January 13, 2008

The Property Party Has Turned Into A Nasty Hangover

A report from the Oregonian. “Developers carved out thousands of new home lots on the premise that they’d enjoy the same tidy profits produced in recent boom times. But demand for land and homes has plummeted, particularly in Clark County and Happy Valley, where construction was most intense. As a result, developers are left to pay heavy interest on land sometimes worth less than they owe.”

“‘I knew the market was going to correct, but to have it hit this hard, it’s a big shock,’ said Debra Oester, lead real estate lender at the Bank of Clark County in Vancouver. ‘To have it come to a standstill like this, I’ve never seen it before. And I go back to ‘74.’”

“There’s clear evidence that new subdivisions built at the crest of the boom have suffered a swift and painful fall. In the Portland area, sales through November were down 12 percent from the year before. The inventory of unsold homes in November was enough to last more than eight months — up 63 percent from a year before, according to the Regional MLS.”

“The Reserve is the kind of subdivision Happy Valley builders drooled over. Developer Corey Harris said his company, Landmark Development, paid $7.2 million for about 60 acres on the peak in summer 2005. The deal seemed like a safe bet.”

“Harris said he already had a deal to sell the lots for $18.5 million. To pay his contractors, Harris’ company took out a $12.3 million loan with Bay Bank of Longview, Wash., in July 2005.”

“‘We had no idea what was about to come,’ Harris said.”

“The project fell behind schedule in the spring of 2006. The housing market sputtered that summer. And by September 2006, his buyer wasn’t interested.”

“He said his company was stuck with a $140,000 monthly loan payment, and he stopped making the payments last year. The Reserve’s contractors have filed more than $500,000 in liens for unpaid bills.”

“In November, Bay Bank filed papers to foreclose on the subdivision to get its money back. Ed Cameron, Happy Valley’s building official, says it’s the first time in his nine years that he’s seen an entire subdivision fall into foreclosure.”

“Happy Valley’s protracted land rush pushed the city’s population from 4,500 in 2000 to 10,400 in 2007. But the property party has turned into a nasty hangover.”

“North Clackamas County, including Happy Valley, had 12 months’ inventory of unsold homes in November, almost twice the figure from a year earlier. Thinking back, Harris says: ‘Happy Valley was hot. Now, it’s drowning.’”

“Tim Gray, former chief financial officer of national builder D.R. Horton’s Oregon operation, founded the Camas-based Zephyr Communities in 2004. Within a year, Zephyr built 100 homes and developed 350 lots during its run.”

“As the long real estate boom continued, Gray was among developers who bid up land prices. ‘Tim was paying top dollar for the land,’ said Scott Combs, a Vancouver real estate broker. ‘But it made sense. Tim was trying to buy land so that someone else wouldn’t buy it.’”

“In April 2006, seven of eight scheduled home sales fell through within days. From there, things just got worse as demand fell further and Gray slashed prices. As Zephyr struggled to pay its bills, its creditors, owed about $45 million, grew restless.”

“That debt load became crushing. Last June, an unpaid creditor forced Zephyr into bankruptcy.”

“‘It was a fast and steep drop,’ Gray said. ‘I didn’t pick a good time to go out on my own. It was a very emotionally challenging time. Still is. I made a lot of promises that I wanted to keep, but I couldn’t.’”

“The Clark County market, like Happy Valley, was made more volatile by investors who bought homes and tried to flip them for a quick profit. Investors made it appear that demand was so strong that developers kept pushing up supply. But when the market tightened, investors were the first to bail out on sales.”

“The housing troubles aren’t limited to Portland’s suburbs. St. Helens-based Decal Custom Homes, an active Portland-area builder, is scrambling to remain afloat amid dozens of creditors clamoring for money. By early 2007, Decal had completed both Brush College and Timberline and had signed contracts to sell the land to builders for about $25 million, said two lawyers familiar with the case.”

“But the builders backed out, spooked by the sales slowdown. ‘Now it’s a question of whether (Decal) can sell the land for half’ its original asking price, said Al Kennedy, a Portland lawyer representing Schleining.”

From News Channel 8 in Oregon. “For more than a year, Ray Sinclair tried to sell his ocean view home the old-fashioned way.”

“He had a realtor. He drove in from his new place in Waldport five days a week to open the house in Yachats. Nothing worked. The market was a graveyard. People looked and went about their way.”

“Time for a fresh approach, Sinclair reasoned. An essay contest for a $200 fee that could result in the full transfer of title to the home, which sits on a 10,000-square-foot lot.”

“Sinclair’s situation reflects an increasingly desperate housing bust in Yachats, which has relied on cash-flush California buyers for years, buyers who are nowhere to be found now that their homes south of the border are also stuck with indelible ‘For sale’ signs.”

“The supply of home listings in Yachats is a whopping 27 months, triple that of Lane County’s, said Tawfik Adhab, a real estate appraiser and expert on the central coast housing market.”

“‘As the California markets have dried up, people who wanted to come to Yachats can no longer do so,’ Adhab said.”

“Sinclair and his wife decided two years ago to sell the sprawling one-story ranch house originally built as a one-room beach cabin in 1964. The couple spent $250,000 renovating the place after buying it for $173,000 in 1995. Sinclair, who lowered his asking price from $600,000 to the current $539,000 after a year and still didn’t get any bites.”

