Local Market Observations!
What do you see in your local housing market this weekend? Falling prices? “The balance of power in the housing market has shifted from the seller to the buyer, according to a new report. According to Daft.ie’s Review of 2007 actual prices of property fell consistently throughout the year, while asking prices remained the same. The average asking price for a property in Ireland is now €353,000, while prices in Dublin stand at €449,266.”
“By January 1, 2008, there was an average of 62pc more houses on sale around the country than in January of the previous year. The capital saw an increase of almost 65pc during the year, while south-east Leinster saw an increase of 87pc, and commuter belt counties saw an increase of 76pc.”
“‘Sellers can no longer expect to achieve 5-10pc more than their asking price, as they might have up to late 2006,’ said economist Ronan Lyons. ‘Now, at the start of 2008, sellers are typically expecting 5-10pc less than their asking price.’”
Signs of overbuilding? “Building permits for new homes across the Midlands fell last year for the first time since 2001, pushed by a glut of homes in Northeast Richland, according to a report out Friday.”
“‘We’ve got a little bit more inventory, but I don’t think anybody is in the panic mode,’ said George Delk, who has been building homes in Columbia for 24 years”
“Delk said economic advisers have been telling builders to slow down for the past couple of years. ‘But none of us wanted to listen,’ he said.”
Or foreclosures? “Bankruptcy lawyer Robert Stack said Friday he felt a little bit like a funeral director in 2007. Business was really good and that’s great for him, he said, but his prosperity meant sadness for many others.”
“Foreclosures in Waukesha County rose about 41 percent in 2007. The 41 percent rise, from 606 foreclosures in 2006 to 854 foreclosures in 2007, was less of an increase than the 51 percent jump recorded in Milwaukee County.”
Or legal matters? “The town of West Tisbury has filed a lawsuit against a mainland subprime mortgage company that loaned more than half a million dollars to an affordable homesite owner in town who had no ability to repay — and then foreclosed on the property.”
“The town claims that Fremont loaned Mr. Cote more than $580,000 on a lot that was permanently restricted for affordable housing purposes, knowing that he had no ability to repay the loan based on his income and credit history, and that he could not sell the lot to satisfy the obligation due to the restrictive covenants.”
“‘Fremont (and thereby Saxon) knew, or should have known, that Cote’s loan, absent prompt refinancing, would fail and result in foreclosure,’ the complaint states.”
“New York prosecutors are investigating whether Wall Street banks withheld information about the risks stemming from subprime loan-linked investments, The New York Times reported on Saturday.”
“Charges could be filed as soon as the coming weeks, the Times said. Connecticut Attorney General Richard Blumenthal told the newspaper he was also conducting a review and cooperating with New York officials. The federal Securities and Exchange Commission is also investigating, the Times said.”
“Two more defendants tied to the LHS Mortgage Inc. fraud scandal, one of the largest mortgage fraud operations recently uncovered in the Twin Cities, are going to prison.”
“Jill Lehn of Prior Lake, was sentenced in federal court Thursday to two years in prison and three years of supervised release after pleading guilty to one count of wire fraud and one count of money laundering.”
“Lehn’s sentence was reduced because she cooperated extensively with the broader investigation, which resulted in several other prosecutions, Frank Magill, acting U.S. Attorney noted in a release Friday.”
“Lehn was the most public of the defendants, writing a detailed story for Minnesota Realtor magazine last year. It expressed regret and explained how as a closing agent, she participated in preparing sham loan documents in more than 60 real estate transactions during the housing boom between 2004 and 2006, passing out the payments hidden from lenders.”
Looking for a bargain investment? How about the Irish stock market? It fell 26% in 2007, making it one of last year’s worst performers, and now sits on a p/e of 9.5, which looks ridiculously cheap.
At least, it would look ridiculously cheap if it weren’t stacked to the hilt with builders. Not to mention banks that would make Northern Rock look like Ebeneezer Scrooge & Co., so lax have they been with their lending criteria. “No deposit? No problem. Here’s a 100% mortgage,” has been the motto of credit control departments across Ireland for several years now.
But that generosity is beginning to bite. The economy is slowing, credit is scarce and amateur tycoons bragging about their property fortunes, an integral feature of any swanky Dublin watering hole for several years, have slunk away into the rafters. The housing boom is over. And it could drag the economy with it…
The Irish economy loses its lifeline
In 2007, 78,000 homes were built in Ireland, says Allied Irish Bank (AIB), against 88,000 in 2006, putting a minor dent in the diary of many a builder up and down the country. But it’s not just bad news for plumbers and plasterers - it could batter the rest of the economy.
