Have An ‘Inappropriate’ Housing Bubble Observation?
Have any housing bubble observations this weekend? The springtime open house season is in full swing in the southwest. Here are some from the topics thread:
“Written by a Santa Barbara Realtor, ‘Many buyers are taking a ‘wait and see’ attitude. Now that a soft landing can be expected, with interest rates remaining favorable and the excessive pressure to ‘buy it now’ lessening, buyers can relax a little. They do need to understand, however, that prices in the Santa Barbara area are not going to plummet. Therefore excessively low offers are not appropriate.”
“How about a share the real estate listing that ‘gets your goat.’ Here is mine. It is a 1,336 sf box in the bad part of Westchester (LA, south of Manchester and one block away from LAX). The annoying part is that it was purchased LAST MONTH for 599K and now is up for 769K. No pictures up yet (looking forward to seeing what vast $170K improvement they made in a month), but I’ll be watching this listing closely, hoping that the flippers lose their shirts.”
“Phoenix now stands at 40,192. Leave your prediction for when we will hit 50,000.”
And some reports of builder incentives in various markets. “In Los Angeles County, sales of new homes in February were up by more than half over a year ago, a big contrast to the otherwise slowing housing market. Meanwhile, sales of existing homes are down 28 percent in February compared to the same period last year.”
“One reason for the disparity is that home builders have more flexibility than resellers in offering upgrades and financing deals to buyers, Patrick Duffy said. ‘Builders have more weapons at their disposal in terms of incentives,’ said Duffy. ‘It’s a really smart way for them to compete with the resale market.’”
From Arkansas. “Mike Robinson, a broker and realtor in Bentonville said, ‘It seems to me, we know that we are overbuilt now in new construction in certain price ranges in Benton County, primarily $250,000 to $500,000,’ he said. ‘The inventory that we have is sufficient to last for a number of months.’”
“Also, Robinson has noticed that resale home prices have crept up to almost parallel new construction prices in the last few years. ‘Not only should we see a leveling off of prices in new construction, we should also see a slight reduction of prices on resale houses,’ he said. Robinson has noticed an interesting phenomenon: Instead of dropping prices, builders are offering creative incentives to buyers and Realtors. Builders who own several houses would rather offer incentives and lose on one house, if it keeps prices up on the neighboring houses on the market.”
“According to the MLS, 21 new-construction homes sold or closed in Bentonville in the last 30 days. Four of those houses underwent substantial price reductions, for example, one house started at $236,900, then dropped to $210,000.”
In Las Vegas. “Steve Fait said he was able to keep the price at around $1 million because the costs were lower. The homebuilder bought the land prior to the 2004 housing appreciation boom. ‘You can’t build my home for what I did and as cheap as I did, the costs have already gone way up,’ he said. ‘People are getting a bargain because we are at the old (land) prices.’”
“As the National Association of Home Builders draws attention to the vast benefits of new home construction during April’s New Homes Month celebration, one thing is clear: while the record-setting pace of the last several years is leveling off, savvy consumers can take advantage of creative perks offered by many home builders today.”
“‘Understandably, some consumers are concerned about the housing market right now,’ said David Pressly, NAHB president. ‘But the recent decline is certainly no cause for alarm.’ Across the country, builders and developers have been offering home buying incentives including..price reductions and help with closing costs.”
“Therefore excessively low offers are not appropriate.”
HA!
The all-time best piece of real estate advice I have heard: “If you don’t feel embarrassed when you present your offer, you’re offering too much.”
Since when was stupidity a matter of pride?
Realtors in California have to present all offers in writing ,even if its just a telephone call with the seller.No realtor has a right to withhold any offers . Realtors can’t even delay offers because a real estate transation is considered a “time is of the essence” transation .
She’ll be saying it’s not appropriate to eat the supersize fries in a year as she serves you your big mac.
“Therefore excessively low offers are not appropriate.”
THis was a quote from Santa Barbara Realtor Lori Hoffman… RIGHT OUT OF THE REALTY TIMES website:
I think it is hilarious that Lori writes that it is becoming more of a buyers market (but don’t under bid too much!!) in Santa Barbara, but out the other side of her mouth she states a “Prices Rising” Trend! Oh boy, she’s coherent!
Things are pretty much stagnating in SB right now, and her March ‘06 entry looks pretty ignorant to anyone that has been reading the front page of the News Press lately.