“Sinclair plans to extend the contest deadline by 30 days if he doesn’t get enough entries, and there’s language in the rules that reserves the right for him to scrap the plan altogether.”

“Kitty Telles, gaming registrar of the charitable activities section at the Oregon Department of Justice, said she gets calls about once a month from desperate sellers such as the Sinclairs and their real estate agents, wondering about their options. Those calls have increased in recent months as the nationwide housing market continues its freefall.”

“‘It’s getting to be more and more of an issue,’ Telles said.”

“She hasn’t heard many success stories from essay contests. ‘It can work, but I ask every one of them I send information to, ‘If you make this work, please let me know,’ Telles said. ‘Nobody has ever come back and said ‘Kitty, I did it.’”

The Keizer Times from Oregon. “Luckily for Keizer homeowners, homes here are maintaining their market value, according to realtor Amy McLeod. But the hopping, skipping and jumping seen in home values in recent years, the average home value increased 18.82 percent in Keizer from 2005 to 2006, has slowed down.”

“Average home values from 2006 to 2007 increased only 1 percent in Keizer. But lower-priced housing is not necessarily a bad thing when it comes to attracting growth, McLeod said.”

“And despite a lack of new construction…available home inventory in Keizer is actually up, according to broker Rich Ford. As of Dec. 16, 2007, 528 houses had been listed in 2007 as opposed to 421 to that same date in 2006, a 25 percent increase in inventory.”

“Sales activity also declined, Ford noted, with 371 homes sold as of Dec. 16, 2007 versus 425 houses sold at the same time in 2006. ‘Inventory is up, sales activity is down and that is pressuring prices downward,’ Ford said.”

The Daily News from Washington. “A long-delayed, 200-unit housing project is hoping to get a boost from the massive flooding that drenched the Pacific Northwest in December. Landscapers are finishing up the first three homes in the 49-acre Grand Prairie subdivision, located on the south side of State Route 505 entering Winlock.”

“When the Winlock City Council approved Grand Prairie in late 2005, Tacoma-based Rockmann Development Group officials promised that the first stage of 20 homes would be near completion by the end of 2006.”

“Rockmann had contracted with another construction company that ran into financial problems halfway through the project, said project team leader Ron Jarvis. Also, the home prices, $280,000 to $350,000, were also too high for the area, he said.”

“The homes will now be built by the Tacoma-based Stanbrooke Custom Homes, with an expected price range between $210,000 and $280,000, Jarvis said.”

“Rockmann now plans to build the homes as they are sold, not in larger groups, Jarvis said. The homes will likely be filled by families, but Jarvis said he thinks the higher-end homes will become more attractive as more retirees leave the workforce and look for somewhere to settle down.”

“‘Long term, we’ll probably end up filling the development up with baby boomers from all over the country,’ he said.”

The Columbian from Washington. “Home building in Clark County slowed last year to its lowest level in more than 20 years. ‘Every person involved (in building a home) - the engineers, surveyors, banks, building contractors, the suppliers, all of that horizontal string of people - all of their business has slowed down,’ said Mike Worthy, CEO of the Bank of Clark County.”

“David Roewe, executive director of the local Building Industry Association, blamed the 2007 slowdown on a rising supply of existing homes listed for sale.”

“‘There’s just too much inventory on the market so builders have tightened their belts,’ Roewe said.”

“The inventory of new and existing homes for sale peaked in September with a 12-month supply before retreating to 11 months in November. The inventory would take 11 months to sell if no homes were added to the market.”

“Builders who are holding undeveloped residential land are hurting the most, Worthy said. ‘They still have to pay interest and carry the costs. And while they’re tangled in the current projects that they haven’t sold yet, they’re not thinking about the next project,’ he said.”

The Anchorage Daily News from Alaska. “The financial turmoil in the mortgage industry and falling home prices nationwide have created anxiety for buyers and sellers in the Anchorage market, some local real-estate experts say.”

“Another problem, according to Anchorage real-estate agents and lenders: Sellers are trying to sell their houses for more money than buyers will pay.”

“Sales of single-family houses in Anchorage declined 10 percent last year, said Niel Thomas, an Anchorage real estate agent who tracks the MLS statistics. The number of houses listed for sale last month — 944 — was the highest since the late 1990s.”

“‘A portion of the total inventory is just sitting there,’ Thomas said during a speech at a recent Anchorage Board of Realtors luncheon.”

“What’s happened instead is the ‘go-go’ real-estate market of the previous few years, which included some years when home prices increased their value by 10 percent or greater, has ended, he said.”

The Daily News-Miner from Alaska. “Shoppers bought fewer homes in Fairbanks in the second half of 2007, a change analysts said could correct an inflated housing market seen in recent years.”

“The number of single-family homes reported sold late last summer in the Fairbanks North Star Borough dropped from the summer prior, according to the Greater Fairbanks Board of Realtors. The slide continued into the fourth quarter of 2007, when home sales were 12 percent lower than the fourth quarter of 2006.”

“The slowdown, along with a corresponding increase in number of available homes for sale, gives buyers some time to breathe following a hectic year for real estate, said associate broker Mike VanSickle.”

