exotic parts of Nevada, operators are reporting slowing growth rates in recent months. In a number of places, revenues are actually down, sometimes by 5 percent or more.”
http://www.iht.com/articles/2007/12/26/business/gamble.php
Foreign “whales” aren’t heading for a hick town to blow their money among poor people with missing teeth.
Not only that, but states are starting to steal revenue from established casino towns. Saw an article a week or two back that said PA’s new slots led to a downturn of 8% in Atlantic City’s take. Link.
When I was living there, the lobbyists and legislators were also trying to scare people into approving gambling because they were losing so much of their residents’ money to West Virginia’s slots.
I expect there will be universal casino gambling in the next 10 years.
It’s a race to the bottom.
we’re “slouching towards Gomorrah”
Thank you Mr. Bork!
–
“‘Our realtors think 2008 is going to be much better than 2007. If people are less scared to make a commitment then the market will start taking off again,’ Stice said. ‘Until then, it’s not a bad place to hang out.’”
Just in case you guys read HBB, 2008 will be a stinker compared to 2007. Recession will get fully acknowledged during 2008Q2 just when the economy is all set to enter the epression.
My advise: knock down the price 20% and then keep knocking it down 5% each month until it is sold.
You are welcome!
Jas
Their Reators are telling them what they want to hear, pure and simple.
–
And “Reators” not serving their own interest of getting a commission. Any realtor that has a listing for more than 3 months is not serving his, or her, own interest.
Jas
I agree, Realtors are not acting in their own best interest. Just more evidence that Realtor drank their own Koolaid.
Jas -
Along those same lines.. Is an “e”pression netter or worse than a depression? (:
“Just in case you guys read HBB, 2008 will be a stinker compared to 2007. Recession will get fully acknowledged during 2008Q2 just when the economy is all set to enter the epression.”
D’oh! netter = better… lol
I guess their real estate agent must have saved up for this rainy year in that there doesn’t seem to be a plan to get that commission anytime soon. I have to hand it to their agent - who seems to be willing to die (starve) for their client.
Gee, why would anyone be scared to make a commitment?
Not scared, just too smart.
“‘Our realtors think 2008 is going to be much better than 2007. If people are less scared to make a commitment then the market will start taking off again,’ Stice said. ‘Until then, it’s not a bad place to hang out.’”
These ppl live a million + (at least thats what they think) McMansion, and they are relying on self-interested realtors with little or nor education rather than relying common sense and disinterested economists to predict market changes. I wonder if their money was inherited because they dont seem too bright.
Someone needs to flag this guy and in 6 months send him a note asking ‘How’s it working for you now?”. Nice place to hang out with falling RE prices and tax assessment on over a Mil. These guys are classic.
Nice place to hang out with falling RE prices and tax assessment on over a Mil. These guys are classic.
But he is a retired t-com exec., he planned for those possibilities when he bought. Right?
“‘We really thought we would sell the house fairly quickly,’ said Cliff Stice, a retired telecommunications and cable executive.”
Retired because his options were to leave the state in 2002 when his job went “wagons east” AND take a paycut with the new company OR stay and sit on the house? $900K in ‘08 if he is extremely lucky.
I continue to hear how Colorado isn’t as bad as everywhere else, yet we are still toward the top of the foreclosure lists. IMO, housing is married to employment, and if so, we are currently filing for divorce……..
I have ties to Denver. It seems like the suburbs are taking a pounding, but the trendy intown areas such as Cherry Creek North, Country Club, Park Hill, Highlands (and no not Highlands ranch), Wash Park, Platt Park, etc. are still holding steady or going up. It’s only a matter of time. I expect ppl in other cities are experiencing similar results (i.e., vanilla suburbs taking the biggest beating, while the hot intown areas have not experienced any significant declines yet). Although the Denver area is close to tops on foreclosure if you look at the numbers it is mainly concentrated in non-english speaking hispanic areas. I expect to see all areas showing negative appreciation in 2008.
I agree with your points. How long can those intown areas hold the line when there are fewer buyers to move up?
Although prices have not budged in those areas DOM and inventory are increasing. Thus, it’s merely a waiting game.
Tim, would you have zip codes for those areas? I have been tracking Boulder and Co Springs and seeing very different results for these areas. I would like to have a closer look at the in-town areas you mention as i have heard the same from others. Thanks.
