It’s A Vulture’s Market
The Chicago Tribune reports from Illinois. “Not far from Illinois Highway 7, Diane Hartman’s four-bedroom single-family home waits for a buyer who never seems to come. It’s the same story across Will County, in new subdivisions built out of cornfields and older streets lined with mature trees: There are precious few home buyers these days. After cutting her price by $25,000…Hartman said she’s resigned to staying as long as necessary, figuring an empty house would fetch even less.”
“It’s a painful surprise considering how everything was selling such a short time ago: ‘We thought this would go fast,’ she said.”
“‘When things were good, I probably would have had it sold in three weeks or so,’ said her real estate broker, Jim Karges, who has operated his local Karges Realty for 30 years. ‘It’s hard for sellers to realize where we’re at. They don’t have a clue how the market has changed.’”
“At the same time, foreclosures accelerated. Foreclosure specialist Dee Villegas said she has noticed a sharp uptick in Will County homes on the block, and she expects more to come.”
“‘They all headed out there for these brand-spanking-new houses. They were going after the American Dream,’ said Villegas. ‘The jobs are there. It’s just a shame you need several jobs to hold on.’”
The Herald News from Illinois. “Carolyn Shinault has tried everything to sell her old house. She advertised for a tenant recently but didn’t get any takers. Now Shinault and many others who decided to build or move in recent months are caught between two homes.”
“‘I’m in the new one, and I don’t want to go back to the old one,’ she said.”
“Shinault said she can continue to pay two mortgages for only six more months. She’s already lowered the price on her old home from $189,000 to $170,000. ‘After that, I’ll have to get a second job. I’m sure I’ll go lower than that — for sure.’”
“Laura and Scott Czerkies have been living in their new Joliet home since May 2006, and they’ve been trying to sell their Willowbrook townhome since June 2006. The couple has lowered the price on the townhome three times. They’ve also offered to pay association fees for one year and to buy down a potential buyer’s mortgage rate. Still there have been no takers.”
“‘It is quite stressful having to pay for two mortgages, two sets of property taxes, heating bills and association fees,’ Laura Czerkies said.”
The Times Herald from Michigan. “St. Clair County’s land management/equalization director, Kenneth Hill will soon go before the office of metropolitan planning and present his findings about the area’s foreclosures.”
“‘I’ve never been through a market like this. I’ve heard about it, from old-timers,’ he said. ‘I don’t want to be a ’sky’s falling’ kind of guy, but I’m not sure what anybody can do about it.’”
“The last two years have brought near exponential growth in the number of foreclosures in the Blue Water Area. In 2005, there were 453 sheriff’s deeds issued in St. Clair County, a figure more than 17 times the number in 1995 when there were 26 sheriff’s deeds issued in the county.”
“This year, there were 993 sheriff’s deeds, a nearly 220% surge.”
“Hill laughs when he thinks about how suddenly foreclosure rates have come to the forefront of the nation’s consciousness. ‘To tell you the truth, a year ago, we kind of didn’t know this was happening,’ he said.”
“‘What’s happening … people who are trying to sell their homes are competing against foreclosures, and they just can’t,’ said Buzz Stanko, a realtor in downtown Port Huron. ‘Why would someone looking for homes buy the one for $150,000 (from a seller) when they can have the one for $110,000 (from the bank)?’”
“The situation has grown worse recently as lending institutions have tightened loan practices, said Lester Wilkins, a loan officer at Flagstar Bank in Fort Gratiot. The end result is both mortgage officers and realtors are having a harder time getting buyers into homes, and sellers are faring even worse.”
“‘It’s a vulture’s market,’ said David Marsh, a developer in Kimball Township, (who has) two of the three homes he owns in foreclosure; all three mortgages are 30-year fixed. ‘It’s not a buyer’s market.’”
The Holland Sentinel from Michigan. “The housing market slump has caused Bosgraaf Homes to announce Thursday it’s ceasing production of speculation home building. This type of construction, also known as volume building, is based on the speculation held in inventory.”
“‘The collapse of the market for new homes has required Bosgraaf Homes to re-evaluate its position and strategy as a volume builder. We have essentially brought to a close our volume business,’ said Bosgraaf Homes President Mike Bosgraaf.”
“Bosgraaf Homes has been in the housing market for more than 30 years, according to spokesman Randy Boileau. Boileau explained there was no market for volume homes in 2007, nor will there be in 2008 and 2009.”
“‘It’s (volume building) a business that doesn’t exist now in West Michigan,’ Boileau.”
The Journal Sentinel from Wisconsin. “Ken King, who helps Sheboygan-area consumers with debt problems, has noticed a change in attitude among some who come to see him. It used to be that people who owned homes would make it a priority to pay the mortgage. They didn’t want to lose their home or forfeit the down payment or equity they’d built up, said King.”
“Now, however, some mortgage borrowers who stretched financially to buy a home with temporarily-low ‘teaser’ payments and no money down - and haven’t owned it long enough to gain any equity - are taking the position that it’s hopeless to try to save the house.”
“They’ll await foreclosure and use their money to try to keep up with other monthly bills instead. ‘We see people coming in who say, ‘We’ll just let the home go. We don’t have anything in it anyway,’ said King, who has been a consumer counselor for 15 years.”
“In its third-quarter delinquencies bulletin, the American Bankers Association said consumer payments that were at least 30 days overdue had risen since the second quarter in almost every loan category: home equity, auto, personal and boat.”
“The report put the overall consumer delinquency rate, not including credit cards and other revolving credit, at 2.44% of accounts, its highest level since 2001. That was the last year there was a recession.”
“‘People are getting squeezed real hard. So now the question is, ‘Who’s not going to get paid?’ King said.”
“Pointe Blue, a large condominium development that promised to reshape much of Racine’s lakefront, is dead, city officials announced.”
“Developer Scott Fergus was unable to secure financing for the project, with 434 planned condos, 90 apartments and an estimated $120 million price tag.”
“Because there’s no way to predict when commercial credit markets might change, city officials and Fergus decided it was best to terminate their agreement on Pointe Blue, said Brian O’Connell, Racine’s city development director.”
“‘It didn’t make sense for the partners to just be hanging there,’ O’Connell said.”