”It’s a bit of a buyers’ market,’ he said.”

“As of the end of December, listing services showed 39 percent more homes posted for sale than a year earlier.”

“Longtime home builder Steve Bee said he sensed early this summer that less-experienced builders were gearing up for heavy seasons…and that the market could become flooded with new homes as a result.”

“He decided not to build the three or four homes on the speculation that they would sell, a practice he usually incorporates into a season’s work, out of fear he could watch them sit unsold for months.”

“‘I think (this) is a slowdown that needs to happen,’ he said.”




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91 Comments »

Comment by Ben Jones
2008-01-13 12:09:51

‘Alta and Bob Strayhan lived in San Francisco about a decade ago. Now, the couple plan to relocate downtown in February, when their Washington Square condominium is scheduled for completion. ‘We really believe Bellevue is where it’s at,’ Wasatch Chief Executive Dell Loy Hansen said. ‘This is where young people want to be. This is where sophisticated people want to be.’

‘Washington Square will have 379 homes in the 24-story first tower and 25-story second tower, which is scheduled to open in April. All of the homes have decks, fireplaces and big windows and range from about $400,000 to $2.6 million.’

‘Brian Petoletti, the owner of Allure, said at Tuesday’s tour that it would be a ‘lounge restaurant’ serving dinner until 1 a.m. every day. ‘We’re going to be sexy Las Vegas meets ‘Top Chef,’ he said. Washington Square is aiming for similar local, urban businesses, Hansen said.’

‘We are trying to create that true New York, Vegas experience,’ he said. ‘We want to be the counterculture to the big-box names.’ ‘While playing up the hipness of downtown Bellevue, and Washington Square in particular, Hansen also said it was safer than places such as Belltown and noted the project’s many garage security cameras and elevators’

Comment by aladinsane
2008-01-13 13:05:45

I really believe Bellevue Hospital is where this utterly nutterly duo, would be better served their lunch…

http://en.wikipedia.org/wiki/Bellevue_Hospital_Center

Comment by NYCityBoy
2008-01-13 17:03:23

It is funny how every city wants to be New York City. They act like there are no problems in New York. Everybody is loaded. Every building needs to be 50 stories. It reminds me of foreigners that only knew the U.S. by watching the show “Dallas” in the 1980s. It seems just as silly. Maybe they do belong in Bellevue.

I hate that I missed the thread about pooping in NYC. Two co-workers left our apartment at midnight, right around Thanksgiving. They were taking the 4 & 5 uptown and some guy took a dump right in the middle of the car. He then went to pick it up with napkins or something. I have more stories but bandwidth is limited.

 
 
Comment by Lionel
2008-01-13 21:05:05

That’s exactly right. When I think Bellevue, I think Vegas. I can think of few places less like Vegas than Seattle.

 
 
Comment by aladinsane
2008-01-13 13:11:50

“North Clackamas County, including Happy Valley, had 12 months’ inventory of unsold homes in November, almost twice the figure from a year earlier. Thinking back, Harris says: ‘Happy Valley was hot. Now, it’s drowning.’”

Just take some prozac and get over it, Happy Valley.

Comment by Doug in Boone, NC
2008-01-13 16:13:35

We also have a Happy Valley here in NC. My guess is that people aren’t very happy there, either!

 
Comment by Dynastar
2008-01-13 21:53:21

Happy Valley really is sort of a no where place, I can’t believe people want to live there. I know the area well, my late Grandparents lived up there on a few acres. After their death the land was sold to a developer and now it’s home to a bunch of ugly new houses on little tiny lots. Portland is a nice place, why live in Happy Valley?

 
 
Comment by waiting_in_la
2008-01-13 13:32:22

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?

Comment by waiting_in_la
2008-01-13 13:33:23

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

Comment by Neil
2008-01-13 14:00:21

The article is still bullish. A peak in August 2007? Soon the NAR’s practice of only reporting the median will bite them as the low end is cleared. I’m sure they’ll succeed in keeping many transactions unreported.

I do like how it notes sales are down 51% YOY. I notice they still cannot compare to 2005. But I do notice they’re quoting $/sqft.

I do notice they try to play off the downfall as in the fringes… Its coming to the core. As the REMax realtor is quoted, ‘If we accidentally price your house too low, it could be a blessing.” For that is the only way to sell.

Got popcorn?
Neil

 
 
Comment by LILLL
2008-01-13 15:28:30

Wow. And on Page 1–not buried deep inside. We should all email Darrell Satzman(the writer of the article) and commend him for quoting Thornburg. GOOD JOB
satzman@earthlink.net

 
 
Comment by ec3
2008-01-13 13:32:42

>> “‘To have it come to a standstill like this, I’ve never seen it before. And I go back to ‘74.’”

On the other hand, in 1974 it was rare to have both Master Charge and BankAmericard in the same wallet. Much less pre-qualify for a $417,000.00 instant line of credit with no collateral. It all evens out.

Comment by cayo_ron
2008-01-13 18:11:45

Touché.

 
 
Comment by rms
2008-01-13 13:40:31

Last evening’s news had rare piece on the economic front. Democrats to Bush: “We want to work with you.” Looks to me like the incumbents are finally waking-up, and they’re scared. :)

Comment by NYCityBoy
2008-01-13 16:52:03

The Democrats and Bu$h working together on the economy? Now I’m scared.

