No Bubble In The Boondocks?
Readers suggested a topic comparing bubble markets versus so-called non-bubble markets. “I would like articles and discussion of house price drops in states other than FL, CA, NY, NV. Try Tennessee, Pennsylvania, Ohio, Texas, Georgia, Carolinas, Virgina, etc. We need more news on those states!”
A reply, “I concentrate my research mainly in Denver, Atlanta and DC/Baltimore. Declines are not even. For the most part exurbs taking the biggest hit, then condos. Housing in good neighborhoods in good locations are not really declining much in my target areas, and in some cases still moving up. I have no doubt they will eventually fall…a lot of it is that the overbuilt areas are hit hardest and they actually have more houses in the exurbs and condos than ppl to fill them.”
“List prices not down, but not much selling. Any major disruptions in the market, such as acclerated job losses, etc. will force prices down.”
Another said, “Laurel is half way between Washington and Baltimore. Can commute to either, plus commuter rail. Near NSA and NASA goddard. Prices are down slightly, for sale inventory is under control, but what is on the market sets for a long time. Maybe if more stuff could sell I would see lower prices?”
One looks at what makes a place immune, “Any predictions for these ’special-it’s-different-here’ places? Will they eventually come down more than other areas, because the run-up was so high, or will they hold value better because of their supposed specialness?”
“Does the ‘they’re not making any more land’ ever have any truth to it for places like Portland (with urban growth boundaries) and San Francisco (height restrictions in many parts of the city).”
One from Massachusetts. “Here in Mass many people are just holding on to their properties. I’ve been keeping track of SFH and condo’s that appear on ZipRealty in two zip codes. About 45% of all the places that were listed on Zip between February and June of last year haven’t sold.”
One questions the data, “My thoughts go to the accuracy of the data used to indicate the ’supply’ backlog, the calculation using the monthly sales figure and the total MLS listings to derive the number of months it would allegedly take to work off the ‘existing inventory.’”
“Sometimes driving home from errands I end up going by a new upscale community near downtown Orlando called Baldwin Park. At night it seems like a ghost town with very few lights on, very little apparent activity.”
“So I wonder what the real numbers are as far as months to sell homes ‘on the market.’ Because it seems to me what is actually on the market is only a fraction, perhaps a small fraction, of what people really want to sell but have not listed.”
One on overbuilding, “The oversupply is very different in different parts of the country, states, counties, and even towns. Take the Sarasota-Bradenton market for example.”
“Massive overbuilding and speculative purchases in North Port and downtown Sarasota high rises, for examploe, but virtually nothing new has been built on the Sarasota bayfront or barrier islands. As a result, prices have fallen a lot in North Port but relatively little on Siesta Key.”
“Sales are off everywhere, but where few people must sell, prices are falling more slowly. In the end, all prices will decline a lot, but the speed and extent of adjustment will still depend on local supply and demand conditions.”
One notes the rolling bubble, “IIRC, even in 2003/2004, people in California were starting to look elsewhere for ‘investment’ purposes. I definitely remember reading the speculators’ posts on RE blogs…they were always looking for the next bubble area. This was around the time Utah and Idaho were starting to see new ‘investors’ from bubble states.”
“When they (equity refugees & flippers) invested in these new areas, they used money from their CA homes (HELOCs and cash-out refis) to buy them — and many also had no or low down payments. The credit market was getting even funkier, but the bubble was beginning to really roll across the country. Mind you, San Diego was already stagnating by mid-2004 while other areas were just starting to pick up.”
“These investment properties were only bought to make money, and the flippers had no intention of holding on to them or sticking around if they lost value. Combine that with no job centers, and the most toxic of mortgages, and you get the sudden crash, as there is no fundamental reason for prices to rise in many of those farther-flung /lower income areas.”
“OTOH, places like Boston, LA, San Diego, New York, etc. really do have a variety of well-paying jobs which can keep prices propped up for just a tad longer. Many recent buyers in the bubble areas had large down payments from previous sales, so they have a significant buffer before they are underwater. The poorer areas are negative from the moment of purchase (more 100% LTV loans), so they’re going to be the first to fall.”
“After the lower end of the market crashes, the higher-end markets will tank as the new buyers for the move-up homes will not be coming in with the tremendous down payments from selling their starter homes.”
One sees a theme, “The vast reaches of flyover in our country, is more like a back-story, not backcountry…Overbuilding knew no bounds, even in the sticks.”
One points to speculation. “I remember stories of people ’snapping’ up shiny new condos in the ‘historic downtowns’ of these same backwater cities in 2005-2006. As if the young hip urban crowd wants to live in vibrant ‘historic downtown’ Lincoln NB or St. Paul.”
“Those are gonna leave a mark. You’re either going to have dirt cheap condos (leading to cheaper SFH), or Section 8’s.”
One looks at degrees of risk, “The ‘backcountry’ areas did experience some overbuilding, and excessive price increases - however not *nearly* the same as the bubble areas. I’m talking in percentage terms, not absolute terms.”
“I live in northern VA - moved from CA recently, and have relatives in both FL and relatively rural areas of NC and TN, and have visited these various areas quite a bit recently. Northern VA, FL, and central CA have seen *massive* overbuilding, caused by price increases that were on the order of 200%. Most rural / mid-west / etc. areas have had price increases more like around 50%, and subsequently the overbuilding hasn’t been nearly as massive - there simply wasn’t the huge profit for the builders there as in the bubbly areas.”
“As a result - now the inventory overload is way bigger in the bubbly areas. I’ve seen some inventory increase in NC etc., but not nearly as much as in northern VA, FL, and CA. Consequently - prices are falling much much faster in those areas, and not falling at all in many rural / midwest areas.”
“I believe that the reason for this is that most of the RE speculation was driven by anticipation of demand, combined with a supposed ‘lack of land,’ amongst other factors.”
A regional view, “For oilpatch country, I still maintain that the rules didn’t suddenly change, it’s NOT different here. The economies are a bit better, is all, but the housing industry saw the same bubble as anywhere else. Insanity is insanity, no matter where it happens to be located. The oil patch country is seeing foreclosures and will see more.”
One from Washington, “Pullman, WA is about as backcountry as it gets. Permanent population of 9000, a land grant university, and wheat fields as far as the eye can see.”
“Yet we have 5 new and empty luxury condo developments dangling in the wind. We have 108 homes on the MLS right now (highest in recent memory) with 2 closing per month (and most of the condos and new construction are not on the MLS). We had a huge building spree, rental vacancies are the highest in 20+ years, etc… And a house that sold for $200k in 2000 is now listed for $379k.”
“Overall, home prices have roughly doubled in the past 6 years, while income and population growth have followed historical trends of the past 30 years– minimal growth for either.”
“No Bubble here? No speculation? We personally know four flippers in town and have only lived here for a year. The backcountry may not be as bubbly as the coasts, but home prices in our bit of backcountry are still 25% above fundamentals and need to fall.”
From Utah, “Go to little podunk Green River, Utah, where over 40% of the population makes under the poverty level (stat released by the city a few months ago). About 4 houses for sale, all over $150k, unheard of prices. 6 years ago you could buy a house there for 50k. No bubble in the boondocks?”
From Georgia, “I notice in the moutains of GA and TN, house prices are insane as well. I can now buy cheaper in north FL!”
The New York Times. “The real estate market these days is a tale of two Americas, and one of them is not doing too badly. In cities like Austin; Grand Forks, N.D.; Yakima, Wash.; and Salem, Ore., the available evidence suggests the real estate market is holding up.”
“Prices there never boomed as crazily as they did in the big cities, and now, even though volume is down almost everywhere, prices in many of these towns are firm or rising.”
“‘I would call them backcountry cities,’ said Robert J. Shiller, an economist at Yale University and an expert on real estate markets who predicted the bursting of both the housing and stock market bubbles of recent years. ‘They are just going through normal growth, and they are out of the bubble picture.’”
The News Times from Oregon. “Lincoln County’s recent housing market is mimicking many of the trends seen across the United States. Following a swell in home prices originating on the east coast and experienced the last few years, prices are settling out to more easily entice those interested in buying, said Realtor Cathy Neuschafer.”
“‘We’ve all seen quite a few changes in the real estate market in the last few years,’ Neuschafer said.”
“Neuschafer said buyers are delaying in the hope that home prices will drop further. She said real estate agents across Lincoln County are receiving phone calls from buyers who say they will wait to buy until the market falls further. She added the lack of buyers pushes up inventory, depressing home prices, leading to pessimism.”
“Home prices in the county dropped as of late. Lincoln City’s sale prices have dropped from an estimated $360,000 in 2006 to an estimated $310,000 in 2007, for example. However, the average home in Lincoln County increased from $174,878 in 2001 to $367,866 in 2007, according to the county’s MLS.”
“Furthermore, the market has been flooded with new homes, which are competing with existing homes, hurting the market in general. The MLS also shows the number of active listings has risen from 1,846 in 2004 to 2,537 in 2007. The number of homes sold during this period has decreased from 1,114 in 2004 to 649 in 2007.”
“‘The good news about our market is, first of all, our housing prices were not hyper-inflated to begin with,’ Realtor Larry Walke said. ‘As a result, our adjustment period has been shorter.’”
The Idaho Statesman. “Want to buy a house cheap? Try Canyon County. The median price of a home in Canyon County has fallen 12 percent over the past year, from $170,000 in January 2007 to $148,900 a year later, according to the MLS.”
“That’s the lowest the median has been since February 2006, when the median - the point at which half the houses cost more and half less - was $145,000, according to Shaun Tracy an associate broker who tracks residential real estate.”
“The median price for an Ada County home was $219,000, about the same as it was a year earlier. But Tracy isn’t sure buyers will flood into Canyon County. The reason: Home values might continue to erode.”
“‘The farther you get away from the job base, the faster values are going to fall when the market turns,’ Tracy said.”
The Daily News from Tennessee. “New data show 2007 was the worst year for new housing permits and home closings in Shelby County since the early 1980s, adding to the well-documented housing woes that stemmed from last year’s subprime fallout and credit crunch.”
“The year ended with just 2,782 new residential building permits and 2,568 new home closings countywide, the lowest totals in 25 and 24 years, respectively.”
