The Nasty Part Of A Down Market
KWGN TV reports from Colorado. “With the number of foreclosures at an all time high in Colorado, homebuilders are starting to feel the effects of the economy in their pocketbooks. Kevin Autry, a homebuilder from Franktown has been sitting on a vacant home for more than two years in Fort Morgan. ‘We’ve already lost any profit that we might have had on the project,’ said Autry. ‘I can’t turn it back to the bank, I don’t want to ruin our credit.’”
“Autry says he has seen many builders go out of business, but he is optimistic about the economy. ‘There’s jobs, there’s people making money, it’s just hard to get the ball rolling,’ said Autry.”
The Greeley Tribune from Colorado. “Weld County’s high foreclosure numbers are now affecting housing prices. Matt Revitte, who brokers foreclosed properties in Greeley, said he isn’t surprised. ‘As more and more foreclosures get thrown into the pool of existing housing, it will dilute the market value,’ Revitte said. ‘It’s probably the natural order of the market trying to reach an equilibrium.’”
“‘If housing prices have decreased, when you’re buying, guess who gets the benefit?’ said Chalice Springfield, CEOof Sears Real Estate. If, for example, someone wanted to buy up but had to take a $30,000 loss on the sale, you also may be buying a foreclosed house from a bank that’s taken a $60,000 hit, Springfield said.”
“‘You might be able to make it up on the back end,’ Springfield said.”
The Denver Post from Colorado. “About 11 percent of subprime borrowers in metro Denver have lost their homes to lenders via foreclosure, more than double the rate nationally.”
“And another 15 percent are either in foreclosure or more than 90 days late on their mortgage payments, according to a report from the Federal Reserve Bank of Kansas City.”
“‘If you look at our composition of subprime loans, they tended to have originated earlier,’ said Mark Schweit zer, an economist overseeing the Fed’s Denver branch.”
The Gazette from Colorado. “New-home construction sputtered again last month in the Colorado Springs area, while the pace of local foreclosures showed no signs of slowing. ‘It looks like all the signals are that we’re going to have a pretty slow year,’ said Colorado Springs economist David Bamberger.”
“Foreclosures totaled 457 in February, a single-month record and a 72.5 percent increase over the same month last year, according to the El Paso County Public Trustee’s Office. Foreclosures are coming into El Paso County Public Trustee Tom Mowle’s office at the rate of about 25 a day, which means about 500 a month, he said.”
“‘There’s really no reduction in site,’ he said.”
From KKTV.com in Colorado. “Foreclosures have hit an all time high in El Paso County and the problem isn’t likely to get better anytime soon. Wednesday morning the Murphy’s home belonged to them, now it doesn’t. Their stuff was left lying in the front yard.”
“Around 10:30 Wednesday morning they were told by their mortgage company that they had 30 minutes to get out of the house. ‘This is not trash, this is our life,’ said Wanda Murphy.”
“‘They told me they had already sold the house to someone else,’ Jerry Murphy said. He says without warning dozens of people showed up. ‘I’m embarrassed to stand out here on the street,’ Jerry said.”
“He says he and his wife fell behind on payments several months ago. He was injured in a car wreck and had to quit working and they had to take out a second mortgage to pay off medical bills. But Jerry says he was trying to refinance and even though he knew foreclosure was a possibility he was told it may not have to come to that.”
“‘They are throwing my stuff out on the lawn while I am on the phone with one of their branches telling me that there is a possibility they can work with me,’ Jerry said. ‘They say owning a home is the American dream, this is no dream.’”
The Aspen Times from Colorado. “The dollar volume of real estate sales plummeted 42 percent in Pitkin County during the first two months of this year compared to last year, according to an analysis by The Aspen Times.”
“Mike Russo, managing partner of Aspen Land and Homes Sotheby’s International Realty, said there has been an overreaction to the slow start to 2008 in Pitkin County and somewhat of a misinterpretation to what is happening. ‘You have brokers saying the market is in the tank, the prices are declining,’ Russo said.”
“Digging deeper reveals that sellers have resisted dropping prices, at least until recently, he said. This year’s slow start looks particularly bad because it is compared to record levels set for January and February in 2007. Last year started off very, very hot.”
“‘It’s not the great cause for alarm that everybody thinks,’ Russo said.”
The Arizona Daily Star. “In 2007, there were 22 single-family homes listed above $1 million, and seven sold for that much, according to the Tucson Association of Realtors. From January 2004 to December 2007, the median sale price of homes listed on the MLS rose by 42 percent, to $210,000 from $148,000.”
“As the architect and contractor of Rancho Merlita, Diana Osborne will offer 15 homes on a 13-acre site that once belonged to cosmetics legend Merle Norman. Prices for the homes start at $1.6 million.”
“Historically, homes that sell for more than $1 million have been found mostly the north of the city. In 2007, 392 homes in that area were listed for more than $1 million, and 91 were sold.”
“The second concentration of million-dollar homes is in the Northeast. That area had 103 homes listed above $1 million, and 16 sold for that much last year.”
“Osborne said she is confident that people will buy the homes in spite of the housing slump. ‘The only question is: When is Tucson going to boom again?’ she said.”
The Arizona Republic . “Moving to a big house in the Verrado development in the far West Valley in December was a dream come true for Marcel Pelletier and his girlfriend. For $1,000 a month in rent, the couple was able to drastically upgrade from their rental in Avondale, and get Evans’ children into a better school, they said.”
