No One Is Immune To What’s Going On
The Enquirer reports from Ohio. “Liberty Township, once billed as one of the region’s fastest-growing suburban communities, has seen a sharp decrease in new-home construction. In Hamilton Township in Warren County and Fairfield Township in Butler County, housing starts have been sliced in half or worse. In West Chester Township, a center of growth along the interstate corridor between Cincinnati and Dayton, housing permits plummeted from 434 in 2005 to 154 last year.”
‘”West Chester is not immune to what’s going on in the housing market. No one is,’ Trustee George Lang said. ‘We’re just as susceptible as any community in America.’”
“In Warren County, there has ‘absolutely’ been a slowdown in housing starts, County Commissioner Dave Young said. Housing starts have come to a standstill in pockets such as Clearcreek Township and South Lebanon, he said.”
“A huge supply of houses for sale in Butler County could be a big reason for the decrease, says Dan Hendricks, executive director of the Home Builders Association of Greater Cincinnati. ‘I can only assume that the higher inventory of homes in Liberty Township may have contributed to less housing starts last year,’ Hendricks said.”
“But the slowdown isn’t a crisis yet, said Liberty Township Trustee Pat Hiltman. ‘There’ll continue to be activity here; it just won’t be at the same feverish pace that it has been,’ Hiltman said. ‘If buyers are waiting for lower prices, now might be the time to jump into the market.’”
The Toledo Blade from Ohio. “With the area housing market mired in a slump for much of 2007, it was no surprise that home sales fell 13 percent in Lucas County and 10 percent in northwest Ohio last year, according to the Toledo Board of Realtors.”
“Available houses and condominiums remained almost too plentiful. Board officials said the local supply rose from just over 15 months’ worth of inventory to nearly 18 months’ inventory.”
“Mary Ann Coleman, treasurer of the local Realtor board and an agent, said people had trouble selling houses in certain locations where home values declined. ‘Some areas are doing quite well,’ she said. ‘Others are drastically slow.’”
The Indystar from Indiana. “After a year with sales of existing homes dropping about 10 percent, Indianapolis homeowners shouldn’t expect things to get better anytime soon.”
“A year-end report released Tuesday by F.C. Tucker Co. shows the Indianapolis area suffered its second year in a row of declining home sales after five consecutive years of record-breaking sales.”
“‘It’s a very competitive market,’ said H. James Litten, who heads Tucker’s residential division. ‘It’s definitely a buyer’s market. The inventory (of homes for sale) outruns absorption.’”
“Veteran broker Tom Mattingly said he would remember 2007 for being the toughest year for selling houses since 1981. ‘You see more buyers walk away from deals than ever before. Buyers are thinking, ‘Maybe I left some chicken on the bone. Maybe I paid too much.’”
“Mattingly said he is currently involved in a pending sale for $142,000 of a Northside home that sold last April for $175,000. ‘That’s pretty ugly,’ he said of the home’s plummeting price over just eight months. In this market, ‘You just have to get real creative’ to sell a house.”
The Beacon News from Illinois. “Realtors are not the only ones fighting for home buyers in a relatively stagnant housing market.”
“Some home builders in the Fox Valley are showing that they, too, have the sales pitch, charm and incentives it takes to lure buyers who have been scared away by mortgage rates and lagging sales on existing homes.”
“Selling off current inventory takes eye-popping incentives, over-the-top service and sales strategies not commonly used by home builders, those in the profession say.”
“Two weeks before Christmas, Louise Bouret, a sales consultant with Kimball Hill Homes, was throwing a holiday party for government officials, community members and business people — mainly of Sugar Grove — to highlight what is expected to be the crown jewel of this village: Settlers Ridge near routes 56 and 47.”
“But even with meats, cheeses, fruits, a vegetable and dip platter, and even hot cider to sip as visitors view model homes, the party didn’t go as expected. Out of about 175 invitations, about 10 guests showed.”
“At RA Faganel, a home builder in Batavia for 75 years, the strategies include handsome incentives like cathedral ceilings, upgraded cabinets and granite countertops, all within the base price. The included options have a value of $20,000 to $50,000.”
“Now might be the best time for builders to become vocal in the real-estate market. More and more, Realtors are leaving the profession as the number of Realtors was expected to drop at least 4 percent in 2007, according to the National Association of Realtors.”
“‘We no longer can pan our side of the fence,’ said Jim Janik, VP of sales and marketing at RA Faganel homes. ‘We need to cross over.’”
The Naperville Sun from Illinois. “Rick Klau was sure that lowering the price of his Naperville house by $26,000 would reel in a buyer.”
“Desperate to get out from under two mortgages, he had already rolled back the price from $489,000 to $425,000. After he told two interested buyers that he would drop the price again, to $399,000 on Jan. 1, he expected someone would seal the deal.”
“But neither buyer bit. ‘We didn’t even get a call back from either agent,’ said Klau.”
“After Google bought his company last year, Klau accepted an offer to transfer to San Ramon, Calif. Because he wanted to give his wife and their three children enough time to get settled before school began, he bought a house in San Ramon and put his Naperville house on the market June 1.”