“‘The numbers … were not surprising,’ said Don Glays, executive director of the Memphis Area Home Builders Association. ‘But the numbers are in comparison to the best year ever for home building in this country, so you have to ask the question, ‘Are 2,500 sales in the Memphis market a bad thing or a good thing?’ Certainly, home builders would want to see those numbers go back up to the 2006 level, but realistically, it’s going to be a while before we get back up there.’”
“The county’s inventory of new homes was exceptionally high: 4,055 new homes were on the market as of Dec. 31, vs. 3,828 new homes as of Dec. 31, 2006. That equals an 18.9-month inventory.”
“‘The pendulum swung from being extremely easy to get a mortgage, whether you qualified or not, to tighter lending restrictions,’ Glays said. ‘However, that’s how it should be. We’re not opposed, in any way, shape or form, to the mortgage lending community doing the job that they should have been doing all along. Had they been doing it, we would not have been in this debacle that we had with the subprime situation.’”
The Enquirer. “Condominium sales in downtown Cincinnati and along the Northern Kentucky riverfront have slumped, leaving some projects unable to get off the ground and the developers of others unable to get on with other deals.”
“To blame: In part, it’s the housing market. Many empty-nesters want to relocate from the suburbs but can’t sell their homes and move into expensive new downtown digs.”
“Another problem is a supply-and-demand imbalance. By one expert’s count, roughly 80 percent of Cincinnati’s ‘condo-ready’ buyers are young professionals needing units priced around $200,000. But in the big downtown projects, there are twice as many condominiums priced at $500,000 or more as there are lower-priced ones.”
“‘If we didn’t have this residential housing downturn, we would have sold more units,’ said Gregg Fusaro, regional development partner at Capital Investment Group, which is building the SouthShore condominiums in Newport. ‘It’s impacted everyone, and anyone who tells you that it hasn’t is lying.’”
From Marketplace. “A good many foreclosures are homeowners trying to pay down adjustable rate mortgages — ARMs…A wave of ARM interest rate resets is looming in the next 18 months or so that could drag the housing market down even deeper. From WCPN in Cleveland, Mhari Saito has the story of a family on the leading edge of that wave.”
“Mhari Saito: ‘John and Vicki Glicken spent years working to improve their credit so they could get a loan for a house. They managed to pay off their debts and fix their credit report. In 2005, they paid $183,000 for their first home. It’s a ranch house in Lyndhurst, Ohio, a quiet, middle-class suburb of Cleveland.”
“The couple got a zero-down, interest-only adjustable rate mortgage from First Franklin, a subprime unit then owned by National City Bank. They planned to refinance a year later, but then John lost his job. Vicki took a second job. John couldn’t find work for nine months, but they kept up their mortgage payments.”
“John Glicken: ‘I cashed in a 401k. We’ve exhausted our savings. The record’s there of lump sum payments.’”
“At the same time, the interest rate on their mortgage went from 7.25 percent to 10.25 percent. No one wanted to refinance their loan. Home prices were tumbling and they couldn’t sell their home for what they borrowed. They filed for bankruptcy protection last October.”
“Now, John and Vicki sit at their kitchen table with a new letter from their lender saying their interest rate is going up again on March 1. Their mortgage will be $1,694 a month and that doesn’t include taxes or insurance. Vicki Glicken: ‘We were naive in a lot of areas.’”
Vicki took a second job. John couldn’t find work for nine months, but they kept up their mortgage payments.”
“John Glicken: ‘I cashed in a 401k. We’ve exhausted our savings. The record’s there of lump sum payments.’”
–
They should have walked away from their home before dipping into their 401ks. There is nothing wrong with not paying and walking away. Businesses do it all the time.
There is nothing wrong with not paying and walking away. Businesses do it all the time.
Much as I dislike the “howmuchamonths” who thought only of if they could pay the teaser rate and bought houses that–if you did the math–they couldn’t possibly afford, walking away is a valid and legal option.
Assuming there was no fraud involved on the mortgage application, or any subsequent re-fi application, the whole point of a loan secured against collateral, like a house, is that the lender gets the house as recourse if you don’t pay.
It is idiotic to cash out the 401K to prolong the amount of time you can stay in your house. Walking away would be a perfectly reasonable thing to do. Obviously, morality would dictate that they mitigate the bank’s loss by leaving it in clean, salable condition (as some FB’ers don’t do.)
It’s not just that “businesses do it all the time.” It’s that it’s part of the deal that was understood by both parties when the loan was made. The lender took a gamble, too, that the house could be sold without a loss.
Agreed. Lenders should be more careful - jack up rates, down payment requirements, and tighten standards. This should put the dagger in nicely.
Business selection (take on natural selection) is unfolding before our eyes. The prudent ones (lenders, borrowers, insurers) will survive albeit not without harm, and the weak and reckless ones will die.
Cinch
Lenders lend, expecting collateral that will be returned to them if the loan goes into default. If the collateral is $0 then that is all they expect, or deserve, if a borrower allows the loan to go into default. They set the rules and now they complain. Boo hoo.
Lenders get their money from the banks/federal reserve which “prints the money” , cost 4cents per paper dollar, and enters this in their books as “assets” to loan out to anyone who will pay it back with their jobs, living wages each month.Good scam but when the public “wakes up” and see they have been had, riots in the street will happen and wanting honest answers why their money has been debased. Good luck on getting answers from Washington and federal reserve. The public is starting to feel there is something not right about how all this money is created by the federal reserve and that is a good sign! Washington knows but they aren’t talking.
If they haven’t noticed yet that their money has been devalued by half (against the euro, anyhow) they are too clueless to notice.
NOW, when gas prices hit $15/gallon. We may see some action on the riot front. Gas prices have been surprisingly stable considering the plummet of the dollar on the world stage. Maybe the .1%ers at the top realize their hold on power rests in making sure everyone can feed their vehicle.
“mitigate the bank’s loss by leaving it in clean, salable condition (as some FB’ers don’t do.)”
One of my neighbors is in default with Well Fargo. They were offered a check from the bank to leave the house intact.
wow how much free money?
I don’t know the exact figure, it was three mortgage payments.
When “walking away” was first actively discussed here, I had mixed notions about the “contract” part. But the more I read, the more I think like Reuven. I think about cars and trucks that are repossessed. Most of those folks thought they’d be able to pay for them. When they couldn’t, the lender came and got them back. Tough on everyone, but it’s business. With houses the assets are worth a lot more, but the turnip still has no blood in it. I am seeing some remarkable collapses here in central Florida - 50% off on closed sales for property bought in late 2006.
I hope the market gets on with it and has the unavoidable bloodbath. The sooner that happens, the sooner we can march on City Hall and see what the tenuously-seated politicians plan to do about spending the taxes they extract from us. Good time to read up on the process of recall petitions.
I have gone through the same evolution in my thinking, Chip. The lenders are supposed to be the experts. If they completely broke from sound practices then it is their own fault. The borrower should be able to do what is in their best interest just as the lender would always follow whatever option is available to them and in their best interest. When is the last time a corporation worried about their ethical duty to anything or anybody?
Ditto for me…in just the past few weeks.
With houses the assets are worth a lot more, but the turnip still has no blood in it. I am seeing some remarkable collapses here in central Florida - 50% off on closed sales for property bought in late 2006.
Central Florida (which I have a vested interest in) will be among the neighborhoods that do a lot worse than having “50% off” sales.
Because so many houses were built and bought by “investors” and not people who actually wanted to live in them, these neighborhoods will quickly become boarded-up ghost towns that nobody will want to go near. Huge swatches of Lake County, and pockets of Orange County will be like that. It’s starting already.
Only established neighborhoods will be lucky enough to find buyers for the homes at reduced rates. Those communities that were built specifically for bubble money are doomed. The houses in them are worth $0.
Why would it go to $0? The snowbirds will just buy them for around $50k and live during the winter. If those houses drop below $50k, ill buy one and snowbird myself.
Problem is when all your neighbors are squatters and crackheads. Or when the city emminent domains your house so they dont have to pay the sewage and water costs or maintenece to the one paying person in a 200 unit development.
“The houses in them are worth $0.”
Absolutely correct. I caused a scene at lunch with a group of co-workers last week, when — in the middle of a real estate conversation where I was straining not to participate — one of them said “if you want a condo for cheap, snake charmer, now is a good time” (as far as I know, he is not looking to unload one). I could not help raising my voice. I blurted out “I wouldn’t pay ten dollars for one of those pieces of [expletive deleted]. I don’t want to insure one, I don’t want to pay taxes on one, I don’t want to maintain one, and I don’t want to pay condo association fees that keep escalating when [expletive deleted] idiots who bought there get foreclosed upon.”
My companions looked at me like I was a toddler who had acted out. Only one woman appeared thoughtful, although maybe it was her sunglasses. She said “interesting … interesting.”
That made me laugh.
“Why will they go to $0? Why won’t the snowbirds buy them?”
Because it will be cheaper to RENT than pay property tax and maintenance for the off months! We had plans to build a house down there on land we bought (pre-bubble). Even though it’s cheap now to build a house (builders are actually begging us to start!) and we don’t have to worry about financing (we deal with cash), it’s not worth it. Why? Because for the cost of property tax alone on the completed project we can rent anything we want. And property tax is no longer inflation protected if it is not your primary residence.
Going to $0 is just what will happen in many of these grossly overbuilt areas in the swamps. You just have to drive through North Port to see what the real problem is. NOBODY ever wanted to live in all those houses. At some point the cost of clearing the rubble will exceed the value of the land and the county will be happy to give them away to get the land back on the taxrolls. This is exactly what happens in blighted inner cities and neighborhoods where urban homesteading becomes viable. There are empty, decaying farmhouses all over the South and Midwest that are too far away from jobs to cover the cost of maintaining them.
Going to $0 is just what will happen in many of these grossly overbuilt areas in the swamps. You just have to drive through North Port to see what the real problem is.
Actually, you don’t even have to go that far! Take a look at this complex, for example. Literally 2 minutes from Disney’s back entrance:
http://farm3.static.flickr.com/2170/2271633408_8a5c357625_o.jpg
There are 34 houses for sale according to Zillow in this tiny development of about 220 attached townhomes. More are for rent if you check classified listings. Only two sales in the last 6 months, both at prices below any of these “wishing” prices.