Comment by NotInMontana
2008-01-13 20:11:51

Yes. Be very afraid.

 
 
 
Comment by Kent from Waco
2008-01-13 13:44:22

‘Alta and Bob Strayhan lived in San Francisco about a decade ago. Now, the couple plan to relocate downtown in February, when their Washington Square condominium is scheduled for completion. ‘We really believe Bellevue is where it’s at,’ Wasatch Chief Executive Dell Loy Hansen said. ‘This is where young people want to be. This is where sophisticated people want to be.’

Bwa ha ha ha….

Bellevue is the Plano of Western Washington. The most distinguishing landmark in downtown Belleville is a generic upscale mall.

Comment by Groundhogday
2008-01-13 14:06:21

What got me about this was the price range starting at $400k. Here in Pullman, WA standard homes on standard lots are listing for $400k, “luxury condos” for $300k, really nice homes for $500-600k. Sometimes it seems like every single development in the country is targeting the top 1% of the population, and while these folks do exist, they CAN’T live everywhere. (Not to mention, most of them already own homes.)

Comment by NotInMontana
2008-01-13 14:52:18

Exactly. What’s been great about this blog is that I’ve learned the prices and median incomes in Missoula are not much different from most of the rest of the country. Yeah, where is this top 1% that’s supposed to buy all this new crap.

Comment by NYCityBoy
2008-01-13 17:05:07

The problem the past 5 years is that everybody had access to credit that could give them the mistaken impression that they were in the top 1%. Now this is gone and people don’t understand the new reality.

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Comment by tcm_guy
2008-01-13 21:48:18

NotInMontana, the top 1 percenters are buying, but not everywhere. Only in Winlock City. (Given enough time.) It’s different there.

“‘Long term, we’ll probably end up filling the development up with baby boomers from all over the country,’ he said.”

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Comment by Jas Jain
2008-01-13 13:46:10


“‘As the California markets have dried up, people who wanted to come to Yachats can no longer do so,’ Adhab said.”

Boy, Californicators were chasing anything in sight.

What is rarely mentioned is that many towns in California were building homes to sell to other Californicators. For example, in Tehachapi 3,000 permits were taken out in 2005 (5-7 years worth of demand) to sell to people from LA, Lancaster, Palmdale, Bakersfield, etc. Looks like we have a pipeline problem; it is mostly blocked.

Jas

Comment by Mary Lee
2008-01-13 19:02:01

Ever been to Yachats? Thirteen homes would be a 27 month supply. One old quasi-resort. A handful of homes on either side of Hwy. 101, and one really good restaurant. Oh - and an old, charming array of “cabins” south of the river. At the suggested 25mph, you’re thru town in 3 minutes. Hilarious.

Comment by bob
2008-01-13 19:15:51

We were just there for 4 days the week before thanksgiving, and spent time driving 10 miles south and 25 miles north of the town. No joke - a bunch of these (frankly very nice seeming) 1 and 2 bdrm cabins, were being upgraded into much more expensive vacation homes - crazy … the few resturants and bars were quite empty (except for Sat night)

 
Comment by MacAttack
2008-01-13 19:18:29

Yes, and Waldport’s another dead fishing and timber town down the road a bit.

Comment by NotInMontana
2008-01-13 20:14:46

I remember those places from driving through 30 years ago. What a shame to see them get manhandled by the Cali’s. Some places should be just left alone. Stockton, okay, but not the north coast.

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Comment by Thelonius
2008-01-13 13:54:45

“There’s clear evidence that new subdivisions built at the crest of the boom have suffered a swift and painful fall. In the Portland area, sales through November were down 12 percent from the year before. The inventory of unsold homes in November was enough to last more than eight months — up 63 percent from a year before, according to the Regional MLS.”

Gee, and just a few weeks ago I read in the same paper that it was never going to happen in Portland, because Portland is beautiful, smarter, has an urban growth boundary, etc. etc.

 
Comment by Jas Jain
2008-01-13 13:55:47


“Sinclair plans to extend the contest deadline by 30 days if he doesn’t get enough entries, and there’s language in the rules that reserves the right for him to scrap the plan altogether.”

What is wrong with these people? Don’t they know that there is a price at which a home will sell?

Drop the price until it sells, 10% a month is the suggested formula.

Jas

Comment by Groundhogday
2008-01-13 14:08:54

I have a hard time understanding how these lotteries are legal. Do sellers have to agree to donate everything over “appraised” value to a charity?

Comment by FutureVulture
2008-01-13 16:57:11

Essay contest, eh? Think I’ll dig up my old Penthouse Forum submission and send it in, with a few strategic word changes. What’ve I got to lose?

“…the rocky hardness of the travertine I’m gonna install will be the perfect complement to your sultry steam shower…”

Comment by Groundhogday
2008-01-13 19:32:48

From the article:

“What Sinclair can do legally is a skill-based contest, however. He formed a nonprofit corporation, hired three judges and has spent $40,000 on attorneys and accountant fees to perfect the contest rules. If the hoped-for 3,000 entrants throw their names in the ring, he’ll earn $600,000.”