“He wanted to sell the house as soon as possible, so he listed it for $10,000 to $15,000 below other homes in his subdivision. ‘The first news of a mortgage crisis really hit at the end of June,’ Klau said. ‘It was after that we noticed there wasn’t a lot of activity on the house.’”
“Klau began dropping the price and offered to cover the closing costs, but he is still the unwilling owner of two homes.”
“‘We bought the home in San Ramon for a lot more than I care to tell anybody,’ Klau said. ‘It is certainly a whole lot more than we are selling our home in Naperville for. We’re hoping we can find a price point that attracts buyers.’”
“The subprime mortgage crisis is the result of lenders giving loans to higher-risk borrowers with lower income or a weaker credit history over the past 10 years, said Eileen Landau, a real estate agent who has sold homes in Naperville for 30 years.”
“‘Lenders were very fast and loose,’ Landau said. ‘If you fogged a mirror, you got a loan.’”
“In December 2007, 853 Naperville homes were on the market, not including new homes. In December 2005, 546 homes were for sale. Landau said the current inventory of homes would take eight or nine months to sell. A year ago, it wasn’t unusual for a Naperville home to sell in 30 days.”
“Naperville residents who bought their homes three or four years ago and are now trying to sell are sustaining the greatest loss, said Susan Ganden of Re/Max of Naperville.”
“‘People who bought in a hot market three years ago paid top price for their home,’ Ganden said. ‘Now we have so many houses on the market, they can’t sell it for the price they paid for it.’”
The Gazette Extra from Wisconsin. “The number of foreclosures in Rock and Walworth counties has risen steeply over the last two years, indicating that the subprime mortgage mess afflicting most of the country has at least brushed southern Wisconsin.”
“‘You can’t attribute it all to one thing, but I think the major factor is subprime lending,’ said Janesville attorney Vicki Schleisner. ‘Most of the clients who walk through my door asked key questions like, ‘What will it cost a month?’ But they don’t think to ask what will it cost me a month in two or three years.’”
“Schleisner cited two examples: a monthly mortgage payment that started at less than $600 a month but mushroomed to $1,500 monthly in three years and an interest rate that started below 8 percent but could rise to almost 18 percent over the course of a few years.”
“‘It cuts both ways,’ Janesville attorney Jim Fowler said. ‘I suspect a lot of people didn’t fully appreciate the implications of a floating interest rate. They assumed their (houses’) value would continue to appreciate and they would be able to refinance.’”
The Pioneer Press from Minnesota. “Dozens of area homes are heading to the auction block this month, but this time, they’re not foreclosures - they’re brand-new construction. And builders are looking at discounts of up to 45 percent to move the merchandise.”
“Local contractors are sending some 200 newly built houses, townhomes and condos scattered across the greater Twin Cities to a public bidding block at the Minneapolis Convention Center Jan. 26 and 27.”
“Most were built on spec, meaning buyers hadn’t been lined up beforehand, and some were model homes that builders showed as samples, said Lisa Berry, a spokeswoman for the real-estate auction marketer promoting the event.”
“As of October, there were 3,548 new single-family houses and townhomes sitting finished and unsold in the 13-county metro area - down from a peak of 4,452 last August, according to MarketGraphics. There should probably be only about 2,400, given the level of closings of new homes, said MarketGraphics VP Todd Bjerstedt.”
“In addition, there are about 2,000 new condos, either finished or under construction, that have no buyers yet, according to Metrostudy.”
“Auctions are something of a mixed bag, Bjerstedt said. ‘If it gets inventory off the market, that’s good,’ he said. ‘I think the fear we have is, at what price?’”
“Deep discounts at real estate auctions add just that much more downward pressure on already sliding property values.”
“Berry, the spokeswoman for the auction marketer, would only say that the discounts would be ‘very steep.’ A local construction finance company with several properties in the auction estimated homes will sell for 25 percent to 45 percent off the original list prices.”
“‘We hand-picked the ones that would sell,’ Berry said.”
“Her company had hundreds more to choose from but couldn’t auction off homes from builders in bankruptcy or from those who owe their subcontractors too much, she said. Some properties they considered didn’t have clear titles.”
“The auction follows October’s mass foreclosure auction in Minneapolis where shoppers bid on more than 300 bank-repossessed homes. ”
“Unlike the October foreclosure auction, where there were set minimum bids for each property, 50 of the houses in this auction have no minimum bid or reserve amount set.”
From KARE 11 in Minnestoa. “Homes that originally listed for half-a-million are expected to sell at a significant discount. The homes are located all over the metro area are brand new, never been lived in, award winning and headed for auction.”
“‘It’s not business as usual, the way we were all doing business over the course of the last two, three four years it’s not working anymore,’ said Construction and Development Finance banker David Buelow.”
“Buelow teamed up with builders and contractors to auction off properties that have sat idle for months. ‘Work for free or lose money on it, we have on some projects,’ described builder Pete Lewis of Lewis Builders.”
“In his nearly three decades of building, he says he’s never seen the market come to a standstill like this. He’s making payments on homes that haven’t sold, he’s laid off his workers and has quit building.”