I remember when the existing home price shot higher than new prices in Phoenix last spring. The press kind of said, ‘well don’t that beat all,’ and ignored the fact that builders were already putting the brakes on prices.
Here are some northern Arizona classifieds.
‘Gorgeous New Verde Santa Fe (Cottonwood) 4br 3ba 2,800+ sq ftHuge master with roman tub. Seperate library. Over 1/4 acre. Priced to sell $529,000 owner/agent.’
‘FSBO Villiage of Oak Creek 3/2, office. Reduced, Vacant Brokers 3%.’
‘PAGE SPRINGS NEVER lived in 2004 home. Ready to move in. Large master bedroom and bath. 3.05 acres. Room for horses $399,000.’
Several ‘reduced price, new price’ and one ‘Will reduce for quick sale.’ Many ‘owner/agents’. That 3/3 new home is still for rent in Jerome; $1,500/mo.
I hate it when people spell “separate” incorrectly. Maybe they don’t proofread their adverts, or maybe they’re just ignorant.
‘People are getting a bargain because we are at the old (land) prices.’
I read this as saying he undercut the builders who purchased later than him. More can be expected as the builders see things slow down and don’t want to hold until the next cycle.
Sorry to repeat a post from yesterday, but this report in the Real Estate / Business section of the Pomerado Newspaper Group March 30, 2006 paper seems to defy almost all other recent evidence I have seen. I must add that this is the first time I have seen the word “frenzied” in print to describe the SD real estate market since last summer. I will type the first couple of paragraphs for your viewing pleasure, but unfortunately I could not find the online version of this article:
“North County housing market still hot — Frenzied sales pace continues at Del Sur
Local housing industry experts have long decried the rumor of a housing “bubble” as fallacy, citing various economic factors that defy the projections of silicon-bust alarmists.
Presented to the industry in late January, the latest statistics on new and resale home sales and buyer tendencies appear to agree with the no-bubble camp. And recent sales performance at Del Sur, north county’s newest master planned community west of I-15 off Highway 56, indicate that in San Diego, the housing market is still going strong.”
The housing market is not a slowly leaking balloon, it is a bursting silicon bust!
“it is a bursting silicon bust!”
It should be silicone not silicon. Silicon is used to make microchips, silicone is used to make big breasts.
Maybe some of these FBs can get silicone injections to increase the size of their brains.
I like this one.
http://realtytimes.com/rtmcrcond/Nevada~Las_Vegas~rooseveltmompremier
Driving around NW Phoenix today I noticed more for sale signs than normal.
Expecting inventory numbers to pick up more speed.
BETTER THAN NEW: 1 yr. old beautiful (they use that word alot, don’t they?) split plan 3/2/2 w/ 12″ ceilings, (yes, 12 inch ceilings!) professional decor and lots of special features. Blah, blah, blah.
Yeah, I see alot of “beautiful” and “better than new” 1 yr. old houses for sale here with lots of granite, stainless steel appliances, and plasma tv sets here too and there’s supposedly no bubble here. Darn you housing bubble, why won’t you die? You, you, bubble, you spread your disgusting bling all throughout the midwest too? It’s like The Blob you have to freeze it to kill it. When will the madness stop???
I feel your pain. The spouse and I went to an open house for this condo in our neighborhood today. There were several names on the sign-up sheet and at least three or four other couples there, including one couple who were there with their buyers’ agent. The owners bought the place for $385K less than two years ago. Asking $729K now. I suspect they’ll get it. Damn you, bubble! Damn you to hell!
“Period: Post-War” What? Post war? Which war, the civil war? Ha ha ha ha.
Apartments in NYC are typically referred to as “pre-war” and “post-war”, the “war” being the Big One, WWII. Pre-war buildings tend to be better built, with more spacious apartments and more attention to detail, and are generally more desirable despite a lack of “mod cons”.
IF someone pays 700K for that, they should sign up for a clinical trial of the latest anti-psychotic therapy.
What a tiny condo. Did you notice the property taxes? That figure can’t be right. It may reflect what the present owners are paying, but if the place sells at this incredibly inflated price, I bet those taxes are multiplied many times over.
With a “view” of the other building no less. And, hey, wonderfully “stage” with IKEA furniture.
Ok….that was bad, huh. But the whole feel of the place doesn’t spell 3/4 million dollars.
Glad you stepped away, MsTerra.