“He announced plans in May 2006 for Pointe Blue. The site overlooks Lake Michigan, just north of downtown Racine. Condo prices ranged from $200,277 for a 900-square-foot unit to $995,000 for a 2,600-square-foot waterfront villa.”
“Fergus, a Racine native, described Pointe Blue as ‘Cape Cod meets Miami in Racine’ when it was announced in 2006.”
The Star Tribune from Minnesota. “A growing number of Twin Cities businesses are giving up trying to repay the debts they owe local banks on development projects.”
“The area’s banks face the highest level of unpaid loans in years, according to a Star Tribune analysis. The share of unpaid loans on business construction and development loans was four times higher in the third quarter of 2007 than in the same period of 2006. Unpaid loans also are four times higher than they were in the third quarter of 2001, a recession year.”
“Twin Cities-area banks hover near the top of the list of lenders nationwide reporting business borrowers as slow-pays or no-pays, according to the Federal Deposit Insurance Corp. (FDIC).”
“‘Typically, construction loans shouldn’t be past due,’ said Rich Gilloffo, a regional manager at the FDIC’s Chicago office. Banks often require borrowers to take out more than they need for a project, creating reserves to keep payments current in case borrowers encounter financial setbacks.”
“‘When you see [nonpayment rates] go up, they’ve run out of reserves,’ Gilloffo said. ‘Are we concerned? Yeah.’”
“A recent FDIC survey of 204 U.S. metropolitan areas found only 16 with higher rates of troubled business loans than the Twin Cities. ‘There aren’t too many metropolitan areas that are worse,’ Gilloffo said. ‘What’s happened has happened rather quickly.’”
“The boom-bust cycle is affecting business and residential real estate, said George Karvel, a real estate professor at the University of St. Thomas.”
“‘Our ability to forecast demand is so poor that we tend to facilitate overbuilding by making too many loans,’ Karvel said. As real estate values plummet, banks may end up getting paid dimes on the dollar for some of their commercial real estate loans, he said.”
“Rosita Fields hit a dead end when she tried to refinance the mortgage on her south Minneapolis house: The appraisal came in at less than what she owed.”
“Aaron Smith was equally stymied when he tried to buy a $180,000 house in St. Paul. The appraisal was $10,000 less than the asking price. The sellers refused to budge, sinking Smith’s chances of getting financing.”
“It’s a major turnaround for an industry that critics said was plagued by inflated appraisals which didn’t garner much attention as long as prices were rising. Now many lenders are trying to curb their losses by scrutinizing not only the borrower, but the value of the property, as well.”
“‘Values might have retreated more than the consumer might be willing to admit,’ said Tom Musil, director of the Shenehon Center for Real Estate at the University of St. Thomas.”
“According to a survey last year by the October Research Corp., almost 90 percent of the appraisers polled said that they were pressured by mortgage brokers, lenders, realty agents, consumers and others to raise property valuations. That percentage was nearly double the findings of a study done three years earlier.”
“The study also found that 75 percent of appraisers reported ‘negative ramifications’ — including being blacklisted — if they didn’t cooperate.”
“Alan Hummel, chief appraiser for Forsythe Appraisals in the Twin Cities and a past president for the Appraisal Institute, has taken his concerns over such practices to Washington, where he testified before a Senate subcommittee on banking and housing.”
“He blamed the problems on skimpy oversight and regulation of mortgage brokers, lenders and real estate agents and what he called a systemic coercion of appraisers.”
“‘Too many brokers and lenders unfortunately view the appraisal process as something to be manipulated,’ he told lawmakers.”
“The most serious attempts, and those that could have the broadest impact, have come from Fannie Mae, the nation’s largest provider of mortgage money, which has issued new rules aimed at protecting lenders and reducing the likelihood that homeowners will find themselves upside down on their mortgages.”
“‘It’ll blow a lot of first-time home buyers out of the market, especially in the most vulnerable neighborhoods,’ said Kris Wilson, senior loan officer for Fairway Independent Mortgage. ‘I really believe that Fannie is going to cause more damage than good by doing this.’”
“Sellers who had bought their homes at the height of the real estate frenzy are also going to feel the pinch.”
“‘They are not about to get out of a transaction with any equity and in some cases, may be upside down and be required to bring a check to closing,’ Wilson said. ‘It’s painful.’”
I’m getting that same feeling I had in 1990 when this same sort of thing was going on. Even though I can afford to buy a place and people are offering everything but the moon to buyers, I don’t want the commitment and seeing how hard it is to sell scares me. I can already see I’m probably going to let another “buying opportunity” pass by.
To each his own. I was told there of several short sales in Sedona recently. I am more interested in commercial property, but someone is going to have to transition all this FB stuff in N AZ.
I’d probably pull the trigger in a high desire area at a screaming bargain.
So that leaves out all of DFW. Sedona is another matter.
Sedona is still way overpriced.It is a nice area but lets get real here.Anyone have any idea how much private property is available to develop there?Could be the case where there is very limited private land and surrounded by blm , forest service etc.Maybe the feds should let go of some of their lands? I have some property up in the foohills near sacramento surrounded by blm.You talk about piss poor forest management.Their idea of management is to do nothing.They are so bogged down with administrative costs and excuses nothing gets done.
I agree. I hear the days on market for lots in the area is almost infinity. And that’s with the vast majority of raw land bottled up by governemt orgs.
Tourist town. Reminds me of Ojai in CA. I don’t know if thats good or bad or both ? Most Phoenix people tend to move to Payson in retirement and view Prescott and Sedona as Californicated.
Sedona is one of those places that rips your heart apart…
So beautiful, and so overdeveloped.
Payson has a housing bubble too. It’s everywhere. There are plenty of Phoenix FB’s all over the place up here. Why the heck have a second home when there are resorts all over the place. Sure, come up and rake leaves all weekend, while you are cash flow negative! These people are speculators, whether or not they see it as overbought by Californians (which it is).
I’ve been to Payson once. I’m not impressed. Even though it’s up in the mountains it still can get very hot in the summer. It does not seem a getaway place for Phoenicians. I like Flagstaff instead. My preference is to buy land up above 7,000 feet, but consider renting a cabin up there during the summers. One house of my own is my limit. It’s financially foolish to have one place vacant most of the year for people like me who don’t ever want to be landlords.
Bill,
I you want land that high in AZ, check out the Showlow area. Much cheaper, but not a lot out there except nature.