“‘In the last year we’ve done nothing, it’s just dried up, there’s so much inventory out there,’ Lewis said.”
“His 2007 Parade of Homes signs still sit in the front yards and now along side of them, signs that describe the upcoming Real Estate Auction in Minneapolis.”
“The discounted auction price will be a loss for the banker, the builder and the contractor. ‘Nobody’s ever lived in this house and it’s going to go, pretty cheap,’ said Berry.”
“If this auction business works it’s likely to stick around for a while, not only are there a lot of houses on the auction block, there are a lot of empty lots that are available and are next to hit the auction block.”
‘There’ll continue to be activity here; it just won’t be at the same feverish pace that it has been,’ Hiltman said.’
‘the Indianapolis area suffered its second year in a row of declining home sales after five consecutive years of record-breaking sales.’
‘ A year ago, it wasn’t unusual for a Naperville home to sell in 30 days.’
‘a lot of people…assumed their (houses’) value would continue to appreciate and they would be able to refinance.’
‘Most were built on spec…said Lisa Berry, a spokeswoman for the real-estate auction marketer promoting the event. As of October, there were 3,548 new single-family houses and townhomes sitting finished and unsold in the 13-county metro area - down from a peak of 4,452 last August’
‘It’s not business as usual, the way we were all doing business over the course of the last two, three four years it’s not working anymore,’ said Construction and Development Finance banker David Buelow.’
MSM: no national bubble?
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20 bubbles out of 25 metros doesn’t a nation bubble make.
But, when the bubble burst all are having problems except for some ritzy zip codes.
Jas
I don’t think I could name 5.
Yeah, I’ll pay to get 5 zipcodes that won’t crash!
MSM: no national bubble?
Ben: I just came back from Indiana having spent two weeks in the area. The Indiana, Ohio and Michigan areas have been severely wacked due to job losses. Land values are dropping and key properties like lake houses have taken large declines. It seems the exporting of jobs is taken it’s toll in these states!
This may continue, IIRC the best case scenario for Michigan in ‘08 right now is a loss of another 50,000 jobs.
Notjhing happens in a vacuum. But I find quotes referring to a recent boom in almost all of these states.
But I find quotes referring to a recent boom in almost all of these states.
I would agree that the boom also played a significant part based upon the mortgage fraud I have seen first hand in these states.
We did a digital mapping test in western Ohio in early 2001 - Logan county and northward towards Upper Sandusky. A lot of that area looked rough even then, many small forgotten towns collapsing in on themselves. How could places like those ever attract the demand to sustain anything but rock-bottom prices? Any participation in this bubble by areas like those will probably be much more devastating over the long term than CA or FL.
I live in Warren county, Ohio, right next to Liberty Township. The way the Builders are carving up the farm land around here is attrocious. Anyway, we have a great surplus of housing.
One difference between Cincinnati and, say, LA, is that Cincinnati as a city is actually moving. It is rebuilding itself 25 miles north of its current location. There is no ocean beach to anchor the city too (the river is nice, but not enough). Furthermore, without a Proposition 13 to lock companies into their current location, companies are closing facilities near downtown and building new ones (with local tax breaks) 25 miles north. We do have a surplus of housing, but in reality, a lot of what has been going on is a rotation of the housing stock and corporate offices from the old city to the new northern exurbs, thus creating a ‘new’ city. The housing on the old city has not been torn down yet, but it continually being occupied by non-professionals. This happened to the area some 100 years ago as well, and those near-abandoned houses from that timeframe are just now being torn down. We do not put much effort into revitalizing old housing here. We just build new, and let the old stuff fall into disrepair, eventually to meet the wrecking ball.
I lived in downtown Cincinnati for a couple of years. It is an absolutely awesome place with tons of character. There were always plenty of working 20-somethings around, too. Downtown remains the center of the metro region, and I don’t see that changing. While many companies have moved to the northern exurbs, many have also moved to the Kentucky exurbs. From West Chester to Florence is at least a one-hour drive. The region needs a center or it will become another detroit.
Fortunately, there are lots of good things happening around downtown
okay, maybe ‘absolutely awesome’ isn’t a totally accurate description. but it was a good place to live and remains a very viable city-center.
Yes, Downtown Cincy is still vibrant (but not like the ’80s when I worked there). It is being revitalized and I think will continue to anchor the area. I think downtown will hold up OK.
But with tons of jobs moving to the exurbs (20+ miles away), I’m not sure what is going to happen to the interviening housing stock between the downtown area and WestChester to the north.
It’s a tough question. I think with higher costs of commuting and arguably a greater demand for a less auto-based lifestyle we’ll see continued growth and demand in the “safe” first-ring suburbs like Hyde Park, Pleasant Ridge, Norwood, and older neighborhoods like Clifton and East Walnut Hills. OTOH, areas like, well, Norwood (parts of it), Avon Hills, and much of Walnut Hills have far too much crime to attract any real interest.
I think the real losers in all of this will be the far-out but inside-the-beltway cities like Forest Park and Montgomery. They have uninteresting housing and acres of vacant strip mall–the latest and greatest is up north another ten miles. Ultimately, one might argue this will be the fate of any far-out suburb or exurb, unless said suburb or exurb can set itself apart in terms of character and sustainability.