House building accounts for about 14% of the Irish economy; and for every 10,000 fewer homes that are built, almost 1% is shaved off the economy’s rate of growth. Considering that AIB reckons 50,000 homes will go up this year, that’s a sizeable chunk. Davy Stockbrokers is even more downbeat, putting it at 45,000. The broker believes that economic growth will slow to 2.1% this year, from 5.1% last year.
That’s the slowest pace since 1993, as Ireland’s finance minister, Brian Cowen well knows. The Irish tax take for 2007 fell a full €1billion short of the Irish Department of Finance’s expectations, resulting in a €1.6 billion deficit against a near-€2.3 billion surplus in 2006. The slowdown in the property market, and the drying up of the taxes that go with it, are chiefly to blame.
And the slowdown is only going to get worse. House prices in Ireland fell 4.7% last year, 9% when you take inflation into account. And as we all know, no one wants to buy a house if they think it might be cheaper next month than this. That’s resulted in a large build-up of houses for sale, putting even more pressure on prices.
“Sellers can no longer expect to achieve 5-10% more than their asking price as they might have up to late 2006,’ said Ronan Lyons, an economist at Irish property website Daft.ie. “Now at the start of 2008 sellers are typically expected 5-10% less than their asking price.”
http://tinyurl.com/2ultf2
Nice to see the bubble is not “geographically challenged”.
You can throw Poland and Australia into the bubble basket. Have relatives in both places and the exact same thing happened/is happening there.
Gee, you don’t think the root cause of all of this is a corrupt western financial system where those who make the rules and control the game knowingly steer economies into bubbles, reap their gains at the right time, and then let it pop? (wash, rinse, repeat)
Nah, that would be a conspiracy and we sheep are taught by the MSM and fellow “police sheep” to say “bahhhh” whenever that word comes up.
$heep Dip
The report from dreary Seattle (40 and rainy…surprise!!!) is that we have transitioned from “Seattle is special/immune” to “Seattle prices may fall a little/stay flat but we have a great local economy”.
Ads for new condo developments that are finally ready for purchase routinely say they are already 90% sold so “hurry over”. However, people who actually live in the area routinely say that only about 10% of the units appear to be occupied. Of course since people are basically honest I am assuming that these reports were just mistyped and they the word “sold” should have been “unsold”.
Even Zillow which is a “lagging indicator” based on old sales/comps is showing the roller coaster has nose over and is now pointing down for most areas in the county.
I am sticking to my prediction of 20 to 50 percent price decreases (avg 33% depending on area/runup) from top of bubble to bottom in 2013.
But we have a secret weapon up here whose sales have purposely been kept low…waiting for the right moment…the ZUNE!!
Sold probably means, sold to pre-construction speculators who never had any intention of living there and are now stuck with the unit since nobody else actually wanted to live there either.
SeattleMoose,
watching Belltown condos (98121) and there is some price reductions (at least by redfin emails). Interestly, the profile pictures seem to be from the builder, so i think it is just flippers that are offering reductions. Cant wait for the downturn? All those big spenders in belltown bars/resturants might be in trouble. Can wait for some of those pretentious idiots are flushed out
The report from dreary Seattle (40 and rainy…surprise!!!)
Hey, Moose, it was nice yesterday. I even saw that glowing orb in the sky, what’s it called again?
The fraud was so easy. The big problem is the paper trails are extensive. Lenders have loan apps, sellers have closing statements and the county has recorded documents. Unless you are willing to live on the fly for the rest of your life, it is very likely you will do jail time. The fraud investigators are just gearing up. They will spend years bringing people to justice. It is happening more and more. It is unfortunate the law works in hindsight, because a lot of this could have been prevented with a little awareness. Just reading Ben’s blog would have given many lawmen a clue.
Jill Lehn is off to jail. Now for the next 1,000,000 fraudsters. Just wait until all the lenders ramp up with private bounty hunters to get some of the proceeds return. $100 billion reasons for a whole new industry.
Guys named “Moose” and “Dog” will be the new “Masters of the Universe”.
Is there any chance that the proceeds of fraud bounty hunts could revitalize the lending industry into a reconstituted version subject to the rule of law? (I know this might be wishful thinking, but what’s wrong with wishing for a better world?)
I live in Sammamish, Washington — a suburb of Seattle right next door to Redmond (home of Microsoft). This is an an area where the median household is over $90K and median home prices around $450K, bolstered by plenty of dot-com money from Amazon, Microsoft, Real Networks, and a host of smaller companies.
For the last year I have seen a steadily increasing number of small office and retail storefronts for rent.
Earlier this week my kids came home from the nearby mall (the Redmond Town Center) and reported that 4 or 5 of the larger retail tenants were closing up shop. This will be the first time that I’ve ever seen any vacancies there.