I can’t imagine what Sedona is like - I used to go in the summers in the late 60s and it was very rural in nature. I’ve heard and read that it’s become some sort of new age vortex and I think there’s some high end spas there.
I do like Showlow and once camped higher up in Apache land near Vernon where the Apaches built miles of excellent horse trails and mountain bike trails. Thanks
are they crazy
When I look at the old photos from even the 70’s, it is hard to even recognize it. If it wasn’t for the rocks, I might not be able to.
I have lived in Sedona for 16 years. When I moved here there was one traffic light, and no traffic. Now there is bumper to bumper traffic, and they are building 10+ traffic circles posted at 15mph. I see cops writing tickets all day long. The average wage if you are not a professional is $8 per hour. Still a beautiful place, but I would not have moved here if is was like this. Rent, don’t buy in Sedona. Rents are dropping and there is no way buying makes sense.
“They’ll await foreclosure and use their money to try to keep up with other monthly bills instead. ‘We see people coming in who say, ‘We’ll just let the home go.
Question…..if let’s say more and more people decide to walk away from their home, take the credit rating hit, move into a rental, and keep up with their other payments, wouldn’t you think the economy would just move along bc now the FB is no longer an FB. This person would probably have freed up money now to continue spending.
How bad is it to have a bad credit rating going forward? My credit is good so I don’t know what it’s like to live with a bad rating. Wouldn’t we go back to lax lending or some new fancy financial product to keep this game going for one more round? Subprime II?
I’d trade reliable cash flow for a bogus credit score anyday. Gotta stay liquid - keep all options open. Retaining the initiative in all matters of our lives will become crucial.
I have a similar question. The banks need people to borrow, but if too many have low FICO scores because of foreclosures, cc debt, student loan debt, car debt, how much will FICO matter? Will they lower the standards or will they come up with some new score to replace FICO that leaves out certain elements?
I bought my first home in 1987– even though I wasn’t in the market– when my dad found a County auction sale requiring only a $7,000 downpayment on a 20s bungalow. I figured, heck, for the price of a car I can buy a house! With some sweat equity, it all worked out quite well. As posters point out over and over, when the #s are reasonable people will buy.
” Wayne Henker’s mother-in-law, Joann Owens, knew she was going to be laid off from her insurance company job, so she decided to take equity out of her home to build an addition on Henker’s home so she could move in. But now she can’t sell her old home, and she’ll soon be out of a job. ”
“This is just one case of many where someone is stuck between a rock and a hard place,” Henker said.
Stories like this just depress me. What kind of thinking is this? This is not “adult” thinking, this is childlike, irresponsible, and lacking in any type of economic forethought. I’m going to lose my job so I’ve decided to take equity out my home and build an addition onto someone else’s!! These people are stongly influencing our economy. Goodness!!
They’re caught between a rock and hard place all right. The rocks in their heads and their thick skulls.
Why?
Sounds rational and cold-blooded to me.
I can see problems in the logic, of course, and it’s borderline retarded to me but I see no moral judgment here.
Selling the house and then building the addition, that seems to me to be the rational thing.
Heh heh heh . . . you’ll like this
http://www.itulip.com/forums/showthread.php?p=24015#post24015
“A friend who finances foreclosures in California explained that one client’s entry into the nine circles of foreclosure hell started after he chose to pay for his girlfriend’s boob job instead of the mortgage. Alas, his bank did not agree with his priorities.”
His bank didn’t agree but all of his buddies did.
Housing, especially the new crap put out by companies such as Beazer, deteriorates rapidly. Silicon, however, will last forever and always ensure she has a place to stay during the recession.
“Housing, especially the new crap put out by companies such as Beazer, deteriorates rapidly. Silicon, however, will last forever and always ensure she has a place to stay during the recession.”
Most of the parts of houses, though, tend to deteiorate at the same rate. Silicon might last forever, but skin gets wrinkled after a number of years. An old female with wrinkled skin and perfect boobs isn’t my idea of a turn-on!
Not true. As I’ve posted before, implants have about a 10 year shelf life, and need to be replaced like tires. The lucky gal gets to lose some flesh in the process.
I had a girlfriend with a set of bolt ons and beleive me they were not pleasant.They were hard as a rock.Once again she made a wise choice in her finances.the moron paind 400k for 2 br condo here near rosevile.You can buy a house larger than her condo for 280k now.She is not moveing in w/ me after the condo goes into foreclosure.She better find a sugar daddy soon.
Dow Cornings made into hootervilles seems like a better use of corn, than ethanol.
he chose to pay for his girlfriend’s boob job instead of the mortgage
But as the next paragraph states,
“Not all busted borrowers were so careless.”
Eric Janszen rocks.
Bro’s before Ho’s, but Ho’s before Ho’mes.
Saline implants have a life of around 10 years, and then generally need replacement. Deflation eventually happens to one side.
But did she hold an open house?
If you are wondering why the dollar is tanking and gold is scaling new heights, look no further than the Four Petitioners of the Housing Bubble Apocalypse. Congress can appropriate it, the Fed can print it, and it’s off to the inflation races until at least 2009.
——————————————————————————
Inflation the other tax
“‘It’s a vulture’s market,’ said David Marsh, a developer in Kimball Township, (who has) two of the three homes he owns in foreclosure; all three mortgages are 30-year fixed. ‘It’s not a buyer’s market.’”
3 carrion bags.
keep it up- consider relieving the writers strike
“Aaron Smith was equally stymied when he tried to buy a $180,000 house in St. Paul. The appraisal was $10,000 less than the asking price. The sellers refused to budge, sinking Smith’s chances of getting financing.”
It’s one thing to not budge against an unfounded counter-offer, but this borders on lunacy. Do they think the next bank will come around with a more liberal appraiser? They’ve already let all of those guys go.
I wish they would list where this house in St. Paul is located. If this house is in one of the many junky neighborhoods, there will probably come a day when Aaron Smith will walk into the office of the appraiser and kiss him on the lips.
lol
So true NYCityBoy!
Do wanna-be FB’s not realize the systems to protect them are being put back in place? I think you’ll have some very happy buyers… in five years.
Sellers? Ugh… I realize we hit 70% home ownership so there are more sellers than buyers so the press prints their story. But wait… there are more sellers than buyers.
Got popcorn?