The same thing has been happening where I’m originally from: Knoxville, TN. The same thing is happening there, which is that huge housing developments are being thrown up 20-30 miles from the city. The city itself has been revitalized, but mostly for entertainment purposes. There’s a few new museums, theaters, art galleries, and parks along with the university. But the city as a place of business save for a couple of banks is now outside the city.
When I go and visit my folks there, I can’t help but feel that the area is becoming devoid of character. There’s tons of Mcmansions which you can pick up for say- 150-200k or so. But they’re all enclosed in a sea of boring, taupe colored housing tracts with small bradson pear trees. The area was beautiful when I was a kid. In some ways, it still is once you get out of the general vicinity. But the area is growing rapidly with lots of transplants from the east Coast, FL, and so on. I’m only 30 year old yet I’ve seen an almost dramatic transformation of the area. If I were to move back, it would be to Nashville or Memphis since those two cities at least have their own unique characters.
Downtown Knoxville has been dead since the 70s. Yeah, they tried to revitalize it, and I used to go to some shows there, but otherwise it is dead.
Also, when I mean downtown, I mean the area beyond the University, Fort Sanders, and the World’s Fair site.
I get so confused because outside Youngstown there’s also a Liberty Township where we have a house. Why do they have 2 towns with same name?
The article is refering to the Liberty Township in Bulter county, just north of Cincinnati.
I also get confussed because we have townships in the Cincy area that have the same name and are in adjacent counties !!!!!!!!!!!
I know. I’m often tempted to not even try to guess which state these reports from your area are referring to.
You’re Liberty Township, Trumbull County?
Yes. I’m in CA desert, but other half is at our house in Liberty Township just outside Youngstown. We bought house there in 4/06.
Yeah, but the places are still populatedwith Kool-aid drinkers. Notice the comments by Hicks, from Ball State University’s Bureau of Business Research.
He thinks a property tax reduction is the band-aid which will cover over the boo-boo. Some research.
No One Is Immune To What’s Going On
I’m willing to bet that this sentiment isn’t shared by a lot of people here in the South Bay, where $200K homes are still priced for well over half a mil.
And homes that rent for $2400/mo are STILL selling for $1 million (BIL has a pending sale on his home in Freemont).
Oh my gawd. That’s quite the bubble that you guys have, no?
Here in S. FL, 2400 a month will rent you ~600-800K home. 1M will be closer to 3K a month. However, in FL, a 1M dollar home has a 20K tax bill per year, as well as another 10K+ for insurance. The carrying costs are just out of sight down here; which certainly skews the price/rent even more.
Still, I think that takes the cake, I would move if I could rent a 1M dollar home for 2400/mo in my area (the home I am in now recently sold for just over 500K, and I am renting it for just under 2K).
The problem is that this $1 million home is a poorly constructed 1500 sq ft 3/2 stucco box, with the smallest 2 car garage imaginable and just enough room in the back yard to set out a lawn chair and grill.
The city of angles is the only place I know, that has paved over their river of denial.
I work in the South Bay but live in the East Bay. Despite living only 30 miles away, the two areas might as well be on different planets cost wise. Absolutely nada is selling around my hood save for one or two apartment complexes and a house in the more pricey area. But all around me are homes that just sit… sit… and sit some more. One home near me was 610,000 last year, didn;t sell, went off the market, came back on for 545k, didn’t sell, got foreclosed upon, then came back up recently for 455k. It is still not selling. That’s the story for a good bit of the area here.
Even so, it is doubly irritating that despite all the news and the lack of sales, We are still not seeing what I would call substantial losses in home appreciation in the Bay Area. Not enough to make me even think about looking at anything. I’ve had my finger on the trigger to move out of state for years now. The current housing bust has made me put that on hold. But as far as I can see so far, the prices simply aren’t moving downward much at all, yet nobody is buying. There seems to be a standoff.
On the other hand, I do see a lot of homes moving in the South Bay. All the companies I’ve worked for out here- of which so far have been many- have CEO’s and execs who all live near their jobs in the South bay. Given that the avg income for such a person is 250k or more, I could see why crappy 800 sq foot homes are still miraculously selling for a cool mil here.
I am going to have to make a choice eventually. I make an income that places me in the upper 5-10% of the earning populace. Yet unless prices were to come down at a minimum of 30%, I’ll have to consider other areas. In the meantime…. rent cheap and save big. Frustrating.
Re: “many- have CEO’s and execs who all live near their jobs in the South bay. Given that the avg income for such a person is 250k or more, I could see why crappy 800 sq foot homes are still miraculously selling for a cool mil here.”
CEO’s who make $250K or more don’t buy 800sqft boxes just to be close to work. Unless of course the box is a tear down in a decent hood. There is still a fair degree of people who think the Bay Area is immune to steep price drops and I’m not just talking about the sellers. There are still buyers out there thinking that now is a good time to buy, not many of them admitedly but still some. Until all of those specuvestors and just plain fools are used up prices won’t fall. Another thing to watch is properties that sell at auction for steep discounts and are not listed at the actually selling price due to concessions or just outright fraud. This is still happening in alot of places in the south bay and east bay were you will get big incentives to buy a property at the asking price but if you subtract the incentive it lowers the price you actually pay a lot. This gives people the false impression that house price is still strong and for some people that’s enough for them to go ahead and pay list price if they don’t know any better.
wages have adjusted here to match the high home prices. The bulk of a tech company makes $120-160K these days.
