The Perennial Truth Is ‘Price Sells’
Let’s clear this bloggers desk for the weekend. “The inventory of homes for sale in the Washington metropolitan area climbed to 28,200 last month, meaning that buyers had plenty to choose from, but that sellers had to sit and wait for offers. Last month’s inventory was huge compared to February 2005, when only 9,800 homes were on the market.”
“As a result, sellers are going to have compete on price, something they haven’t done in years. And sellers aren’t going to be asking as much to begin with because they are beginning to recognize the perennial truth that ‘price sells.’”
“So far this year, sales of North Texas homes priced below $120,000 have fallen about 13 percent. Sales of houses costing between $120,000 and $200,000 have grown 14 percent, and sales of higher-priced houses have shot up 20 percent and more. ‘There has been a flurry of people coming in from California and other higher-priced markets buying houses,’ said James Gaines, an economist with Texas A&M.”
“To move increased inventory, builders have raised the incentives they are offering on some home models. Going into 2006, builders had 8,751 unsold new homes in the D-FW area, an all-time high. ‘We will continue to have ample speculative construction, so I wouldn’t be surprised to see another round of discounting and incentives this summer in D-FW,’ Dallas-based housing consultant Ted Wilson said.”
The Wall Street Journal reports not all lenders are opposed to the new guidelines. “Bank trade groups and financial institutions blasted proposals by bank regulators to rein in unconventional mortgages that allow borrowers to afford more expensive housing, dismissing concerns about risk as overblown.”
“Meanwhile, a few consumer advocacy groups and small banks wrote letters applauding strict guidance. ‘It is very dangerous to use mortgage products that allow borrowers to buy homes more expensive than they can afford. Add this to a slowdown in the economy and the job market and we could have a serious recession,’ said David Stone, president of the Portales National Bank in New Mexico.”
Homebuilders are beefing up their credit lines. “Stephen Scarborough, CEO of Standard Pacific Corp. today announced Standard Pacific’s increase in its revolving credit facility capacity from $925 million to $1.1 billion through the exercise of the facility’s accordion feature. In addition, the Company proposes to issue a 5-year $100 million loan and a 7-year $200 million loan.”
“Toll Brothers, Inc. today announced the expansion and extension of its bank credit facility. The $1.8 billion unsecured facility, which matures in 2011 and replaces the Company’s existing $1.2 billion revolving credit facility, is comprised of a $1.5 billion revolving credit facility and a $300 million term loan. The credit facility has an accordion feature under which it can increase to a maximum of $2.7 billion.”
From the Post Star in New York. “Green grass and grizzly bears are not the only thing coming out of hibernation this spring. Local real estate offices have noticed a surge of home owners looking to sell in the past weeks, according to Nels Crisler, president of The Warren County Association of Realtors.”
“Crisler said part of the rise in properties may be due to many people being ‘cash poor,’ which means a person has money coming in but no savings for a down payment on a home. ‘We’re finding a lot of people are financing 90 to 100 percent of the homes they’re buying, which means higher mortgages. Again, it’s still too early to tell if it’s indicative of a buyer’s market. I’d be making millions if I could predict that.’”
The Sun Sentinel in Florida. “Q: What is going to happen to all these condo developments when the developers realize that they are not able to sell them? A: Experts predict developers would try to sell at below-market rates. In other cases, lenders would take back the properties. Some condo projects also could be canceled if developers can’t get financing.”
And the Las Vegas Sun. “For now Panorama Towers is surrounded by old industrial single-story warehouses. The closest restaurant is an In-N-Out Burger to the south of the development. It’s a neighborhood that had many industry observers doubting the project in the beginning. The variety in plans also led to some oddly shaped units, and in some cases interior bedrooms with no windows.”
“Sales have been helped by young celebrities, from Leonardo DiCaprio to Toby Maguire and most recently Pamela Anderson.”
“Las Vegan Jason Smylie, 24, purchased a 1,644-square-foot unit with a friend in the first tower for $650,000. That unit is now for sale, listed through Panorama’s resale program, for $1.5 million. Smylie said if the unit doesn’t sell, he may live in it instead. ‘It has a prime view of the Strip,’ he said. ‘I’m stoked.”
Another great week. my thanks to those that support this blog with donations and/or ad clicks. Please check back this weekend for breraking news, your topics and market observations.
“Las Vegan Jason Smylie, 24, purchased a 1,644-square-foot unit with a friend in the first tower for $650,000. That unit is now for sale, listed through Panorama’s resale program, for $1.5 million. Smylie said if the unit doesn’t sell, he may live in it instead. ‘It has a prime view of the Strip,’ he said. ‘I’m stoked.”