Nothing’s going to sell here! No sane person will make an offer when there are 10 identical units for sale right next to it.
This tiny development, in Orange County, just south of Isleworth, in the “Windermere” zip code will remain empty for years.
The ones where the owner doesn’t have to give it up to the bank may be rented out a few months a year to “spring break” kids, etc. The rest may become section-8 housing.
No buyer who looks on a map and sees all the units for sale in a 1-mile radius will touch it. Few people buy a townhome with long-term plans, so you might as well rent!
This is just one of dozens of little developments in Orange County, FL, that will become either ghosttowns or dangerous slums within the next 2 years.
Talk about throwing good money after bad money. Those who put down 20% or dipped into savings really did lose out. Those with 0% down were just renting from the bank and walked away with nothing more than a 2 year mark on their credit.
Makes me cringe at the thought that I’ll be a cash buyer. Guess that’s why I need to wait until the “you’re crazy to buy real estate” stage.
Make sure all the weak hands have been flushed out.
Lets just say I ‘ve done Ok with realestate. I have my paid off empire and I’m happy. That said If I had 20 more years (I wish) You will be able to buy the cream of the cream for cash and just about make it cash flow. The next two years are going to hurt. My guess to bottom………… late 2011.
I agree. By accepting a loan with less than 10% down, the lenders assumed the risk of a downturn.
I can attest to house prices staying high here in the north east. Here in Rhode Island prices have come down just a bit, but they are staying stubbornly high. While the MLS listings are up substantially from the 2005 lows, there doesnt appear to be many homes for sale, like you see in Florida or California.
Homes are still unaffordable according to old financing standards. It also appears that anything over $400,000 is staying on the market for a long time. I have to wonder how long those people in the higher end can hold out for their price?
We are in the boondocks, on a fairly large lake near the mountains. Within our community there are more spec houses being built, or completed and empty, than ever before. While it’s not a lot in absolute numbers, the quantity is such that it would take more than two years at normal absorption to clear the inventory. Yet builders are still building! These are small, local guys; how long can they hold out? I have seen a number of price decreases in the 5 to 10% range in both new specs as well as used homes.
After a total freeze-up through most of 2007, I have noticed a fair number of sales in the last 45 days. Frankly, I’m surprised.
“Frankly, I’m surprised.”
Surprised that people are stupid? I’m surprised that you’re surprised.
Bill, are you near the Highlands area? If so, how do you think that area will hold up? The economy is getting ugly so fast that I don’t see any nook or cranny holding out indefinitely.
NYCB, Highlands is about 45 minutes away. We are not in the mountains here, but close by. I have heard that much of Highlands and Cashiers is summer places for the Palm Beach crowd. I do know that properties in those two ZIPs are MUCH higher than mountain properties not that far away.
Don’t know what’s been happening to prices there, and I’d hesitate to guess how much they’ll go down.
I have heard the Highlands market has frozen. We almost bought land in Cashiers. We were very close. That area is big for the Atlanta crowd as well. I just can’t see all of those expensive 2nd homes that are owned by Georgians and Floridians holding up. Those markets were propped up by the Florida run up. How’s that working out?
If I am reading between the lines properly, Bill is on Keowee. I sold a 4/4 house with 300 ft of deep water shoreline in 2005 on Lake Keowee. So happy to be done with the lake living. When I bought/built in 1985 the lake shore was mostly wooded and the lake prestine.
You, the taxpayer, paid for the development of that lake and many others and since around 1993 Duke Power (Crescent) has been selling off all of the property that YOU provided them with your tax $$$ to cool the power plant. As all of the money has flowed into the retirement/second homes on the lake market, the lake activity has increased. That of course means more wakes destroying the shore land with the ever bigger and more expensive boats.
To this day, I can’t stand seeing Florida tags on cars. And, I used to like Floridians. Talk about your equity locusts!
Here in Fort Wayne IN. Median house prices are around 90k. Volume is down 30-40% yoy. I think Fort Wayne is near the bottom of OFHEO’s list of 300+ cities and price appreciation for most time periods. There is no reason to buy or sell unless you have gone to the big house in the sky…..
HoosierGoldBug
- I was born in Muncie and raised by my grandparents on their farm. I have lived in SoCal since 1966. Whenever I call my kin folk back there, they tell me that even the thugs can’t find anybody to roll. It is D.O.A…
All of the union jobs are gone and the only thing left is Ball State, Ball State Hospital and Wall Mart.
No place is as back woods as Laramie, Wyoming. According to the last census Laramie is losing population at an alarming rate. School enrollment is declining. At the same time, housing units have increased by over 7 percent. The bubble is everywhere. Five years ago new residents had to search the newspaper to see who died to find a house. Now the for sale signs are as bad as the weed problem.
I worry about places where the main claim of fame is the killing of minorities by the locals.
Tim, I know the incident you are referring to. There’s a lot more to it than the MSM let you know about. This kind of brutality happens in every city in the nation. Some happen on slow news days. Some don’t.
I know man. I wasnt making a jab at anyone. It really is all I know about laramie. I dont doubt its not indicative all ppl there. I was just pointing out that its the only thing ive heard about it. Wheareas in some places the realtors claim that everyone wants to move there.
Sorta like whenever I hear folks talking about Bushwick in Brooklyn, all I can picture is Bushwick Bill from the Geto Boys..
http://images.amazon.com/images/P/B000000W7U.01._SCLZZZZZZZ_.jpg
I also wondered why Wyoming was so expensive and I don’t mean just Jackson(hole)
My mother grew up in Laramie, and got to study paleontology under Dr. Samuel Knight (not the slightly more famous Dr. Charles Knight of paleontology.) About all it has is the University of Wyoming, but then, one could say that about much of Wyoming. There are people who love to live there, but they have to take it as it is— which includes the possibility of blizzards in the summer.
You don’t move to Wyoming unless you love it, because there’s nothing else to hold you there.
Will someone put a fork in the lie that rural and economically depressed areas didn’t see massive price increases? WTF!!! I can name town after town all over the northeast where prices tripled and sometimes up 4x. $50k in 2000 would get you a very nice 3/2 ranch on a lot, sometimes with pool, almost always with at least an attached garage on a decent sized lot. These same shacks were selling for 175 to 200k in late 2004 into spring 06. And everyone local is still wondering how anyone got financed for that amount and how the hell are they keeping up with the payments……
And people act all surprised that you can get a 3 bedroom house for $50k in NW Pennsylvania and automatically assume there must be big problems. When houses elsewhere cost $50k, no one will care about NW PA anymore. But then would NW PA houses become cheaper? Comments please!
Cleveland is not that far away, and houses are selling there for a dollar. Is it “different” where you are?
A dollar? Id like to know the crime, property taxes and repair costs. In NW PA crime is almost zero, property taxes are around $1500 and no repairs needed for homes costing over $15k-$25k
I forgot to add, if theres any low crime neighboorhoods, id be willing to buy for a buck and do no repairs and refuse to pay the property taxes. The collateral is they will take the house back after a year or two(how long?) then I basically live rent free with the only expenses utility costs and the $1 to buy the house “as-is”
Your hospital expenses while on life support along with the air freight charges for sending you cadaver back to CA would exceed the 75K mortgage that some Euro bank ran away from. What was the charge for the boat ride to Hades in classical mythology…. around $1 ? The real reason for trying to sell these at any price is that it costs the city around 10K to remove hazardous material and then tear down and landfill the avg pos. As an aside, there are no reasonably crime free areas in Cleveland proper, let alone any major city.
I thought a $1 was the price to local govt, not individuals?
I dont remember all the details, but if memory serves correctly, we are talking huge tax liens on homes that would otherwise be condemned due to the state of repair.
If those $1 homes are not allowed to close till those tax liens are paid off and repairs made(if the house is unlivable) then it could be tens of thousands. Might as well buy a $30k move in condition house then.
Yes. I think the government thought giving them away would be cheaper than bulldozing them which would be the other alternative.
The government will have to “forgive” some of the tax liens. If they bulldoze, they lose the money. If they forgive part of the liens, they still make money.
Bye, I might consider the southwest border of Virginia. Climate is nicer, towns are smaller, prices are equal (at minimum) to those you cite in NW PA. Plus - VA runs efficiently, up and down the full scale of government. Assuming a ‘going concern’ scenario, you will not be fooked on property taxes and other hidden costs. If it all goes to heck, taxes won’t matter, guns will. Not a realtwhore or any other kind of shill. You might just consider.
Personally, I am a wage slave in a decent job (thankfully) keeping my head above water. With a more apocalyptic mind set. I dream of 40 acres and a mule, and a homesteading base in an earth bermed house off the grid (grew up on poor farm in Northern Europe, I know what to do).
I watched the Pentagon burn on 9/11, and was “coffee break” friends with two of the folks who perished there. I want a place with independent water, enough land to subsist and barter, for cheap, so I KNOW I have someplace to go when the sh*t hits the fan. I can carry enough to get there overland within a 140 mile perimeter. That nixes SW VA as a home base.
Doesn’t mean you shouldn’t take a look at it. It’s where I would establish base camp if I was sure I could get there.
Absolutely. I’m in the Conway/Jackson/Bartlett N.H. area and the prices are stupid here. 100K per acre, 250-300K avg home. The census tells me that the median income for a family of four is around 45K.
I’ve been following homes and land around here for about 8 months. Nothing is moving but nobody is lowering prices either. It’s crazy because no one can afford these prices up here under normal borrowing metrics and I don’t understand how the realtors are eating.
Go ahead and relocate. You can always come back when prices return to sanity. I am leaving FL, but might come back or buy a house there and snowbird if prices drop enough.
Auger, do you have any info available for how many of those homes are 2nd (or 3rd) homes? I went to school in Plymouth (NH) and went over to your neck of the woods a lot. Even in the 80s it was a big vacation spot and if you knew someone who was there year round they lived kind of more of a hippy lifestyle.
Kind of like the New Yorkers and NJ types heading up to their homes outside of Stratton (VT) and Killington for the weekend.
Hey CA, I’d say that there is a higher percentage of 2nd homes here than most places because of the skiing but I don’t have any guess on what percentage. Looking at what is forsale, most don’t have the feel of vacation type homes. My sister went to school at Plymouth in the 80’s as well. We were in that area looking around this past summer, fair amount of wishful thinking going on in that area also.