“But the homeowners have warned the renters that their financial picture has changed, and with the possibility of foreclosure, they should be looking for a place to move. ‘It’s ridiculous, to tell you the truth,’ Pelletier said.”
“If they could afford it, they could buy the house. But they say it’s not worth the $330,000 owed on it considering homes on the same block are selling for $290,000 or so. ‘There’s already five houses on our street nobody lives in,’ he said.”
“‘It’s a bad situation,’ said Kevin Murphy, director of Labor’s Community Service Agency, which he estimates to be the largest foreclosure-intervention service in the state. ‘We’re talking to a lot of people that are devastated.’”
“‘Up until less than a year ago, we were able to help most of the people we talked to out of foreclosure,’ he said. ‘Now, because of these crazy loans, we are not able to help most. They are either upside down and can’t sell, or the next increment of their (adjustable-rate mortgage) kicked in and its another 300-400 bucks a month they just can’t make.’”
“For some clients, finding the fat to cut is easy. Counselor Dollie Torrez made one man sell his boat and cut end his weekend trips to the lake to keep his home, she said.”
“‘I encourage them to either get a second job or increase their income somehow,’ she said. ‘And cut their spending. If they have cable or Internet, cut their utility bill. If they are going out to eat or ordering movies, I tell them to go to the library.’”
“Foreclosed properties in Chandler jumped tenfold from 2006 to 2007, according to the real-estate data research firm Information Market. Realtor, Liz Morganroth, who solely handles foreclosure properties in the Southeast Valley, said her business has increased so rapidly that she is having trouble keeping the properties maintained.”
“‘The weed problem is coming from the HOAs constantly. You can drive down the street and see it,’ she said. ‘We can’t keep up with them fast enough.’”
“Brian Lincks, VP of City Property Management Company, said HOAs his company represents are struggling with paying for the upkeep of the empty properties, at the same time they’re not receiving monthly dues from the property owners with houses in foreclosure.”
“‘It’s hard on the HOAs,’ he said. ‘Some even have to raise dues temporarily to cover some of the dollars they’re not getting.’”
“In the meantime, neighbors like the Webbs are left to keep up the place on their own. Last weekend, as the couple worked outside on their own lawn, they said they hoped that after a two-year vacancy, the place will come off the market soon.”
“‘I’d like to see someone move in and take care of the place,” Bob Webb said before pointing to his own house. ‘We’ve got a big investment here.’”
“Marshall Vest, a University of Arizona economist who predicts a growth rate of about 2 percent this year, relies mostly on the numbers of new electric residential customers in the Phoenix and Tucson metro areas.”
“Pete Ewen, an APS economist, predicts only about a 1.5 percent growth rate in APS customers because of the large inventory of unsold houses and the loss of construction jobs. In previous decades, the rate has…never fallen below 2.5 percent, even during some of the worst recessions in the 1970s and 1980s, he said.”
“‘We haven’t seen the bottom yet, so the trajectory is still downward. The housing market is still overbuilt and they’re continuing to overbuild it, so I think the prospects for construction job growth are weaker in the near term than stronger . . . Sitting here today, I am not sure that 1.5 percent is low enough,’ he said.”
The Review Journal from Nevada. “Southwest Gas Corp. of Las Vegas on Tuesday reported a decrease in net income for the fourth quarter and for the year because of warmer than normal temperatures and slowing customer growth. CEO Jeffrey Shaw attributed slowing customer growth to the housing market slump.”
“‘For the first time in 15 years, our new-customer growth rate was below 3 percent,’ Shaw said. ‘We have not been immune from the downturn in the housing markets.’”
“Shaw estimated that the company’s service territory in Nevada, Arizona and part of California contained 25,000 vacant homes as a result of foreclosures. Housing prices are declining in Phoenix and Las Vegas, he said.”
“‘We believe that growth continues,’ Shaw said. ‘That’s just a big number of homes that needs to be absorbed.’”
In Business Las Vegas from Nevada. “A decline in Las Vegas property values has made more home lenders unwilling to finance purchases in similar spiraling markets. Some lenders have eliminated entire regions or even specific types of properties, including high-rise condominiums in Las Vegas, while others have tightened underwriting guidelines that have made it difficult for buyers to get loans.”
“‘It has been an interesting setback for mortgage brokers in Las Vegas,’ said Gary Schivo of Schivo Financial. ‘They are scrutinizing all loans, even full-documentation and high (credit) scores. Purchasing is getting more and more difficult and refinancing is impossible. … Interest rates are still beautiful but there are no products out there.’”
“Tim Sullivan, president of Sullivan Group Real Estate Advisors said what’s happening in Las Vegas is happening elsewhere where values are declining and the market shouldn’t feel picked upon.”
“‘My observation is that lenders are operating in a very business-like fashion,’ Sullivan said. ‘This is the nasty part of a down market, When you look at values declining so quickly, the lenders feel the market is crashing down on them.’”
The Reno Gazette Journal from Nevada. “Texas economist Ted C. Jones offered some advice Wednesday on how Northern Nevada can help resuscitate its housing market: Trim the asking price on homes.”
“‘You had a bubble, and it’s bursting. It’s time to get realistic,’ Jones, chief economist for Houston-based Stewart Title Guaranty Co., told a Reno audience.”
