The Level Of Expectation Couldn’t Remain Where It Was
The News Journal reports from Delaware. “The housing slump hit Delaware homeowners hard in 2007 with sales of homes in New Castle and Kent counties tumbling by double digits from the previous year, according to Prudential Fox & Roach Realtors. Norman Harrison has been trying to sell his four-bedroom house in Brandywine Hundred since March. Now, he’s ‘ready to let it go.’ He’s dropped the price by nearly $100,000.”
“‘It hurts, yeah, but it hurts even more because I can’t get rid of it. The market changed on me,’ said Harrison, who bought the house in November 2006. ‘I’m not going to make what I wanted to make.’”
“After years of ballooning prices, the rate of home appreciation is also beginning to drop in New Castle and Kent counties. In Delaware, inventories also ballooned last year. In December, there was a nearly two-year supply of homes available in Kent County.”
“‘I’ve never seen it like this. And you can’t find a single reason for why the entire market is in such a nose dive. Historically, it’s always been interest rates. This time, you’ve got to create a laundry list,’ said Jack Corrozi, a home builder since 1974.”
“Corrozi said he believes the market has yet to hit bottom. ‘Unfortunately, there’s been a panic out there,’ Corrozi said.”
The Burlington County. Times. “The Builders League of South Jersey hosted a forum yesterday on the 2008 housing forecast for New Jersey, and the outlook was grim. ‘I can’t stand here and tell you that housing markets in New Jersey have reached bottom,’ said keynote speaker Patrick O’Keefe, one-time CEO of the New Jersey Builders Association.”
“‘We can be assured that 2008 will, at best, be a year of tepid economic performance,’ he predicted. ‘Under the best of circumstances, certain sectors, and ours is among them, will experience negative growth, the equivalent of a recession. The questions are how deep, how long and how are we going to address it?’”
“‘We’ll find the bottom,’ said Al Garfall, president of the Delaware Valley Division of Texas-based D.R. Horton. ‘We’ve made adjustments to get our house prices to where they need to be. We’ll sit with a buyer and find the affordability factor with them and find the price that they can afford to pay. What we haven’t been able to do is master the science of helping them sell their house.’”
“‘We realized six or eight months ago that it doesn’t have much to do with our price,’ he said. ‘It’s 100 percent the buyer coming to the reality of the value of their resale.’”
“League officials estimated that the typical working family in New Jersey, earning about $55,000 annually, can afford a house priced at about $160,000.”
“According to the Builders League, average sale price of a new home in the state jumped from $226,856 in 1997 to $547,231 through June 2007.”
“‘Housing became unaffordable to middle-income households,’ O’Keefe said. ‘Closing that gap, even over time, could occur as long as other costs, like property taxes, don’t rise.’”
“O’Keefe said he was incorrectly optimistic that prices in the state’s resale market would adjust to the affordability problem. ‘Because I misunderstood that state housing prices in the resale market would stay up, my forecast that the housing market would stabilize in the third quarter in 2007 was wrong,’ he said.”
“O’Keefe said resales in 2007 were down 30 percent from 184,000 in 2005. ‘That is a measure of what has happened in terms of affordability,’ he said.”
“He predicted that in 2008, only 19,000 new homes could be built in New Jersey. ‘We will get through it. Not without pain, and not without adjustments,’ O’Keefe said.”
The Associated Press on New York. “The subprime mortgage meltdown is taking a toll in New York, with New York City and Long Island feeling the brunt, according to data released Friday. Overall, the average rate of subprime mortgage foreclosures throughout the state is 9.7 percent, according to figures from the Federal Reserve Bank of New York.”
“The zip code with the highest number of subprime loans covers parts of Canarsie and Flatlands in Brooklyn. Of the 1,930 subprime mortgages sold for homes there, 12.2 percent are in foreclosure, according to the bank’s figures.”
“Brentwood on Long Island has the second highest number, with 1,782 loans and a 12.5 percent foreclosure rate. Bay Shore is third, with 1,484 loans and a 13.4 percent foreclosure rate.”
“Lenders also have been tightening their standards, making it more difficult for borrowers who might be in over their heads to find buyers, particularly on Long Island, where most lenders now require 10 percent down payments rather than the 5 percent they previously had accepted, said Gene Tricozzi, president of the New York Association of Mortgage Brokers.”
The Daily News from New York. “A Brooklyn community had the highest subprime foreclosure rate in the state in October, according to Federal Reserve Bank of New York data.”
“One in four homeowners with subprime mortgages in the 11233 zip code, which spans Brooklyn’s Bedford-Stuyvesant and Crown Heights neighborhoods, lost their homes, the Fed said.”
The Times Union from New York. “ZIP code 12180, which also includes the town of Brunswick, has the Capital Region’s highest number of subprime loans held by borrowers who occupy the buildings, according to a statewide analysis.”
“And 12180 has the state’s highest number of subprime mortgages held by borrowers who don’t live in the buildings. ‘The absentee landlord issue is a big one here,’ said South Troy resident Meisha Rosenberg. ‘And it had been long before the subprime mortgage problem.’”
“Some Capital Region housing counselors welcomed the release of the Fed numbers, because they have wanted statistics outlining the scale of the subprime mortgage problem. ‘We haven’t had that,’ said Ellie Pepper, assistant director of Better Neighborhoods Inc. in Schenectady. ‘We’ve only had our own anecdotal evidence.’”