Neil
“Not far from Illinois Highway 7, Diane Hartman’s four-bedroom single-family home waits for a buyer who never seems to come. It’s the same story across Will County, in new subdivisions built out of cornfields…”
The really sad part is that a lot of the land plowed under to build Chicagoland sprawl was some of the most productive farmland in the United States and it probably will never be as good again if those subdivisions were torn down.
A lot of retired former farmers are enjoying their mai tais by the poolside so it’s all good.
And some went on to buy up cheaper farmland downstate - messing things up for those folks too.
We produce more food that we consume. The government actually pays farmers not to farm. Less farmers equals a good thing. Remember poverty and starvation is due to politcal and economical issues, not production problems.
Perhaps, but the soil in that part of Illinois is amongst the best in the nation. Maybe the excess cropland you may be alluding to is the result of our “watering the desert” out west?
Farming is a business, and no doubt farmers found the economic return on selling for development was significantly greater than that of farming for profit.
If the trends reverse, so does the business case. The problem becomes it’s probably not easy to un-sub-divide lots into farmland.
You would think that they would be able to easily export any surplus leftover, what with record prices for grains and such.
No one needs to tell that to Hartman, a high school English teacher who has had her Joliet house on the market since buying another last spring in the Will County town of Frankfort
Oops. Yet another person who thought they could game the market on the way up, when they didn’t realize it was already going down.
“In the top 20
A recent FDIC survey of 204 U.S. metropolitan areas found only 16 with higher rates of troubled business loans than the Twin Cities.”
Woohoo. The hometown boys made the Not So Sweet 16. Ben is aware of Minnesota’s place in the subprime universe. Bloomington had tons of these organizations pumping bad loans into the Twin Cities. I think Resmae or Rescap was the really large subprime lender in Bloomington.
“For three quarters in a row, Key Community Bank, based in Inver Grove Heights, has led the list of Twin Cities lenders with construction and development loans in the “non-accrual” category. In the third quarter, nearly 68 percent of the bank’s construction and development loans were labeled as unlikely to be repaid.”
You can’t get much closer to home than this one. The amount of development in Inver Grove Heights is earth shaking. It’s turned into another suburban wasteland. Everybody was high on the thought that it could all go on forever.
The lesson of this article is a lesson that some people still don’t understand. The bubble was everywhere in this country. It wasn’t a coastal phenomenon or limited to certain areas such as Phoenix and Vegas. It was in every nook and cranny.
This moron - “But the pullback likely will sow the seeds of a real estate recovery in the next year or two, said David Vang, chairman of the University of St. Thomas finance department.” - is yet another clueless wonder. And what magical event happens in a year or two? St. Thomas has a lot of hot students but obviously not a lot of bright professors in the finance department. There is a lot of pain left for the Land of 10,000 Lakes.
Will county IL is a sight to behold. When CA HBBers talk about the IE, I cannot help but think of Will Co. In this cycle (1995-2005) sprawl jumped the Fox River full force. We mapped a lot of it in 2000-1 and it was going full bore. Mostly vinyl cookie cutters - some got fancier after the Millenium and used stone facades and such. Prime cropland lost too.
Oh, and when Villegas says ‘jobs are there’ she’s talking your typical suburban $8-$10 stuff. The best paying jobs in that part of the region are on the I-88 tech corridor to the northeast - and there’s plenty of folks living much nearer to those already.
I agree. People interested in the area should read these IL articles; it sounds like the wheels have come off there.
In the 1980s the tollway once known as Illinois 5, now I-88 the Ronald Reagan Tollway, was designated a “Tech Corridor”. Com Ed, GTE, Lucent and a whole slew of others relocated/located out there.
That drove growth in Naperville, which we read a lot about here. IMO the Will Co. sprawl was an offshoot of that event. Explosive growth in and around Naperville brought jobs which in turn created a new outer band of development to service this new economic node. A lot of those buyers have got to be counting on those jobs. Will Co. itself has Joliet, Joliet…yeah Joliet. Some old manufacturing but not much else.
You can’t forget that the “Tech Corridor” also includes both Argonne National Laboratory and Fermi National Accelerator Laboratory (Fermilab). Both of which have had significant budget cuts and will likely be laying off scientists in the near future.
Ditto Lucent and Motorola
Don’t forget BP moving 2,000 jobs to Houston and 1,000 to downtown Chicago.
I was perusing a realty site last night, and checking out what property has been selling for in the Gold Coast (downtown Chicago area). It appears the sellers are getting b*tch slapped. There are several listed as “short sales”.
I can only imagine how screwed the sellers in Will County are. We know a couple who moved to San Francisco (due to hubby’s job). They have a house in Rogers Park that has been on the market for over a year with no takers.
And, “the Donald” and his kids have been building some monstrosity downtown, which will house a hotel, hotel condominiums and residential condos. Mr. Trump recently strolled into town because those places are not moving.
No kidding!
Yesterday we snapped some photos of 2520 N. Lake View. Starting price: $750,000 one bedroom condos in Lincoln Park. I’ll try to pipe the photos over to the HBB later this week. They are tearing down an entire hospital to build it.
I don’t know how to really explain what I see around this town to others - only to say that: 1. it doesn’t add up and 2. it is not going to be different here. Stubborn Midwestern optimism clouds the picture.
A friend of mine in Chicago claims all is well. Whenever I ask him details about how the market is doing based on anecdotal evidence I’ve seen on HBB and elsewhere in Chicago, he denies denies denies. He claims he could cashout his 3 condos for almost $2M. Unless there is something that’s going gangbusters in Chicago with respect to the job market, none of it makes sense. I think the midwest in general is so isolated from the coasts that cutoff of capital and slowdowns/recessions hit there last.
“…hit there last.”
That’s what I’m bracing for, a backloaded event with regards to the Midwest in general. An event in which the coasts begin the long trek back up while we have many years of a “L” shaped recovery.
It all rests on the jobs now…
Actually, I used to live right across from the zoo. Loved the neighborhood. Now, it looks like I may be buying a condo again in about 4-5 years when prices get real.
My data is showing condo prices are falling fast in Chicago. As for the trump towers, many are in litgation. 2008 will not be a good year for him, but then again, he could retire for life tomorrow and still live better than I ever could, so I guess it doesnt matter. Then again, no one marries him or hangs around him for his looks or personality. Celebrity Apprentice? If that’s not an indication that his real estate ventures are not going well, I dont know what is. Checks have to come in somehow.