BayQT~
stage=staged
BayQT~
We weren’t considering buying, we were just curious. We honestly can’t afford it anyway. We’ve been here long enough that we remember when that was an empty lot and those condos were merely a twinkle in some developer’s eye. The building was completed in 2004 (so maybe by “post-war” they’re referring to Gulf War II?) and I think it’s played a large part in gentrifying the block. A few years ago we talked to a realtor who referred to the street as “Crackett Street”.
I don’t think it was staged, just brilliantly de-cluttered. There was a wedding photo on the nightstand, so I’m guessing the couple bought not long after getting married, and possibly they’re selling now because they’re pregnant. I’m pretty sure it’s not a flip. Just a pair of greedy bitches.
The new bestseller, Freakonomics (which I highly commend) had a section on realtors and their pet terms (along with a convenient “what this really means” translation. The book pointed out that the Internet will basically relegate traditional realtors to the dust bin of history, since smart buyers no longer need to count on realtors for an “information advantage.”
Typical trivialization. Realtors will not always dominate all transactions for 6%, but people will still use them to find and market homes. You will understand a lot more about why as people start to get anxious to sell. People who can make deals happen will always be in demand even if the terms for that change.
“You, you, bubble, you spread your disgusting bling all throughout the midwest too? It’s like The Blob you have to freeze it to kill it. When will the madness stop???”
I like this. Especially the “disgusting bling” part.
I found this in a Week Standard Article. I find it interesting given the source.
“Consider the price-to-income ratio (above, right), an obvious measure of affordability. This ratio has reached an unprecedented level in the bubble markets. While this ratio hovered around its average of 4-to-1 for the past 30 years, it has zoomed to nearly 8-to-1. The current figure is 3.6 standard deviations from its average level, which, if the data have a normal bell-shaped distribution, means the odds of the price-to-income ratio reaching this level would be less than 1 in 300. In other words, it is off the charts.
The National Association of Realtors recently produced an analysis of about 100 different metropolitan areas and found prices justified in every one. The NAR concludes it would practically take a depression for home values to drop 5 percent. But this is an awfully rosy scenario from a group that routinely warns of 15 percent declines should Congress even tinker with the home mortgage interest deduction.”
You can see the NAR talking points show up in most RE related articles. The Weekly Standard whose audience probably does not benefit politically from a housing bust during the 2006 and 2008 elections called them on their BS.
Notice how the realtors never talk about affordability, interest rates rising ,investor driven fake demand ,bad loans and foreclosures, and excess inventory as all being signs of a down turning market. They have had 6 months of evidence of the declining market . What makes them prophetic.
Let time be the judge. I’m content to wait.
I guess I have made it clear by my posts that I am not happy with the real estate agents and the lenders . This outright attempt to
mislead buyers as to the market conditions by realtors is out right deceptive. Buyers should boycott the real estate industry .(I’m not kidding ).
Buyers should boycott the real estate industry .(I’m not kidding ).
Buyers also need to retain their own “independant” appraiser and not the number hitting hack in the hip pocket of the lender and real estate agent. Remember-Despite the fact you are paying an “appraisal” fee in your closing statement-the actual “client” for the appraisal is the lender, even if payment is COD. Plus many appraiser’s include no “third party reliance” disclosures which futher shuts the door.
From the website of a real estate firm in Washington, DC:
“April is International Open House Month. Celebrate our 100th anniversary all month, at Open Houses everywhere. It’s our biggest Open House event ever - and your best chance to see what’s out there if you’re thinking about a move. “
Charlotte - I mainly just watch my subdivision, and the next two closer in to town. These are 1960’s ranch homes and split levels.
Inventory has risen the past few weeks, but I do see homes going pending and then taken from the MLS. I have not yet seen any homes listed under last year’s prices.
Neighborhood chatter indicates they’re being patient and getting close to asking price.
Here’s one Rudelkarl will like. This is a neat building and Ron Womack is a very good architect but 549K for a one bedroom condo in DALLAS!!!!! Are they insane??? Where do I start? Anyone with 500K for a place to live in Dallas has almost unlimited choices very close to that condo in a SFH that is much larger. Secondly, the kind of people who live in places like that (very young, mostly) can’t afford 529K. This is the height of insanity.
http://tinyurl.com/lnrhs
No way!!! That has got to be a joke.
Wow! The old live/work loft deal. $500+ in Dallas. Crazy. I guess the Historic Landmark tag is supposed to justify that?