“Subprime mortgages problems are not confined to cities or areas considered relatively poor. The Fed said ZIP code 12020 in Ballston Spa, for example, had 217 subprime mortgages, and 26.8 percent of the loan holders were either in default or behind on payments.”
“In ZIP code 12180, the number of subprime mortgages held by borrowers who did not live in their buildings raised particular concern.”
“To some, it suggested landlords who either had poor credit histories, evaded even the investment required by a down payment, or took an adjustable rate mortgage because they didn’t intend to own the property for long.”
From Bloomberg on New York. “Three New York agencies sued Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co. and 23 more underwriters for allegedly helping Countrywide Financial Corp. to defraud investors.”
“‘The underwriters and accountants enabled Countrywide to release false statements. Investors lost millions and New Yorkers lost their homes,’ New York State Comptroller Thomas DiNapoli said in a statement. ‘We need to recover the pension fund’s losses and find a way to help all those families.’”
“The state and city pension funds’ combined losses from Countrywide’s declining stock price were as much as $100 million, City Comptroller William Thompson Jr. said Nov. 30. Countrywide’s market value, which peaked at $25.9 billion last January, is now $3.5 billion.”
“The securities and accounting firms and the lender misled investors by ‘falsely representing that Countrywide had strict and selective underwriting and loan origination practices, ample liquidity’ and ‘a conservative approach that set it apart from other mortgage lenders,’ according to the lawsuit.”
“Countrywide’s growth ‘resulted from the company’s continuing to aggressively originate risky loans without regard to its stated origination policies and in spite of worsening market conditions,’ according to the lawsuit.”
“Countrywide CEO Angelo Mozilo told investors in March 2007 that the deepening housing crisis would ‘be great for Countrywide’ adding that ‘at the end of the day, all of the irrational competitors will be gone,’ according to the lawsuit.”
The Boston Globe from Massachsuetts. “When Marcia Neilson couldn’t qualify for a home loan in early 2006 because of poor credit, her mortgage broker, Nicole Lyder, had an unusual solution: Add Neilson’s daughter to the loan application. Neilson’s 21-year-old daughter had just lost her job, but Lyder remained undeterred.”
“‘That wasn’t a problem,’ Neilson recalled her broker saying.”
“Neilson’s real estate agent said Lyder enlisted him to drive Neilson and her daughter to Brockton City Hall. The pair filled out a business certificate that claimed they owned a hair salon in Brockton.”
“The Neilsons qualified for a mortgage and bought a Dorchester house in June 2006 for $565,000. Last fall, Marcia Neilson learned from state investigators looking into Lyder’s business practices that her loan application was padded in other ways.”
“Neilson’s house is in foreclosure, and she expects to lose it. Two of Neilson’s family members also purchased houses with Lyder’s help. Neilson’s sister, Anne Marie Wynter, purchased an investment property that is now in foreclosure. Wynter’s daughter, Patricia Sujballi and her husband have already lost their home in foreclosure.”
“Over the course of several interviews, Lyder denied any knowledge of fake documents. At times, she portrayed herself merely as a clerk who accepted documents from clients and processed papers or acted on the direction of other mortgage professionals.”
“At other times, Lyder described her clients as eager to buy and insisted they could afford homes that cost $300,000 to $500,000.”
“Looking back on the trail of loss among these borrowers, Lyder was unsympathetic. ‘These people came begging, greedy for a house, badgering me, harassing me a hundred times a day,’ she said. ‘Everybody wants a house, but after they get it they can’t afford it, and they want to blame somebody.’”
“Don’t look for the Federal Reserve’s rate cut to revive the housing market. ‘No matter what happens to mortgage rates, housing is not going to turn around,’ said Patrick Newport, an economist with the Waltham forecasting firm Global Insight. ‘Lower borrowing costs help a little, but the problem right now is that you’re buying something that’s losing value.’”
“Meanwhile, the souring economy is leaving people with less money to spend on housing. ‘Buying a house right now is really risky,’ said Newport. ‘In many cases, it’s smarter to rent.’”
The Stoneham Sun from Massachusetts. “Local real estate agents tout Stoneham’s accessibility to major highways and Boston as one of the key selling points for homebuyers.”
“But not all real estate agents are so bullish on the Stoneham house market. ‘The seller hasn’t come into reality yet,’ said Bob DelVecchio, broker in Stoneham. ‘There’s a stalemate between the buyers and the sellers. If you watch television, they’re still telling the public that home prices haven’t bottomed out yet. If you were a buyer, what would you do? Wait.’”
“Waiting seems to be exactly what homebuyers have been doing in recent months. ‘Buyers are saying why should I buy when in a few months the price could drop $30,000 to $40,000,’ said DelVecchio. ‘Sellers need to realize that they’re in a declining market and they need to price their houses right.’”
The Amherst Bulletin from Massachusetts. “Amherst house prices have held steady while many parts of the country have seen declines over the last two years.”
“But now there are indications that the local real estate market is getting softer. Sellers have to wait longer before finding buyers, and many houses are selling at prices that are below their assessed values.”
“Statistics from MLS show that the days are long gone of multiple buyers bidding for an available house, a common occurrence five years ago.”