My sister has a client who recently sold in the Chicago area. Took an offer about 20% off listing price and remarked to my sister that the MSM is not telling the truth about the housing market. My sister is finally accepting that this downturn is happening.
Downtown Chicago is stagnant right now. There is a lot on the market but very little is selling. Prices are also not coming down much (unless the seller HAS to sell) because no one is admitting that the game has changed.
Foreclosures are hammering the south side of the city but the north side is seeing just a trickle of them, mainly in the apartment to condo conversion high rise buildings where many investors bought.
I expect that to change this year as more sellers get stuck with condos and homes they can’t sell.
There is also a glut of condos priced over $1 million now all over the city. I expect a large price contraction in that price range (down at least 30%- maybe more.)
Trump is closing on the hotel/condo portion of Trump Tower at the end of the month. Everyone is waiting to see how many of those units with contracts actually close. There is no way to flip those hotel/condo units in this market. Anyone who closes is going to own a LONG time.
The condo portion of the building won’t be ready until 2009.
You should consider Chicago part of the NYC zone.
I lived in Chicago for eight years and now live in New York for just under that.
They are both part of the FIRE (finance, insurance, real-estate) economy, and as it tanks, they will be toast too.
There is severe delusion in Chicago with rents/price far out of whack (closer to SF insanity than NYC insanity.)
In any case, it will crash.
Too bad though. I love Chicago, and would live there again if I could.
“The most serious attempts, and those that could have the broadest impact, have come from Fannie Mae, the nation’s largest provider of mortgage money, which has issued new rules aimed at protecting lenders and reducing the likelihood that homeowners will find themselves upside down on their mortgages.”
“‘It’ll blow a lot of first-time home buyers out of the market, especially in the most vulnerable neighborhoods,’ said Kris Wilson, senior loan officer for Fairway Independent Mortgage. ‘I really believe that Fannie is going to cause more damage than good by doing this.’”
“Sellers who had bought their homes at the height of the real estate frenzy are also going to feel the pinch.”
“‘They are not about to get out of a transaction with any equity and in some cases, may be upside down and be required to bring a check to closing,’ Wilson said. ‘It’s painful.’”
So what you are saying is that Fannie is going to FORCE people to buy home they can AFFORD???…I think I need to retake that finance class in college…I always thought that was a GOOD thing..
Or to put it another way, the mortgage industry is going to force people not to buy houses they cannot afford. Either way it is the death knell for fantasy pricing. Look for 30 - 40 percent down in Minnesota. Expect the same thing throughout this great land of ours.
My grandfather had a lake house in Wisconsin before he died, and I will always have fond memories of my time spent there. Hopefully, I can pick one up for 300k or less at the tail end of the recession. Burn baby, burn.
It may sound bad, but I look at it this way, people bought much more than they could afford so it never was their house. Forget about them. And for the Banks that threw out due dilenge in favor or volume, who gives a damn. As for all the ppl that will be out of work during the enormous recession, that blame should fall squarely on the Bush administration and the Fed. They may have not been responsible for everything, but their willingness to let it get out of hand, and do nothing to stop the esculating appreciation to avoid the bust, to make their Wall Street buddies rich makes them guilty of it all. Everyone knows Wall Street, brokers and realtors, are crooks and con men, but government approval is obscenely offensive in my mind.
How can you blame it on the Bush Administration and the Fed without exonerating Congress, which approves budgets and holds the purse strings, and all such?
Actually, its amazing what powers the FRB does have without Congress in the loop. ‘Creature From Jekyll Island’ was such a great book. The govt. and the FRB are partners in the cartel. Ed Griffin has my utmost respect.
Fascinating front page article in today’s LA Times speaks of “new bubble prone economy” and suggests that the Feds should have stepped in to tamp down an obvious RE bubble. Greenspan is fingered, Thornberg is exonerated. Bottom line is that no one really knows how to stop this runaway train.
http://tinyurl.com/2bz7ys
Well lowering interest rates when real estate was appreciating at over 20% per annum was the equivilant to removing the breaks. And 100% LTV no money down loans? You dont have to be educated to know that would turn the housing market into just a gamble with no downside for the gamblers. Why rob a bank with a gun, when you can get them to loan you 500k, and if you make more than that you pay them back and keep the profit, if the house goes down in value you just drive off in your new Hummer you HELOCed. How could the result have been any different? Of course this would lead to the end game, and a massive depression that would destroy the lives of millions of hard working ppl. This isnt difficult. Just pure corruption from the feds and bush administration.
“It’ll blow a lot of first-time home buyers out of the market, especially in the most vulnerable neighborhoods,” said Kris Wilson, senior loan officer for Fairway Independent Mortgage. “I really believe that Fannie is going to cause more damage than good by doing this.”
Translation: “But that will make it harder for us debt peddlers to walk away with huge sums of ill-gotten gains.”
“For example, new restrictions no longer let the lender pick the person who is going to do the appraiser. That’s now automated. And getting the proper documentation for an appraisal is now more complicated and takes longer.”
That sounds good to me. The fact that lenders are crying should confirm that this is a positive.
Not to mention double appraisals on a random basis. No more cherry picking an appraisal.
The added 5% down payment is but a start. Now wait as Fannie and Freddie have trouble selling the lowest traunches. Even they will have spooked investors. No low traunches… they’ll need more insurance… but that’s getting pricey. Expect a 25% minimum down payment soon or 15% plus insurance. I can recall when 10% + insurance was the minimum.
This has a long way to go folks. I understand the desire to buy. But wait… at least through 2009. You’ll kick yourself if you don’t. Then buy? Sure. It might not be the bottom, but at least I can say with a clean conscience that a two year delay keeps a buyer from becoming a serf. Underwater? Yea, for a bit. But someone who bought in 2005 will be underwater until 2015 to 2017. Then they’ll see the light only thanks to inflation. Oh, I’m assuming they bought with a 30 year fixed… People who bought with ninja loans are screwed double.
Got popcorn?
Neil
Just last night my husband and I discussed our future plans regarding the rent vs. buy dilemma. We had planned on buying, but now we’ve decided to stay put. I’m not crazy about our apartment, however, we can deal with that better than dealing with buying overpriced property!! Our money is better served in other areas.