On the bright side, my RE agent wife is still keeping busy and just sold her first house of the new year
.
I have tracked listings and sales in our community closely since we moved here in 2005. It has been dead for over a year except for the high end. But now homes in all price ranges are starting to sell again. No tidal wave of course, and inventory is still high. Realtor friend says calls from potential buyers have definitely increased.
Local Observations from NJ:
Jersey City: Some of the large condo towers that have been built here in the past few years are being turned into a combination of rentals and condos. Other buildings are simply sitting with many empty apartments. Hovnanian has been a big builder in this area, a couple of months ago one of their 1/2 built buildings caught on fire, the Fire Department was able to put it out before the more than a couple of floors were damaged. I am sure the Hovnanian people wish they would have let the fire burn.
Middlesex County: I have relatives in the title business. They tell me that from the end of 2005/beginning of 2006 that their revenues are down about 70%. The strong title companies are letting people go, the weaker ones are going out of business.
Jersey Shore: I have a friend who has been trying to sell a house for about a year and has dropped the listing from $890k to $799k. The most recent offer was for $100k under asking, which was declined.
Even with all this I don’t get the sense that the magnitude of the problems that the real estate market is facing have completely sunk in with most people. I recently forwarded an article to a friend who lives in the Raleigh area about the increase in foreclosures in NC. He was stunned, for some reason he was under the impression that “It was different there”.
The local classifieds show houses asking way under appraisals, but none are moving, apparently. And I have had people mention recession, un-provoked. It must be getting down to the ground level here.
There is a multi-page spread in a regional lifestyle magazine, with dozens of golf course mcmansions listed, most just under a million. I can’t imagine what the carry costs must be, and there just isn’t a job pool in N AZ to soak these up. I wouldn’t even touch these at a fire sale, even tho most look really nice.
And the rental situation is looking flooded. IMO, late 2007 was when the ceiling fell in on this housing market.
The vacation condo market in Puerto Penasco, Mexico (about 4 hours south of Phoenix, on the tip of the Sea of Cortez), seems to be on the edge of the precipice now.
Many of the condo owners used second mortgages on their properties in Phoenix and Tucson to buy the condos in Puerto Penasco. Being speculators (basically) they expected they could flip the condos for big profits when the sales prices shot up.
But that’s not happening now. Sales have stalled, projects are being delayed (or mysteriously fading away as fast as they were proposed), and existing owners are now panicking. And why shouldn’t they? Their primary residence in Phoenix is upside-down, and now their vacation home is upside down. For the first time, you’re seeing one-bedroom condos (like those at the Senoran Sea or Senoran Sun condo developments) list for under $200,000.
But if the condo owners think it’s bad now, I’m afraid it may get a lot worse. I could see a lot of these condos eventually dropping to, say, $150,000 or even $125,000 for a one-bedroom. Pretty nasty fall, t’is.
San Diego County here. Ben reported, as did the San Diego UT, that prices in our 66 Zip codes were down in 65 Zips. Hardest hit: South Bay (e.g. Chula Vista and environs). I live in an eastern but close-in suburb. What I am seeing is people in my neighborhood taking their houses off the market. I guess they don’t HAVE to move. There is one house that has been for sale for months but that’s because the elderly owner died and the kids evidently don’t need the money.
My 80-something dad lives in another eastern, close-in suburb, with a slightly different situation. Elderly owner of a four-bedroom died, kids tried to sell it and couldn’t. They rent it out as a “mini-dorm,” which is a very contentious subject in SD right now. The house isn’t even that close to San Diego State — maybe 4 to 5 miles — but the tenants are driving other residents crazy. Many of these people, like my dad, bought their houses new in the 1960s.
I live in San Diego, too (PB). We have a neighbor who once every two or three years rents out his place to NINE 19-22 year olds from Ireland. And his place is a shade over 1,000 sq. ft.
It’s insane. There were kids sleeping (and sexing it up) on mattresses in his garage.
That is truly gross.
Hillary’s $30 billion housing bailout:
http://www.politico.com/news/stories/0108/7842.html
It’s crazy how *they* (pols) can come up with all kinds of plans to do *whatever*, but they never say where the money will come from. Of course, it will more than likely be found disguised as taxes and fees of some sort. Anyone with a real brain, who actually uses it, can see that ANY funding plan as part of a campaign is ludicrous, especially in light of our $5(or $9, depending on resource) TRILLION national public debt.
Anyone seen this? Death and Taxes 2008 poster
http://tinyurl.com/yrsx65
I just came across it today. Apologies if it’s been posted before. But, hey, it would be cool to look at it again.