“Take the house at 525 Station Road. In the 184 days it’s been on the market, the price has dropped from $535,000 to $450,000, far below its assessed value of $480,400. ‘It’s not the price, it’s that buyers are hesitant to step forward,’ said Realtor Nancy Hamel, who has listed the house.”
“The house at 12 Hawthorne St. has been on the market for 283 days. The price has come down from $789,900 to $714,900, which is less than its assessed value of $728,500 and less than the $750,000 it sold for three years ago.”
“High-end houses are the most difficult to sell in this market, said David Burgess, Amherst’s principal assessor. While 10 houses sold in Amherst for more than $700,000 in 2006, only four sold in 2007, according to the MLS.”
“Meanwhile, buyers are trying to decide whether to make offers at far below asking prices, hoping to find sellers who are eager to unload properties. And sellers are trying to decide whether to hold tight and keep their high asking prices even if they’ve gotten no acceptable offers.”
“‘Realtors are trying to urge prices that are more realistic,’ said Steve Feldman of Realty World/Sawicki. ‘Buyers are not in a hurry to buy because they see the market going down and think time is on their side.’”
The Providence Business News from Rhode Island. “Amidst concerns about whether there will be enough demand for downtown Providence condominiums, three major developments are scheduled to open during 2008 – bringing almost 400 condos into the downtown market.”
“Peter Palandjian, the Boston-based developer of Waterplace, told Providence Business News last week that some of the 193 Waterplace condos that are set to be completed by mid-April might be rented as apartments until the stale condo market picks up.”
“Currently, only about 14 units are under purchase-and-sales agreements, said Palandjian.”
“‘We’re going to continue to sell condos and look to rent up apartments in the meanwhile – just to get the lights on and get the property cash flowing while this condo slump has chilled the market,’ he said. ‘So nothing is really changing, we’re just going to rent up units to ride this out.’”
“It’s a measure that the developer, which manages property worth more than $2 billion nationally, hasn’t in the past had to undertake. ‘But you either slash your prices or you weather it out. We’re well capitalized. We’re not going to panic,’ Palandjian said.”
“The Waterplace condos will range from $400 to $800 per square foot, he said.”
“Rhode Island Association of Realtors President Rob Scaralia doesn’t think there are too many condos in the state. The 117 condo sales in Providence during the first three quarters of 2007 were slightly higher than the 111 sales during the same 2006 period.”
“But year-over-year median price for those sales fell 11.5 percent to $177,000 during 2007. ‘We came off such a high that the level of expectation couldn’t remain where it was,’ Scaralia said.”
“Leonard Lardaro, a professor of economics at the University of Rhode Island who compiles a monthly Rhode Island Current Conditions Index, said the state is the early stages of recession. Along with the slim differentiation between median condo and median single-family home prices, that’s a sign that the condo market will continue to decline, he said.”
“‘You’ll get a price that’s a lot better than a year ago, but what if price continues to go down?’ he said. ‘Then you’re upside down, as they call it. I think what you’re going to see is that housing weakness is going to continue.’”
“A Brooklyn community had the highest subprime foreclosure rate in the state in October, according to Federal Reserve Bank of New York data.”
“One in four homeowners with subprime mortgages in the 11233 zip code, which spans Brooklyn’s Bedford-Stuyvesant and Crown Heights neighborhoods, lost their homes, the Fed said.”
Gentrification efforts all for naught…
Bed-Stuy is really interesting.People who made profits selling their apts. in Park Slope, gentrified 20 years earlier, moved into Bed-Stuy, buying old townhouses to gut and rehab. Bed-Stuy is the hood, think Compton, but trashed townhouses were going for a million. The tide is turning too fast for those palatial rehabs in a neighborhood returning to it’s baseline. And man, easy pickings with their French doors and backyard balconies for burglars. Red Hook, another “almost” gentrified nabe is getting swamped too.
Next will be Long Island City, who can afford $500K studios? Sure you get a great view of Manhattan, but Long island city? And to make matters worse they tore down a big parking garage to put up new condoze.
Or how about Hunters Point on the 7, 3 new buildings and no supermarket even close by. and one overlooking the Entrance to the Midtown Tunnel… this is going to be bad.
I’ll take you for a walk down 10th Ave. on the UWS (more like a cabride.)
Then, Chelsea, and all the marginal areas around 23th near 3rd Ave.
You are going to cr*p noticing how much supply is going to hit the market.
There’s literally a freakin’ condo going up at every subway stop on the 1/2/3 lines. This is going to be epic!
The housing market will rebound, just like any other investment market, there are ups and downs. The two main reasons I believe that things will go back to normal are:
1. Building cost is on the rise due to increased world demand on wood, steel and other construction material, and let’s not forget that the value of the US dollar is lower than ever against other world currencies.
2. If the feds would raise the conforming loan cap to 625k, as being debated now, it will ease the purchase process and in turn stimulate the real estate industry again.
“I believe that things will go back to normal”
They are going back to normal; it’s just that it’s a long way down to normal.
Of course you know, this means war?
OK, Mr/Ms REALTOR, what part of this do you not understand?
‘League officials estimated that the typical working family in New Jersey, earning about $55,000 annually, can afford a house priced at about $160,000.’
‘According to the Builders League, average sale price of a new home in the state jumped from $226,856 in 1997 to $547,231 through June 2007.’