“‘We as an industry have a duty to counsel people on the best time to get a fixed-rate loan,’ he said. ‘We had a lot of people led down the path to slaughter who finally got to live the American dream. That’s wrong.’”
“Jones said Nevada’s falling home sales aren’t as severe as California’s, and he believes the Reno-Tahoe region’s allure with its physical attractions and quality of life will help it endure. ‘You live in a beautiful place here,’ he said. ‘If you don’t think you do, come live with me in Houston.’”
The Record Courier from Nevada. “Carson Valley of course can’t escape the world, or troubled California’s reach. But there are longterm forces working in our favor.”
“Rob Wigton mentioned something during a speech to the Douglas County Building Industry Association that struck me: ‘The fact remains that we sold real estate last year in this area at levels about equal to what was going on in 2002,’ the president of the Nevada Association of Realtors said.”
“The market has dipped from a peak. The correction cuts sharply if you are in the business, certainly. Blood is flowing from brokerages, title firms, mortgage lenders and construction. The ripples hit the merchants, restaurants, casinos and others, including local media, plenty hard, too.”
“But this is a correction, which happens periodically, not a collapse.”
“Besides, there’s a glint of silver in corrections. A drop in home prices will make homes more affordable to more people. Home ownership remains the single best way to build personal wealth, in addition to that niggling fact we all need places to live. Generally it’s better to own than rent.”
“Meantime, you can almost hear the investors unfurling and fluffing their wings from their perches, rustling ever more excitedly with each dour report. Soon, soon now, the market will reach bottom, and it will be time to swoop in.”
“Wigton and his wife, Kari, have begun swooping themselves.”
“‘I believe, strongly, that the worst is behind us and we are headed for stability,’ he said. ‘My wife and I just bought another investment home, at a great price, and we look forward to buying another in the not-too-distant future.’”
‘Although there aren’t turnstiles to measure everyone who moves in or out, it’s clear that Arizona’s dependable, decades-old growth machine is sputtering and that tougher times have come to the businesses relying on it.’
‘Arizona Public Service Co., which has about 1.1 million customers and is the state’s largest utility, predicts a growth rate of only 1.5 percent this year, its lowest in at least 35 years. And that may be on the high side.’
‘The reasons for the slowdown are straightforward. Economists blame the uncertain economy, the fact that people can’t sell their properties back home and the shrinking number of new Arizona jobs.’
‘You are less likely to move when things are bad because you would be moving from an area where you have some roots and where you have extended family and friends,” said Tracy Clark, an Arizona State University economist. “That’s not the time people feel particularly adventuresome.’
‘He also said that when housing prices fall, people are less likely to move, especially if their homes are worth less than they paid for them.’
Ben,
Do you think the people exiting CA are going to land in AZ, or are they gonna continue eastward? 1.5% seems pretty low considering the thousands that will be leaving CA.
Did you ever comment on the auction up in Flag? If so, I missed it. Care to retell?
The housing bubble probably set this state back 5 to 10 year. The best thing it had going was cheap land. Construction has plummeted, gas is killing tourism and even uber-bull economists agree we are in a recession. Retirees die off as fast as they move in, and the health care isn’t tops. Looks like the rolling bubble is over and now we wait for prices to get low enough to start the growth again. BTW, the leadership in Phoenix is awful. I hope for better days.
It snowed hard the morning of the auction and I chickened out.
Preach it on the quality of the health care, Ben!
I’ve been in Tucson for 21 years, and it is HARD to find decent doctors and dentists here. (Believe me, I’ve looked.) And don’t get me started on the quality of the hospitals. Just don’t.
Is there a place in Arizona that is’nt like living in the attic of hell?
Flagstaff, Mogollon Rim country, & the White Mountains.
Don’t mean to hijack the answer, but a couple of days ago I posted of substantial rumors of CA tech companies relocating to a redeveloped Motorola site in Chandler, near the new Intel fab. So that will obviously include some ex-Californians who follow their jobs.
One of the biggest things going on in AZ is the contraction of the “cash economy” - the 550,000 “undocumented” workers and their families that were building houses, clearing lots, paving streets, etc. during the construction boom. With that part of the AZ economy contracting, all those cash spenders and the businesses that they support (Cantinas, small restaraunts, cash-wiring businesses) are feeling the pinch, and many are diappearing, along with the workers themselves.
AZ is still lucky in some respects that it is near California, whose 20-times larger economy is going to shed jobs and businesses like crazy during this downturn - if AZ gets 1% of those jobs it will actually moderate things in the “on the books economy” pretty well. I can’t imagine that every financial and insurance business in LA and Orange county is not seriously looking at ways to reduce overhead, including leaving the ultra-expensive CA locations.
As a kid, we used to explore ghost towns all over Nevada and Arizona. Marvelled at the luxuries afforded during the boom times in copper/silver/gold mining, and how all that was left were a few brick foundations–whatever folks didn’t bother to salvage and take with them to the next town. For example, Candelaria, NV was the birthplace of the founder of UPS, and at the time (1888), one of the largest towns in the area. Now it’s just dust in the wind.
I always hear and read about companies relocating much of their back-office IT operations to AZ, TX, NM, etc. only to find that there are issues when the air-conditioning occasionally goes down. I know it’s unrealistic to have IT centers in the middle of Alaska, but I have to wonder what the wisdom is of moving any large IT infrastructure to the hottest parts of the country.
This CA couple is headed 1500 miles east of San Diego. I grew up in AZ. Not going back ever. Going to Omaha area.