“Does the ‘they’re not making any more land’ ever have any truth to it for places like Portland…
Weren’t making any more land in Japan, either. Haven’t been for tens of thousands of years. Same story I told 1, 2, and 3 years ago on this blog - my father-in-law’s neighbor bought his house for 1.2 million at the top. “Worth” around 200k now. (Maybe even less now - who the heck really knows?).
“2007, er, 08 is going to suck.”
The bubble in Japan was even worse than the bubble America experienced. Houses were 5-10x overpriced in Japan vs. 2-5x in America.
But none of this comes close to the turlip bubble where some turlips were $1000-$10000+(equal to several year’s salary) and in a very short period of time crashed down to a buck or a few dollars for the same prized specimens.
Anybody know what Beanie Babies were selling at their peak?
Oh I remembered that bubble too. Good thing I never jumped in, the most I paid was $20, it’s worth around $3 now. Most of my beanie babies cost me around $8, the stores still want $6 for any beanie babies. I can get the exact same retired beanies I have on ebay for around $3 each.
The loss in value was 80% to over 95% depending on rarity. Very few beanies still are worth over $100. They were over $1000 at the peak. I kinda wish I had bought a whole bunch of those rare beanies the day they came out for a few bucks each and sold them for hundreds each at the peak.
Even the newspaper that had an article warned against paying more than $20 for what amounted to a piece of cloth with beans inside. No one bought them to keep, they wanted to flip them. The GF’s got stuck and some lost many thousands of dollars.
I never bought a Beanie Baby in my life. After it became clear that bubble had burst, one of DH’s coworkers was GIVING out their “collection”, just to unload. So that’s how we got our Beanie with the plastic protector covering its tag.
Hmmm… wonder if the same thing will happen with houses?
Gotta love them “turlips.”
I had a momentary case of dyslexia and thought it was a “turnip” bubble.
You do know what DNA stands for?
National Dyslexics Association.
I am originally from the Atlanta, GA metro area. There have been many foreclosures on the south side of the metro area due to flippers buying up ghetto houses, doing some cosmetic work and selling to some of the South’s most disadvantaged residents. The flippers are gone and what is left is foreclosure city. There were subdivisions in the NW and NE metro areas where over-sized poorly built houses with landscaped yards were bought by young professional couples and families with delusions of having “made it” at an early age. They mortgaged their lives away, leased cars and pretended to be part of the elite. Plenty of those houses are for sale.
Metro Atlanta has small pockets of condos but they are mostly in the close-in areas. They appear to be occupied by mostly singles and young couples. Most condo complexes remain almost empty. Overbuilt. Not enough buyers for condos there. People in the Deep South prefer SFHs with yards. Most families can still buy a decent well-built SFH at a decent price.
Townhouses only popped up like crazy the last 5 years. Prior to that there wasn’t much of a market for THs either. Originally built so the younger people could have a nicer home without the yard expense and upkeep, THs began to be inhabited by very young families who couldn’t afford a starter SFH. Now there are 1000s of THs that are empty. Prices have been slashed upsetting residents who bought at a higher price.
The metro Atlanta area has more SFHs, THs, and condos than there are people who want to buy. If fact they may have more than any other large metro area right now. The prices are not super crazy like the bubble areas, but just high enough to keep most residents staying where they are.
In 2007 I bought a house there (which I rent to my daughter and her boyfriend) in a “trendy” gentrified area close to Buckhead. The owners wanted $258K for a small brick ranch that was built in 1963. I offered 208K and we settled for 214K. I don’t expect any fast appreciation and don’t expect to make a profit when I sell to my daughter in 3 years.
People get full of themselves. If their neighbor dupes someone into overpaying for their so-so house then everyone in the neighborhood gets uppity. “My house is worth this now.” Give me a break. Not one house in that neighborhood was worth 259k. True there were comps from the prior 2 years that showed some yuppies paid that kind of money, but they weren’t very smart. I hurt the comps when I bought. The owners and their agent were upset, but the house had been on the market for 7 months. The couple had already committed to moving into a large suburban house in a better school district.
The resort areas of North GA around Lake Burton and other mountain area lakes are extremely expensive, but North Georgia property has been out of sight for 15 years or more. Beautiful country in those areas, but beyond my ability to retire there.
Atlanta (excluding the downtown area) is a lovely area. And had I not been offered a great career opportunity and double my salary I would still be there. Where I live and work now, I won’t buy. The houses are ugly and beyond over-priced. I would be a fool to even consider it. That and the property values are depreciating as I type this. Once I retire I am headed back South probably to the mountains of NC. Property isn’t cheap there but it is doable.
“In 2007 I bought a house there (which I rent to my daughter and her boyfriend) in a “trendy” gentrified area close to Buckhead. The owners wanted $258K for a small brick ranch that was built in 1963. I offered 208K and we settled for 214K. I don’t expect any fast appreciation and don’t expect to make a profit when I sell to my daughter in 3 years.”
How much did you put down? Youd be wise to walk away once your ARM resets.
The crime in Atlanta is horrible. Lots of safe suburbs but I hear crime is slowly spreading. North Georgia is a ripoff, I can buy in north FL cheaper.
Why go to NC? Theres much more affordable locations.
I didn’t get an ARM…good grief. I wouldn’t consider it. I put $36,000 down on a 30-year fixed.
The crime in downtown Atlanta is horrible. No argument there, but you obviously know very little about the most of the suburbs. No one lives or likes downtown Atlanta…well maybe a small number of folks, but they are a bit weird by my standards.
Florida? You couldn’t pay me to live there. Flat, hot, ugly and full of bugs. I like NC because of my love for mountains. The the culture and atmosphere of Asheville are far more to my liking and sensibilities. Have no desires to live anywhere the it is ugly, hot and even if affordable.
People are different. I’ll pay a little more to be where I like. I have money…money isn’t a problem for me. Culture, climate, people, and being close to colleges and universities in my golden years are important.
I would never, ever take out an ARM and I will always put at least 10% down.
I live in downtown Atlanta. Where is this crime that you’re speaking of? The people who live in the suburbs believe that but I’ve been downtown since graduating from georgia State University back in 2002. I have classmates of varying ethnicities who live here too. I felt more afraid when I lived in Miami. The regentrification has pretty much wiped out most of the worst areas downtown like the area around Techwood and North Ave. Even Stewart Avenue/Metropolitan Parkway, which used to be extremely seedy has condos and townhouses up now. Most of the crime has been exported to the Exurbs because that is the only place that poorer people can now really afford to live. Crime in areas like Marietta and Lawrenceville has been increasing a lot.
Nice post. Thanks for the anecdotes.
I miss Alanta. In particular, the Buckhead area around Paces Ferry Road and Mt Paran is one of the most beautiful neighborhoods I have seen in the United States. Prices are falling, about 10% from peak on the properties im watching. Still cheap compared to other cities of its size (big family homes for around 400k in the suburbs, many decent choices for less than 800k in great neighborhoods intown, not cheap and will far further, but at least 50% cheaper than DC). Of particular concern is the hi rise condos along Peachtree Street. Over a dozen new projects luxury projects. Many have 30% or more of the units for sale. I think they will go into free fall. I hope to buy something their again in two years.
I miss much about Atlanta. Lots of great restaurants and most of the people are wonderful! Don’t miss the red clay or the politics, but I am glad I own a home there . All of my extended family have stayed. None want to leave. The cost of living is great, the job market is great if you are college educated and are business-focused.
Buckhead, Druid Hills, much of Brookhaven are gorgeous. Buckhead has become a bit over-commercialized and the crime has really crept up that way. It is a shame.
I love Charleston and Savannah also. Both are far too hot for me…sweating for 8 months a year is not exactly my idea of comfort, but they are still beautiful cities.
Where I am now (the DC metro) is ugly. Once one gets out of the metro area and into the Virginia hillsides it is quite different. Some of God’s country to the West of here, but DC…geez it really doesn’t get more depressing. The architecture here (or the lack thereof) is awful. I don’t believe I have ever lived where there is more ugly, old, run-down, and dingy looking areas. Yet, many people here believe they live in a paradise. All I can think is that they haven’t lived anywhere else, but maybe the rust belt cities of the North. This might be a move up for some of them. But, seriously they need to get out more often.
Yes. I love all three of those neighborhoods. Bethesda, Chevy Chase, and Potomac have some decent homes, but Buckhead, Brookhaven and Druid Hills are 50% cheaper and usually come with much larger lots with very lush vegatation. Also there is virtually no traffic unless you get on the highways in these areas of Atlanta.
kuga, sometimes it isn’t about the architecture. Sometimes it is about getting your life back. I escaped from a horrific marriage and absolutely pathetic career prospects (after GE, IBM, GTE, an insurance company, and a couple of other firms) left Connecticut in the 90s. At the time, there were 300,000 middle managers and professionals with graduate degrees and decent credentials begging for jobs at the local hardware stores in the tristate (NY, CT and NJ) area. Most ran through their 401Ks over the years, expecting to get their next $100K job any day now. Now, the place is a morgue for has-beens who have blown through any means to bite the bullet and leave without corporate relocation.
Coming to this area with no prospects and experiencing a growing economy first hand — for the FIRST TIME — was a wonderful experience. There is a different energy in the air. Conversations become worth having, because everybody has enough to live.
Yes, there are a lot of bigots from India and wherever else they get the HIB’s to populate the McMansions. The illegals are brazen and refuse to learn English, and are obnoxious about it to boot. The traffic is unspeakable. The architecture is apalling. On the flip side, these are indications of an economic vibrancy which was completely missing in New England. Rush hour in Danbury is four hundred cars.
As I said, I got my life back and am happy to have made the trade off.
This place is all about career. There is no argument there. My initial post said that. My issue with the DC metro is that people here literally live in a psychological bubble. The majority have no idea what is “out there.” It is amazing. The people in Atlanta are far more worldly and cosmopolitan than average DC residents. That is surprising. Go to Paris or London…DC falls way short of the vibrancy you speak of.