BayQT~
“disguised as taxes and fees of some sort”
Leading version of this: Create mortgage guarantees from thin air, and claim they will cost the taxpayer nothing. The guarantee will encourage lenders to make loans they otherwise would not make w/o the govt guarantee, and when and if the loans go into default (because of buyers purchasing homes they cannot afford, for instance), the taxpayers get to pick up the tab for the unfunded liability.
It’s nice to have the luxury of promoting irresponsible bailout proposals on the campaign trail, without any worries about where the moneys will come from to pay for them (or even whether they are economically feasible).
Northern VA report
Condos in Ballston not selling - have a friend who put his condo on the market nearly a year ago. Lowered the price a couple of times but no sale. Now needs to get out and a real estate agency is offering to rent the condo for guaranteed 3 yrs at market rate (a loss for the owner). This is a prime location next to metro, etc. etc.
Hey dc_renter,
Can you shed some light on Woodbridge (Prince William County)? How is the market holding up there?
don’t know, but if Ballston is suffering….I can’t imagine Woodbridge is holding value.
newbie:
http://www.novabubblefallout.com
Yeah, and there’s still more condos in the Ballston area that are coming on line shortly.
I did notice that a house in my neighborhood (on Glebe Rd, between Hwy 50 and Columbia Pike) that had been on the market for at least 7 months now has a “Contract Pending” sign out front.
I mention this only b/c there’s about 8 houses for sale in McClean, Arlington and Fairfax areas that I’ve been keeping an eye on for the last several months, and this is the first house of those 8 that has sold.
Did you guys see this? :
http://money.cnn.com/2008/01/11/real_estate/cleveland_lawsuit/index.htm
I having been keeping up lately, so this might be old. We expected the lawsuit phase, but did anyone expect cities to sue the lenders?
‘haven’t been keeping up’, that is.
May their efforts spawn 1000 imitators.
Of course the cities would start the lawsuit phase, did anybody expect otherwise?
And if the city loses this lawsuit, who do you think will be paying the costs? The taxpayers that live Cleveland and possibly the state of Ohio.
A milestone in the NY Times Sunday RE Section — they finally dip a teeny toe into explaining the RE market — how it was OK in 07, but may not do so well in 08:
http://www.nytimes.com/2008/01/13/realestate/13cov.html
They gloss over the net outmigration in the city, and the simple disconnect between how far off the median income (even in manhattan - at 70k a year) is from affordability in their predictions that the market won’t fall by so much, even as they concede prices in some boro areas have fallen by as much as 15 pct.
Also their NYC forclosure figures cited from PropertyShark - 607 in Q4 2007 seem to differ wildly from figures cited by NEDAP (neighborhood economic development group):
The damage from the credit crunch is spreading beyond the Street. New York City foreclosures rose dramatically in 2007, to an expected 14,000 compared with last year’s 9,000, according to the Neighborhood Economic Development Advocacy Project. The
epidemic of lost homes is worse in Brooklyn and on Staten Island.
14,000 would average to more than 3000 foreclosures per quarter, and in a city where only about 1/3 the citizens can afford buy instead of rent that is a significant number.
I have been avid reader and believer. I always thought that when renting and buying became more in line, it was time to buy. I will live in Manhattan for another 5 years (at least). For family reasons I need to get a bigger place. I looked at a couple of places to rent (2 bedroom—$4000 to 4500) and then saw a few coops to buy which were around 800 to 850k (FSBO). After interest deduction, my monthly mortgage payment would be close to 4200k with 20% down. I still believe we will have a correction, but given my time horizon–what do people think? Still a very bad idea to buy? Renting and buying are definitely not in line when you think of new developments, but for older prewar co-ops, I have been seeing some reasonable deals. Any thoughts? I appreciate thoughts, advice, commentary.
Best,
Sam
Hi Sam, I think the keys to whether it’s a good time to buy are
1. Can you afford to carry a large mortgage (of 600K plus in your case) for a very long time? Factoring in that you most likely won’t be able to tap any additional equity?
2. Can you afford to take a loss if you have to sell in a couple of years and the market is down?
Even if NYC’s market stays stable to flat, the boom market is over — and homes can’t be viewed as a investment, merely as a place to stay. If your goal is only a place to lay your head, and you can afford to pay off a large mortage, or loose a bit if you have to sell, then buying might be a fine idea.
“2. Can you afford to take a loss if you have to sell in a couple of years and the market is down?”
THAT’S the rub. Even though I’m seeing the mortgage to rent gap close quite rapidly here in Central California on some isolated offerings, I’m wondering how big of a $$ hit I’d take if the deteriorating market and macro economy says I need to move in a couple years.