That is over 100% mark up!!! Who is this guy kidding? Hope he enjoys the view of The Strip because a corner on The Strip might be his new home when he and friend go bankrupt.
“I’m stoked.”
This idiot takes drug abuse to a new level. I hope he rots in his dinky little apartment when the ramen runs out two or three months into his new adventure. I’ll be stoked when I see a reenactment of his pathetic demise on CSI Las Vegas.
Or was he “soaked?”
Its a shill. Just like the ones they put on poker tables. Its the developers grandkid or something .Come on 1.5 million .They want the next group of buyers to think that the 1.5 mil price is what new buyers could get for the units .Lets face it the units are located in a bad spot.
I drive past that Panorama project every day. It’s beautiful. And unlike some condo towers, this one actually exists. Truthfully, I wouldn’t mind living there. It’s very nice.
http://www.manhattanization.com/las-vegas/panorama-towers/profile.rub
Here’s another view of the Panorama, showing it’s relationship to the strip. This picture only shows one tower. There are actually two of them now.
http://www.mslasvegasrealestate.com/panorama_towers.html
I can’t help it. I happen to think this is a very, very cool project. Stuff like this is what makes Las Vegas great.
Are you trying to advertise here? Because this may not be the best venue, given how the rest of us keep saying what a bunch of idiots are the folks who are still buying in LV, despite the recently reported 47% haircut in land values. But maybe those views and the buildings from which they can be seen are so valuable that the land they are built on does not matter…
Hey guys, why even acknowledge this so called “LVlandlord”. She is obviously just trying to get a rise out of the readers here. Besides, I suspect LVlandlord is actually a habitual nickel slot player living in a trailer park in North Vegas just doing this for cheap thrills.
Seriously, what’s to view in LV?
Beautiful barren land with a few transplanted palm trees?
Welcome to the desert! You can probably swim in the sand if you are a bug.
Last time I drove through LV (Su 2005), I saw an ocean of residential housing stretched from one horizon to the other, and
plenty of billboards along the freeway advertising the major national HB brands (KBH, Lennar, etc).
Overpriced condos with nice views of the bumper to bumper traffic and tops of tilt-up warehouses. This makes Las Vegas great ?
Absolutely. The city was built on suckers getting fleeced.
Wasn’t LV originally developed by mobsters (Bugsy)?
Industrial ave. Sounds Ritzy to me.
They renamed Industrial Road to “Dean Martin Drive”. The south part, anyway.
Hey, we all know that part of Las Vegas is gritty and edgy and a little bit wild. The urban jungle thing is not for everybody. But some people like it just fine…
That’s some high dollar livin’. I’d live there if they paid me $2-3,000/mo.
Looks swanky to me. Next to blocks of ugly warehouses and porn stores and overlooking the scenic freeway. Put me down for a dozen units at $1.4M each. I’m stoked.
Thanks for your opinion, I drive by the towers too, they look great and have a nice view. There were too many projects announced at once in LV, there is some shake out going on now, and once the current buildings are complete and occupancy established, the next towers will go up. Yes, Las Vegas is great…..
Top 3 Las Vegas Industries:
1. Prostitution
2. Gambling
3. Real Estate scams
Yes, it takes a special person.
Have you ever met a piece of real estate you didn’t like??
He thinks if he says this crap enough times, it will all suddenly be true.
Looks like another fricken eyesore to me. Ugly as dog turds!
LVLandlord,
I would love living in something like this. But to pay so much for noisy neighbors and smelling other’s cooking? The fun goes away quickly.
This kid is 24-years-old. It seems to me that a lot of 20-somethings and 30-somethings are going to find themselves in deep doodoo before this whole mess is over. Most of them have never seen a real recession let alone anything worse.
claudia,
I remember during the dot-com bubble reading articles about smug 20-something programmers and web designers bragging about how they could dictate their own employment terms and how they got a BMW as a signing bonus. 2 years later: articles about armies of unemployed programmers and web designers in Silicon Valley taking jobs in restaurants. They had never seen a downturn and the idea was inconceivable to them.
Me graduating from college in 1992 was definitely a good thing, reality-check wise.
Read about Interesting Orange County Stats.
With the ever rising inventory numbers, when do you think this will reach a breaking point?
People will be unable to take HELOCs with falling prices and will be forced to sell. Investors and speculators all rushing for the exits when the see price appreciation stuck in reverse. Also, demand will slow as it is now when buyers realize they don’t have to rush to buy and maybe holding off is best.