Zip codes for you:
Platt Park - 80210
Washington Park/Bonnie Brae - 80209
Highlands - 80211
Country Club - 80218
Cherry Creek North - 80206
Hilltop? - 80220 (an educated guess)
Prices holding strong but volume is starting to go down. Everyone is waiting for the snow to melt. My thought is that things will start to go slightly down on slow volume next year. All of these areas (excepting highland and platt park to some extent) are affected by high rates on jumbos.
Volume is going down on a month-to-month basis, but not YOY to my knowledge. Ppl in Denver often pull their housing off the market in December and wait until mid Jan or Spring to relist. Let me know if you disagree, but I believe December inventory is down from November, but up significantly from December of last year. I notice that about a 20-30% drop around December is common.
Park Hill - 80220, Cherry Creek North/Country Club - 80206, Wash Park 80209/80210, Highlands - 80211/80212
JohnD depending on what type of modeling you are doing note that mean/median sales prices going back more than a year or so may be misleading because in certain areas; particularly Bonnie Brae, Hilltop, and Cherry Creek North tear downs go for upwards of 500k and urban McMansions are put up in their place. In some of these areas 25% or more of the housing stock has been torn down over the last 5 years and replaced.
I think that housing in the trendier Denver areas will not go down as much as that in the suburbs. But — we will see a decline, nonetheless. This ain’t NYC or SF, folks — people just don’t make that much money out here.
There seems to be an increasing number of “flippers who flopped” real estate listings. I mean, houses torn down to the bones, plastic tarps on the roofs, etc. The money-lending supply is sure drying up around here.
Yes, I think Portland is in the same situation, but, you know, it’s different here, so the stuff in the inner city will never go down. Actually there are cracks starting in the facade if you look at Craigslist.
Naw, still way too much. 750k in ‘08 if he can unload it at all. And even then, who is going be making that kind of bet on housing with things crashing all around? His only hope is to get out in front of the hordes and unload this mega sucker.
“But others like it remain unkempt, dragging down property values in neighborhoods across the metro area.
This is all wrong! It shouldn’t be the city’s job to try to manipulate prices in a market (through abatement or other means!)
They should only act when there’s a health risk, like a rats nest.
But if the eyesores drag down all the nearby property values (more than they otherwise will be going, that is) then the assessments will go down (that much more) meaning less property tax revenue to the city/county.
Enlightened self interest at work?
Read “Fixing Broken Windows”–derelict properties don’t just undermine property values; they encourage more generalized disrepair, leading to vandalism and low-level crime.
“The vast number of foreclosures and the volume of paperwork that goes with them have overwhelmed lenders….”
We’re probably going to need another RTC to clean up this mess. Loan servicers are dragging their feet. There is no money in it for them to do the right thing.
Mr Trump last year? “the condo’s in Vegas are selling like hot cakes.” When nobody closes on them maybe Mr Trump will be selling hot cakes to keep afloat?
Driving through Phoenix and Tucson, the overbuilding of both houses and businesses was overwhelming to see…
35,000 people in Casa Grande?
“The per capita income for the city was $15,917. About 12.4% of families and 16.0% of the population were below the poverty line, including 21.2% of those under age 18 and 12.3% of those age 65 or over.”
http://en.wikipedia.org/wiki/Casa_Grande,_Arizona
And I don’t remember ever seeing as much smog in Tucson in perhaps 15 trips in 30 years, as I did this week…
You’re not the only one, Aladin. I live in Tucson, and the rationalizations for the overbuilding defy logic, to say the least. And, by overbuilding, I mean residential AND commercial.
Even back in 2003, I was astounded at the drive between Tucson and Phoenix. In the mid-80s, you could drive at night, get out on the highway and see stars too numerous to ever number. By 2003, there wasn’t a single spot along that drive that wasn’t suffering from serious light pollution.
‘I guess it would be similar to if a dealership was to repossess a car, would they be responsible for parking tickets on that car?’”
Maybe I’m wrong here, but this doesn’t sound right. I would agree if he said “would they be responsible for mechanical bills from work already done by the local garage.” Then no, I would agree they shouldn’t.” But this is general maintenance on this “car / house” if the car needs an oil change, new wipers, or tires to sell. I would think that would be the responsibility of the “dealer” to provide, after taking possession back. Either fix what is wrong – or by golly drop the price of the “car” to sell… But again maybe I’m wrong..