DOC
How secure is your employment / income ? What if you lost your job and got a new one at 70% - 80% of current pay, would you be ok ? What if you had to take a job(s) you hated because you had a mortgage ?
How about 50%? If you’re lucky. I remember how awful the recession was around 2002/2003. High level mgt were thrown out of their jobs and couldn’t find comparable work. Then the housing boom roared in and poof! the horrific recession was “gone.” Global competition plus everybody and their brother and sister in the workforce (mom, dad, teenagers) means there just aren’t enough jobs to support everybody. The housing fiasco temporarily “fixed” this but now we’re faced with an even bigger mess. JMHO.
Sam.
I lived in Manhattan when it tanked last time…in the early 90s.
Do yourself a favor and wait at least 6 months…there is so much new condo construction coming online, and the market is really just in a holding pattern right now. A lot of those unsold condos will end up as rentals, and I’m willing to bet the prices will come down.
But buy in this market now?? Give yourself some breathing room–the deals will be out there, but not yet.
Doesn’t look like you are including co-op maintenance in your calc- that will tack on a lot to your monthly payment, even if a portion is deductible. Also, make sure you’re considering the barriers to exit- e.g. the often lengthy board approval process your buyer will have to go through (during which you’re still responsible for the mortgage and maintenance even if you’ve moved on) and the transfer tax (does that still exist? It’s been a while since I’ve lived in NY).
Those are great points NC girl! Especially considering the recent spikes in maintenance –taxes and insurance, and water bills, went way up in NYC recently, and they sure won’t go down if the flat market isn’t putting any more dollars in the city/state’s coffers. And I recall the co-op problems of the 80s, when prices were discounted like crazy to reach qualified buyers — but sometimes the qualified buyers just weren’t there– so apts stayed empty or were sometimes rented out against the board rules.
Another point would be the opportunity cost of what you could do with the 200K downpayment. In CDs at 5%, that would be $10K annually, bringing your yarly rent down from about 50K to 40K, or $3,333 monthly. Of couse, you would have to pay taxes on that money, but it still helps a lot. You could take a RE sales course for 150 dollars and pretend to want to change careers, but really you would have access to the real MLS and find a sweet rental for your family, saving even more. Or just develop a good working realationship with a re agent who will look for a good bargain for you.
Another point is that when renting, it is much easier to move if you get “the neighbors from hell”. You don’t want to be stuck in a place you can’t sell in a down market. In a tough market, buyers will be checking EVERYTHING, stopping by at night, talking to other residents, etc. I needed a bigger place, too, in 2005 for my family. So I sold my house I owned for 12 years and rented a bigger one, in a nicer neighborhood. I became a re agent and found the listing on the MLS. It’s been a really sweet deal for 3 years now, and the landlords are a very nice couple who we exchange Christmas presents and cards with. Really nice. Also saved us about 27K so far. To top it off, I don’t owe anyone a dime and have money in the bank. Sweet! No car payments, credit card balances, no mortgage, all the bills are paid and housing prices in this area (Suburbs of NY) just got a 100K haircut. And we can move anytime we like. Renting is good!
Also renting seems to be better than what sam is finding in nyc - if you check out the listings - 4 grand or a little more can get you a luxury 2br - I doubt you’d be able to get same kind of luxury for 850k
Upstate South Carolina (Greenville). Things still seem pretty normal here, restaraunts and stores are still crowded, realtors and mortgage people not euphoric like last year, but apparently holding on ok. People that know say the high end (over 375K) has died but homes on the Eastside (best side of town) priced nearer the median ($200K) are holding up due to people moving from other areas and focusing on affordability. LOTS of inventory in the further out exurbs (Simpsonville) and definite price reductions occuring there.
Ultra local observation from Chicago.
Came home from a walk and found a posting for a 2 bedroom unit’s open house in my lobby - not very remarkable except for what appeared at the bottom in big bold letters, underlined too:
CASH BUYERS AND BUYERS WITH COMPLETE BANK APPROVAL ONLY!
Things getting a little tight?
I just came across a condo in Newport Beach that was sold in January 2007 for $1,300,000. It’s now on the market for $795,000. That’s a huge loss! Yes, it’s across the street from Newport Harbor HS, but still, it’s in a nice area in a coastal region that we’re all told is immune.
Spoke with a friend of mine who is a realtor in the Inland Empire. (or perhaps was a realtor, because he can’t sell anything and is looking for other work). He says it is no longer possible to get loans there except with 20% down. Given that the IE is weighted towards first-time buyers, that implies a long more crash to come there (although he disagrees).