Neil, I think your advice is right on the money.
It is the same here. Finally my husband is on board not to buy. We left the east coast, Virginia, and rent where it is much less, while waiting out the ongoing crash.
Two family members have walked from their homes. Prime credit (not now) and we know of two more families in trouble, again prime borrowers. Only one of the four families had bought in the last five years.
All of the above are solid middle class doing very well five years ago. It is troubling watching family and friends sinking like a brick. These people may not ever catch back up to where they were prior to the bust. All of them are in the 40-45 yoa group.
I have a 52ish year old aunt who lives in a trailer that is at least 25 years old and falling apart. The rent is $200 a month, at least in 2005 it was. There is no refrigerator and the water lines feeze when the tempature drops below freezing, so at times…no running water. Her heat is a plug in heater that she stands over in the morning to warm up after getting out of bed. It was a shock to see her living like that. The stove does not work and she has several animals.
I met her when I was a kid and then 20 years later in 2005. I gave her a microwave and some cash. She pumped for money all the time. Here is the thing…she received about $100,000 from an insurance settlement in the mid 90’s and is totally broke. I can see where some people who never could have imagined themselves so broke with nowhere to get money and skills that pay minimum wage ending up like that especially with the cost of food and gas hitting big time into a $6.50 an hour wage.
Yes I do adore stocks, but mostly in my tax deferred plans. I won’t tap them for many years. America is not going to become Russia. Also the creative minds won’t shut down and stop producing. I just think we are headed for a period where we need to rely on savings and very high unemployment until we get rid of the dang socialists from both top political parties. I think the stock indices are headed way low for a few years. Those who think that they can time the stock market are in for a rude awakening, however, and they will miss the best buying opportunities of the next 30 years. I’m buying right through this. I read somewhere that those who had the resources to dollar cost average in stocks during the Great Depression did well by the end of the depression - 1952? Got 20 years?
Some blurbs from the Chicago Tribune article:
“But its woes, and those in otherwise healthy spots such as Denver and Minneapolis, “illustrate just how serious this housing bust is. Geographically, it’s all over,” (how long has Ben been saying this?)
“Real estate is “a chain-reaction market,” he explained, and the chain is broken. “Without that first-time buyer, there’s no chain reaction,” he said.” (how many times did Professor Bear and others note that home prices and sales are “set at the margin”?)
“Price cut, but still no takers.” (chasing the market down anyone…?)
But, isn’t Hillary Clinton planning on giving 50 billion to FBs to help pay their mortgages (per NPR radio yesterday), so they aren’t foreclosed on? By the time the elections get here, all the candidates will be falling over themselves to convince distressed “homeowners” they are soon to be recipients of government handouts amounting to hundreds of thousands of dollars apiece. I guess since most FBs don’t cook, despite veneer granite counter tops and pseudoindustrial ranges, a chicken in every pot isn’t a good enough bribe.
How far would $50B even go? Assuming it was handed out at Valentine’s Day it would be gone by Easter. Heck, (anticipated) tax refunds are used to buy Christmas presents nowadays.
How funny. If this real estate collapse really does amount to trillions, not billions, I don’t know if anybody can do anything to stop it, or even slow it down. But, they’ll definitely promise to. So far, nobody seems to be focusing on HELOCs, and the cliff ahead, only on subprime; maybe when Hillary finds out that most of the people in trouble aren’t illiterate victims, she’ll come up with an even bigger imaginary rescue. At least, till the votes are all counted.
“I’ve heard about it, from old-timers,’ he said. ‘I don’t want to be a ’sky’s falling’ kind of guy, but I’m not sure what anybody can do about it.’”
Looking in the mirror at my gray hair, I guess I’d qualify as an old timer. I can say that without a doubt the sky is falling. What I find interesting is that it is falling faster than it did in prior recessions. What I don’t, but suspect, is a key reason for this acceleration is the information we are provided by the Internet. In past downturns MSM played a key role in holding down the bad news. I’m convinced that were it not for the Internet, it would have been easier for failed mortgage companies like New Century and now Countrywide, to survive for a longer period of time, thus slowing the rate of decline for real property assets.
Thoughts?
Yes. The internet has changed everything. Where I work there are many ppl that would not read the paper even if they didnt have access to the internet. They now check the news hourly at work to lessen the boredom. Although some check for the latest on Paris Hilton or K-Fed, sometimes there eyes are diverted to real news.
A few months ago most ppl thought housing was the best investment available. Now are scared to buy and believe that recession is likely. I believe that the media’s recognition of the problem and ppl seeing these stories as they scan the headlines at work is primarily responsible for the shift.
Did home-buyers in the late twenties (pre-crash) have to have 10% or more down to get a bank to lend to them?
I agree from my personal standpoint, but most folks still get what little news they’re interested in from MSM and just switch stations if they don’t like what they hear. I do think there’s a certain amount of her psychology at play, also. If the MSM keeps beating the drum of housing bubble and recession, most folks will be forced to believe it and will be willing to believe because the info came from the TV. Then it just feeds on itself as they adjust to what they hear is the new reality - the same way they did on the way up. Remember the days of housing lotteries and people camping out overnight for a chance to buy in new developments?
P.S.
Free flow of information via the internet, has indeed changed everything…
Aside from carefully selected letters to the editor and radio talk shows, what sort of a voice did we have in past housing bubbles?
Filters on the internet? ala China’s request to Microsoft?
watch out Lubbock tx
Pointe Blue, a large condominium development that promised to reshape much of Racine’s lakefront,
Racine ? wtf
Hey..the views and the night action are only a couple of steps down from Duluth and the Artic Circle in most Januarys.
What do you expect for a measly $200,277 for a 900-square-foot unit to $995,000 for a 2,600-square-foot waterfront villa. Naples or Miami?
http://www.pointeblue.com/
wow ,it where cap code meets miami ?
in an old meat packing town !
“a key reason for this acceleration is the information we are provided by the Internet.”
I certainly believe the information available on the internet has played a key role in accelerating the decline in the housing market…and to take your argument another step further, do you expect to see equities fall rapidly over the next 6 months as more and more awful economic news appears on theHBB, itulip and minyanville…?
The internet is becoming the new MSM.
Well run blogs (like this one) are self editing; the Truth must pass peer review from thousands of members and be ironed out before it is accepted as fact.