So this idiot has just tossed $40k and a lot of time down the toilet… while the market continues to fall.

GET A CLUE buddy! Lower the price and it will sell.

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Comment by cayo_ron
2008-01-13 18:16:14

I’ll take a crack at that essay:
Dear asswad, accept it, you are underwater on your glorified cabin. If you sell it to me now for $100,000, I won’t report you to the Feds for running an illegal lottery.

 
 
Comment by aladinsane
2008-01-13 14:25:36

Cargo Californian Cult

“Sinclair’s situation reflects an increasingly desperate housing bust in Yachats, which has relied on cash-flush California buyers for years, buyers who are nowhere to be found now that their homes south of the border are also stuck with indelible ‘For sale’ signs.”

Comment by txchick57
2008-01-13 14:55:29
 
Comment by cayo_ron
2008-01-13 18:18:30

Wouldn’t it just be easier if people put out signs only in front of houses NOT for sale?

 
 
Comment by Groundhogday
2008-01-13 14:30:21

Here is a good example of what is happening in the PNW:

Monster house (4500 sq ft), but a big yellow box in a primarily rental neighborhood (townhomes, duplexes). It has been on the market since March 2007, back and forth between MLS and craigslist (now both). Went under contract in October and occupants moved into their new $500k home on the hill. BUT, buyers couldn’t get financing so this baby is back on the market, now vacant and eating up $2500/mo for the mortgage plus taxes, utilities and insurance.

Rather than lower the price, the owners think the solution is to post craigslist ads every week (in addition to MLS) telling everyone about their “GREAT GOREOUS” CUSTOM HOME with “barber” carpet!!! As if exclamation points after every sentence fragment will make a sale.

http://tinyurl.com/2etnp6
http://tinyurl.com/2hpnp7

Comment by NeilT
2008-01-13 15:19:59

I hope their 500K (new) house has more sq footage because 4500 sq ft is too little to get all the needed entertainment in everyday life.
I pray to Lord Almighty to make the housing market crash so hard that all the high-fliers suffer excessively. Schadenfreude.

 
Comment by Cinch
2008-01-14 00:06:09

It is a glorified garage with a house attach.

 
 
Comment by Thelonius
2008-01-13 14:43:16

I have a little cabin on the Oregon Coast, and last year a huge ugly condo development started about a half mile away, with for sale signs asking $1 million per unit. Probably still haven’t finished building them. I think they’re about 2 years too late.

 
Comment by txchick57
Comment by housing hanky panky
2008-01-13 16:02:41

My question is……….will this deal settle?

still a long way to go…………and when all the facts about CFC are known…………will BAC pull out taking the best meat off the prey?

 
Comment by Groundhogday
2008-01-13 16:15:46

Underlying Shawn Tully’s evaluation of this deal is a fundamental assumption that the worst is over for lender writeoffs. Worst case scenario, Countrywide has to write off another couple $billion, BofA can stomach that. These analysts just don’t get it. We are coming off the biggest bubble EVER by an order of magnitude. The downturn will not be like previous downturns. What if Countrywide has another $30 billion in losses? Does the deal still make sense Shawn?

There is a reason Buffet decided to start his own bond insurance company–why take on the negative value of existing firms?

Comment by NYCityBoy
2008-01-13 17:39:41

The analysts are believing their own “bottom” talk. They are no different than any other profession that has squandered its credibility in the past 10 years. As if they had much left after the tech fiasco.

 
 
Comment by NYCityBoy
2008-01-13 17:41:26

Alan Sloan is great. I love listening to him. The “Sloan Report” is one of the best things on NPR.

 
 
Comment by NotInMontana
2008-01-13 14:53:21

“The couple spent $250,000 renovating the place after buying it for $173,000 in 1995.”

WTF?? they went a little oveboard, yes?

Comment by SDGreg
2008-01-13 15:40:59

“The couple spent $250,000 renovating the place after buying it for $173,000 in 1995.”

That must have been some renovation, or some price for the renovation they did do.

Comment by Groundhogday
2008-01-13 17:18:07

As mentioned a few months back, my BIL spend $200k in Seattle for a simple 2-bed, 1 bath remodel. Granite bathroom vanity counter, tile shower and floor, hardwood bedroom floors, and one wall of built-in bookshelves. Quality work to be sure, but NO structural work of any kind, nothing unusual, nothing truly special.

THe project was estimated at $70k (I told him THIS was too high), but since he didn’t even get that in writing the final bill came in at $200k. Initially, he was angry but over time has convinced himself this was a “special” job that has made his little 3/2 truly “special.”

Jeff Goldblum (Michael): I don’t know anyone who could get through the day without two or three juicy rationalizations. They’re more important than sex.
Tom Berenger (Sam Weber): Ah, come on. Nothing’s more important than sex.
Jeff Goldblum (Michael): Oh yeah? Ever gone a week without a rationalization?