People are extremely brilliant here. More PhDs and MBAs from prestigious institutions of learning than in any place in the US, but they lack common sense. Look at the houses they bought for 1M. Were they on drugs? They wax and wane about their houses’ values. Boring. Heck, I have multiple degrees and am considered an expert in my field, but I also have common sense. THE WORLD doesn’t begin and end in DC.
BTW, I left Atlanta an emotionally broken woman also. And I too got my life back here in many respects. I left my adult children and my aging parents to further my career and to put some physical distance between me and a marriage that eroded my spirit.
I disagree about people having enough to live here. Abject poverty is in the District and in many suburban areas. Maybe within your circles people have enough, but I see plenty who can barely scrap by and the haves ignore them. The haves often use them to the point of humiliation. Yes, if you are smart, educated and very good at what you do, come here. I just wish with all the smarts that are here, people would have exercised better judgment in buying homes. A lot of money and not much sense.
Kuga, thanks for the courtesy of your reply. I do not dispute your observations, as I see them also. I guess I am on a lower rung on Maslow’s hierarchy of needs, FWIW, and am grateful to have a decent income, a rental where I can lock the doors. I am grateful for the ability to ignore everything about the world except the ideas, for now.
Certainly there are have nots here. There is no place outside of Lake Woegegone where everybody is above average. There is no place in this country where you can avoid the cumulative effects of missed opportunity, random dragnets with horrific financial tolls, ill-conceived choices made in good faith, and plain old fashioned malevolent luck. OTOH, I HAVE seen people dig out by taking the (plentiful) have not jobs and living six to an apartment for several years. This is what the SE Asian immigrants did. They did it as the better choice between being poor here, vs. being dead where they came from. The ones I knew dug themselves out. OTOH, they harbored no illusions about credit cards, new cars, wide screen TVs, shopping at Nordstrom’s, etc. Nor did they feel entitled to roll a native out for a walk when they ran short of cash before payday.
Bout them conversations…in Connecticut, the haves ARE the have nots, and have been the have nots for the past decade. There are no meetings of eyes or exchanges of pleasantries in grocery stores. The people who must be out in public walk about in stunned silence, amid a rotting infrastructure. It is soul sapping. I thought it normal until I came here.
OTOH, I harbor no redemptive fantasies towards those who have propagated in this area, or have been drawn to this area, to feed on its more prosperous inhabitants.
A family of four from Kansas City is going to share a seedy apartment with other families. If you are single here, as I am now, then you can rent a tiny place and get by. I still say this area is ridiculous for the median family. And most of the people here do have families regardless of the density of singles found in condos and high rise apartments.
Suffice it to say I disagree with you on “those.” But that is a debate for another place.
There are plenty of substantive conversations in DC. Here brains and degrees carry far more weight than money which is probably contrary to most American large cities. Still far too many drank the RE koolaid. Though this isn’t CA or FL, AZ or NV, DC metro follows close behind on number of RE fools per block.
I wish you the best here.
One thing that gets missed by Mr Shiller and the press is this: how did we get to where we are overbuilt in so many areas all at the same time? And not only overbuilt, but at prices far above what the locals can afford. That alone should prove there were much larger forces involved, and that just because the houses may not cost $700,000, there may very well be a housing bubble present.
If one takes a simple supply/demand chart, and adds an artificial level of demand, the first result will be over supply. IMO, this can be attributed to speculation fed by the mania and absurd lending. Unsustainable demand IS the bubble in some respects. Which is why the situation with couple from Ohio is an example of mania forces at work.
What I see is a world that still wants to deny the existence of a global housing bubble, and which uses any thinly disguised excuse to hide from it.
Mr Shiller is also proving once again to be some sort of bubble apologist in this NYT article. Why step around the issue? Why make exceptions? Until we face the totality of the problem, understanding what got us here and how it can be prevented will only be that much harder to achieve.
Ben, why do people want to deny reality about this bubble? Why do used house salespeople continue to refuse to lower prices and admit something unusual has gone on? why can’t sellers open their eyes to reality?
What is it about the human condition that they’d prefer to be like NYCityBoy’s ostriches than to come to grips with reality? What makes the posters on this blog different?
This is the real question, and it’s not just about money or even pride, for that matter.
Why is become the big issue. I can only conclude that there is some agenda behind it. We are past the ‘weren’t we foolish’ phase. Perhaps we are getting close to something the PTB don’t want addressed.
It has been said that ideas on this blog find their way into the media. Well here’s some for you Mr and Ms Reporter:
Unaffordable prices - bubble.
Prices that don’t match local incomes - bubble.
Soaring foreclosures - bubble.
Overbuilding - bubble.
New paradigm housing - bubble.
Unreasonable levels of specualtion (including closet second-home ownership) - bubble.
None of these thing has anything to do with location.
“None of these thing has anything to do with location.”
That’s exactly what I see. I have been looking in the boonies of Alabama and Georgia - places that no one with the hope of a decent salary would want to live. The RE agents in each place claim that there was no bubble. So I go to the tax records and show them that Bubba paid $481K for brand-new in 2004 should be worth anywhere near the asking price of $850K today. This is in Podunk!
I’ve scouted approximately 100 neighborhoods in the past 18 months and it’s been the same in all of them. But by following some of them very closely (Spreadsheet of every house in the subdivision), I see the ARM-induced cracks appearing. Sooner or later, the Comp Monster is gonna get ‘em.
In Alabama there’s a couple of civilized spots like Huntsville and Mobile. In Georgia there’s Atlanta. Thats it. There is nothing else. Nothing.
No way would I move to one of the small town, rural areas in those 2 states (and I grew up in one). Unless you have an affinity for handling snakes at Sunday church services, things like that.
“Ben, why do people want to deny reality about this bubble?”
Why would you expect practioners of behavioral finance to be immune to its effects?
Stucco, I think adults tend to deny reality in all phases of their lives. I see it all the time. They do it about their weight, their children, their families, their co-workers, everything. Political correctness is nothing more than a war against painful truths. It is sad.
Being truthful as an adult is a very difficult cross to bear. I am far more honest than the people around me and it gets me in trouble all the time. But when people hear what I say they know they are getting the straight story. Sometimes they like that. But generally the truth is taboo.
When this Bubble is gone people will go right back to their happy little existences on The Ostrich Farm.
I for one appreciate your honesty. Im sick and tired of the politically correct crowd treating ppl like cht in their own insane form of reverse prejudice in which demographics and statisics are to be discussed behind closed doors. Continue to call it as it is man.
Perhaps Shiller, like Lereah, has concluded that all real estate really is local?
He is certainly uncomfortable in the role of explaining what we are seeing. The only reason he gets so much press is he was early, and he is unconfrontational. Fleck was early too, and he doesn’t get on the national TV shows. Hmm.
There are a number of economists out there that firmly believe that any fall in asset prices is a BAD THING. Therefore one shouldn’t shout “fire” in a crowded theatre lest this cause a panic.
Personally, if there really IS a fire in the building I’d like to know about it.
It’s herd mentality and greed. To be honest I thought prices wouldn’t drop then thought they won’t drop much. I was hoping my parents could cash out and sell their house for a fortune. I gave up on them in mid 2006 and became a big bear and hope prices crash big time so I can afford a house.
Therefore one shouldn’t shout “fire” in a crowded theatre lest this cause a panic.
Don’t panic! Don’t panic! Don’t panic!
But if you do panic, just make sure to be the FIRST to panic!
Why didnt they cry spark when the spark was evident if they were so scared of fire. Most of us saw it. Even my elderly grandmother with a 6th grade education used to say that the current prices didnt make sense in 2005. It really wasnt hard to see.
…and Shiller wrote a book - “Irrational Exuberance” - 1st edition called dot-com bubble, 2nd edition called housing bubble. I read it in 2005. Shiller’s doesn’t believe in EMT (efficient market theory), he mainly writes about the effects of mass psycholgy and “herd mentality” on the markets - i.e. bubbles. What’s interesting is that his analysis in 2005 was considerable more pointed than appears now in the MSM. IMO, he understands that to continue reaping rewards from his prognostications and new found media status he must tone down his discourse to the point that no basic institutional relations are questioned.
Maybe Shiller wants to get a Fed post some day.
Must seem reasonable… must control fist of death!
http://en.wikipedia.org/wiki/Alice_(Dilbert_character)
Roubini’s out there making appearances. He doesn’t mince words.
I remember a couple of years ago when they started interviewing Robert Schiller more often on CNBC & other financial shows.
He always disappointed. Not because he didn’t know what he was talking about, but because he wouldn’t really debate anyone else’s points. He’d maybe bring up a fact or two, real causually and non-confrontationally, then end it.
Very frustrating to watch, as bubbleheads were excited to finally see a housing bear on TV for a change. He did NOT get the point across very well at all.
Why would Schiller think the boondocks would be any different from anywhere else? Just what underlies that premise?
Out here in the sticks, we buy books and electronics from Amazon or other internet sellers. our groceries are pretty much corporate, coming from the larger chains, even though the stores are more mom and pop. Our gas comes from the same place as that of the cities. Ditto with pretty much anything. We are not disconnected from the rest of America, at least not in that way. So why would our mortgages and finances be any different? In fact, we’re probably MORE connected to the Boyz on Wall Street because we don’t have any local banks that can actually hold mortgages for long, they need to sell them off to have the funds to make more. Our good citizens out here watch the same propaganda on TV as the rest of America, and are thereby just as manipulated and brainwashed.
One basic difference is that there seems to be less conspicuous consumption, but that’s because your neighbors aren’t as easily impressed, they know what you do and how much you make and they might just consider it foolish to drive a fancy new car every year. But people are people, the same everywhere.
So I ask again, why would it be any different out here in the boondocks?
If it’s different, explain why the city of Montrose, Colorado, pop. about 12,000, approved a subdivision (Blue Sky, aptly named) that would house another 5,000 people? Not built yet and probably never will be. Where are those people going to come from? Outer space???
Second verse, same as the first.
Robert Shiller is a smart man, but no one is immune from making mistakes now and then. Didn’t he advocate lowing interest at the Economic Summit in Jackson Hole this pass year?
“‘I would call them backcountry cities,’ said Robert J. Shiller, an economist at Yale University and an expert on real estate markets who predicted the bursting of both the housing and stock market bubbles of recent years. ‘They are just going through normal growth, and they are out of the bubble picture.’”