When will the brain washed population realize that media comments such as, “596 people lost their homes, etc.” is total b.s. They didn’t lose “their” homes. They didn’t lose anything unless they put down a deposit. They were just paying rent.
Of course, they might have a lot of personal and family aggravation because of the moving out of a foreclosed home process but it wasn’t THEIR HOME in the first place. It was the bank’s home or a non-performing financial asset of whoever the lender might be.
The occupant only gets to call it “home” after 30 years and 30 years is a long time. A lot can happen. Divorce, deaths, job loss, health problems, etc. Just look around you. Many of those life hazzards can also bring an end to the phallacy of it being THEIR home.
However, after 30 years, you will be the proud owner of an asset which is a cash cow for government taxes and an asset which you can get a reverse mortgage on to pay for that joint replacement - which will NOT be covered or only partially covered by medicare by then.
“Now is NOT a good time to buy.”
I’m completely against any bank/FB bailout (except maybe easing regulations so that lenders can renegotiate adjustables into prevailing fixed rate mortgage rates w/o penalties for restating the income for the way the mortgage was originally “booked”)
HOWEVER, it disgusts me that any talk of bailuts doesn’t IMMEDIATELY exclude those who either put 0 down OR those who HELOC’d or borrowed out any equity.
Anyone with 0 down or a mortgage against the paper equity will NOT be losing anything if they have to move out of the home. In fact, they got a great deal.
When i saw Jesse Jackson in news standing with a woman who had THREE mortgages she couldn’t afford saying that we need to do something to HELP her, I thought it was the most disgusting thing I’ve seen on the news in years.
“‘Our realtors think 2008 is going to be much better than 2007. If people are less scared to make a commitment then the market will start taking off again,’ Stice said.
Realtors keep talking of hoards of buyers just waiting to jump into the market but they never present any evidence that these buyers actually exist. There are millions of people headed for forclosure. The homeownership rate is dropping back to historic levels as the market shakes out the people who can’t really afford a home. The pool of potential buyers is shrinking and the pool of available houses is expanding. And even if there are some people willing to make a commitment they will need 20 percent down and a bank willing to also make a commitment. The savings rate in America has been negative for several years. I don’t see a lot of people with that kind of money in the bank for a down payment. I wish more reporters would ask realtors to explain where these “hoards of buyers” or the “pent up demand” will come from.
Tommy : Good question.
The reality is a so called reporter who asked such questions (and editor who printed it) would no longer work for that so called ‘paper’.
I semi-reluctantly enrolled for ‘Houston Chronicle’ recently. They are giving it away with the place I live in and the cost is the ‘tip’ the paperboy ($1 per week). I wanted it weekends but get it daily ( I guess it it their way of jacking up circulation).
Occasionaly, I read it but I am just apalled at the standard of content. I feel I am more read by leaving it untouched. The Mrs reads it for the shopping offers (Probably the real intent…)
“‘Our realtors think 2008 is going to be much better than 2007. If people are less scared to make a commitment then the market will start taking off again,’ Stice said.
Dream on, loser.
Sammy…the Stice’s million-dollar house is a 2-bedroom, 2-bath, 2900 sq. ft. trophy house on the east side of I-25 north of Castle Rock. I suppose they could call the neighborhood Castle Pines, but I think it’s a stretch.
They bought it for 895k in 2005, so at their asking price of 1.25 million, they’re hoping for just shy of 3% appreciation. Who do they think they are kidding? Castle Rock houses, with few notable exceptions, are down anywhere from 3%-17%, and they are NOT moving. I’m glad the Stice’s are in no hurry to sell, because it’s going to be a l-o-n-g wait.
Sorry, I meant to write 30% appreciation, but even then my math was off. Actually, they’re hoping for 40% in two years! Good Lord, what are they smoking?
Dream on, loser.
The guy’s purported to be a retired cable tv exec. If he worked for Comcast, then he’s an even BIGGER loser.
Went to Sedona and saw plenty of for sale signs on the Red Rock Cyn loop. Very touristy place with all the indian stuff and the white people who sell it with enthusiasum. I liked the road from Sedona to Flagstaff very cool.
“Restrepo Consulting also found that units were languishing for months on the resale market. MGM’s condo-hotel, for example, had 124 units - 10 percent of its inventory - on the market an average of 117 days.////
10% is nothing. Here in Sunny Isles, you see 40%-50% units for a new construction for sale or rent as a rule.