The only thing that is going to cause price declines is the loss of these well-paid jobs.
GOOG and AAPL have created tens of thousands of new millionaires looking for SFHs in the area. With Prop-13, everyone who bought 1850-2000 can just sit on their property and rent it out forever if they want.
The only new building going up is god-awful medium-density townhomes.
The situation in the South Bay Area is . . . hard to predict. I think we’ll see 10% drift down, but not much more. The going rate on a 1B apartment is pushing $2000 as it is.
The problem with the Bay Area is that it is sort of like the goodie-two-shoes of national cities; the all-A’s wizz kid who never got into trouble in middle school. There are a bazzillion reasons why people think this area is on a different planet. This is tied mainly to the undeniable success that business and the multi-cultural ism that comes with it. Apple, Pixar, HP, Oracle, Facebook, Google, and EA are all here. All names that are not only world-famous, but have almost cult-like followings in some instances like Apple and Pixar. This naturally puts people in a mindset that the area is immune because of the barrage of insanely profitable businesses here. Add to a rather pretty-even beautiful area with near-perfect weather and you get the environment in which the BA exists in.
The problem is that most who live here see the above mentioned items as reassurance that paying more- sometimes 4 to 5 times more to live here is justified. What they fail to see is the consequences. That includes over-congestion, home prices that far exceed whatever higher salaries those successful companies might pay them, less time with their families due to longer commutes, poor infrastructures like badly performing schools and freeways with enormous potholes.
The true environment of the BA is hyper-competition. If people were to strip away the glamorous, I wonder what they would think given their living standards.
Fairly accurate commentary Jetson…..Particularly the competitive nature of the BA….
“There are still buyers out there thinking that now is a good time to buy…”
(This is in East San Francisco Bay area)
Recently a friend of mine bought a new bigger home in San Ramon and rented out his existing smaller home in Pleasanton. I tried talking him out of it, but apparently he got a good deal on the new home !
Why not sell the old house, you say? He is has a good interest rate currently, and plans to sell in about 2 years.
I shed a tear for him on the granite counter of his new home.
Number of google employees now is over 10,000; however, it was less than half that at IPO.
Are there really tens of thousands of GOOG millionaires, or is that an urban myth, like all the space people moving into [name your locale]?
Urban myth, urban myth.
Plus, just pull out a calculator and do some simple arithmetic of whatever number you have divided by the real estate value and see how much they can hold it up by. (Hint: not even $1000.)
Atherton and Woodside are gonna get creamed!
I live in Fremont too, and this morning I noticed that the condo on the end of my building, which just came up for sale and whose occupants just moved, has a foreclosure sale notice taped to the door. It’s real everywhere.
Condo’s will be the first to fail in the BA…..They have been sold with the most leverage and have the smallest pool of potential buyers…Price drops as a percentage will be the largest in this group….
“Now might be the best time for builders to become vocal in the real-estate market…”
“‘We no longer can pan our side of the fence,’ said Jim Janik, VP of sales and marketing at RA Faganel homes. ‘We need to cross over.’”
Can someone explain what this means? Builders are going to get into the Real Estate business and take business from Realtors?
My first read was 180 out from your thought. In the past builders were mostly direct sellers. I think he is talking about using Realtors to sell new homes in the way used have done.
Not just sell to people that come directly to them…. get the houses into MLS so that people thinking about buying used will consider new. This is seen more and more in PHX!
Well, your theory makes more sense. Actually, here in Pullman, WA most builders have been (reluctantly) listing on the MLS for a year now.
The people in Naperville i’ve got news for you, 299K will take it sorry but that is the market at this time.
Didn’t Naperville loose BP (or some other large employer) and 3,000 jobs not too long ago? That’s got to be hurting the market there.
‘The first news of a mortgage crisis really hit at the end of June,’ Klau said.
Where was this guy late last year when originators were going under at 1 a week? Where was his head in Jan/Feb when sub-prime secondary market was imploding? Yeah, it got a lot worse in June-Aug when it spread to Alt-A, Prime, Jumbo, etc… But that was hardly the “first news”.
OK, time to report in after the holidays. A little off topic, but it’s about the bubble.
The builders in the Kansas City area are really starting to feel the pain. The only major national builder, Pulte Homes, pulled out recently. The regional builders have hundreds of completed, vacant inventory apiece that they are now renting out.
RENTING OUT. To me this means capitulation by the builders. They know they’ll never be able to sell the homes after renting them (or at least not without losing their shirt) so they’re just trying to keep from going under right now, and are not even thinking down the road. Of course once the renter is in the house they give them a pressure sell, but the lease is signed and they can’t make them buy. And according to all the realtors I spoke with, NO ONE wants to buy right now, only rent. People I spoke with who had ties to the industry (builders, construction/real estate lawyers) sounded very dour on the future. While all of this is anecdotal, it was universal, and music to my ears.