Ben, you need to go to New Jersey and discuss real estate. You get to see eyes that are filled with 50% hope and 50% intense fear. Another bad year, which they are certain to have, will be devastating. Their state budget is going to look just awful by 2009. But I’m sure a rise in the conforming limit should fix everything. Bwahahaha. Even our cat laughed at Breckenridge’s post.
I’ll give you NJ and raise you CT.
They are still in denial but the fear is intense and palpable.
The housing market will rebound, just like any other investment market,
The link goes to a real estate site.
“Breckenridge” considers the housing a market an investment market, not just a means by which people secure acceptable shelter for body and soul.
And there you have it.
Breckenridge looks a little down at the heels…
Breckenridge is the bug; we’re the windshield. This is going to be amusing.
It kinda looks like “Deliverance” w/o the water…
“League officials estimated that the typical working family in New Jersey, earning about $55,000 annually, can afford a house priced at about $160,000.”
Aaaaaand, they just now figured that out? Nice to finally see some truth regarding fundamentals in print.
And the builders still blame poor sales on everything EXCEPT the price of their houses. I’m sure they could sell $160,000 houses all day long, if only they would build them. Of course then they won’t be able to pay developers $175,000 for the lots.
That’s like Romney making the statement last week that the reason for the downturn is that J6pk is spooked and won’t spend (like he’s actually got anything left to spend).
(shakes head)
Just not getting that affordability concept are you Mitt?
“The housing market will rebound”
If you had added “in 2015″ then I would have agreed with one thing in your post. The rest is all nonsense.
I watch my hometown listings. There is not a single house listed for more than $400,000 in my hometown. How does lifting the limit help?
I hope this post was in jest. I think we’re headed down for a long awhile. The Bank Credit Analyst forecast has been updated to a recession with -2% GDP for 4 quarters.
I assume this was a joke. Tighter lending standards, recession, 40% out of whack from historical norms for pricing ratios, no more ignorant expectation of 10% or greater price appreciation in the buyers’ calculations, how could prices not rise.
On reflection I agree, after prices drop 50% as a result of recession and depression, they will go up. Most of us actually love the housing market which is why we come to site. We are just smart enough to know the difference between a real buying opportunity and a fools market. This is a fools market and the real buying opportunity will be in in about two years. Its not dumb to buy real estate. Its actually often smart. Its just dumb to buy it now. You probably have any savings or retirement in equities. Enjoy the ride down. See you at the closing table in the upcoming years as a buyer. Many of us created the machine and know how it works. No surprises here.
“It’s not dumb to buy real estate. It’s actually often smart. It’s just dimb to buy it now.”
Mr. Buffett: “The price you pay determines your rate of return”.
It’s not rocket science.
Things to do in Breckenridge when the market is dead?
Breckenridge,
1. Costs of building supplies in the US have been falling for nearly 2 years…check out lumber costs. Timber mills have been closing in the US and in Canada.
2. Who needs to build? Pick a city and look at the inventory overhang. Then figure out how many months or years it will take to unload it. And, this is traditionally the “slow’ selling season. Watch that inventory ramp up in the spring.
3. Who can get qualified for a mortgage now without a downpayment? Guess how many folks have 30-60k available. no more fake docs, liar loans, and zero down mumbo-jumbo.
4. If shrewd renters resisted the mania, why would they buy now?
Prices have nowhere to go but down for the next few years. Renters can just wait it out.
5. Feds could raise the conforming loan cap to a million, would do nothing for the mopes who can’t sell the house they have now, can’t afford the resets and may face recasts as well. Foreclosures will escalate, banks will be forced to unload, sellers will compete with foreclosures to chase the market down.
6. Prop Tax revenues are falling, services will be cut back, neighborhoods will change demographics, houses will be financial albatrosses, and those who hold on will be soaked by increasing prop taxes.
7. Global RE will crash and burn too. Watch China’s overheated market implode.
Other than that, nice post.
Spike,
I had a reponse prepared similar to yours, and decided to keep reading instead of posting.
Great response!
Leigh
“The housing market will rebound . . . two main reasons I believe that things will go back to normal are”
I hereby agree to pay you $100 publically with an apology if you can respond with evidence supporting the conclusion that today’s housing prices are “normal” based on valid sound analysis of economic data using a 40 year or more time frame. Not NAR type one liners. Im talking solid economic data and mathmatical modeling using historic rents, incomes, etc. Good luck.
Single family housing is not an investment market. The vast majority are owner-occupied. Apartment buildings are different, of course.
I dont agree 100%. While I agree that houses should not be bought as liquid investments for the purpose of flipping for profit, I also believe that while in historical norms, and when it make sense to buy, buying does have tax benefits and can serve as a hedge against rising rental rates, changing interest rates, etc. Thus, it is an appropriate consideration for one’s long term investment stategy. Of course now is not a buying opportunity though.
You get stuck with tax rates at the whim of your neighbors though so housing isn’t an entirely fixed-price proposition. Lots of variables when owning, not quite so many while renting.
I would like to buy a decent place though someday, if only so I can have a dog and build a large enough garage with a lift and space for tools. As long as it’s within reasonable range of 20% down and a fixed mortgage of course. In the meantime, I’ll rent, and maybe have a nice fish tank instead.
What are the tax benefits of owning a house?
I understand the ability to expense part of a mortgage.