 
 
 
Comment by Captain Credit Crunch
2008-01-13 15:16:10

There’s no Washington & Wall St. thread today, but I was curious what everyone thinks about beginning a 401k during this turbulent time. I’ve been saving cash, because I want to be ready for the bottom and buy a house, but I think I’m getting close to enough. Wife and I together will have 30k at the end of the year, and I will have separately saved another 75k (which I might use toward the house or my Turbo, as some of you recall I am always on the lookout for ;) ). We don’t have any tax deductions–even student loan interest is blocked for us. Heh, it stinks! So I thought a 401k might be a good idea to shift the tax burden to when I retire. I could max out the $15,500 contribution limit, but it would stop me from saving separately (still able to save toward the house with my wife).

I’m afraid of catching a falling knife in securities, too. What to do? The plan has a lot of choices through Fidelity. I thought about commodities, natural resources, utilities, defense, foreign stuff per Schiff’s recommendations…but is anything going to be safe? Heck, I could wait until Oct, Nov, and Dec and just max it out for the year then if we know markets are trending lower.

I don’t know–just looking for thoughts.

CCC

Comment by flatffplan
2008-01-13 16:36:18

if you qualify for a ROTH you can use it to buy your first home……
2009 ?

Comment by Captain Credit Crunch
2008-01-13 19:56:05

I wish I could, but the married income limit I think is 160k ish–we don’t qualify. However, I wonder if I contributed 15k to the 403b, if it would bring us down below the required MAGI and then I could put away some in a roth. Either way, I could convert the 403b to a roth in 2010 under that special program.

Comment by NotInMontana
2008-01-13 20:24:11

I stopped my 20% contribution last month because I didn’t like the choices and even the mmkt has a lot of commercial paper, whatever that is. But I decided to start up again because you get the tax break up front that way. Putting the same amount after-tax into an IRA leaves you with a lot less of your paycheck. You get it back in a refund the next year but w/o interest.

So I guess I’ll just have to trust in Franklin-Templeton. Meh.

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Comment by vmaxer
2008-01-13 15:35:00

I don’t know how old you are, if you haven’t started saving for retirement, the sooner the better. You know time value of money and all that stuff. You can just leave it, for now, in an interest bearing MM fund, till your more comfortable with other investments.

Comment by vmaxer
2008-01-13 15:36:06

Sorry, I meant to post a reply to: Captain Credit Crunch, above.

 
Comment by Captain Credit Crunch
2008-01-13 15:57:24

That’s a good point, I could just keep it in treasury stuffs until I’m more comfortable, then buy when I’m ready.

Comment by Troy
2008-01-13 17:19:36

I’ve been in a 3.2% return MM for the past year. I saw what happened to 401Ks 2000-2001 so I have no stomach for downside risk with this.

The 401K money is coming from the ~37% bracket now so it makes sense for me to max out the contribution even with the 10% early penalty (which is deductible so it’s more like 8%)

Comment by LILLL
2008-01-13 19:06:56

I’ve been in a 5.85% CD at Wamu(they offered for a limited time–they must’ve really needed cash)…but it’s coming due next month. I will be pulling the cash from that establishment as I hear they may not be as stable as they appear.

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Comment by Affordability
2008-01-13 19:16:29

I have some here for now - the introductory was for 6% for three months and now it is 5.05 - you can put it in and take it out easily enough - no locking you in for a specific time period https://www.fnbodirect.com/01d/html/en/

Comment by Captain Credit Crunch
2008-01-13 19:59:52

Thanks guys, but I’m more concerned about reducing my tax burden than what to do with my liquid cash (it’s in E-Loan @ 4.5% and my credit union @ 5.3%). I think the money market is a great idea, since chances are slim to none I’ll need more than the cash I have any time soon.

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Comment by housing hanky panky
2008-01-13 15:38:45
Comment by joe momma
2008-01-13 16:02:39

Good article. This part sums it up.

In summation, the US economy is at the beginning of a huge problem. The economy depends on credit creation. However, the financial sector is hampered in that ability right now because the value of assets backing outstanding loans is decreasing. This lowers the value of outstanding loans, which in turn limits the financial sectors’ ability to extend credit. So long as the US economy is experiencing deflation this process will continue.

 
 
Comment by Doug in Boone, NC
2008-01-13 16:29:26

This might be a little bit OT, but finally someone pointed out that despite their plans to bail out FBers at non-FBers’ expense, whoever is elected president won’t take office until January 2009. By then things could be so bad that no amount of tax money will help.

 
Comment by Peter
2008-01-13 16:59:36

It is funny what some people will do to try to get the peak bubble price for their house. Ray Sinclair’s essay contest is a hilarious. He is chasing the market down and since the supply of home listings in Yachats is a 27 months, prices will continue falling for a long time. He will end up selling at the bottom for about $250,000. That will be even more hilarious.
This guy sounds like a shyster. He has spent $40,000 on attorneys and accountant fees to perfect the contest rules? All this sounds fishy. I don’t believe the part about the bacterial infection and emergency room visits. It sounds concocted to gain sympathy.

 
Comment by NoSingleOne
2008-01-13 17:00:15

It seems the bubble in Anchorage is deflating slowly. Sellers are still holding on to yesteryear’s prices, but loans are getting harder to come by for buyers…maybe not as bad as the rest of the country since our conforming loan limit is 625K. Job growth has been flat over the past year. However, no one is sure where the economy is going (since Alaska’s mineral commodities-based economy is shooting through the roof right now), so wheeling and dealing for a home isn’t as rampant in other markets like CA or FL.