My in-laws live in southern Utah, and my FIL is a loan manager at Zion’s Bank. He still claims the economy is doing great, but from what I saw first hand massive cracks are showing and the dam is about to collapse. They live on what used to be a nice quiet street in New Harmony. A few years ago (well, maybe 5 or 6 years) there were only a couple homes on the street (actually a country road). Now the road is pretty much built out with ~ 40-50 homes. Over half of them are for sale at ridiculous asking prices (one asked $540k for 1700 SF, the low end $320k for about the same size). Several are offering to rent as well. This in an area where the in-laws built about 2400 SF for under $160k 10 years ago. Almost no one in the area has this kind of money.
The in laws say people are just seeing if they can get rich selling and no one is in trouble. but I walked the street and obviously the “will rent”ers are in bad shape, and there were quite a few homes for sale by the builders as well. I asked mt FIL if anyone had taken out HELOCs or ARMs and he didn’t think so. I would love to have that info, because I have a gut feeling there’s a lot of underwater bag holders in southern Utah. I should have taken pictures of the street - it was really mind blowing.
“I have a gut feeling there’s a lot of underwater bag holders in southern Utah. I should have taken pictures of the street - it was really mind blowing.”
Similar to here in north Mesa, AZ. 1/4 mile from where I am sitting now, the “Legacy” development is at the streets paved, sidewalks laid, stage with only one (1) house under construction! ( in a 40 plus unit plan)
2 years ago the LOTS were $750K and I believe a MINIMUM 4000 SF house could be built. We have here in Mesa the appearance of a new sub-human species, the underwater zombie.
They are easily spotted by the shark-like black eyed stare whenever “real estate” is mentioned, along with the slightly open, but speachless mouth.
The local SoUtah “Homes for Sale” magizines are now full of short-sale houses, make an offer, lease to own, must sell, etc. etc. etc. I also notice a lot of rental homes and condos in the area with stainless and granite, never lived in, rent to own, etc. with rents that are way to high for the area ($2000.00-3500.00 per month). New home construction is dead. Commercial is way too overbuilt. My local Bank stopped giving out home mortgages about six months ago. The manager told me that they didn’t like the risk that they saw in the local market.
The average wage around here is about $48,000.00 per household (Chamber of Commerce). We are horribly overbuilt on the higher-end of the market ($350,000.00+). The local MLS shows about 300 homes in the $700,000.00+ price range. I just talked to a realtor friend who told me that at current sales numbers that means about a 14-16 year supply of homes in that price range.
Not that SoUtah is a raging metropolis but New Harmony, which is closer to Cedar City, is considered the “boonies” to the people living in St George. The building spread out to places like NH and Toquerville, La Verkin, Hurricane and even Virgin because it was cheaper to buy a house in these places than in St George.
IMHO: As the market here crashes (it has already begun in earnest) many of these areas will dry up and revert to what they were before the bubble. Sheep, rocks and tumbleweeds.
I knew southern Utah was toast when I saw all the upscale mansions going up in La Verkin and Hurricane (rymes with La Verkin, I kid you not). And that new massive bridge. I couldn’t figure out where the money was coming from, I mean those people are used to living in squallor. And then I found out about the financing schemes the big boys have been banking on the last few years.
But after seeing what was going on in La Verkin and Hurricane I knew whatever else happened, the big boys were going to go down hard. When you have nothing and a loan shark dumps a truck load of money on you, when you default there’s not much they can do to you (legally), and they can just kiss they loan goodbye.
Too bad, b/c So Utah is kind of a neat area. I would have liked to retired there. Guess everyone else had the same thought.
Just wait a couple years, you’ll still be able to retire there at a significant discount. The majority of the price run-ups have not been from retirees.
The regional builders have hundreds of completed, vacant inventory apiece that they are now renting out.
One question: are they carefully screening prospective renters? If they’re not, and are accepting anyone just so that they can get some cash flowing in order to minimize their losses, there may be a rude surprise once the arrangement is terminated…
The guys we talked to that tried to get us to rent looked desperate. It seemed like they were willing to rent to anyone who could make the payments.
Oh, and the builders were using realtors to try to rent out their inventory. The realtors we spoke with seemed pretty down and depressed - they hadn’t been selling or renting much lately.
Eileen Laundau, realtorwhore in Naperville said, ” The subprime mortgage crisis is the result of lenders giving loans to high risk borrowers with lower incomes or weaker credit over the past 10 years.”
Wow! Thanks for the insight Eileen! What are you doing wasting your life in Naperville? With your talent for seeing obvious flaws, you should be in Washington - with the rest of the idiots.
Jeez. She has to be a 55 year old dyed blonde with ultra white capped teeth, a nose job and a boob job who wears too much jewelry who drives a leased BMW.
Okay, okay! I’m describing a stereotype but I’ve just come up with the alternative to, “Now is a good time to buy.” How about, “Would you buy real estate off this woman?”
No - Eileen, along with most of the media, are wrong about the cause of the subprime mortgage crisis.