But owning a house and having a mortgage on same are two different things, no?
Yeah, but what about the % of sales involving investors? That’s what drove the market up, and that in large part is what’s going to take it down, now that no investors are buying, those that can are selling, and those that can’t are walking.
Thank you for talking your book. I wish you luck with collecting on all that pent-up demand.
You do know that “conforming” requires LTV and actual income, right? I’m sure you have a gaggle of buyers with $120K just waiting for those stale $600K listings.
“I’m sure you have a gaggle of buyers with $120K…”
…not to mention incomes of $200K and excellent credit.
I got called a nasty name by another poster a few weeks ago because I suggested in my “Predictions for 2008″ that lower end homes would move faster than higher end homes. He thought that only ‘lower end people’ would buy cheaper homes, but what is happening is that expectations and excess are being brought back into reality. The average buyer is making the realization that it is better idea to purchase a less-impressive home and keep more of his/her own money in the bank. Any home can be fixed up, and no home is worth becoming a lifelong mortgage slave.
No one wants to hear this, but it’s going to take a lot longer for the nice homes to come down to affordability because the seller’s expectations live in an alternate reality. They can’t see that they have to compete not only with overpriced homes, but an overbuilt luxury market and a dwindling number buyers who can afford them.
“High-end houses are the most difficult to sell in this market, said David Burgess, Amherst’s principal assessor. While 10 houses sold in Amherst for more than $700,000 in 2006, only four sold in 2007, according to the MLS.”
Whoops, here’s the quote…sorry.
NoSingleOne,
I think you’re on the money. Downsizing boomers will continue to try to simplify and unload those oversized homes that cost a mint in maintenance and taxes. Other would-be buyers, mindful of the higher costs of everything, will be looking for smaller, more energy-efficient homes. As for the social factor, now that bigger ain’t better, and appreciation has gone the way of pet rocks, a McMansion looks so yesterday, a financial albatross, not a status maker.
I am invloved in commercial development - building and land costs are down. IN fact, they are down significantly! That is a fact! Also, workload for contractors is down and when I get bids on anything, they low ball the shit out of each other. These guys are hungry (at least in Ca) and are doing jobs for any price just to keep cash flow up!
They ain’t real hungry yet. Wait until next year. This is what is called a “market shakeout”. Contractors have been living fat and happy for far too long.
“The housing market will rebound, just like any other investment market”
I own JDSU at $160, now trading at $10.06. Tell me when I can expect the tech market to return to normal so I can make 20% a year on this dog ad infinitum.
a) Land is what caused housing prices to rise. Construction costs only played a minimal part. For example, compare and constrast new homes in the Midwest built in 2007 and 2000 vs. those on the coasts. The rise in prices in the midwest were puny compared to the coasts, and that factors in the increase in construction costs.
b) Construction costs are down for some materials (i.e. plywood).
c) raising the conforming rate won’t ‘help’ new home buyers (as a whole). Most individuals didn’t have the needed money for a down payment these past few years, and they don’t today. The difference is that a conforming loan requires a 20% downpayment, or else a substantial PMI penalty (never mind decent credit scores). And unlike the funny loans of the past decade, the conforming loans (with PMI penalty) will charge the full amount from day 1. Oh, and that full amount can not be more than 28% of the household income.
You’re waay off on your contention that land is what drives up housing costs. There’s more land available than there are houses yet land appreciates at a rate greater than inflation? Land is the most speculative tradeable asset ever known to man and it crashes just as rapidly as the speculation drives it upward. And when it sits, year after year, flat in price YOU get to pay taxes on it.
It’s the land the house is on. A plot of land in Alexandria is worth more than than a plot of land in Bristol. There would be minor differences between the construction costs of identical houses built on those two plots, but the sales price would ultimately be much higher in Alexandria, because (drum roll, please) of the price of the land the house sits on.
Now, I’m not saying that we’re running out of land, or that the run-up in prices was rational, just that it was the land that was being valued too much, not so much the structure sitting on it.
This is BS. To blame the housing problem on the conforming loan rate is ridiculous. Realtors and others should now have to work for a living. Greed is what caused the problem. I live in another state and I asking my congressman to not support the greed in other states by raising this and putting the financial system in more jeopardy.
I thought “normal” was 2.5 - 3 times gross.
Yep, we’re still at abnormal.
Brek, I’m from Colorado, and I know your town well. You’re hosed. The tourists aren’t going to save you, nor are the investors. The REICs that were buying up Brekenridge and the rest of Colorado’s ski towns are crashing and burning. Real estate’s not selling, is it? I lived in Aspen for 10 years, I know a lot of people there, and the realtors there are beginning to feel the fear. Same with Telluride. Things just aren’t selling. Oh, and don’t forget climate change - sure this year’s got lots of snow, but how about the past few years when things weren’t looking too good? Skiing’s going down the tubes, we’re going into a recession/depression, and not many people ski when they worry about putting groceries on the table.
You’re pulling our chain, you know you’re history, be proactive and get a real job. Greed’s a bit passe these days, you know.
“Building cost is on the rise due to increased world demand on wood, steel and other construction material, and let’s not forget that the value of the US dollar is lower than ever against other world currencies.
Sorry… you are just plain wrong. Construction materials are dropping like a rock: lumber is down 1/3, drywall is down over that amount and the gypsum companies near me are laying off. Labor is down because of unemployment in the field. If you’re going to troll at least get your facts straight.