I would personally LOVE to see housing prices go back to historical appreciation levels (about a 50% drop from today’s prices) in Alaska, but it is frustrating that the sellers are living in a different world. However, I don’t want to suggest that not every area of the country is as f*#ked as CA or FL, lest the nasties accuse me of trollage.

Comment by LILLL
2008-01-13 18:53:52

Good idea. There are those on this blog who are turning on their own HBB comrads.

Comment by LILLL
2008-01-13 19:02:23

I believe even the character of my 15 year old son was attacked in the last California thread by ex-nvmtgbrkr. And BTW, thanks to all of you who came to my aid. We may not all agree about everything, but that independent thought is what seperates us from the masses of sheeple. I don’t think you can get lower that accusing someone of being a realtwhore.Nasty!

Comment by crisrose
2008-01-13 20:26:40

“I don’t think you can get lower that accusing someone of being a realtwhore.”

Ha! How true!

I think the problem was that you were trying to justify buying a house by painting it a ‘good deal’ - as opposed to the bad deal that it is.

Just say you want to buy a house now and you don’t care if you screw yourself out of money.

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Comment by LILLL
2008-01-14 15:56:35

crisrose–Get your facts straight!!!!
I never said “it’s a good deal”. I said my mortgage will be lower that the rent I’ve been paying for two and a half years and it is true! I also said I’m putting a large downpayment…something that is still a rarity.
‘Snarky’ is a good word.

 
 
Comment by Faster Pussycat, Sell Sell
2008-01-14 09:21:45

How about crack-addled debt-pushing realtwhore?

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Comment by AKron
2008-01-13 19:18:31

Fairbanks (Alaska) Housing Market Cools according to the News Miner

http://newsminer.com/2008/01/13/10847/

(Actually, Fairbanks is butt-freezing cold every January, but I digress)

Unless there are big military cutbacks or a big drop in oil prices, I would expect house prices here to drop about another 25%, which would bring them to the point where you would get good cash flow from buying and landlording. With rentals making up more than 50% of households here, rents will put a floor on the housing prices.
NOTE: The Anchorage and Juneau markets are more overheated then the Fairbanks market, both because the latter is very much dominated by rentals and there is PLENTY of land around Fairbanks.

Comment by Kyle
2008-01-13 20:02:12

But vacation home buyers from California/Mexico/Hong Kong/Abu Dhabi/Tanzania/Slovenia will save the Fairbanks market! Suzanne researched this!

 
Comment by JP
2008-01-13 20:02:45

rents will put a floor on the housing prices

But what will put a floor on rents, which will also drop?

Comment by crisrose
2008-01-13 20:34:42

“But what will put a floor on rents, which will also drop?”

Someone I know who bought preconstruction in Lehigh Acres initially listed the house in July 06 for sale at $245K (”If it isn’t sold within 30 days will list with realtor at $260K” - obviously a real estate seminar sap).

When that didn’t work, the house was put up for rent with an asking price of $1250 per month. Several vacant months later, it was dropped to $900 and rented. Those tenants stayed a mere six months until they vacated following a burglary (Lehigh Acres = future slum).

It was relisted for rent at $900 and, after a few more vacant months, was eventually rented as of 1/1 for $700 per month (with one month free on a 12 month lease).

There is no floor on rents - people will double up, move back with mom and dad, live in their cars…

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Comment by talon
2008-01-13 18:08:04

“We are trying to create that true New York, Vegas experience”

And exactly what the hell is that? I prefer the Tokyo, Cleveland experience myself.

Comment by SDGreg
2008-01-13 21:31:36

“We are trying to create that true New York, Vegas experience”

You lose all your money through a mugging?

 
 
Comment by txchick57
2008-01-13 18:10:28

GO GIANTS!!!!!!!!!!!!!!!!! HAHAHAHAHAH

Oh lordy, we’re going to hear all winter and spring how those Double Ds did in the Big D! Just trade the guy!

Comment by NYCityBoy
2008-01-13 18:24:57

How ironic. The Texas Chick wanted the Giants to win and the New York City boy wanted the Cowboys to win. I wanted to hear the whining at work tomorrow.

Go Green Bay!!!

Comment by arizonadude
2008-01-13 18:38:49

The giant suck.Eli looks like he is in a drunken haze all the time.Those double d’s would be fun to play with for sure.Well brett farve is the man now.He is the only one who could beat pretty boy brady.A day of morning for texas or a lynch mob for simpson?

Comment by Diggs
2008-01-13 18:59:22

“He is the only one who could beat pretty boy brady”

LOL. No, he can’t. Did you see the the clinic Brady put on Sat. night? 26 of 28. Farve will have to score every possession because Brady can. Even then he’d lose. I’l give Farve credit for his scrambling ability and lucky throws off his back foot but that aint gonna get it done against the Pats. The Giants and Packers game will be interesting if the weather isn’t snowy. Eli does suck, but that pass rush is vicious.

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Comment by michael
2008-01-14 07:19:02

i got my beer and all and started watching the game right before the half.

the announcers were talking about how blitzing brady was not part of jacksonville’s game plan.

i got up…went to my comptuer and played CoD4.

that game was over before it started.