All of a sudden there is a 6-12 then maybe 2 year supply of homes on the market?
Realistically, by this summer, what do you think the supply on the market will be in places like Phoenix, Miami, California, D.C, and Boston?
Big
The supply in California will be gargantuan.
“I’ve always liked that word…”gargantuan”… so rarely have an opportunity to use it in a sentence.”
GiNormous….
a bazillion
Okay Elle Driver =P
“As a result, sellers are going to have compete on price, something they haven’t done in years. And sellers aren’t going to be asking as much to begin with because they are beginning to recognize the perennial truth that ‘price sells.’”
Whatever happened to location, location, location? And “the price will keep going up forever because they aren’t making any more (beachfront / desert / swamp) land…”?
“To move increased inventory, builders have raised the incentives they are offering on some home models.”
Incentives = off-the-record price reductions
Sort of OT… GREAT NEWS! Phoenix can start to celebrate!!
As of Mar31, end of Q1, they turned 40!!! Phoenix now has over 40K homes for sale, according to OCRENTERS tracking, http://bubbletracking.blogspot.com/
Break out the noisemakers, cowboy boots and champagne!!!
YEE HAW!!!!!!!!!
Problem is, Bush gave large tax cuts, making the rich richer, and Greenspan and the Japanese gave low interest rates to compliment those tax cuts. Now people are going crazy with real estate and it is another bubble, a supply side bubble for any of you who are interested in the damage this economic philosophy is having. I don’t see Bernanke wavering, but you never know. I hope he pops this bubble before every place in the USA is out of sight for average Americans.
Even if interest rates were zero there would be an eventual collapse in the market as no more buyers can qualify. We allready have people with no savings living week to week with a huge mortgage payment. It won’t take much to push people over the edge when they are stretched so thin.
“It won’t take much to push people over the edge when they are stretched so thin.”
Kudos. You have captured the essence of our situation. Americans are extraordinarily vulnerable. What will push them under? Maybe job loss? Delphi jobs are being cut dramatically. GM is cutting jobs. Ford is cutting jobs. All the major airlines are cutting jobs. And for those who aren’t fired, their pay is being cut. Don’t believe the unemployment numbers that the government issues. Unemployment is much higher than reported.
The depression is coming.
Low rates and asinine lending practices provided the spark to ignite a dry forest. But the Fed can’t have a do-over. This market is now driven by psychology. The Fed is being driven by the market, not the other way around.
” Add this to a slowdown in the economy and the job market and we could have a serious recession,’ said David Stone, president of the Portales National Bank in New Mexico.”
Sounds like a bank to invest in.
“Smylie said if the unit doesn’t sell, he may live in it instead. ‘It has a prime view of the Strip,’ he said. ‘I’m stoked.”
He’s so stoked with the view, he’s got it on the auction block. BTW we all know stoke means to encourage and in this case it probably means it stoked his anger that he’s been had.
What happens to the owner of a Condo project when a significant number of the units go into bankrupcy? Does the back payments of HOA fees get paid by the foreclosing lender or does the HOA get stiffed? Is there any risk of owning in a building that isn’t selling, beyond your own loss of equity?
If anyone knows…
I know that he HOA fees are due at sale from the foreclosing bank when it is eventully sold to a new buyer. That could be hard on the HOA if multiple units are foreclosed on. I know they can get loans to cover the shortfall also.
Thanks Mo Money! So it would appear that eventually the HOA would be reembursed for the defaulted fees. I suppose there is still some risk to the HOA in a significant downturn (i. e. Crash) where units spend years in bankruptcy looking for a buyer, that the back fees owed would be more than the value of the unit. I seem to recall that Ben was speculating on that once.
I still think that condos are much more at risk in a downturn because they are priced more efficiently than houses and costs are more transparent. You have a hard time finding a buyer at 900,000 when the larger unit next door is priced at 750,000. I expect that we will see condo’s lead the way down.
How about this. What happens when 25% of a condo project are unsold and the developer goes bankrupt? There is no way to keep the HOA going except by the condo owners ponying up what is required. I wonder how many are going to experience this before it is all over?
If a condo project is substantially unsold, here are a few of the problems that seem to me might occur:
1. Price erosion. If there are a significant number of unsold units, the value of the owned units will fall. That will pressure some who are stretched thin such as speculators and start a cycle of selling, prices dropping, more selling, more price drops….
2. HOA fees have to go up to cover the shortfall from unsold units if the developer can’t cover them.
3. If retail space is provided at street level, some or all will be unable to make it because of the lack of patronage from a partially empty building and will go out of business.