I live in a small town (Bozeman, MT) and in a neighborhood where the asking price ranges from $360K -$800K. Californians should be jealous of our prices. Our bubble is bigger than most California cities (price to income off course). BTW, the vast majority of our neighbors are in the REIC business.
Where is Neil’s popcorn when you want some?
Cinch
Here are how things going in Bozeman. Of course we are different here. And we are in the backwater.
There is a huge inventory of custom homes, with builders either planing more or still building more. There are vacant homes homes all over. One by my brothers business is kind of amusing. The owner keep a car in the driveway and has lights that turn on and off so it appears that some one is living there even though its be vacant for close to a year.
In the blocks around Montana State University there are long time rental homes have just sprouted for-sale signs. This area you should never have to worry about being able to rent your property. Unless you have rent it for more than a college student can afford in order to cover your mortgage payments.
At a local tavern (Haufbrau) a bartender has just ended her real estate career. Back to being a full time bar tender. Early last year I had told her the housing market was going take a nose dive. Back then she told me “Duane, your crazy, so shut up”. Now, I have to listen to her bitching about how the realtor she worked for screwed her over. When the market slowed down the realtor cut her commissions to next to nothing. Of course very little was selling anyhow. I haven’t had the nerve, yet, to tell her “I told you so.”
Last night I was talking to an employee of ABC Rental. He was telling me how employees there are biting their nails because there business has slowed way down. They rent equipment to contractors.
In the building where I work, down the hall, is a major local developer/rental property owner’s office. He has been going into hysterics for the last couple of months. A while back he was screaming at an employee of his about last year, “I have never lost so much money in my life!” He siting on “million dollar custom home” for about ten months now that nobody has even give a offer on. This in addition to all the vacant rental property. And there is $300,000 he lent another land developer who has disappeared.
Then there is a local bank that is being run like 1980’s Texas Savings and Loan (see the I-30 condo scandal). The bank has never made a dime, but that doesn’t stop members of it’s board of directors using to finance their projects. I heard really disturbing story from a finisher. He was working on one of the director’s home. He was told to order a $1500 dollar door and put it on the “Bank’s account.” The Bank is building a new building, thus the account.
All the local politicians talk about is how we have worry about is growth, even as the area gets overbuilt with empty homes, empty condos and empty offices.
The local paper has had story after story about how there is no sub-prime loans, there are no foreclosures, construction might slow down a little bit, but any recession will be minor in Bozeman. Knowing how Chronicle buries things they probably sitting on whole bunch of information they don’t want the public to know.
See, things are different in Bozeman.
“Just what underlies that premise?”
Not standard financial economics theory. Investing in coastal bubble zones and midwest bubble zones are alernative assets when viewed as investment choices by San Diego hairdressers with easy money in hand. The no-arbitrage principle applies to real estate investing just as it does to any other asset class; when homes in locales with names starting in San- (San Diego, Santa Barbara, San Bernardino) were bid up astronomically high in price, the natural next move was to reallocate liberated equity and bid up the price of real estate further inland. Builders cooperated by building plenty more homes than the regional economic base needed, on the theory that if they built it, investors would come.
That sure sounds like a leveraged disaster.
Real estate might be local, but credit is global. The same loose credit that drove 3/2 stucco boxes on the coast to $1 million let a laborer buy a $250k home in Pullman, WA.
Is it just a coincidence there are large numbers of new and vacant “luxury” condos in just about EVERY city large or small in EVERY state right now?
“Just what underlies that premise?”
I have to agree, that in my backwoods things don’t have the outward appearance of falling off a cliff, at the moment. It is though deathly quiet. Houses here (in towns and in the country) have doubled or trippled in the past 10 years. Population has not increased. Places to work fade away every year. We still got the McMansion tracts near cities like Corning and a hotel is under construction in Watkins Glen with something like 300 rooms (build it and they will come?) The Walmart is the biggest employer in Watkins. It is a monstrosity.
I rent a 3/1 farmhouse on some acres. This was a $40,000 property 10 years ago. Now it is a $160,000 property, but it rents for $525 and had been empty for a year when I moved in. The rent tells the story. It is a bubble by all definitions except the autopsy.
Possibly we can maintain the not-a-bubble attitude here today, like Shiller encourages us, because we can’t feel the drop yet. It has been a cold slow winter, but spring is just around the corner.
$525 a month is a good price. In NW PA $40k homes also rent for $525 a month. Your location is probably just as “desirable” as NW PA and prices should not be any higher than NW PA either.
I am going to stay in NW PA for a few years and ride out the bubble. There doesn’t seem to be much of a bubble in NW PA unlike other locations. When prices bottom out, I will decide if I want to stay or relocate elsewhere.
I had considered other locations but feel I would be catching a falling knife and NW PA was the logical choice to minimize bubble exposure and catch the smallest knife closest to the ground.
Blue Skye–
You’re an upstater like myself. Do you think the retiring boomers are holding prices up there? The people I see buying of late are returning chickies to the nest….returning to raise their family away from crime and a more liberal lifestyle (not my comments, theirs) or else people new to the area who have paid their dues, done well in life and want to spend their retired years where the expenditures will be spent away a bit more slowly. I don’t see anyone under 35 moving here that wasn’t here already unless they did a brief stint in Syracuse and now are moving back to the burbs. Love of the untouched outdoors is an oft repeated theme among the older set. A place where everyone knows each other is mentioned as desirable too.
Carrie,
I moved back in 2000 from the Philly burbs for reasons you mentioned. My two youngest finished HS in the rural setting. The downside to that was there were no interesting jobs for them so moving away was their best option. I’d conclude that it is not a place that can attract many young people.
Local wisdom is that for the past few years the people buying were from nearby metro areas like NYC and DC. Many retirees taking a stab at B&B and second homes bought with equity withdrawal. My opinion is that what’s “holding up prices” is the rear view mirror. One would think/hope that the trend is over, but it doesn’t show because there aren’t many transactions. Lot’s of nice houses off the market for the winter, etc.
I will have a dilema if prices correct significantly. I will be ready to retire (on savings) in a few years and would like to settle into a modest house without mortgage or rent. Plant a garden and all that. Trouble is; the taxes are nearly as significant as a mortgage. I cannot imagine them going down no matter how low prices drop and I can imagine them going up as employment drops. It is not an attractive retirement plan to have taxes as your most significant expense. Owning a home in NY does not look like a way to drop out of the “system”.
‘They are just going through normal growth, and they are out of the bubble picture.’
Shiller has made many brilliant observations on the housing market situation, but I believe history will prove him wrong on this one. There were simply too many San Diego hairdressers (and other recent entrants to the real estate investment craze) investing in Bentonville, Arkansas real estate, not to mention many other off-the-map places in the heartland.
I have stated this before that Rogers, AR was one of the most incredible things I’d seen. This was back in 2003. The amount of development was amazing. Our customer told me, with a smile, “this is the second fastest growing area last year. Only Las Vegas grew faster.” Everything was predicated on ChinaMart headquarters in Bentonville booming forever.
I can cite a couple of examples of the housing bubble creeping in to places that are well off the radar for most folks….for example, my grand father bought some land in East Texas (Nacogdoches) in the late 1970s that is adjacent to Hwy 59…he bought the land as an investment, and for 30 plus years, we had been trying to unload it, but never found any takers….my uncle was thinking that the NAFTA agreement in the 1990s was gonna present lots of opportunities since there was talk about making Hwy 59 in to an Interstate Hwy for trucks running in and out of Mexico, but still there were no buyers…anyways we finally DID sell about half of the property 3 years ago to some home builders and that may be a tell-tale sign of the HBB reaching all the way to Nacogdoches TX.
There was lots of building in Central Texas along Hwy 35 between Austin and San Antonio….places like Kyle, San Marcos and New Braunsfels had all these bill boards advertising “Homes from the 120s” and such….FYI, for those of you who’ve never spent much time in Texas, the state flower might as well be the “Billboard” b/c they are almost everywhere you look.
I lived in that CTx area for almost 10 years and worked in Kyle for a couple. You know what they were selling those new houses for in 1996? $50-60,000.
Those same houses could be had for around $100k at anytime. So I don’t see much of a price drop after adjusting for inflation. Maybe drop down to $80k. Anyone that buys would lose their 20% downpayment at the most. It’s generally cheaper to buy than rent and those that buy and hold for 5+ years will come ahead of renting anyway.
It’s those $200k shacks in FL and the northeast that are very bubbly.
Hey-not sure it’s fair to attack Shiller, I ready Irrational Exuberance, main reason I didn’t get sucked into the insanity. You have to imagine though, you know all that abuse you’ve been taking the last few years for being a “renter”…actually, up here in Seattle, where there is no bubble cause its different, I still get odd looks. “You going to buy now that its a buyers market?” I’ve stopped giving my predictions rather than risk getting foil hats handed to me. Anyway, imagine how Shiller has probably been treated at times. Or go watch them take Peter Schiff apart, or, actually try to, on Faux News. Shiller did us all a favor with massive amounts of research and reasonable conclusions.
Nobody’s arguing that Schiller hasn’t been way ahead of the curve on all this. We’re simply at odds with his recent statement that there was no bubble in the boondocks.
“I still get odd looks.”
That’s almost worth a thread of its own, IMO. Where I live (rent), I think I have been transformed from an oddity (can afford to buy for cash, but rents) to a weathervane. It may simply be my ego getting out of hand, but I sense that some of my neighbors now look to my looking-or-buying plans as a sort of omen about the market in general.
I can relate, Chip.
In 2004, we were fools to sell and rent because we were, “missing out on all that equity!!!”
Now, everyone approaches us with the same nervous question: “are you guys going to buy a house now that prices have dropped?”
It seems they think that if we were to buy today, they would be okay. When we tell them we have no plans to buy for quite a while, they always get a more worried expression on their faces.
real estate locusts go everywhere to find a flip. greed is everywhere because it starts at the top.
listening to eliot spitzer on cnbc and reading his article in the washington post is the smoking gun of the real estate bubble.
i simply wont vote for a republician ever.
Predatory Lenders’ Partner in Crime
How the Bush Administration Stopped the States From Stepping In to Help Consumers
By Eliot Spitzer
Thursday, February 14, 2008; Page A25
I realize W hasn’t done much to stop this, but what did you think the states could’ve done to “Help the Consumers” ?