The housing market will rebound, just like any other investment market, there are ups and downs. The two main reasons I believe that things will go back to normal are: (blah blah blah)
Now, now, Breckinridge,
I hope your minders in the group home for people with “special needs” don’t catch you using their computer to post such tripe instead of looking for employment in the fast food or sanitation industries. Really, you probably should just log off right now and go back to your usual pasttime of sitting out on the front porch, an vacant grin on your placid moon-like face, waving bye-bye to the passing cars.
“The securities and accounting firms and the lender misled investors by ‘falsely representing that Countrywide had strict and selective underwriting and loan origination practices, ample liquidity’ and ‘a conservative approach that set it apart from other mortgage lenders,’ according to the lawsuit.””
Who do you trust? False numbers drive the entire financial world
It drives me crazy when CNBC announces earning season, or stock pickers stress earnings to tell me how well a company is doing.
It would be helpful to have the creator of these financial reports sign his or her name to them. In the end, somebody finally agrees that these are the numbers to report to the lemmings and the news media. I’d like that persons name on the document, so we can ask “What Happened”
‘a conservative approach that set it apart…’
Their approach definitely set them apart. Not so sure how it qualified as conservative, though…
“Countrywide CEO Angelo Mozilo told investors in March 2007 that the deepening housing crisis would ‘be great for Countrywide’ adding that ‘at the end of the day, all of the irrational competitors will be gone…”
Does Mozilo now describe himself as irrational?
“‘It’s not the price, it’s that buyers are hesitant to step forward,’ said Realtor Nancy Hamel, who has listed the house.”’
But I bet the buyers would be a lot less hesitant to step forward if the price went down.
But not right away. Those falling prices are what is making buyers even more hesitant. Massive price drops, to the equilibrium of rent vs. own, will be what bring buyers back. Fewer and fewer people seem willing to catch that falling chainsaw.
That statement is so stupid. Of COURSE it’s the price that’s making buyers hesitant. First, too high. Now, not low enough.
I wonder if there are any realtors out there who - like us - were disgusted watching the bubble grow and who are now pleased to see a turnaround. I realize it’s their livelihood, but I truly believe if I were a realtor during all this, I’d have felt pretty bad seeing people priced out (although I would have kept cashing those big commission checks).
I worked with them and I didn’t see any angst over the price run-up. I used to wonder aloud how the young people were supposed to buy their first home, and when I did I was met with blank stares, or an attitude similar to what Bob Toll stated: We’re going to be like Europe now and people will be living with their folks well into their 30s.
Although I do know one or two who may have felt bad seeing people priced out as they happily cashed their commission checks. But the overall feeling was you’re not supposed to say Word One about prices going anywhere but UP because it might some kind of bad mojo happen.
No realization that even if Toll was correct, they were eating their seed corn. Heck, even with Toll incorrect, they were eating their seed corn.
Even while allegations of a vast web of fraud swirl around Countrywide, I can hear their stupid debt consolidation advertisement playing on the TV in the other room, during the commercial time between episodes of my seven-year-old son’s Saturday morning cartoons. What seven year old needs to consolidate their debts, Countrywide?
The ad is targeted to the parents who are in the same room as the kids; In this case the ad was targeted to you.
And it hit the target.
Tivo rocks!
LOL,
Leigh
An interesting thing happened yesterday. Somebody asked if we deal in “CDOs, foreclosures and things like that”. He was looking to pick up a foreclosure. He told me he had just been in Arizona looking for those things. We are getting to a point where people will not buy unless they know a property is distressed. The mentality has completely changed towards real estate. Every day, even here in Paradise, people get more and more negative on it. There is nothing the jeniuses in government can do to turn that around. Time heals all wounds, not bureaucrats.
Hey NYCboy
Want to have another HBB meeting on Fat Tuesday feb 5th?
I need to finalize the details, but Obivia at 201 Lafayette st 1 block south of spring on the 6, has a happy hour till 8, food and i will start spinning mardi gras zydeco music at 6-11 or so …what do you all think?
let me know if you guys are planning something
i am sorry i missed the last one due to working crazy hours
but i would love to catch up with you guys
“And you can’t find a single reason for why the entire market is in such a nose dive.”
Maybe way-too-high prices might be the single reason!
There is much written about the houses that are valued at 800K or more. If you live in CA then I can understand that being a point of reference, but for most of the rest of America that would be a mansion or castle. It amazes me how perspective is lost by many respondents to comments. “If it is the norm in my neighborhood then it must be the norm everywhere.” It isn’t.
Often I read biting comments on what it takes for someone to live or “get by.” If you live in the middle of Kansas your lifestyle and the $ it takes to maintain it, has ZERO to do with NYC, SF, DC and other hyper-inflated areas of the country. So for one to say “I can live off $70K a year. What’s the matter with you?” only displays ignorance of what is required to maintain a modest lifestyle in certain areas of America.
If the 4000 sq ft. mansion for a family of 6 in your town can be bought for $350K, be mindful that $350K in some of America’s large metropolitan areas will buy a dilapidated townhouse with a maximum of 1200 sq ft. in a dangerous neighborhood. There is no comparison to be made. Yep, people could move to your town, but there aren’t enough jobs for everyone in NYC to move to your town. If there were then the inflated prices would be where you are.