Now all the homeschoolers will be leaving California as well.
OMAHA????
My husband is there right now. It was 5 degrees this a.m.
My youngest daughter moved there for college almost four years ago for college. She loves it.
Omaha is a cool town. I really like Lincoln, too. It is funny how the “good” cities (Portland, San Diego) have, in some respects, nothing on a place like Lincoln.
“5 degrees this a.m.”?? Good, it’ll keep the riff-raff out.
My dad was born in Lincoln NE.
Omaha you say! Grew up there, it is really a great place except for the cold weather in winter. Good honest people who mind their own business. Number of large corporations there and that would suprise most people. Good luck in the Omadrome
“Going to Omaha area”
Raven I am certain you will return.
“For $1,000 a month in rent, the couple was able to drastically upgrade from their rental in Avondale, and get Evans’ children into a better school, they said. But the homeowners have warned the renters that their financial picture has changed, and with the possibility of foreclosure, they should be looking for a place to move.”
Wouldn’t it be wise for lenders to start negotiating with tenants for continued occupancy?
I believe lenders pretty much have to empty out REO’s for liability and other reasons.
Obviously the $1000 rent wasn’t enough to cover the mortgage and the owners got tired of bleeding cash. As the article says, they won’t have trouble finding another place.
You should see the Phoenix classifieds. Dozens of new houses, some with pools, for rent cheap.
it must be pretty sweet ot be a renter in az vegas or florida
I wonder if the renters can go to court to give them some time to find a new place?
We had a little different situation. We rented from a woman whose divorce settlement stiuplated she live in the house or sell it. When her ex found out, we got a summons to appear in divorce court as a witness. I’ll never forget the judge saying, “Well, it looks like Mr. (me) doesn’t have a valid lease agreement.” Uh-oh! We hired a lawyer just to play a stalling game to give us time to find another place.
With a foreclosure, the tenant usually has a longer time between notice and eviction.
It might be difficult to do after the fact, but, afaik, there’s no law against penciling-out and writing-in whatever lease terms a renter desires.. and in this market it might be wise to do so.
Be sure to include the line “Homeowners will stop by once a week and refill the squirrel feeder.”
“A drop in home prices will make homes more affordable to more people. Home ownership remains the single best way to build personal wealth, in addition to that niggling fact we all need places to live. Generally it’s better to own than rent.”
A drop in house prices has made houses far LESS affordable because lenders understand that they can’t factor expected appreciation into the repayment equation, and refuse to lend money to unqualified buyers. Even today, lending is not as restrictive as it rationally should be given the underlying fundamental value of the collateral. Thus, house prices should decline precipitously over the next 12 months.
The single best way to build personal wealth is to have production exceed consumption.
The delusion continues on Main Street, even as Wall Street seems to finally be getting it.
“Jones said Nevada’s falling home sales aren’t as severe as California’s, and he believes the Reno-Tahoe region’s allure with its physical attractions and quality of life will help it endure. ‘You live in a beautiful place here,’ he said. ‘If you don’t think you do, come live with me in Houston.’”
When are these dolts going to realize that aesthetic beauty does not carry a real estate market; incomes do? Furthermore, the only thing beautiful about windy, dry, dusty Reno, is a look west to the mountains. Get over it buddy, I grew up there. The whole “Reno’s special” talk is revolting. Reno is going to get throttled worse than many CA markets. There is a shortage of well paying jobs. Last time I checked, $13 hour warehouse workers couldn’t afford $350k homes.
There seems to be an inexhaustible supply of Bay Area residents who can’t help themselves from buying second homes in that area.
Apparently that inexhaustible supply has been exhausted, because there were only 125 closed sales in February; the lowest number on record. The market isn’t on life support, it’s decomposing.
You nailed it! If you take out the incomes generated by housing over the last couple of years it’s still the same old NNV. Housing has got a long way to drop here to align itself fundamentally. And even if does get back to affordable, I expect a massive out-migration of folks that moved here over the last several years. A lot moved here for the housing jobs. That’s going to be gone for a while. There’s no other jobs for these chumps to go to. So demand will remain low regaldless of how low housing goes.
What would really set Reno on fire is decent train service through to Sacramento, so as to hook up with Caltrain, which goes on to Richmond (where it hooks in to the San Francisco/Oakland BART subway system), and San Jose. Or even really nice thru-bus service to the Bay Area, with wireless internet support and electrical outlets.
Reno has an incredible future ahead of it as the closest non-California metropolis to San Francisco/Silicon Valley. The lack of a state income tax, the University of Nevada near downtown, superb climate other than a few cold weeks in winter, closer to the Sierras than San Francisco, lower cost of living–I could go on and on about Reno’s advantages. The days of Reno as nothing but a place for low-paid warehouse and gaming jobs are over. The future lies in technology, and that future is very bright.
I’m a retired electronics engineer/programmer from the Bay Area, currently living in Reno. I rent right now, but I would have little hesitation buying several properties in Reno once the prices get reasonable. I see this place exploding within the next 20 years, even more than it has exploded within the past 20 years. The next two or three years might be tough, I’ll grant that.
This is the kinda thinking Ben was talking about.
I’m sold on the hypothesis (not the timeframe, etc.) but the basic hypothesis is sound. I know more than a few high-end engg. folk who are sorta-kinda “ski bums”. As in they work remotely from Tahoe 1-2 days a week (which is 3-4 days of skiing/snowboarding) and haul @ss back to SF for the remaining.