The cause was not lending to the “wrong” people, but lending the wrong amount of money, i.e. far more than was justified by the fundamental valuation of the property, i.e. the present value of the net rental income that the property can generate.
That’s the real problem, and that’s the problem across all classes of borrowers. Remember the subprime crisis was preceded by falling prices, not the other way around. As are the upcoming problems with other loan classes.
If the amount lent is not in excess of fundamental valuation, there will always be an able buyer at a fair price, or a renter at a price adequate to cover expenses, if the original buyer encounters difficulties.
Well put, Yogurt!
Actually, a fair number of the recently constructed houses are somewhat accurately valued (not the one’s built on $750k lots). The problem is that builders universally went mad the last 5 years and for the most part built mansions and few entry level houses.
Now we’re at a stage where even though the material and labor cost $600k and the house looks like $600k, reality is coming back to haunt….. The median purchasing power is only based on $45k +/- annual household income.
I agree that there are many crap boxes priced at ridiculous levels, but while on vacation I also saw lots of very nice well constructed homes with intrinsic value equal to the price. Too bad the builders didn’t bother to conduct market research to determine that there were no buyers at that price range…
We are not talking the brightest bulbs on the Xmas tree.
Last night I was talking to the architect/development manager for a group that started this “New Urbanist” development about 7 years ago. They have 84 lots and have only off-loaded maybe 36 (and 4 went to the affordable housing group that subsidizes the mortgage for those under 230% FPL.)
Anyway, the lots are 50 x 95 (.11 acres), 50 x 125 (.143) and 50 x 150 (.17). Absolutely teeny tiny in a rural area. When it started they were peddling these things at $32K -45K. They claimed that it would be ‘affordable housing.’ Uh huh….the architectural design standards end up costing a mint since the houses have to be Victorian or Craftsman types. At the height of the bubble, finished houses (1100 -1500 sq ft and no garage and dirt drive) were hitting $250-275K. Problem is that median income is $42K. Only 10% of the county can afford those things.
House in the development next door took a huge price hit when the owners got desperate in July ‘07. 2250 sq ft, 2 1/2 car garage, paved drive went for $292K down from $434K (and their next door neighbor in a 100 sq ft smaller house is still listing at $399K after nearly 2 years on market being in a fog.) In Nov ‘07, a nice house 3 blocks away sold - 1750 sq ft, 2 car garage, paved drive and .25 acres for $189K down from the 1/07 list of $290K.
I mention all of this to the architect/developer last night who had been whining that they want to move the land and had just been turned down flat by the village when he had ask to put 12 units on 3 lots totalling 150 x 125. He responds with “What does that have to do with us?” After I picked up my jaw, I said “Try comps, try your development will NOT appraise at the old prices, try land prices have taken a 36% hit, try ‘not appraise, bank not lend’!” I said that the spec houses on lots they had sold to contractors didn’t have a hope in hell of selling for their list prices of $274-284 for 1500 sq ft houses. He said that then the contractors were pricing it too high. I came back with “yes, and price drops apply to the land as WELL.” DUMB AS A POST!
No one - not ONE - bothered to pull the data showingwhat incomes are in the area, how many households are in the different income brackets and figure out what theycould afford to spend. Seems developers and builders havea rich fantasy life that involves hordes of ‘buyers from somewhere out there’ descending to buy these houses which are clearly out of the range of their potential buyers.
BTW, the architect/developer has a great business plan for unloading these lots. They have been given permission to start selling phases 4 and 5 so he doubled the price in June ‘07…….and now whines that he needs to be able to sell teeny eeny lots as high-density multi-family so ’some big developer’ will come in and buy them……yeah, right, $65K -75K for .11 -.17 acres in anarea like this……
Yeah, high house prices based on land “values” are way overpriced. So are the dumpy old homes that the owner has let go down the tubes, but want the same price as the new stuff (the only thing of actual value being the land). Then there’s the actually nice stuff that the builder/developer just didn’t do any market research on to know what was realistic. It’s too bad that the competant (construction-wise) builders have to be stupid business-wise and go under, because heaven knows the shady crook big builders build crap quality-wise, but can hold out longer in a down turn.
Oh well. I content myself knowing that this downturn will be so long and severe that the crook builders won’t survive it either.
Heh, great story Ann. We have a few of those New Urbanist projects in the works here as well. And I’m sure the houses will all be greeeeeen too!
Her blog expects prices to fall, noting that a 630K asking price house just sold for 500K while the others just sit unsold at the 600K+ prices. Nor is she blond.
http://www.eileenlandau.com/template16/nextpage.asp?mnu=70625
“Would you buy real estate off this woman?”
Actually I would (if I were in the market). If you look at her blog entries she is a realist, and has been around the block - selling since 1976. In 2005, she was predicting the problems that we are seeing now. None of her entries are rah rah.
Klau began dropping the price and offered to cover the closing costs, but he is still the unwilling owner of two homes.”