BayQT~
that is a very cool bldg.
I agree. I think it’s a beautiful loft. Lofts usually have only one bedroom (the “loft” part), but the floorspace of the entire unit is quite large. Yes, it’s horribly expensive, but a better deal than most of the stuff we’ve been seeing of late. Try checking these out for a laugh (scroll all the way down the page; you don’t want to miss anything):
http://overvalued.blogspot.com/
It is kind of nice, but also a huge showcase for how far “loft” has come. In the distant past a space like this would have been redone with minimal fixtures. Not only one bathroom maximum, but possibly just the one sink. Fancy materials for the floors, windows, and counters are all recent luxuries. Not to be rigid in thinking, but this really is kind of like “improving” shaker furnature by covering it with mother of pearl or gold. The utility which was always the whole point ends up being lost.
I don’t know. I remember lofts back in the ’80s that were very done up. The cost of heating and cooling can be extremely high: sometimes more than a thousand a month for a much smaller loft than this one because of the high ceilings, tall windows, and complete lack of insulation. I wonder if architects have found an answer to that.
If I were spending a half million dollars, I would definitely want a really nice kitchen and bathrooms (plural), but one bedroom would be fine.
I’m not sure, but I believe this loft was featured on HGTV. If it’s the one I remember, it’s even more beautiful than it looks in the pictures.
Think of paying for cubic footage rather than square footage - it starts to seem a little more reasonable that way.
Actually, it does. The height makes it all look very comfortable.
Charlotte is like that, too. $200K will be a nice 1600sqft SFR on 1/4 acre, in a reasonably good neighborhood. $200K isn’t enough to even buy a new 1 BR condo in uptown.
More anecdotal evidence of prices coming down to earth…
A few of you may remember the Arizona Republic interviewing a couple in North Phoenix several weeks ago (maybe two months ago) about how the housing market is slowing down. Someone was able to find the MLS number for this home. I have been tracking it ever since. It’s still for sale and the price keeps coming down:
MLS #: 2434945
Price Reduced: 01/19/06 — $463,000 to $449,000
Price Reduced: 02/05/06 — $449,000 to $434,900
Price Reduced: 03/08/06 — $434,900 to $419,000
Price Reduced: 03/29/06 — $419,000 to $410,000
Two months ago, they were really nervous. I can imagine how they feel today.
You mean this house?
http://armls918.vstone.com/detailsarmlsres_44549.cfm?startrow=61&&list_id=2434945&PageID=44560
I don’t know what they feel but I feel nausea when I think about paying 410K for that POS.
That is a sorry drip drip drip of drops.
I know that zillow has its problems, but what part of this home’s sale history could be true? And, no, that wasn’t a typo…there are 2 entries for August in the same year.
5/17/2001 - $198,000
8/22/1996 - $161,406
8/21/1996 - $31,415
BayQT~
The 31K was just the lot sale. I suppose the 161K would be the sale pending construction of the house.
If this house rents for oh… $1150 a month, then a rent multiple of 120 (I’m being generous) would yield an investor’s value of $138,000.
Home owners often will pay more than an investor. Let’s give a 25% premium for an owner occupant. So I suppose $172,000 would be a supportable, rational value.
Keep dropping that price, folks.
Could it be a mobil home that was converted to “real property”?
The 30k number looks like a foreclosure purchase by maybe a banking insider, and then a flip to a spouse or friend. Happens so quick nobody notices. It’s like insider trading in the stock market.
I too have been watching this house since it was posted in the AZ Republic. Original article: http://tinyurl.com/j7wvr
It must be bleeding them a little bit if they are dropping prices every 30 days or less. I wonder if they are making two martgage payments yet.
When I would see red tag or Filene’s Basement clearance sale items, you could get some pretty good deals if you watched, waited, and timed it right. Of course, they would drop the price 10% every week or 2.
Don’t they get it!!?!??!! If you were looking for a coffee maker that cost $41.90 and the store advertised a BIG sale with a flyer saying the coffee maker was now ONLY $41.00, people would laugh!
THAT AIN’T NO SALE.. Wake up, people! And buy some Degree antiperspirant, cuz you must be sweating big time.
Wow, down more than ten percent. I wonder if that’s “fairly priced”, i.e., based on local comps. What if the comps are dropping that quickly.