ATLANTA
7500+ homes were foreclosed on in November in the 13 county Atlanta metro area. That’s right, more than 7500 in ONE MONTH.
New home builders are not paying their subcontractors. One sub I know is owed $150K for HVAC work. Another sub that is in the foundation business has not been paid by builders, and now cannot pay for material. The concrete supplier has liened all of the houses that this sub worked on, even some that were already sold by the builders. For those who aren’t familiar with construction loans, the foundation work is part if the very first construction draw a builder gets, so if builders can’t pay the first sub on the job, it’s pretty bad out there.
As to the drought, our wonderful Governor Perdue (aka the Chicken), came up with a plan for 11 independent water shed areas in the state, to manage the water supply. All this will do is add another layer of bureaucracy to the mess. Can you say “infighting”?
My wife and I spent a few days in the Houston/Katy area last week on vacation visiting friends. A couple who is one of our best friends lives in Cinco Ranch which is a monster-sized master planned community in Katy. For those not familiar with the area, Katy is is a large upscale suburban sprawl area about 30 miles west of downtown Houston. Think Plano Texas. Median household income is probably in the $100,000 range.
Our friend are having a new 3500 sf house built in Cinco Ranch that will cost around $370 grand and they don’t plan to put their current house on sale until mid-Spring…perhaps April. Their new house is supposed to be ready for occupancy in June or July.
I was a bit shocked that they’d be buying/building before their current house (a $180 grand type place) is sold. But they seem confident that it will sell quickly. I’m not sure if their agent is serving them koolaid or what. She’s a doctor and he’s a software engineer so they can afford 2 mortgages easily. But still….
In any event, while the girls were out shopping I spent a couple hours out driving around looking at neighborhoods and real estate. I was expecting to see lots of for-sale signs but was rather surprised to not find very many houses for sale in the Cinco Ranch area. Many times I would drive for block after block without seeing a singe for-sale sign. There certainly didn’t seem to be any more real estate signs out there than the last time I was in Katy a year and a half ago. And I didn’t see any signs at all of a real estate meltdown in that particular part of the Houston metro area.
I have lived in Katy, this was three years ago. I used to work in one of the big oil field service companies. Oil companies were hiring lot of Engineers and Katy is near to the many offices of Oil companies. BP, ConocoPhillips, ExxonMobil, Oxy, Shell have offices near I-10 and Hwy 6. This is west side of Houston and not far from Katy.
Apart from Oil companies there are lot of oifield service companies there. Schlumberger, Mustang Eng, Wood Goup and many more.
I have a friend who lives in the metro Houston area. He bought a new house last year. He says that new houses in his neighborhood are still selling quickly and that prices were still going up. He was completely unaware of the nationwide crash. What’s going on?
oil > $90?
Sure hasn’t helped Denver
What’s going on? It depends entirely upon the area. Some places are doing OK and probably will continue to do so.
Here in Mobile they are working on a $300mil extension to the port which will most likely add lot of jobs and income, a new NASCAR track is being built and last year a $2.8bil steel mill construction started which will also add 2k-3k more jobs. The local housing market is dropping slightly but the beach areas are seeing a real slump (much like Fla). However, tourism (and rentals) at the beaches are very strong.
The previously cited article in the Vineyard Gazette Online was an eye-opener:
The restrictive covenants [dedicating the land in question to low-cost housing use only] were wiped out by the mortgage foreclosure; if the court does not reinstate them, Saxon [aka the foreclosing lenders] will be free to sell the property at a significant profit.
“The town, its residents and all those needing affordable housing in West Tisbury and on Martha’s Vineyard will be damaged if Cote’s former property is not [restored to its affordable status],” the complaint states, adding:
“If the lot can be sold unrestricted, Fremont and Saxon will receive an unjust windfall for their fraudulent conduct.”
I fail to see how that would be fraud (from your synopsis). But I do appreciate how one person’s opinion on something being unjust is enough to create laws.
North County San Diego
Richmond American just dropped the starting price of the 4,000+ foot McMansions to 630’s. At the peak they started at 918K The project is in Arrowood and the subdivision is Montemar
$918,000 - $630,000 = $288,000 in savings to those who refused to catch falling knives. Who says that market timing does not work in the housing market?
After another 30 percent off, they will be within range of those using conforming loans to buy homes.
I’ve read many posts about where the bottom lies in this market. Surely most of that is based on the slow depreciation we have seen in most markets. I expect things to pick up speed quite rapidly, as sentiment is changing. Many people were in denial, but now its first page news. One guy I spoke to that is underwater on a house in florida, says he doesnt know what to do. He cant rent it and cant sell it and he expects it to depreciate more this year. Last year was a different story, he thought it was a good time to buy and the market would come back.