I like the idea of basing myself in Vegas, actually. Not paying the 9% California income tax would be nice on a healthy six-figure income, but the lack of Prop 13 is the major downside. That, and there’s nothing with naturally lush vegetation within 500 miles of the place.
“Home ownership remains the single best way to build personal wealth”
Yeah right, it’s also a great way to pay a lot of taxes, upkeep, remodeling costs, special assessments and ever increasing HOA fees etc. They don’t have the nickname “Money Pits” for nothing.
Using the anecdotal example of myself, the single best way to build personal wealth is to avoid homeownership most of the time. And I heard the NYT had a piece last summer (?) saying something like, “Wanna get rich? Rent!”
IMO, the best way to build wealth is to buy quality at a discount, whether it be houses, stocks, bonds - whatever.
Recessions offer such opportunies, but one’s finances need to be liquid before he can act.
Hence my mantra: Cash is king.
Another key to building wealth is to extract every last bit of use value out of whatever you buy, and if you can’t - then rent it.
Many of the places they built and sold during this bubble would probably take many lifetimes to extract all the use value - provided the plywood and Tyvek held together that long.
The ~1997~2007 Bubble = Worst mass allocation of resources and labor ever!
I agree.
Buy anything low and sell it high.
The notion that RE always appreciates over time is somewhat baseless. If you factor in all you spend for maintenance, taxes etc., renting looks mighty good. RE will appreciate over time due to inflation but it is at best a forced savings account.
When my father and mother sold the old homestead up north, they thought they made a fortune. When I figured taxes and maintenance over the 28 years, factoring in inflation, they really made nothing. They were fortunate though, as it was a forced savings plan, but that only happens when RE appreciates.
The way to make money in RE is flipping. I have done it all my life. It just that right now it’s probably not a good idea. I don’t know when it will be a good idea in Florida again.
The one new factor that is having and will continue to have a great effect on most market is new construction. Builders can buy lots for 30% or more less than 3 years ago and labor and material costs are way down also. If you build a smaller house, a builder can actually sell all he can build leaving those that bought from him 3 years ago and “used” house sales flat.
I know a builder who was accosted by a guy who bought a home in a developement in the Orlando area becasue the builder put up almost the identical house two streets over from him at just about half price, so now the guy can’t sell his.
The first lot cost the builder $70,000. The last lot cost him $20,000, he built it 300 sq foot smaller and materials and labor were approx 30% cheaper.
This is not lost on most builders. In effect, when you use the new house in a comp, you lower all prices in the area.
This is a trend that I think we will see way more of. Logically, this will do more to bring down comps and thus prices quicker than waiting for sellers or relators to smarten up.
I think builder are getting aggressive at this.
“I know a builder who was accosted by a guy who bought a home in a developement in the Orlando area becasue the builder put up almost the identical house two streets over from him at just about half price, so now the guy can’t sell his.”
The way I see it, you got your story mixed up. It was the builder that was doing the accosting, JOSHUA TREE STYLE!!! Whoooo-hooooo!!! Work it!!
“The way to make money in RE is flipping. I have done it all my life.”
I disagree wholeheartedly. I have in-laws who have been into real estate (both commercial, and residential) since the 1950’s, and are extremely well-off. It’s more about purchasing sound properties with high cap rates and low vacancy rates, which provide positive cash flow, than it is about making a quick buck.
Bantering, I know a couple of Tucson real estate investors who are exactly like your relatives. They’re savvy people, and I learn a lot every time I have a conversation with them. They’re also great guys.
In bad times, almost nobody makes money. In good times, almost everybody makes money. But, in general, if you’re reasonably handy and have some time, owning makes sense, as it provides a decent source of part-time employment.
OK, my friend at big money Pimco (Bill Grosshead) says the Fed will need to start buying Mortgage Backed Bonds to help push yields lower and lower mortgage rates to prop up home prices. So I would expect to see 3% fixed rates coming soon to a pueblo near you!
Big pimpin’ at Pimpco, I see.
Fed buys MBS’s. Dollar has a cow. Derivatives market implodes. Canned peas and AK-47 time.
Nobody will care about the 3% rates or a house.
LOL. I already have the canned peas!
Get this device & your canned peas can double as short-range artillery rounds.
3% rates are one factor, having a down payment (a what?) and proof of qualifying income is another.
after that then FHA will by NINANJ loans - they will stop at nothing to keep this rod up!
Of course they won’t stop, but has any of it worked so far? Exactly! Nor will it work in the future. An economy based on credit expansion has a finite life span. By it’s very nature it must eventuall fail and die. This one has seen it’s day.
Of course the Fed will try to prop it up. That is there job and why they were created. But the horse that they were created to beat is dead. So, continue to watch in amusement, or horror, as the Fed continues its exercises in futility.
I’m reading Deep Economy right now. Very interesting analysis about how Growth is no longer connected to Wealth, like it had been in the good ol’ days.
That’s an interesting statement. What does Deep Economy say wealth IS connected to?
What I should have said is that wealth is no longer a predictable outcome of growth. I just started reading, but I’m gathering that he is saying a paradigm shift is afoot, and prosperity will be more connected to local efforts.
I would prefer to buy homes at much higher interest rate environment than low interest environment. The reason is that if you bought during low interest rate era, your home will definitely worth less when interest rate starts to rise back up. On the other side, if you bought in high interest rate, you have a better chance to refin to lower interest rate as well as more demand as interest rate starts to drop.