Anything they do to help the consumers is going to prolong their agony and prolong the much needed correction. The sooner we get it over with the sooner we can get back to normal, whatever that might be.
I agree; there’s little states can or should do now. However, Spitzer claims action to regulate lenders early may have prevented the bubble from inflating to current levels. When the issue of lending problems were raised early Bush sided with the bankers - surprise, surprise, surprise.
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html
Spitzer is absolutely correct.
What could States have done?
Good giref, the States are supposed regulate relators, morgtage brokers, assessors, builders and even critical terms in morgtage contracts. Most fell down in all these areas. Why does everybody expect Washington to solve their problems and forget that their State and local governments have completely dropped the ball in this. Who else but local governments should have seen the excesses in local markets.
Do you really want to run this from Washington where solutions range from freezing contracts to expanding government credit guarantees?
Pretty easy to spot the bubbles.. What would the house your looking at have sold for in 1999?
If your paying that price or less and you need a place to live and you are planning to stay for years, then your probably not getting screwed.
I bought a house in 2004, paid 5K less than they paid in 2001 and they did about 50K worth of upgrades / remodeling to boot…
Could I sell it tomorrow at a firesale and get all of my money back? Heck no, but the mortgage is a little over 2X my earnings and fixed for 30 years, so time isn’t my enemy…
This isn’t rocket science…
One website says houses in Oil City, PA went up 20% from 2000 to 2005. So that is the extent of the downside
In cities like Austin; Grand Forks, N.D.; Yakima, Wash.; and Salem, Ore., the available evidence suggests the real estate market is holding up.”
As for Grand Forks, the town was virtually wiped out by flooding several years back. Many folks there thought the town would be closed up for good. Since then, US Customs & Border Patrol have opened an aviation operation in town to patrol the northern border and L-3 Vertex Aerospace has joined them as the contractor for maintenance and logistics support. I’d estimate that this brought in over 150 jobs and the lowest paying of them was about $40k. Many of the senior Custom’s GS-12/13’s make well over 125K and the L-3 folks make $50-70k on average. Many of those people have bought homes in and around Grand Forks and no doubt caused a “mini bubble” over the last 2-3 years. I wouldn’t exactly be crowing about the situation if I was a local realtor as two of my friends up there with L-3 have told me that there isn’t that much going on in GF to cause a land rush anytime soon.
Plus, it’s one the windiest places in the continental US. Customs had to build a hangar with heated floors so the aircraft wouldn’t freeze on the flight line overnight
ND is one of two states predicted to actually to decline in population by 2030 (by the us census).
Why would I want to live in ND where the summers can get over 100 degrees and the winters below -50 windchill? PA is far better and houses are just as cheap anyway.
Hope you like long winters and lots of snow.
The main thing to look at is always jobs and incomes. In North Dakota there is relative stability while in much of Pennsylvania there is persistent rust belt free fall and a build up of the dregs of humanity who came seeking cheap housing and nothing else. Your location may be well optimized for you, but for young people looking for opportunity all the growth centers have the same bubble flaws.
There was an excellent National Geographic piece last month, complete with photos that also can be seen on the magazine’s website, on abandoned buildings in western and northern North Dakota. Some of the houses looked like people hadn’t even bothered to pack up beyond what they could carry — a wedding dress left hanging in a closet, for example. Some of the profiled towns are filled with elderly people and have suffered a 90% decline in population.
I visited a friend in very small town ND & toured a neighboring town. There I found an expensive RV parked on a paved RV pad connected to water, sewer, etc, on a vacant home lot surrounded by regular homes. It was a nice looking rig, obviously just there for the summer. The locals were glad to have someone living there if only for part of each year.
One looks at what makes a place immune, “Any predictions for these ’special-it’s-different-here’ places? Will they eventually come down more than other areas, because the run-up was so high, or will they hold value better because of their supposed specialness?”
They’ll come down hard. I just finished a blog posting showing how bad this will be. By all means discuss it here, but I put up some graphs that tell a clear story. Meltdown ahead.
http://recomments.blogspot.com/
Note: I admit my blog is a 3rd string blog. In a way I use it just to post graphs for discussion. But look at the sales drop off! Look at the inventory! Folks, sales are multiple standard deviations below the ten year median. That means ‘the process is broken.’
Got Popcorn?
Neil
Your blog is not letting me post. It needs to be like Ben’s blog where I don’t have to register.
Anyone who buys in 2008 is an idiot. Wages will decline and that means rents are going to drop. So the price to rent ratios will get even further out of balance. Exceptions? Actually yes. I’m advising a cousin to buy in Cleveland during his medical residency (recall, where doctors go for residency isn’t usually their call) because buying there is far cheaper than renting. If you have a secure job in Detroit (”Hi!” to all the police and fire workers), there are great deals with little downside risk.
*****I am buying in NW PA despite many people telling me to rent because it’s 2-3x cheaper to buy than rent. I don’t yet know what price to spend, but between $15k and $50k. I won’t be too happy if I spend $50k and prices drop more than 25%. I need this information so I can determine if I should get a shack or enjoy a nice house.
Pencil out the expenses in the scenairo where you decide to leave after one winter. Calculate the money lost “renting” for six or twelve months vs. buying. Just an idea.
I doubt crapville, pa is going to go down by 25%, but if it went down by 15%, that’s still only $7,000. Spread out over how ever many years you plan on living there and it ain’t that much. But probably is a good idea to rent first unless you really know the area. And why NW PA? Relatives? Job?
Well, there are some places where the prices are already pretty cheap. NE Indiana for instance - rents are pretty close to buying. The only thing is that I don’t want to bother with upkeep unless some woman suckers me into becoming a family guy.
There is nothing wrong with your blog!
We are all going to get burned. This is already going into a defaltionary period. I bet a large number of people are trying to cut expenses and generate savings. Companies are trying to figure out financing.
Just cause we are in a big aerospace company doesn’t mean we will be immune. The Japanese called it twenty years of price destruction. Every company that has debt (including ours) may find its debt is unservicable.
What the hell is it with mission systems people and reply to all?
Save the popcorn. We might need it.
Neil, for heaven’s sake, I seek out your comments in places where you post because you are tough minded and interesting. Your blog gives one QUITE a good think, FWIW, and this is the standard by which I judge. Thanks for your involvement, whatever flag it may fly. I will continue to seek out your commentary.
Latest in Missoula is jan sales down 17% compared to last Jan, greater area sales down 20%. Lots of spec houses like these sitting around. Median is around 220k, still too much for income. Median income among owners is 54k, but I just found out that actual median including renters is only 43k. So most houses here are out of reach.
I could tell there was a bubble though I wasn’t familiar with the term. I sold my little 500sf shack in 2002 for 74k but felt I was screwed because ALL prices were quickly increasing. I could get only 500 rent, but now Zillow says the place is “worth” 150k and I’m not surprised. Everything was going crazy like that. Lots of skinny 2-story “affordable” houses were tucked in empty lots in town and probably half bought by speculators, many out of state. I kept watching real estate all through the period and just couldn’t believe what I was seeing. It seemed like everyone in Cali was coming here, which I could understand because that’s what I did myself in 1975, to get away from all that.
Anyway, we’re going through the last-stage condos / conversion bubble, and they’re not selling. But more are being built, and there was a recent story cheering all that saying urban living is where it’s at. Subdivision builders are forging ahead. I can’t wait to see how it all plays out this year.
I am still the only one talking about the bubble here, while others who should know better rant about lack of affordable housing yet it’s always about needing subsidies, deed restrictinos etc. and they don’t get the bubble connection.
The local paper is really really dependent on REIC money, just had a builders’ supplement recently..their reporters read my blog so they should know the score but there’s still not a peep about it. It’s been long enough now that I know it’s a deliberate omission.
$150k for a 500 foot shack? OMG LOL even south FL never got this bad. You need to relocate away from the insanity! Move to another state!
You can get a decent house in Loveland or Greeley for about 150K. And I’ll bet the median income here is way higher than in Missoula
Hell you can get a decent house in parts of Florida today for $150k
Isnt fl still cheap if you are willing to live 20 miles inland. I havent been since before the boom, but i remember land had almost no value there.
I heard rural north FL land was going for $3k an acre. It isn’t very good farmland but great for gazing and your animals won’t freeze in the mild winters.
There isn’t much cheap land in south FL except maybe Okcheeobee.
It had a nice fenced yard, cellar and old garage. Those things make a bit of a difference. But it’s gone now. It really was old and in bad shape so the buyer did a tear down. Zillow doesn’t know about it yet. I think it would be more like `30k property, now that things are coming down to earth again.
uh that was supposed to be 130k property
Here is a listing for a new home in Sterling, CO
http://www.realtor.com/search/listingdetail.aspx?ctid=90325&typ=1&sid=c1cdfa58d0114a4ca69f3edd8b1013e5&pg=4&lid=1093516233&lsn=34&srcnt=87#Detail
Sterling is Colorado’s boondocks. The house is under 80K.
According to wikipedia: “The median income for a household in the city was $27,337, and the median income for a family was $39,103.”
So there are places where you can still get a new house for under 100K.
I
Sterling’s part of the “oh bury me not on the lone prairie” half of Colorado.
“There are a number of economists out there that firmly believe that any fall in asset prices is a BAD THING. Therefore one shouldn’t shout “fire” in a crowded theatre lest this cause a panic.”
I think there is a massive accidental conspiracy in finance and its regulatory agencies right now that is based on just that, and the hope that if things unwind slowly catastrophe can be avoided. And I think they believe a 25% fall in housing prices nationally followed by five years of stagnation and falling behind inflation by another 15% to 20% is catastrophe.
I think you are on to something in part because no ones seems to know exactly who holding the bag (bad investment), and the bagholders doesn’t know what they are holding. Case in point: credit default swap, an obscure financial instrument that is effecting real movement of money in the market.
Cinch
I just IMed a realtor friend in our ciy, Syracuse NY. She said her buyers are not having any difficulty getting financing from the local banks.
http://www.peilin.com/homes.php?key=382
$53,000 for a two family. Not a fantastic part of town, but good enough, and gentrifying slowly.
http://www.peilin.com/homes.php?key=379
$82,000 for a 4-bedroom in a livable established blue-collar neighborhood.