The other large piece to this whole puzzle is funding. Anybody wanting to buy in the spring is going to be met with a challenging credit environment. I’m still surprised that banks are willing to lend to people at 4x plus wages. A friend of mine just bought a house for 225,000 and he earns or should I say grosses around 50,000 a year. He didnt put much down, either. However, after this latest round of mortgage companies consolidation and going bellyup, country wide and nova financial, I think its only going to get tighter.
If I’m right we may see the most depreciation in houses between now and the fall of 2009. After that we may see further weakening but I think the meat is about to fall off the bone.
The SD Onion-Tribune has almost completely eliminated any meaningful local reporting from its Sunday Home section. This is pretty sad, given that San Diego is one of the 20 to 30 or so “ground zeros” for the housing bust. Instead of excellent local interest stories on the current state of the San Diego real estate market from writers like Emmet Pierce and Dean Calbreath, this week’s edition features a page 1 story about Stokesay Court, a vast Victorian country estate. A photo of a castle-like building occupies half the front page of the Home section. This photo just makes my mouth salivate — I want to go out shop for a $1m McMansion as soon as I hit the “Add comment” button on this post.
There are a couple of reality-relevant items buried in the inner bowels of the Home section:
p. D7: Mortgage relief is no walk in the park (Kenneth Harney)
http://www.signonsandiego.com/uniontrib/20080113/news_1h13harney.html
p. D6: No surprise: Housing bust is No. 1 land-use story in state
http://www.signonsandiego.com/uniontrib/20080113/news_1h13topten.html
Why so little coverage on the No. 1 story???
That Kenneth Harney article has a few eye-openers and is well worth the time to read it. It brings to mind a question I may have raised here a few weeks ago: “Suppose they offered a mortgage bailout, but almost nobody qualified?” It also makes me wonder exactly how many mortgages Freddie Mac owns?
Here is a sample:
But in this case, according to Gusman, the servicer demanded a higher sale price than indicated by the would-be short-sale purchaser’s appraisal. The servicer then referred the case to the owner of the mortgage – Freddie Mac – where contentious negotiations have continued over an acceptable final price to resolve the deal.
There is still another complication, said Gusman – one that could potentially affect thousands of short sales in 2008 across the country: Besides first mortgages, many houses have large home equity lines. As junior liens, credit lines can be totally wiped out in foreclosures, leaving the bank that extended them empty-handed. However, for short sales to proceed, all lien holders generally must agree to the terms of the deal.
In a pending case involving a client of Gusman’s, there is an $80,000 equity line debt on the property. The bank says it wants nothing less than 50 cents on the dollar – $40,000 – while the owner of the mortgage, Freddie Mac, generally limits its offers to 10 cents on the dollar.
Padgett agrees that the presence of home equity lines, second mortgages and other liens against a property can seriously gum up short sales – even torpedo them – if the junior lien holders won’t cooperate and take only a fraction of what they are owed.
Some banks holding large equity lines – $100,000, $200,000 and up – “play hard ball to the bitter end,” said Padgett, and can slow down what should be a quick short sale process by months.
P.S. An information vacuum in the face of a housing bust will only serve to help dry up market liquidity, as any would-be sellers will have very cold feet if they are kept in the dark. Why can’t the REIC grasp this very simple principle of information economics?
They’ve failed to capitalize on opportunities the entire way down. No sense in changing now.
Right — better to let hordes of Realtors abandon their profession than to take actions that might help get sales going again. I guess that’s the reason the NAR always tries to make believe that prices are going to come back soon — to get sellers’ hopes up for a speedy recovery so they will never list their homes at prices where a sale will materialize. Meanwhile the NAR’s constituency can live off the accumulated equity on their multiple real estate investment homes.
Stupid is as stupid does.
– Forrest Gump –
Every 6 weeks or so I look on ziprealty for Phoenix area houses and condos. Today I’ve seen more than a few with 20% drops since July of 2007. That’s probably a 30% annual rate. Still the prices are too high. I want to see blood on the streets first. But I’m looking at some condos to suit my frequent travel lifestyle with good access to SkyHarbor airport, a living room (that can be completely closed off from destructive house pets such as my cat), a two car garage, and upscale amenities. I am not a do it yourself guy and botch up every repair I have ever done, so I would do HOA if it’s required. No, I’m no troll. Like I say, I’m waiting for a serious amount of blood in the streets. I think there will be much more considerable price drops in the next two or three years. I’m a vulture, but not starving.
“20% drops since July of 2007. That’s probably a 30% annual rate.”