This certainly not the case when a single editor, under pressure from sponsors, defines and determines the Truth.
The blogs have forced the MSM to accelerate their reporting or continue to lose readership. My sister keeps asking me how I know stuff; I tell them the blogs I read. Coworkers wonder how I know about stuff two weeks before its in the WSJ (that usually leads the rest of the MSM by a few weeks anyway).
But there are enough J6P’s out there who want to be fed their news without thinking. They’ll believe the uptick is always three months away. They’re sheeple.
Got popcorn?
Neil
Neil, you’ve unconsciously done it AGAIN ..
In these scary times with talk of jingle mail, foreclosures, recession and depression you had to mentioned sisters, which gave me to pause and reason think about another possible major hidden RE related problem.
How MANY really weird sisters could POSSIBLY appear on peoples doorsteps with their baggage, cats and marriages gone crying..
“B..b..but I have NOWHERE else to GO!” ?
“The Horror..the Horror”
Plan A.
Possible quick and dirty, pre=emptive, no-interest, boiler plated loan contract to brother-in-law as required.
Plan B.
Large bribe to older brother to take the hit for the entire family and forgo all historical threats and promises of sibbling mayhem for lots of cold hard cash.
Plan C.
Contemplate a sudden and distant move, while she shops at the Mall with my soft-harded but idiotiotic girlfriend ..Destination and Location…UNKNOWN.
Please..NO hate emails NOW …I’m BUSY and in a panic packing my popcorn
j/k
“They are not about to get out of a transaction with any equity and in some cases, may be upside down and be required to bring a check to closing.”
Roaches check in…
The weakness in the market is accelerating so fast, it seems like there might actually be a reset in home prices by the end of 2008, at the foreclosure sale price (maybe 30-50% off peak). Once the shake up on Wall St. is addressed with write-downs, the banks are not going to be hold-out sellers. By the end of 08, it would seem hard for a regular seller in one of these areas to hold out for higher numbers if the “market” for the area has been completely reset with foreclosure comps.
We need the regulators to come in as they did in the S&L crisis. Banks arent willing to deal right now because they dont want to lose their false mark-to-market which is keeping them within required guidelines. The regulators need to force them to do so. Once these properties are sitting for more than a year, the regulators should come in and say time to get real guys or we are taking over. Most firesales will be 2009.
What can regulators do until banks hold a property as a REO for two years? The way the current rules are written the banks can play chicken for 24 months post foreclosure… then the firesales begin.
I agree, the big firesales will be in 2009. Its part of my basis on why I believe that year will be the year of the greatest declines. It won’t be over in 2009… I wouldn’t want to imply that. Its just stupid to buy before 2010.
Got popcorn?
Neil
I agree with your analysis. I didnt realize they had 24 months. That pushes my projections out a bit. I agree that the fire sales will begin in 2009. 2010-2011 the low, and then flat for about 4 years. Im all cash, and hope and expect that by “low”, we will see properties with postive cash flow available again.
2010 or bust?
The vultures are really out there. I’m in MA, Essex County.
It just so happens that changes in my life make this the time to sell my house. I have it listed myself, so I am doing the showings and the interface with buyer’s agents. It’s like buyer’s revenge time, or something. I book appointments and get last-minute cancellations after cleaning and organizing for hours. I have canceled my plans to accommodate buyers who never show up. When they get here, they are extremely demanding. My only offer was so low my attorney wrote back to the buyer’s agent that I will not be entertaining “preposterous offers.” The RE agents are fairing any better. They are getting run-ragged by “buyers” who seem to be just “lookers.”
So, as we knuckle down for what may be a long ride down, I may refinance into a 30 year fixed to lower my monthly payments, put in a woodstove, and wait it out.
So much for writing letters to sellers “please let me buy your house….”
I’d be interested in hearing the approximate numbers if you care to share? What constituted a preposterous offer, etc? Thanks in advance.
Yes, but what did you pay for the house and what are you now asking? Not much sympathy from this board, I’m afraid. Your house is only worth what someone is prepared to pay for it.
Why shouldn’t buyers be demanding?
They are contemplating what may be the biggest purchase of their lives, one that may involve 30 years of payments; and in this bust it is in reality a gamble.
They better be demanding!
said Buzz Stanko, a realtor
No way…
Here is that question coming up again — will people who COULD afford to pay the mortgage by living in extreme house poverty choose to do so? How will the decline in housing value be apportioned between bondholders and FBs.
I think you could have the financial equivalent of a riot. The more people walk away, the more the system is too overwhelmed to come after then for deficiency judgements, the more people will walk away.
People will see their brother-in-law, who HELOCed to the moon to live large, now living reasonably well on their actual income in a rented house, while they have no money to eat out, no money for Christmas, no money for treats, no money for after school activities for the kids. Then their friend down the street will do it. Then their sister’s family.
Lifestyle changes follow person to person, and only those with an independent frame of mind will bite the bullet, not follow the heard, and be mocked by those living better than they do after defaulting as their children are mocked in school for used clothes two sizes too small. And most such people did not become FBs to start with.
WT - great post.
This is the very reason why Hope Now will fail. It is also the reason that the interest rate cuts by the Feds will also fail.
Your point about those who HELOCed to the moon, mailing the keys are living relatively comfortable lives as renters, got me thinking about that California family that was portrayed in one of the articles discussed on this board not so long ago. Remember that family that bought 2 homes, one in California, one in Texas. They HELOC’ed the California home to the max, had a Hawaii vacation for the whole family, bought 2 Luxury cars, and then mailed in the keys for the California home. Then moved the whole family to the cheaper Texas home. All in the same six months? What will happen to people like this?
Well, I can guess at their next lives, assuming reincarnation is real. Prosecutors should be rounding these crooks up; the notion of forgiving their debts or bailing the out is astounding. This is grand theft, pure and simple, but few in the media seem willing to say so.
“It’s a painful surprise considering how everything was selling such a short time ago: ‘We thought this would go fast,’ she said.”
Silly rabbit. You can now count months, not years, when baby boomers get rid of the hot potatos (extra houses) to finance retirement and downsize. Should have had the attitude of buying up houses in 1980 instead of now. The time to sell all your real estate holdings was 2004. Should have read Harry Dent’s books to study the demographics. Imagine an anaconda digesting a deer. There is a big bulge as it makes its way down the length of the snake. That is a kind of vulgar analogy to the boomers. There are fewer people to buy their houses unless we invite tens of millions of Red China’s people to come to the U.S. and buy up real estate. Fat chance.
b.i.m.,
You still adore stocks as much as metals, given the eCONonic climate, currently?