Her listings run the gamut, up to 400k, but she has a 112k that looks like it sold within a week of listing, and I know that’s not gamed because I wrote the system that is telling me that.
Based on watching houses sell on our street, I would say in 2005 prices were high by 10-15%, they came down in late 2006 back to rational levels (meaning 2-3% annual appreciation from previous sale price). It’d be nice if we could stay isolated from the nationwide idiocy. The outlying richer towns look overpriced (to me), but the city proper, not so much.
How do I check the time on market for a particular place in NY, anyone know?
” She said her buyers are not having any difficulty getting financing from the local banks.”
Are they putting 20% down? If not, prices will drop more once 20% down is required and interest rates go up. Your location could take another 20% hit in house prices but that’s nothing compared to FL
She says the average down payment she sees is 5%, only stellar credit gets you 0% down, and some put down a lot, 20% and more. When we bought here in 96 we didn’t put anything down, the mortgage was a special deal with the university for buying in the university neighborhood.
If I bought a home to live in for 150k, say and next year it drops to 120k. I’m not going to feel as burned, if I’m planning on staying for 5 years esp, than these guys that are dropping in value from 650k to 500k. That’s some real coin, that. Also, how would I know that it’s fallen? These aren’t housing developments; this is like post WWII to 1960s construction… (a maze of twisty passages…) all different. There is a yellow house around the corner made from one of those metal kits you could order from a magazine when they were melting down the liberty ships and had excess steel. Down from that is a house with an orange tile roof and a castle turret. down from that is this high peaked house with really fancy brickwork, but in need of a repointing. Comps are much harder to determine around here.
Yes, we could still get into trouble, but I’m hoping that small local banks have not effed themselves, and the market, up like these national banks have.
“How do I check the time on market for a particular place in NY, anyone know? ”
Ask your realtor friend to e-mail you the MLS sheets. They all have DOM (days on market) listed right on there.
That spits out 35 days. Realtor friend says their local mls can’t be gamed by pulling the listing, it remembers and the dom does not reset. Huh, reassuring. Maybe I’ll have her recheck that in 6 months. I have this notion of building a new house and selling the one I’m in at some point in the next two years. I think whatever the prices, it will be easy to hire a builder.
Good luck selling.
The beauty of it is… if we can’t sell it, the mortgage is almost paid off. (the original amount is only .7 of our annual income) We’ll carry two mortages for a year and a half and then rent the old one for taxes and insurance plus a little beer money to drink away the hassles of being a landlord. That’s the worst case scenario, which is quite manageable. We are right on the free bus line to the uni, so prime student area.
Personally, I’m looking forward to negotiating with the builders. Heh.
But thanks for the luck, snarky or not
The Southern Maryland Report:
Calvert, Charles and Saint Mary’s County’s are perfect examples of bubble areas that never received any media coverage because they are essentially completely ignored by the Washington Post and Baltimore Sun. The local papers and websites are jam packed with real estate propaganda and you seldom see a negative article.
Calvert and Charles County’s have been flagged by Countrywide and other lenders as being “declining markets,” but nobody is reporting it or talking about it.
http://blownmortgage.com/wp-content/uploads/2008/02/softmarkets.pdf
I consider Saint Mary’s as the bell-weather county of the three due to the Patuxent River Naval Air Station. It’s not your typical military base because it’s filled mainly with civilian positions. There’s lots of good, high paying jobs but the average Saint Mary’s family still has a median income between 65-70k. At 3X salary housing would be 210k, but it’s been in the low to mid 300’s for several years now. There’s nothing visually appealing about our median priced homes. Decent stuff is in the 400’s. The entire county population hovers around 100,000 people.
I’ve spent a lot of time in the tax records and during the 1990’s there was very little, if any appreciation on housing. Selling for a loss was common. BRAC increases to PAX River and housing bubble sent the area into orbit with prices increases around 130% from 1999 - 2006. So far much of those gains have not been given back with the exception of the high end homes.
The MLS stats paint the picture. I essentially ignore the median and average garbage stats and focus on dollar volume and sales by price class.
Total dollar sales volume was $18,246,480 in January 2008. In January of 2005 that same sales volume was $33,973,592. During that time there was 219 listings, but there are now 907. The number of listings has remained at that level over that past year.
The MLS lists 277 new construction listings. They sold 13. That’s the norm. Lots of 500k spec houses have been reduced to the low 400’s before selling. Empty 2-3 year old spec houses by small local builders are a common sight.
Price classes tell the story in the MLS data for January 2008. Most of the current sales activity is in the under $400k range. Between 400-500k we have 154 houses for sale. 6 were sold. From 600k up into the millions we have 74 homes for sale in Saint Mary’s. 4 were sold.
Low priced home values have held up well due to high demand. It’s nothing short of amazing that the crashing prices on the high end homes have had virtually no affect on the lower priced stuff. Yet!
Homes put on the market in the 1.5 million range often sell for 2/3 of their value after languishing months or years. I suspect the sales that did occur have been a saving grace for the median price. There weren’t many to save January however and it took a 10.4 percent downward hit.
http://www.mris.com/reports/stats/route.cfm
Foreclosures used to be a rarity. When they happened during the bubble years either real estate agents or investors immediately grabbed them and flipped them for big profits. They are rarely purchased now even after sitting in the MLS for months with big price cuts.
Many homes for sale in the MLS that are in foreclosure are being marketed without any hint of the home being in foreclosure. Same goes for short sales. You have to ask or look up the public records to figure it out.
I recently put up a new blog with data and links for Saint Mary’s to help anyone who is looking for data to make a home purchase decision.
http://saintmaryscountymaryland.blogspot.com/
An interesting thing the blog has shown is the market is totally dead. I’m able to use the stat counter to detect what people are searching for etc. There’s no activity. No one is searching for street names, MLS numbers, subdivision names - absolutely nothing!
I did a line by line scrub of all January 2008 sales posted in the Maryland Tax records for Saint Mary’s County. The research revealed that nearly 20% of the transactions that took place involved foreclosure - either a bank selling the house or banks taking homes back.
http://saintmaryscountymaryland.blogspot.com/2008/01/jan-2008-homes-sales-data.html
In summary, I still believe the party is still just getting started…
Thanks for the SoMo report patch. My brother works at Pax River and has a place in Chestnut Hills. I believe he said he paid about 350k 5-6 years ago (one of those 3300 sq ft new victorian replicas). Says it went up to 600k and now he think’s he’d be lucky to get 500k, and it will stabilize around 450k. I want to head down there for soft shell season.
He may be worse off than he thinks…
This Leonardtown home was sent out this morning as a price cut:
http://www.homesdatabase.com/SM6469165
It’s now $499k. In July of 07 it was listed for $649,950…
And the real shocker? Despite all this high priced real estate, we still rely on volunteer fire and EMS. That’s right, dialing 911 is no guarantee you’re getting an ambulance…
Oh, and we have school children in trailers too…
Yes. That looks like a comparable, and maybe a little bigger. Speaking of 911. When I lived in Atlanta I called 911 to say someone was was trying to break into my back door. They put me on hold for 5 minutes. No lie. Took them over an hour to show up.
One question. Does Countrywide have different lending standards based on what on what category of risk the subject falls in on their chart? For what purposes do they use it?
They’re restricting loan amounts, which is driving down prices.
“As a result, a growing number of lenders are labeling certain local ZIP codes, whole counties and even all of the Baltimore metro area as “soft” or “declining” and requiring larger down payments for all types of loans. Borrowers wanting a 5 percent-down mortgage would find, for instance, that they need to put up 10 percent. Someone looking for 100 percent financing would have to come up with 5 percent.”
http://www.baltimoresun.com/business/realestate/bal-te.bz.sales10feb10,0,7178233.story?page=1
Wow thats gonna hurt. Thanks for the info.
It depends what the “boondocks” are. Out in rural Montana where I live (not the pretty parts of the state, but the desolate north and east) population has been dropping for decades and housing prices have been in the toilet. In these places the housing bubble will not have much effect except to the extent that it damages the overall economy. In fact, with wheat prices in the stratosphere this part of the state may be in for a bit of a recovery even as the rest of the state and most of the nation suffers.
The real estate market these days is a tale of two Americas, and one of them is not doing too badly. In cities like Austin; Grand Forks, N.D.; Yakima, Wash.; and Salem, Ore., the available evidence suggests the real estate market is holding up.”
This is the first time I have heard ND mentioned on this blog. I am in Fargo, ND. Seems like more for sale signs around however I do watch for them. Select properties have been on the marked for a while. One on my block has been for sale for probably 18 months but it has a pool and those aren’t very practical in this area.
The house next door went for sale last fall. They went FSBO and had three offers but about 20K less than the 185000 they were asking. They had already bought another house and were getting desperate so they decided to hire a realter. Ended up selling for about 180000. The realtors in this area have started media campaigns trying to tell the people in the state how the market is holding up well despite the problems around the country.
Maltose
I’ve been thinking more about this. There’s Boonedocks and there’s just outtatheway places. Where I live, Syracuse, NY, we are rust belt, but from 1890, so the economy has had lots of time to re-diversify, unlike Michigan, say, or Rochester, even, where one employer still dominates(ed), I read a nice description of European economies once and the description of Italy fit Syracuse (ironically enough) to a “T”. It described the notion of a “raft economy” made up of many small diversified businesses that relied on milking grey-market family labor in boom times and could shift quickly to other business in down times. Contrast that with a “battleship economy” where there is one big employer or industry and if something puts a torpedo into the side of it, it just sinks. A raft you can bomb all day but the individual logs will resurface and regroup as best they can. That so feels like where we live. We have one retail business which is liquid gas and, get this, driving range. Bring in your tank and while it’s getting re-charged, hit a basket of balls. How about TV repair and Hummels. Yup, we got that too.
Only time will tell if we bubbled into a blister needing lancing, or, barring that, if our raft can weather the storm when the rest of the nation starts bleeding into our local economy.
Any posters in here from southeast washington state?
I recently moved to this area and I have been told that land prices have doubled since 05. However, a five acre timbered parcel is about 50k., that seems reasonable to me.
Lord have mercy! on us. We are up to our eyeballs in doo - doo & its NATION wide!