I wonder if any of this will happen?
Back in the ‘90 recession, a co-worker of mine in MA could not sell her condo in Natick because there was a lien on her HOA. It seems a group that held 30% of the association (and was out of state) just walked away leaving the condo owners holding the bag.
To LVLandlord,
I know you like it, but it reminds me when my son was little and we drove by a house with the concrete drive and lawn area painted green. My son looked out the window and said, “Isn’t it beautiful?” Several years later it was the uglist thing he had seen.
Instead of more pic’s, I’d like to know what the HOA fee’s are. What is costs to use those in house services like the gym, pool, etc? What your share of the fire and other insurance costs are? Do you also have to pay for your parking space or spaces? Answers to these questions would help paint a broader picture.
I know exactly what you mean. These condo’s next to casinos, highways or 7-11’s will not age well. They will be eyesore’s even if they do become occupied at all.
Chicago inventory all time high. More than 115K homes for sale - a jump from 70K from 1/19/2006
Look at
http://chicagobubble.blogspot.com
Bring on the pain!!
chicago will be saved by retiring mobsters
Interesting….I have been wondering about Chicago…I consider it a very stable market…If it is starting to have problems, any market can…
I lived in Chicago for a while so I’m keeping an eye on it. The house prices in Chicago have always been fairly high, and they didn’t go up as much as in Cali, Florida, Arizona etc. But it’s still vulnerable to rising interest rates and growing inventory.
The housing prices of a particular area or their recent appreciation rates don’t seem to have a high co-relation to the area’s housing bust potential. Take Atlanta for example - has had miserable appreciation rates for the last 3-4 years (at least), and is one of the cheapest areas in the country, but apparently their housing market is taking a dive already.
if anyone can seriously say that “young celebs” like Toby Maguire Leo DiCaprio etc’s buying a unit is “helping” sales, then it highlights the utter insanity driving this bubble…
In Japan these celebs sell coffee and beer…here they sell million-dollar condos! I think someone will end up suing HGTV as one of the entities responsible for this when it all blows to hell..
cheers all!
Who is Toby Maguire? Probably just exposed my age here . . .
Spiderman. He was also excellent in “Pleasantville”
The cover story of the April 10 BUSINESS WEEK is the HOUSING MARKET. See:
http://www.businessweek.com/magazine/toc/06_15/B39790615housing.htm
There are a number of articles and places to COMMENT online.
I’m going to give them a piece of my mind. You have to believe there will be a lot of prospective buyers reading these comments!
This might be a great opportunity for one and all to comment as well!
Good find, thanks for sharing
I really like the upside down house on flipper/investors head. What a great way to portray the mess these jerks are in.
I love this comment. I hope this b**tch takes a $300K haircut.
STUNG ON BOTH ENDS
Two smart people who just might be guilty of that in the New York City suburbs are Joe Watson, a neurosurgeon, and his wife, JoAnn, who has a PhD in genetics. In relocating from New Rochelle, N.Y., to McLean, Va., they planned to come out even by selling and buying at roughly the same price: $1.2 million. Now they’re getting stung on both ends of the transaction. The Virginia house is costing them “significantly more” than $1.2 million, and they can’t get what they want for their 1937 Tudor in New Rochelle. Says JoAnn: “We were advised by two brokers to price it initially at $999,999, but my husband and I wanted to start at $1.19 million because we thought we could get it.” Even after nudging the price down to $1.09 million, though, there haven’t been any offers. JoAnn has taken to blaming the shoppers. “It’s a great house,” she complains. “Why doesn’t anyone realize it?”
why would you spend 1.5M for a crappy view of the strip when that will get you one of the fattest condos in a high rise in San Diego with views of the ocean, coronado, etc., with much nicer weather during the summer?
this is what 1.5Million should be getting you.
http://sandiego.craigslist.org/rfs/145875371.html
1600 SqFT La Jolla Ocean View. Vegas or La Jolla? Its a tough one.
I’d take the 1600 SqFt Ocean View as a place to rent at probably
I’d rather do this at 1.3m save about $500. in condo fees and about $1,500 in payments. But to buy anything in this market is death.
http://www.realtor.com/FindHome/HomeListing.asp?snum=21&locallnk=yes&frm=bymap&mnbed=3&mnbath=2&mnprice=1250000&mxprice=1750000&js=off&pgnum=3&fid=so&stype=&mnsqft=0&mls=xmls&areaid=38225&poe=realtor&exft=ewater&exft=eliteview&ct=Palos+Verdes+Estates&st=CA&sbint=&vtsort=&sorttype=&typ=1&x=31&y=4&sid=0663CB4DB45FC&snumxlid=1056022248&lnksrc=00002
Young Jason Smylie won’t be smylin’ when he realizes there isn’t another Bigger Idiot coming along to take his overpriced “investment” off his hands. I think his expression is going to be more like what you’d see on a Bowery bum when he realizes the bottle’s empty and there’s nothing left.