And what if the true prices of new homes (i.e., the “sales price” of the new house minus some portion of the “incentives” they’re all adding in to make the sale), while I’m at it, are dropping as fast. Some of the homebuilders have a profit of no more than 15% of the sale price. If things are collapsing that steadily in Phoenix and elsewhere (e.g. Las Vegas), we really could see more than one homebuilder report a negative-earnings quarter after the spring selling season is over.
http://www.springssearch.com/browse/IDX1_ViewRecord.asp
I’ve been following RE trends in Colorado Spring’s prestigious Old North Side. Inventory is rising slowly but steadily, and many of these homes, especially at the high end (400K plus) are sitting on the market for months. Also the usual trick of pulling them off for a couple of months, then relisting, usually at the same price as before. At the beginning of the year there were 14 properties for sale in my search range (4 bd, 2 ba), between 275K- 10M; now there’s 25. I’m betting that by September there will be 50 or more, easily. This doesn’t count the FSBOs.
Colorado Springs has been completely taken over by fundamentalist Christians, many, presumably, awaiting the heavily advertised Rapture. Since they won’t need houses or money should the Big Event arrive, perhaps you could talk them into giving you all their homes as a demonstrating of their faith.
Some New Math on Homes
any one read this? I could not access the formula they use. Here is the kicker.
They argued that the value of a home is determined by the rent it could fetch. Calculate the future rents, subtract mortgage payments, taxes and other costs, factor in a good annual rate of return of 6 percent or more, and one should be looking at the proper price of a house or condo.
Their bottom line was: “Buying a house at current market prices still appears to be an attractive long-term investment.”
Speculating about bubbles — their cause, their longevity, and indeed, their very existence — occurs whenever there is a rapid rise in asset prices. When dot-com stocks pushed the stock market to record highs in the late 1990’s, many people tried to explain — or justify — the high prices of the stocks by talking about how the Internet was creating a new economy, one that worked by different rules or needed valuations that did not depend on earnings but on eyeballs viewing Web sites or the “stickiness” of those eyeballs. Those justifications were proved false by the technology meltdown.
They concluded that not only was the Los Angeles region not in a bubble, but many markets that others were calling overpriced, like Chicago or Boston, were probably underpriced.
“Homes they surveyed in San Mateo County, south of San Francisco, were, however, overpriced by about 54 percent.”
They sure have that right!
“But you can’t time the market,” he said. “If you are a house flipper, we aren’t talking to you.”
Market timer does not equal house flipper. Those of us who are forgoing a purchase are making the simple calculation that it’s cheaper to rent than buy.
“factor in a good annual rate of return of 6 percent or more”
This is a lousy assumption for my neck of the woods and will be for the next 5-10 years. I wonder what their assumptions are for returns on alternative uses of cash?
Yeh, when I did a rent v buy cost analysis for apartments in San Francisco I came the conclusion that they were overpriced by 40-50% on that basis, so I’m not surprised by this figure for San Mateo (or anywhere else in the Bay Area, for that matter).
Calculating What to Pay for a Home
The pics are now up on ziprealty for the Westchester house mentioned in this topic. The updated kitchen LOOKS like it was done in a month. To recap, this property was purchased last month for $599K and is now listed at $769K.
Here’s the link:
http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=06_020325&page=1&property_type=SFR&mls=mls_so_cal&cKey=8tg9pwd5&source=CLAW
Absolutely disgusting….
To Karen,
Damn woman, did you see the quotes from the Realty Times you flagged/
” For this area, the average sales price is $373,595.12 for a single family residence of 1940 square feet. As of January of 06, 42 homes were sold with an average $ per square feet of 187.36.”
Where did this guy go to school? ($373,595 and 12 cents and $187 and 36 cents)….wow, love the insignificant figures here.
My guess is Nevada, our school are world class. (NOT)
A co-worker bought about a year ago in Goodyear, AZ. Making two payments now, but won’t lower the price. 3 bed/2bath, 355,000. Losing his ass. Also, what is with the re-listing of property? I have been looking in the 95776 zip on ziprealty, and houses that were on for 150 days now say listed 2 days. Same price. Are we not supposed to notice?
OT, but speaking of co-workers, had another buy a house (cash) in Justin, TX, and another buy in Bullseye,AZ. Anyone know what these towns are like?
He’s getting in touch with his inner shitkicker.
Ziprealty showing 40,068 listings for Phoenix area!!
Phoenix hits 50,000 May 15th, 2006