Not really.
(1) A rise in interest rates is a more efficient “refinancing” than refinancing to a lower fee, as you already have locked in the low rate and pay no fees and closing costs of refi. Thus, the effective gain in value of the loan is greater than it can possibly be in a declining interest rate environment.
(2) When rates first begin to rise it will be because of increasing nominal demand - i.e., either higher inflation or higher real demand. Either one is likely to result in higher prices. The former does not affect the relative value of the property, other things being equal, but gives the benefit in (1). Higher real demand will tend to raise the value of the house.
Higher REAL interest rates, other things being equal, may tend to lower the value of housing, especially when first undertaken. But, all in all, I would generally prefer to buy in a low interest rate environment if I were borrowing a substantial amount of money.
RE: So I would expect to see 3% fixed rates coming soon to a pueblo near you!
FHA mortgage guarantee limit raised to $534k here in Mazzland.
3% down. Downpayment can be a “gift” meaning “fudged”.
Mortgage companies are doin’ the originations with FHA’s “pick your own appraiser” underwriting standards.
Your 3% finance money soon to follow. WTF…it’s only paper.
“That area had 103 homes listed above $1 million, and 16 sold for that much last year. Osborne said she is confident people will buy the homes despite the housing slump.”
Let’s see, that’s another 5 1/2 years of inventory to clear. Gosh, her dollar-devaluation prediction is pretty steep. (I’m thinking the USD has to go down to about 30c if the wannabe sellers aren’t going to lower their prices.)
How does dollar devaluation help houses? People’s salaries are denominated in dollars too.
How is any of this going to make salaries go up?
Yes the poor guy who can’t afford his nequity (negative equity) will struggle to put food on the table and pay for home heating oil.
I don’t know if US wages will rise, but the continuing Fed response to hard times here seems to be cut cut cut, which seems to bring the dollar down vs other currencies, which seems likely to bring those Foreign Buyers we hear about. I don’t know if there are enough Foreign Buyers (not to be confused with FBs) to take care of the inventory, but it seems like the most plausible source of funds.
How does a foreign investor “investing” in an asset where local price/income and price/rent are completely wrong change anything?
They would have to be ultimate fools — it’s freakin’ Pebble Beach and Rockefeller Center all over again.
Worse, the currency bet would be going against them too! Wow, they couldn’t be more wrong than that if they tried with their socks on.
The FB’s (foreign buyers) would have to be the ultimate FB’s (…)!!!
“‘I believe, strongly, that the worst is behind us and we are headed for stability,’ he said. ‘My wife and I just bought another investment home, at a great price, and we look forward to buying another in the not-too-distant future.’”
It’s statements like thes that make me think that a lot of “investors” are just plain tools! Are these people wanting to become property managers, or are they looking to hold in flip for imaginary profits two years from now?
Once they find out what property management is like, oh, brother. Those “investment” homes will be dumped back on the resale market.
This is what you call the invisible hand of Wealth ReDistribution. They had the bird, and now they get the bird.
I can’t help but juxtapose “the bird” with “flipping.”
Good eye. That’s where i was going with that….
Correct me if i’m wrong… but according to the article Rob Wigton made that statement.. and he’s the president of the Nevada Association of Realtors.
.. and even if he were just another average schmoe I’d suspect the schmoe’s brother in law, some RE stooge, paid him to say it and bribed the newspaper to print it.
You know, as I read more and more about these developments imploding, it occurs to me: can the remaining owners structure the HOA to buy and rent out the properties? Seems like a logical way for them to monitor their neighbors, and potentially protect their neighborhood values; as compared to some vulture investor (don’t get me wrong, I hope to be one some day) swooping in and just going Section 8.
Maybe we’ll see HOA representative showing up at foreclosure auctions in the future.
Probably that works only if the price/rent ratio allows the HOA to get a positive cash flow. !!??
The HOA’s are continually cash strapped due to gross underestimates made by the builders on what it would cost to maintain the grounds. I doubt any of them have the cash to buy up houses.
They are also cash strapped due to non-payment of dues. In the last newsletter from our HOA, they mentioned that the “economy has affected some homeowners, so liens have been placed on the property for non-payment of dues”.
I live in a HOA, but thank god we don’t have the swimming pool/spa complex, nor is it a caged community with the clanky entry gate where everyone knows the “security” code anyway, so who are they kidding? We only pay for front yard landscaping and street resealing, which is fine by me. Fees are not much higher than if I paid for a gardener.
Caged community. Another classic HBB turn of the phrase.
I appropriated that phrase from another poster who coined it a couple days ago. I told him I’d steal it.
The HOA in our neighborhood has places liens on several of the houses on our street, including the one I rent, and exceedingly low dues don’t leave much to build up the cash reserves necessary to pull that one off. Nice idea, though.
“lien for non-payment of dues”
Something to know: my lawyer says in AZ the mortgagee’s lien is senior to the HOA’s lien. Chances of HOA ever getting paid by FB or the bank are small to none.
BUT…. what you will find is that any HOA shortfall will be spread amongst the other (paying) members of the HOA as a special levy or whatever.
Believe me, you (as a paid up memeber of the HOA) are going to be paying for the delinquents as well. Read the tiny type in your HOA agreement.
No recovery from delinquents = YOU pay.