Each of us needs to step outside of where we are and accept that middle class in America is NOT a dollar amount. It is buying power which is totally different. A Wendy’s worker in NYC probably makes more than a Wendy’s worker in Montgomery, but it is much, much harder to live in NYC on a Wendy’s wage than Montgomery. The wages/salaries required to buy houses in DC is maybe quadrupled what is required in a Nebraska city. Maybe more if a small township.
Damn it. Now I am craving Wendy’s. Thanks a lot. I’m glad you didn’t use White Castle in your example. Much harder to find in NYC.
$200k income in NYC = $80k income in flatlands
That would be about my guess. The “one size fits all” economic model is silly.
Damn it. Now I am craving White Castle. Thanks a lot. (haven’t had one of those since we lived on the east coast
Some supermarkets carry frozen White Castles. I can even get them down here in Alabama at Target.
That’s right - forgot about that. I’ve always assumed they wouldn’t taste the same if I made them. How do you get the bun so soft?
You can come close by micro-waving them with just a slot in the plastic. The buns are still not as soft as the restaurant ones, which are steamed.
i live 12 blocks from white castle
only late at night when my wife has to much to drink
http://www.youtube.com/watch?v=eMWEQ_XAroU
The defining movie of our generation: HAROLD AND KUMAR GO TO WHITE CASTLE.
“It amazes me how perspective is lost by many respondents to comments. “If it is the norm in my neighborhood then it must be the norm everywhere.” It isn’t.”
That is a good quote that we could all benefit from remembering. Of course, it is the same argument that some realtors use as a euphemism that “all housing markets are local”. Well, maybe…but not so much recently.
catch the falling knife !
http://www.lennar.com/promotions/cement.aspx?pid=12260&cityid=SAC&SourceID=MKT
Minimum 580 credit score. That eliminates a lot of FBs, right there. Selling houses like used cars is what got us into this mess in the first place. It’s not hard to imagine why Lennar lost $1.25 billion this week.
Neither a borrower, nor a Lennar be.
Secretaries and staff used to talk about how much their house went up and how come i haven’t bought a house although I have a high paying job. They now talk about how we are in recession, and if I think prices will rebound. We have come so far in such a short time. The mindset has completely changed.
prices still haven’t reverted to the mean. Secretaries and staff will soon have houses they overpaid for and no income to make ends meet.
For the tidal wave of option ARM resets scheduled to hit in the next couple of years, I’m sure almost none of them had credit scores of 580 or less. I think there is a lot of evidence that this housing ‘crisis’ extends way beyond subprime. They are just the first ones to feel the pinch.
I read it as a min score of 680. Also, it is not clear if a 10% DP is required or not.
“Countrywide CEO Angelo Mozilo told investors in March 2007 that the deepening housing crisis would ‘be great for Countrywide’ adding that ‘at the end of the day, all of the irrational competitors will be gone,’ according to the lawsuit.”
__________________________________________________________
“Man does not live by words alone, despite the fact that sometimes he has to eat them.”
Adlai E. Stevenson, Jr.
When she relisted it recently, her real estate agent, Mary Beth Adelman, president and owner of Re/Max Associates in Wilmington, urged Pegg to cut the price by 8 percent. It sold in a matter of days for $440,000 and there were two offers.
“We still made money,” Pegg said. “But it’s just such a bad market.”
So she would have been happier if the buyer who bought her house substantially overpaid, instead of just getting minorly hosed.
I’m now considering buying in DE, because the property taxes are so much lower than my home state of PA. I’m glad these articles were posted so I can get some insight into the mindset of the typical Delaware seller.
My Oh My Oh Myra Breckenridge. If it returns to normal is it back to Myron? Normal is so darn difficult to pin down. You just can’t get back to the old normal until the new normal has run its course. You pays your money and you takes your chances. Ain’t life grand?
Look for most realtwhores to sell more excuses than houses over the next few years.
The people in this forum consider “normal” to be historical appreciation rates, right? I have heard more or less convincing arguments that “normal” is somehow indexed to average mortgage LTVs, median income purchasing power, or predominant tax assessed values. Just checking….
I would refer to normal as falling within historic rent v. sales price and income v. sales price ratios. Applying a “normal” 4% or similar appreciation rate to a price which is outside historical ratios is not appropriate in my estimation.
Since there seems to be a few NYC dwellers on this blog, I would realy like some input. I know you all believe Manhattan will fall too. I used to be a big time believer, but then I read the article in NYTIMES about the “new guilded age” and realized that in some neighborhoods, 500k median income is normal, I have come to rethink my position. Maybe Manhattan is different (I know some of you will tear your hair out with that comment). Will we really have big drops here too? Inventory is low and there are tons of very wealthy people here.I moved here three years ago and have been a bubble believer and every year I have been wrong. The difference between buying and renting a 2 bedroom after 20% down is not that much in Manhattan for some neighborhoods. I want to buy a 2 bedroom in Carnegie Hill—close to my job. Renting a 2 bedroom is $4200. Buying costs 6300k. After tax deductions and 20% down it is around $4500. It is pretty close in monthly costs. If I were to follow the advice of buying when renting costs are close to buying costs—then I should buy. No? Do you really believe we will have a big drop? I used to, but I have been worn down. Its not like I am going to get any real return by putting my down payment in the stock market (bad idea now) or CDs. Any thoughts? Will I really lose money over a five year horizon (I doubt I would gain) if I bought the very nicely updated, 2 bed 2 bath, 1100 sqft apt (899k, with 1600 monthly main and tax) in Carnegie Hill? I know I will be here for at least 5 more years. Advice from Manhattan dwellers would be appreciated.