“‘We bought the home in San Ramon for a lot more than I care to tell anybody,’ Klau said
I can’t speak for Naperville, but I can speak for San Ramon. I first moved there in 1992. Nice homes could be had for under $200K. In 1996, still around $200K. In 2005 when I left, they were going for WTF $1M. In 1996, I could have purchased one on my telephone company salary alone. By 2005, I wouldn’t touch one combined with wife’s salary. Hence, why we left. Mr. Klau, bend over - it is coming and coming hard. You could have rented some nice places in San Ramon and let prices fall. But noooo, you had to be a knife catcher. Good luck. Where is Bubbles the Clown when we need him. Assume JT position.
Bubbles is out cross-cutting Joshua trees, oiling and priming them for the big “thwunk”.
No oil for YOU!
“Mattingly said he is currently involved in a pending sale for $142,000 of a Northside home that sold last April for $175,000. ‘That’s pretty ugly,’ he said of the home’s plummeting price over just eight months. In this market, ‘You just have to get real creative’ to sell a house.”
Yeah, lowering the fuggin price is real “creative”.
Been looking at the “land” situation up here in the Jackson/Conway/Bartlett area of New Hampshire. Nothing is selling but asking prices are still 05 wishing prices as well. Used houses seem to be slow movers also but I have not paid that much attention to this part of the market. This area seems to be a long way from reality, not sure if anyone here really wants to sell their house/land or not? I can assure you that no one is going to be buying acreage property for the 30-100K/acre that is on the MLS.
OKAY! Notice that 50 of the houses in the Minnesota auction will be sold without a reserve price and without a minimum bid. I’m not inclined to be at the Minneapolis Convention Center Jan 26-27, but I daresay some of those houses are worth more than one dollar.
Minnesota: we have price discovery.
True price discovery may not really happen until the same unoccupied-from-birth house goes through at least three or four “naked” auctions. This is because these “naked” auctions will be propped up with shill-bidders.
Got 10% down?
I won’t build until I have 100% cash down. The whole system is rigged and I refuse to play any more.
‘If buyers are waiting for lower prices, now might be the time to jump into the market.’
Buyers are not waiting on lower prices. They are waiting on the lowest prices. By the time that comes around, the sentiment will be that RE is a bad investment and the crowd will turn away from buying homes. When the media starts reporting that news I’ll be looking to buy.
MSN money tells us how to lowball
That article quotes Jon Boyd, president of the National Association of Exclusive Buyer Agents.
Has there been discussion about the NAEBA on this blog? When the right time to buy eventually arrives, what do you think of using the services of an exclusive buyer agent? I’m thinking they may be realtwhores who put on a different uniform when the market changed to favor buyers.
There was a local buyers agent in Sedona that put out a mildly bearish weekly in the paper. When the news started getting bad, he just stopped.
Used a buyer’s agent back when I bought the Arizona Slim Ranch.
The plusses: He was quite energetic, and seemed to be clued in to the realities of the local market. (He was quite sympathetic to my need to NOT overpay for a property.)
He also pitched in and helped the seller’s agent do his paperwork. (The seller’s agent had never sold a house before.)
The minuses: The home inspector that he strongly recommended missed/didn’t tell me about things that have cost close to $3,000 to replace or repair.
He also didn’t seem to interested in staying in touch with me after the deal was done. I’ll admit that I didn’t fit the profile of his usual buyer, who is a purchaser of a luxury or golf course property, but sheesh! I might have given him a referral or two.
If he thinks a lot of buyers are going to do their homework he’s crazy. We have a whole bunch of them who didn’t and now they’re called sellers.
“Housing is driving the bus right off the cliff and taking most financial-related companies with it,” said Giddis.
Good quote from a guy at Morgan Keegan (sp?) firm
And when the financial-related companies go off the cliff the economy goes with it.
The financials created/distributed the money that created and financed the economic demand. When the demand cannot be created or financed then the demand will disappear, taking lots of jobs with it.
Go to cash.
If one more person tells me it is a great time to buy….I think I am going to throw up in my mouth. I guess a good timme to buy Countrywide as well then? We are in deep doo doo people.
You got that right.
I guess a good timme to buy Countrywide as well then?
That putz Ken Lewis seems to think so.
“Her company had hundreds more to choose from but couldn’t auction off homes from builders in bankruptcy or from those who owe their subcontractors too much, she said. Some properties they considered didn’t have clear titles.”
And here’s another way people are going to get burned. Clear titles. Everyone, when the time does come to buy, research that title. I can see that half the properties out there may have some problem because of investors, LLC’s, straw men, etc.
I thought the same thing. ‘nuther one to file under “law of unintended consequences.”
Where’s the logic here, couldn’t they have settled into a rental?
And there is your creative marketing strategy for a home seller, “This house comes with a clear title!”
“Agnes Kallon and Bai Turay, a Staten Island couple…have a combined income of $39,000 and six children to support. In 2005 they took out a mortgage for a $412,000 house with a low introductory rate, based on their mortgage broker’s assurance that they would easily be able to refinance when the rate went up.”
“But when their mortgage payment reset to $3,000 a month, far beyond what they can afford, that assurance didn’t hold up. ‘If we lose the house, what will happen to the kids?’ Turay told Reuters. ‘These brokers are profiting from other people’s misery.’”
They may have been lied to, but where’s the personal responsibility? And 39k with 6 kids?