 
 
 
 
Comment by Sekar
2008-01-13 19:52:05

This is Brady and New England’s football world…everyone else is just allowed to play in it. 17-0 and 2 more to go !!!!!!!!!!!!!!!!!!!

 
 
Comment by bodz
2008-01-13 18:11:45

It is funny what some people will do to try to get the peak bubble price for their house. Ray Sinclair’s essay contest is a hilarious. He is chasing the market down and since the supply of home listings in Yachats is a 27 months, prices will continue falling for a long time. He will end up selling at the bottom for about $250,000. That will be even more hilarious.
This guy sounds like a shyster. He has spent $40,000 on attorneys and accountant fees to perfect the contest rules? All this sounds fishy. I don’t believe the part about the bacterial infection and 19 emergency room visits. It sounds concocted to gain sympathy.

 
Comment by bizarroworld
2008-01-13 19:07:14

“‘It was a fast and steep drop,’ Gray said. ‘I didn’t pick a good time to go out on my own. It was a very emotionally challenging time. Still is. I made a lot of promises that I wanted to keep, but I couldn’t.’”

Translation: I thought I could make a killing, but instead I got killed.

 
Comment by measton
2008-01-13 19:27:36

NYT business section, BEN STEIN

” Alas the FED is still behind the curve. There is a real solvency fear out there right now.—.. The Fed must act decisively to calm these fears by reassuring lenders. This might even take the forrm of legislation allowing the Fed to buy stock in large banks on a temporary basis. The banks are already largely socialized through the federal deposit insurance. To add the prop of government capital infusion is not such a big step. Let the Fed concentrate on stimulation. No matter what, we’ll get through it all, but why make it more painful than it needs to be?”

This man needs to walk the plank. Painful for who, inflation for the workers and savers, higher stock prices for the CEO’s who caused this mess and gamblers like him who were recommending financial stocks last summer. He is really a pig at the trough

Comment by Sekar
2008-01-13 19:50:49

i.e. keep the game going so I can make more money off stocks and derivatives. Ben Stein is a dope.

Comment by NotInMontana
2008-01-13 20:28:27

I think these guys are still living in 1986.

 
 
Comment by WaitingForREO
2008-01-14 05:16:29

After continuously minimizing the debt crisis for the past year - Mr. Stein seems to have finally realized the gravity of it. So, he’s suddenly converted to socialism - for banks of course. Why not let the banks just steal Ben Stein’s money?

 
 
Comment by Melvin Frumph Hoppe
2008-01-13 20:49:18

Washington Square will have 379 homes in the 24-story first tower and 25-story second tower, which is scheduled to open in April. All of the homes have decks, fireplaces and big windows and range from about $400,000 to $2.6 million
“We want to be the counterculture”

a residence with a 2.6 million dollar apartment, or an expensive restaurant like the one described is sooo far from being counterculture, I just can’t believe language is used in this manner.
Dominant culture is in this day and age-materialism,consumerism, celebrity fixation and mass tv hypnosis and sports. the people who live there I would imagine would be more inclined towards the general ideology. they will I’m sure walk down the street to City Lights books and read some of the publications and poetry there for a “counterculture” experience, not the restaurant with the 15 buck vodka drinks.

http://www.citylights.com/

 
Comment by dcnative151
2008-01-13 21:53:46

HGTV is doing “National Open House.” It is all about how if you are an owner you have all this equity and didn’t “throw your money away renting.” It is funny because a show they had recently had a guy in Columbia Heights DC with a super small, but in other ways a decently nice rowhouse he bought for $525k. They tried to help him sell it. They said homes like his in that area were going for $525k to $575k. But, his house sold in February 2007 for $440k

 
Comment by sfbayqt
2008-01-13 23:50:36

Hey! Check out Ray Sinclair’s contest web site. It says he’s gotten 53 applicants so far. Hmmm…originally a one room cabin that grew into a “sprawling, one-story ranch”? It looks more like a majorly altered double-wide.

http://www.win-this-home.com/

BayQT~

 
Comment by venture60
2008-01-14 00:13:31

I live near Happy Valley, OR, nice place. Too many houses in the $600-$1M range for this market though. Maybe they should rename it “Short Sale Valley”. Lots of short sales happening in the area, it’s the only way the sellers will unload the excess inventory. Buena Vista Homes had large auction in December, 2007 (100+ homes in Happy Valley area) and it appears to me it was a failure. Just drove by the auction homes recently, and it appears most of those auctions homes really didn’t sell, there still empty. The strange thing is almost 30 days after the auction the auction signs are still up everywhere. That must really tick off the other sellers in the area.

 
Comment by Thelonius
2008-01-14 01:08:12

“Hey! Check out Ray Sinclair’s contest web site. It says he’s gotten 53 applicants so far. Hmmm…originally a one room cabin that grew into a “sprawling, one-story ranch”? It looks more like a majorly altered double-wide.”

No way he’s going to get 3000 entries (3000 x $200 = $600,000), for a majorly altered double-wide in Yachats. His only chance is to majorly lower the price and hope for a bidding war. Maybe that’s the plan: (1) use the contest for publicity, (2) cancel the contest for lack of response; and (3) invite a bidding war among the contestants.

 
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