I’m not from Manhatten, but here’s my two bits worth. They said Aspen and Telluride were different and they’re being affected by it. Lots of very expensive real estate there. Lots of very wealthy people. No place is different.
I retract that. Utah is different - but in a different sort of way.
That $4200 is on the higher side of rents. Rents are not etched in stone, your 3 year example is meaningless. They will come down.
As for your comment, very few people make $500K. Very few. There is a perception that tons of people make that but the statistics speak for themselves. Perception is not reality. There are a lot of playas who are going to get flushed out.
Remember NYC is a three pony town — finance and media (in all forms) make the money; healthcare exists to service them.
If you can’t see the upcoming carnage in the economy leading to a carnage in NYC’s two main industries, then we cannot help you.
Worn down,
Carnegie Hill is a beautiful nabe. And yeah I think prices will come down. The city tanked in 89-93. But why believe me. Check out the first wave of layoffs coming…Merrill, Morgan and now Goldman. This is just the first wave. Google for more info.
Then, review the old RE sections of the NYtimes circa 91 or 92. Lots of articles on how to attract a renter to your condo or coop to cover part of your mortgage and maintenance costs. Manhatan condos and coops gave up their enormous price gains from the 80s. Do the research.
Shrewd buying decisions involve patience.
With the financial landscape shifting dramatically, do you really think this is a good moment to committ yourself to a buying decision? Will you be happy with a 100k haircut in a year? Will you be happy with increased maintenance costs to cover those who are in default on their loans in your building?
Think it can’t happen? Do your research and decide.
if you can afford it and are going to stay awhile go for it
but please make sure you add in all selling and purchasing cost besides the down payment
you pay thru the nose going and coming with any nyc real estate transaction. i think even if you waited another 12 months prices are not going to skyrocket and may even level off or drop so
wait and more inventory is on the way
btw $4200 is pretty much market rate these days for a doorman 2 bed in a nice area
i am sure there are alot of high earners in nyc but there is alot of funny euro-asia-south american etc $$ proping this pig up
“500k median income is normal”…..for now
“Over the course of several interviews, Lyder denied any knowledge of fake documents. At times, she portrayed herself merely as a clerk who accepted documents from clients and processed papers or acted on the direction of other mortgage professionals.”
This is Massachusetts - former home of the Puritans. I say we bring back the stocks as a punishment. No rock throwing, of course, but soft vegetables would be OK. Cheaper than prison and much more satisfying.
“”‘We’ll find the bottom,’ said Al Garfall, president of the Delaware Valley Division of Texas-based D.R. Horton.”"
We certainly will. However the real question is. How long can you tread water?
“‘That wasn’t a problem,’ Neilson recalled her broker saying.”
“Neilson’s real estate agent said Lyder enlisted him to drive Neilson and her daughter to Brockton City Hall. The pair filled out a business certificate that claimed they owned a hair salon in Brockton.”
“The Neilsons qualified for a mortgage and bought a Dorchester house in June 2006 for $565,000. Last fall, Marcia Neilson learned from state investigators looking into Lyder’s business practices that her loan application was padded in other ways.”
“Neilson’s house is in foreclosure, and she expects to lose it. Two of Neilson’s family members also purchased houses with Lyder’s help. Neilson’s sister, Anne Marie Wynter, purchased an investment property that is now in foreclosure. Wynter’s daughter, Patricia Sujballi and her husband have already lost their home in foreclosure.”
“Over the course of several interviews, Lyder denied any knowledge of fake documents. At times, she portrayed herself merely as a clerk who accepted documents from clients and processed papers or acted on the direction of other mortgage professionals.”
“At other times, Lyder described her clients as eager to buy and insisted they could afford homes that cost $300,000 to $500,000.”
“Looking back on the trail of loss among these borrowers, Lyder was unsympathetic. ‘These people came begging, greedy for a house, badgering me, harassing me a hundred times a day,’ she said. ‘Everybody wants a house, but after they get it they can’t afford it, and they want to blame somebody.’”
—————-
How can people be sooooo stupid. This is what happens when greed meets stupidity.
“Looking back on the trail of loss among these borrowers, Lyder was unsympathetic. ‘These people came begging, greedy for a house, badgering me, harassing me a hundred times a day,’ she said.
I find this hard to believe. And the only way to get them off her backs was to write a fraudulent loan?
“Looking back on the trail of loss among these borrowers, Lyder was unsympathetic. ‘These people came begging, greedy for a house, badgering me, harassing me a hundred times a day,’ she said. ‘Everybody wants a house, but after they get it they can’t afford it, and they want to blame somebody.’”
Vile, greedy people collaborating on a scam, then pointing the finger at each other when it goes bad. The FBs end up losing the house and the mortgage broker loses their license and job. Home prices drop as sleazy mortgage brokers, realtors, and FBs end up as bleached bones by the side of the trail.
If there’s a downside to this, I’m sure not seeing it.
60 minutes tonight if you are in PST