I have to say, if I thought Pam Anderson would be laying out at the pool with a tback, I might be
enticed to purchase a condo with a pool side view!!
The cover story of the April 10 BUSINESS WEEK is the HOUSING MARKET. See:
http://www.businessweek.com/magazine/toc/06_15/B39790615housing.htm
There are a number of articles and places to COMMENT online.
I’m going to give them a piece of my mind. You have to believe there will be a lot of prospective buyers reading these comments!
This might be a great opportunity for one and all to comment as well!
if you buy one of those Vegas condo units and need extra storage, it looks like there’s plenty of mini storage facilities right next door.
CBS’s “close to home” is showing “Land of Opportunity” about RE frauds
Wow.
Here’s a Las Vegas local telling everyone how it’s his town!
http://tinyurl.com/m5ybd
That’s crazy! When was that filmed?
I can’t imagine what I would have done if I were watching that happen! A guy with a crowbar swinging away at another car… I’d stay away as much as possible and try and call the police. That guy looked deadly.
Not sure when that was filmed, but a police officer probably would have shot him given the opportunity.
Wow. Seems like she had the chance to run him over. Don’t understand why she didn’t move on that. Wow.
Yeah it always amazes me the decisions people make.
There were a couple of times the driver could have broken both crazy dudes legs.
Then get out of the car and finish the job.
Funny listing on Zip Realty today. A 4 bedroom house has been listed for a total of 1 day and the price has already been reduced from 596k to 530k! The shenanigans the Realtors ™ are pulling these days are becomming quite amusing.
I’ve seen that, too! In the very first listing, they reduce the price (maybe by $10) and then advertise, “Price Reduced!” (That’s here in the D.C. market)
http://tinyurl.com/qduxf
Down and Out in Bloomfield Hills
By Jeffrey Zaslow
Word Count: 2,493 | Companies Featured in This Article: General Motors, Ford Motor
BLOOMFIELD HILLS, Mich. — Foreclosures are up and charitable giving is down. A local country club has a waiting list — for members who want to quit. The market for expensive homes is so slow that Michael Robbins, a divorce attorney here, says one of his clients is still living with his ex — three months after the divorce was final.
With the Michigan economy battered by the ailing auto industry, the ripples are …
This article is only available to WSJ subscribers unfortunately. It is useful as a primer for what is coming. They are suffering already in Michigan. The rest of us will too before long.
There is no avoiding the depression that is coming. Bernanke can’t stop it. Congress can’t stop it. It is baked into the cake. The best any of us can do is cope with the problem. Pay off debt. Burn credit cards. Have some spare cash available. Buy gold and silver. Sell stocks except for precious metals and oil companies. Sell bonds. Hunker down. It won’t last forever and life will be better in many ways when it is over.
Dawnal,
Maybe the depression will not turn out so bad as long as the govt keeps it out of plain view by manipulating official statistics.
Why do you suggest selling bonds? They did well in the 1930s…
GS
Homebuilders are beefing up their credit lines. “Stephen Scarborough, CEO of Standard Pacific Corp. today announced Standard Pacific’s increase in its revolving credit facility capacity from $925 million to $1.1 billion through the exercise of the facility’s accordion feature. In addition, the Company proposes to issue a 5-year $100 million loan and a 7-year $200 million loan.”
“Toll Brothers, Inc. today announced the expansion and extension of its bank credit facility. The $1.8 billion unsecured facility, which matures in 2011 and replaces the Company’s existing $1.2 billion revolving credit facility, is comprised of a $1.5 billion revolving credit facility and a $300 million term loan. The credit facility has an accordion feature under which it can increase to a maximum of $2.7 billion.”
I am guessing these new credit lines will somehow help the HBs with their pump and dump operation — share buybacks, for instance. Is this on target, or am I missing something here?
Likely needed the extra doe for carry costs…The metric has changed in that the turn of the money will not happen as fast (Obviously) as it has in the past couple of years…
Its the start of winding down time….
How the HBs can they possibly need that kind of money after the boom they’ve enjoyed just goes to show they have no better savings skills than the average consumer they’re trying to sell to.
They can console each other in the halls of the BK courts.