“‘It’s a vulture’s market,’ said David Marsh, a developer in Kimball Township, (who has) two of the three homes he owns in foreclosure; all three mortgages are 30-year fixed. ‘It’s not a buyer’s market.’”
Awwwww…no greater fools left to overpay so you can make a fat profit? Well that’s just not fair! What a bunch of vultures these people are, how callous of them to not put money in your pocket and take on your liabilities. It’s not that they’re smarter than you, it’s that they’re vultures.
how much will real estate drop , and for how long before it comes back,and what will it do to usa economy 08,09
jaymart - the spring rebound is just around the corner. just wait until the superbowl and everything will be fine.
What I don’t understand and have never understood, is buying a house before you sell the one you own.
I’ve seen people do this before this bubble, and know people now that are paying two mortgages. To me, this lacks common sense. I would wait until I’ve sold the house, rent until I find the one I want to buy, and then buy.
I just talked with a colleague a week ago and he told me he is putting his Los Angeles home up for sale and moving back to Phoenix. He thinks his LA home is $700,000 worth and is in the market for a $600,000 home in Phoenix. I hope he waits to sell his LA home first, even if he has to make the necessary 30% price cuts to “price it to sell.”
I’ll break out the house bubbly, if he doubles up.
Keep us posted.
You would most likely not be posting here if you thought buying a home before selling the one you currently own was a good idea. My sister did this in Dec 2006, and thus far remains the proud owner of two homes.
You gotta take every schadenfreude opportunity, like it might be your last…
Has anyone checked zillow in their area recently? In the East Bay here zillow appears to have significantly changed their Zestimate modelling. While a month ago, a friends apartment in Walnut Creek had a zestimate of $450K (he purchased for $440K in Feb ‘06) it now shows a Zestimate of $347K!! The historical price graph data also shows a significant descent since late ‘05. The same is pretty much true for all other sample properties I queried in the area.
It seems a reality is starting to set in, even for the wishful thinkers.
I’ve noticed here on the L.A Zillow that a) the ‘Zestimates’, as of 1/3/08 are all rounded up/down to round numbers ending in ‘000′ or ‘500′ and b) the Zestimates are getting further and further away from actual asking prices, and previous sales prices.
I’ve also noticed, for the first time, that some asking prices are lower than previous selling prices (for places bought/sold within the last 5 years or so).
However, Zillow still seems to be modelling the Zestimates on 20% appreciation. How 2005 of them.
i.e a place going for $999K, last sold at $1,1000K in 2006, with a Zestimate of $1,350K.
This is just an example, but I’m seeing more of this kind of thing.
Still a very long way to go in SoCal.
Potential Buyer and Krazy Bill”
Am I looking for sympathy? My house is priced appropriately for the market. It is priced below what I paid in 2003 and I put almost 20K into it. My point was that the buyers are there now are vultures, as in the title of the topic. Is everyone else on this blog a renter? I doubt it. God forbid you should find yourself in the situation where you need to sell.
When I sell it, then I will be a buyer again. Will I be demanding? No! Will I be responsible and particular? Yes! There is a difference between the two. Things change in people’s lives and they need to sell and move on for many reasons. I don’t see the need to aim your guns at my head.
So what exactly are you looking for? Probably the majority of people on this board have been bent out of shape for YEARS now that slaptards have been out there over-paying for RE, effectively leaving us with the choice of making an obviously-poor financial decision or renting. We’ve been waiting years for this nonsense to unravel so we can buy a home without making a bad decision. Prices have only just begun to unravel, and for me, every story I hear about someone being unable to sell at or below 2003 prices brings a great big smile to my face. Maybe you weren’t trying to make that leveraged double-digit return when you bought in 03, maybe you were just looking for a home to live in. But in my estimation, you made a piss-poor financial decision in 03 and bought into an overheated RE market full of brainless bulls, and now you’re reaping what you’ve sown. I would have preferred that the brainless bulls had never taken hold of the RE market, and that people that would like to buy a reasonably-priced home, such as myself, had that option. But in fact they did take hold of the market, and for those of us who played our hand well, don’t expect us to stop cheering as the market falls because of collateral damage to “innocent bystanders” that played their hands poorly. Frankly I’d like to see everyone that bought in 03 get crapped on big-time, and my best advice to you would be to get out ahead of the downward market trend, price that thing 5-10% below current “asking” (”begging”) prices, and eat your losses before they become much larger. And next time there’s a money band-wagon, stay clear of it.
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
I thought I’d bring this to the blogger’s attention. Sometimes it’s difficult to conceptualize what’s happening with the asset bubble deflation. It is perhaps even more difficult to understand it if you’ve had some university education in economics. Such education, being Keynesian-based, tends to obfuscate rather than illuminate real-world events.
In contrast to this sad state of affairs, Roger Garrison, professor of economics at Auburn University, has worked to inject some pre- and post-Keynesian analysis into the mainstream economics debate. What he’s come up with is an expansion and illustration of Friedrich Hayek’s business cycle theory (for which he won the Nobel Prize in economics in 1974). Garrison has worked for 30 years to rehabilitate Hayek’s theory and present it in a way that modern economists and students of economics can understand.
Garrison’s work earned him the first visiting Hayek Fellowship at the London School of Economics, where Hayek held a chair in economics from 1931 to 1950. Garrison released a book of his work in 2001, “Time and Money: The Macroeconomics of Capital Structure”, an illustration of Austrian Business Cycle Theory (ABCT).
In short, ABCT involves a capital structure, a loanable funds model, a production possibilities frontier with intertemporal substitution between consumption and investment, and wage-specific stages of production.
Below is a powerpoint presentation of Garrison’s work on ABCT. I think bloggers here will find the ideas presented as intuitively appealing. Hope you enjoy it and find it useful.
http://www.auburn.edu/~garriro/cbm2006.ppt
I dunno . . . nine point rally off the low on the S&P. Wonder if there’s a rate cut or rate cut rumor floating around. I know these mean nothing in the long run but the vix and vxo ain’t doing anything considering how the markets have been tanking.