I would expect to see property bodies corporate become extremely unpopular because of this potential liability……
“Besides, there’s a glint of silver in corrections. A drop in home prices will make homes more affordable to more people. Home ownership remains the single best way to build personal wealth, in addition to that niggling fact we all need places to live. Generally it’s better to own than rent.”
There is so much in that statement that makes me want to scream. First, it is the governments’ intervention with the professed purpose to provide affordable homes to as many people as possible that created the bubble, and it is the government that is working like mad to prevent home prices from falling…despite that falling prices helps the average person.
Home ownership remains the best way to build personal wealth, so long as you ignore those pesky cycles of home deflation and investment that vaporizes billions (if not trillions) of paper wealth.
Generally, it’s better to own than to rent…yes well…I guess it’s the specifics that kill you, like, if you as a specific person lie about your income and take out a teaser loan to buy 10 homes as speculative investments…owning might not be for you. Or, for that matter, any of the other homeowners who were competing against your fictitious bids in the neighborhoods where you bought your homes.
BAH. I never thought I would say this, but now that the schadenfreude of being right about all this has passed…I’m getting bored by the inanity of the commentary and the inability of the average person to have the minimal capability for self-awareness it might take to admit that just maybe this was their own g-d fault. I thought I was jaded before…
BAH. Bring on the canned peas and AK-47s…I’m ready.
First, it is the governments’ intervention with the professed purpose to provide affordable homes to as many people as possible that created the bubble…
They didn’t want to provide affordable homes…only temporary affordable monthly payments. That went well, eh?
So much irony in that statement. The common psychologies of “it’s better to own” and “it’s the single best way to build personal wealth” has caused it to most definitely be a better time to rent.
I still can’t believe that those crappy 1100 sq. ft. patio homes built in Tuscon’s Continental ranch in the mid 1990’s are going for (or should I say the asking price is) in the 200’s and up. What noodle head thought that would be a great investment? A trailer in Vail seems much more appealing.
I have a dear old friend whose daughter bought one of those Continental Ranch places. Boy, what a gulag!
I dreaded going up there with my friend, but went because the daughter was so unpleasant that my friend didn’t want to deal with her by herself. I couldn’t help thinking that the daughter’s surroundings were accentuating her nastiness.
OMG it sounds like you needed a 2 martini prep to face that ordeal.
I saw some Doctor Suess colored Townhomes on River rd and Cambell . Nice area IMO. I guess they all sold or no?
There has been a massive amount of townhouse/condo/whatever development along River east of Campbell, Cactus. If you have a bike handy, get on the trail that runs along the north side of the Rillito Wash. You’ll see quite a few unsold units in those complexes.
3 PM , PPT time. The 3 pm spike is not looking all that strong
It’s spiking now!
PPT is trying to get us back to 12,000 now…
yeah, fun to watch. Bring on the Viagra.
Lets hope it doesn’t stay up above 12,000 for more than 4 hours.
bwahahahahaa! All the way up to 12k? That’s a relief!
/sarcasm off
“But this is a correction, which happens periodically, not a collapse.”
“Besides, there’s a glint of silver in corrections. A drop in home prices will make homes more affordable to more people. Home ownership remains the single best way to build personal wealth, in addition to that niggling fact we all need places to live. Generally it’s better to own than rent.”
“Meantime, you can almost hear the investors unfurling and fluffing their wings from their perches, rustling ever more excitedly with each dour report. Soon, soon now, the market will reach bottom, and it will be time to swoop in.”
Despite all the news and facts to the contrary, this joker still can’t tell it straight… what a sleezeball.. I hope he plunges in with both feet and hands and buys all the houses he can and then some.. couldn’t happen to a nicer guy..
Ummmmm, between you and me, your sleezeball discription falls well short of actuality……..but you didn’t here it from me.
“‘The weed problem is coming from the HOAs constantly. You can drive down the street and see it,’ she said. ‘We can’t keep up with them fast enough.’”
Suburban HOAs resorting to weed? –shaking my head sadly–
My observation is that lenders are operating in a very business-like fashion,’ Sullivan said.
How dare they–the monsters!
“‘If housing prices have decreased, when you’re buying, guess who gets the benefit?’ said Chalice Springfield, CEOof Sears Real Estate. If, for example, someone wanted to buy up but had to take a $30,000 loss on the sale, you also may be buying a foreclosed house from a bank that’s taken a $60,000 hit, Springfield said.”
“‘You might be able to make it up on the back end,’ Springfield said.”
I truly have no idea what this guys is saying?
i think his point is that declining prices don’t matter if you’re relocating: you’ll sell for less, but you’ll buy for less, too.
he had to give some long weird example though.
he’s saying that due to falling prices:
Sure.. you may lose $30K selling your current house (the one you need to sell) but you may also “save” a larger amount.. perhaps $60K.. on the bigger house that you intend to purchase.
there’s no better time to buy, dontchaknow..
Anyone notice for sale signs popping up like spring flowers? In my little neighboor of a few blocks (Idaho), five homes have gone on the market in the last few weeks.
I’m sure that the local Boise RE cheerleaders will encourage knife-catchers to jump into the market.
I’ve noticed! Occasionaly I drive in around a working class neighborhood of 1970’s 3/1 starter homes near the RR tracks. (For some nutty reason I’m thinking of buying in this neighborhood. Probably because it’s a lot like the place I grew up.) And just on the 4-5 streets there are about 10 For Sale signs in the snow. Spring nonselling season is staring early…
I’m noticing the same thing here in Tucson.