7/07 through 1/08 = 6 months
((1-0.20)^(12/6)-1)*100 = -36 percent annualized rate of decline.
This was in response to BiM’s post above. Six percent may not sound like a big deal until you realize that six percent of $500,000 is $30,000.
Sorry about my math. In one case the July 2007 for sale price was $315,000. Now it’s at $249,000. I saw one in the neighborhood of $250,000 that has hardwood floors, 1,700 square feet, a 2 car garage, good central location, gated community, but was in the $300s last summer. Methinks the $250,000-priced condos in 2010 will be marked down from $480,000 since July 2007.
I have one eye on the rent versus buy ratios and another eye on my long term desire for a central location near good transportation (light rail, airport, bike paths). My final test is that the buy price must be no higher than 1/5 of my net worth. This will limit my losses and protect my credit in case I end up unwittingly attempting to catch the knife.
No worries — you were in the ballpark. I just wanted to call attention to the fact that a few percentage points can really cost a FB who catches a falling knife (or the bank that eats the short sale).
Shaver Lake, Ca. report:
There must have been 5 real estate signs that had a red addendum that said… “the prices you’ve been waiting for!”
OMG - Hell has officially froze over. Did anyone read the LA Times RE section this morning? They wrote an article about the falling prices in LA, how it’s only going to get worse for sellers.
They quoted Thornberg, for christ sake, saying that he predicts 30% by ‘09 and flat prices . Yes, there still was a little bit of ‘it’s different here’ in the article, but it was talking realistically about the downturn, for the most part.
Has all their RE ad money dried up and they are going for more auction ads? Did me letter to the editor a month back help persuade them to balance their perspective? Or, is it just undeniable at this point?
I don’t think the article has been posted yet, but this LAT RE blog cites some of the article :
http://latimesblogs.latimes.com/laland/2008/01/a-sellers-lamen.html?track=realestate-blogs
The local paper had a big section today touting all the condos and townhouses that have gone up - I think we have a little problem. I think they’re not selling. I stopped by one place, a converted motel (Uptown Flats) and checked out one unit and saw the bldg floorplan 11 sales out of at least 60 units, 1 under contract. NO cars in the nice parking area except the realtor’s truck. And this place has been on the market since last summer. Condo assn fee = 185, prices start at 159k but most are higher than that. They are nice, only 600sf. I wouldn’t mind them if I were single again, but they’re too small for 2 people. These condos seem to be for young professionals or old widowers.
Also saw a small dev. here on Shindig Dr, originally 235-335k, now I see they redid the sign 215-299k. I doubt any have sold. They’re just too big, on small lots. It seems like anyone who really *needs* 5 bed/3 bath cannot *afford* the price for same. Better off renting for 1200.
It’s pretty easy to see that our condo bubble here is bursting, with yet more units in the pipeline.
Might as well tell my “local” -slash- sob story. Got transferred from California to Colorado last spring. Put our Palmdale house up for sale in April at $399k. Go ahead, rag on the AV. You know you want to. Anyway, other details are 3bd/2.5ba/2154ft2 on a hill side with a view.
Didn’t get any bites until $374k in July. Got an offer for $365k and accepted it. But, never heard from the buyers again. So, on down in price we go.
November rolls around and we get an “full price” offer at $327k. Accepted. Supposed to close on 12/10. Monday after Thanksgiving the guy loses his job. No job = No loan.
So we are now down to $299k. Get an offer in December for $329k plus we give 10% back towards the down payment. On problem is that the company relocation rules won’t allow that much. Not having to pay taxes nor commission is a lot. The offer withers and dies.
So far this month we’ve had “a couple” of showings. I’m calling the realtor this next Tuesday. If we’ve had more than a showing or two, we may keep the price for another week. No showings? We’re dropping down another $25k. And if that doesn’t get an offer, it goes down a further $25k.
Luckily, it never occurred to us to use the house as an ATM, so we’re not too bad off even paying for two mortgages right now and still have lots of equity. But, it certainly dropped our spending by a lot.
T least you are off to a higher quality of CO.
Bolts beat Colts! AFC championship game versus New England next week will determine who goes to the Souper Bowl. Maybe if the Colts go all the way to a Souper Bowl championship, the San Diego housing market can take off again during the red hot spring sales season this year.
ColtsBolts (oops!)I think the chances of a hobbled San Diego team beating a scorching hot Patriots team is about as likely as house prices in San Diego returning to their 2005 levels in the foreseeable future.
I’m a Bolts fan, but I’m also a realist!
Holidays are over I see open house signs all over Phoenix. My old ex-rental house is just sitting empty no renters and no sign ? And my neighbors are selling just put the sign up a week ago.