Same here too. It reminds me strongly of all those “Invasion of the pod people” movies.
My guess is most of the sellers who were advised by the realtors to take their property off the market.. to wait and not-sell last year.. have run out of time, patience, money or some combination of the three.
I’ve seen that in NoVA. A house in Vienna that was listed for $799k came back on the market this spring for $724k and with a remodeled kitchen.
I hate to break it to the guy, but the place is worth $550k, tops.
Maybe in a funny way this recent crop of vulture (knife catcher) stories will even further increase the inventory. If the FBs want to sell - nothing will get them off the fence faster than their greed. The thought that they are missing out on something big might just get them to play an unwitting role in the downward spiral.
“Meantime, you can almost hear the investors unfurling and fluffing their wings from their perches, rustling ever more excitedly with each dour report. Soon, soon now, the market will reach bottom, and it will be time to swoop in.”
“Wigton and his wife, Kari, have begun swooping themselves.”
“‘I believe, strongly, that the worst is behind us and we are headed for stability,’ he said. ‘My wife and I just bought another investment home, at a great price, and we look forward to buying another in the not-too-distant future.’”
Their feeling of greed is greater than their emotion of fear
How quickly that will change.
Looks like those two idiots took a weekend “wealth building” seminar from one of the many charlatans still operating out there.
Oh yes.
They are going full tilt in our area. What the scaminar attendees don’t realize is that by purchasing RE now - they are having the same effect as rearranging deck chairs on the Titanic.
They’ll keep prices supported for a while, but the trendline is going one way…DOWN.
“Their feeling of greed is greater than their emotion of fear”
Maybe I am a naive rainbow chaser, but this invasion of wall street thinking into main street thinking, or values, is horrible to me.
They are knife-catchers.
And incidentally, the end result of every “permanently inflating” fiat currency is precisely this kinda speculative frenzy. People realize the only way to get ahead is to “hit the jackpot”.
Somewhere out there, the ghost of Ludwig von Mises is wagging his freakin’ finger with a I-told-you-so.
Only problem is that they are inflating credit not the money supply so there will be an implosion when people can’t afford to pay back the debt. This would be the part that the Mr. Bogle simply does not get.
fpss, thanks for coming back to that. I see what you are saying now.
Fear will rule over greed. That’s how we humans are wired.
Studies have demonstrated that the power of fear is about three times greater than the power of greed.
Accept this fact and you will be a long ways toward preparing yourself for the great buying opportunities that will present themselves near the bottom of this recession we are now entering.
Remain patient and liquid, and keep informed.
Great comment combotechie.
I am way more scared than I am greedy.
And
I’m slightly self centered but very generous.
Right on. Good things come to those who wait.
How do we stop our government from rescuing banks and FBers at taxpayer expense. I believe this is coming soon and my head will explode with rage and hatred when the rescue plan is announced….
not gonna happen, jb. Seriously. There isn’t any way. We have our stimulus package coming and that’s it. Enjoy your check.
Thank you palmy.
I agree, I just want to take one politician out so they know their is a cost. Perhaps someone with the know-how (and who is informed enough) could start a website with the most egregious politicians involved in rescue plans and we call for their removal. (I will send whoever sets this up a $100 check to pay for costs, I am sure others here would too). Somehow we have to be vocal. I have e-mailed Clinton, Chucklehead, Obama, Boxer, and a few others, but it is time for taking to the streets. The bankers are laughing at all of us… collecting another fat check for a job poorly done.
“I just want to take one politician out so they know their is a cost. ”
Great idea! I’ll bring the rope!
Friend just refinanced with Wachovia.
4.7% rate. I said that’s an ARM! She said, no it isn’t. She does have about 50% equity and did not pull any money out. I went and looked at it. She is right. How could they do this?
This is also weird. If the FED keeps lowering rates, her rate drops… if the rate rises, it locks in at the lowest rate.
How can they do this? Are banks that desperate?
She does have an excellent credit rating too.
Bank’s cost of funds is no higher than the Fed funds rate of 3%; average cost is actually considerably lower. Collateral is 200% of loan value. What you describe at the end is no different than re-financing. Bank has many ways to hedge self against rising rates should it desire to do so. Bank should make money on the loan, even if not a lot. Bank also establishes customer relationship, who can be nickel and dimed to death over the course of the relationship.
Does that 50% equity count on as assets Wachovia’s books? Maybe they are desperate to keep up the numbers in their reserve.
In a word, no.
30 year or 15? What part of the country? Thanks
Pennsylvania and it’s a 15 year.
Hume Bank in Missouri closed; FDIC named receiver
If anyone is interested in emailing 60 Minutes and requesting a story (on the current housing situation as viewed from HBB), send an email to: 60m@cbsnews.com. Presumably they will contact you in a few weeks if interested. I tried………………:-)
Or: we all write the same letter to:
Story Editor
60 MINUTES
CBS News
524 West 57th Street
New York, NY 10019
Looks like the home price crash in California is knocking on the door:
“According to Trulia, the median listing price in Malibu is $2,297,000 but the median price of a foreclosure listing is just $1,045,500, 54% less.”
http://money.cnn.com/galleries/2008/real_estate/0802/gallery.million_dollar_foreclosures/6.html
Foreclosures in Malibu? I thought those high priced coastal communities were immune!