Carpetbaggers Drove The Market Up And Now Down
The Rio Rancho Observer reports from New Mexico. “According to realtor Cari Barlow with Sunland Realty in Rio Rancho, the housing market is returning to what it was before the big upward rise in prices Rio Rancho experienced several years ago. ‘For those two years it was a seller’s market,’ Barlow said. ‘But, it is back to being what it had always been: a buyer’s market.’”
“Sunland Realty is encouraging house sellers to consider leasing their property until they find the right candidate, who wants to buy. ‘Sellers can’t afford to keep them on the market,’ Barlow said. ‘Renters can lease until they sell.’”
“Residential land has mostly been divided into small lots, which is how developers wanted it from the beginning. ‘Developers bought it and sold the land as postage-size lots,’ explains Scotty Scott, working for the same real estate office. ‘Carpetbaggers drove the market up. And, now, they are driving the market down.’”
“Scott says 100,000 acres have already been sold there, but there is between 65,000 and 75,000 acres still available for sale at Rio Rancho Estates. Upper-end lots can go as high as $125,000 per half-acre, while if you go outside the Rio Rancho city limits, land can run as low as $3,000 per acre.”
“Molly Kraft from Pulte Homes thinks it is a great time for the market, and that buyers sitting on the fence waiting for changes either way should go out and buy.”
“‘It will not get any worse,’ Kraft says, ‘or any better for the buyer.’”
“Karen Gauze with Desert West Properties, explains that because we don’t having the housing boom we had 18 or 24 months ago, there is no reason to consider that Rio Rancho is still not a good market. ‘Investors are looking for long-time investments now, rather than a fast flip,’ Gauze said.”
The Las Cruces Sun News from New Mexico. “The value of property in Doña Ana County has nearly doubled since the 2000 tax year ‘The main reason why our tax base has been increasing so much has been due to new construction added to the tax base,’ said Doña Ana County Assessor Gary Pérez. ‘The base also changes and increases because of an increase in market value for existing homes.’”
“A decrease in residential construction is expected to be felt this year, however, and will be reflected in 2009’s taxable value. In 2007…nearly 600 fewer building permits were issued by the city of Las Cruces than in 2006.”
“‘2006 was a banner year,’ Pérez said. ‘I think there’s going to be a little bit less of an increase this year.’”
“But Pérez said he does not expect the value of property to actually decline. ‘The Las Cruces area will still increase in value,’ he said. ‘It may not be as high as other years, but it’ll be higher than the national average. We’re still booming, we’re still a desirable area.’”
The Arizona Republic. “Charles DeWitt hadn’t planned to stop last week at the abandoned house on South Williams Street. DeWitt had other work in mind, a list of complaints about shabby properties in the area he patrols as a Mesa code compliance supervisor. But en route, the small ranch house caught his eye. Weeds were almost hip-high and a side gate stood ajar.”
“DeWitt called City Hall to check on the property, and in short order his suspicions were confirmed. Another foreclosure had hit home in Mesa. The people living here had just walked away, leaving a mess, an unpaid $400 city electric bill and an eyesore for neighbors struggling to maintain their own property values.”
“‘It’s actually been an issue that we’ve been tracking over the last 18 months,’ said said Mike Renshaw, who runs the code compliance team. Since prices peaked, the collapse of the subprime mortgage market and falling real estate values have plunged millions of homeowners and real estate investors into financial hot water.”
“A Web site lists more than 3,600 distressed properties, either bank-owned or heading for auction in Mesa. The problem is citywide, Renshaw said.”
“‘I think, unfortunately, it runs from east to west,’ he said. ‘It’s obviously gotten much worse over the past few months.’”
“DeWitt pointed out several apartment buildings along Elton Avenue that are either in foreclosure or on the brink. One eight-unit building has one occupied apartment. Investors bought many such properties during the 2005 boom, DeWitt said, but now they can’t collect enough rent to cover mortgage payments or repairs.”
“‘The crime rate in these neighborhoods is just astronomical,’ DeWitt said.”
“Single-family investment homes have been hit, too. As an example, DeWitt pointed to an empty house on South Forest Street, purchased by an out-of-state investor in 2005. Trashed by previous tenants, the house needs repairs the owner can’t afford for the amount of rent she can charge.”
The Arizona Daily Star. “A developer is planning to use a live auction to sell nine new homes in a Green Valley subdivision. Mark Hughes, owner of Hughes Development, will use that method to sell some of the homes in Las Campanas Village, a retiree-oriented community.”
“Three of the nine homes will be sold ‘absolute’ — that is, no matter how low the winning bids are.”
“The homes previously were listed in the $250,000 range. The developer said he has 27 unsold homes in the subdivision that have been sitting on the market for about nine months.”
“Hughes said he’s taking an experimental approach to ‘kind of see where the market is.’ ‘They just need to be sold,’ he said.”
“Green Valley saw a huge upswing in investor activity about two years ago, rapidly driving up prices, said Steve Smith, president of the Green Valley Association of Realtors. Now, there is ‘just too much on the market,’ he said.”
“Hughes said builders ‘just couldn’t keep up with the demand’ during the boom years. But sometime last year, the market ‘came to a screeching halt’ in Green Valley.”
The Green Valley News & Sun from Arizona. “Hughes says the housing market ’slowed’ in 2006 and ’stopped’ in 2007. ‘I’ve built 12,000 homes over 15 years in the Phoenix Valley and Tucson-area, and this is the first time I’ve had to start auctioning,’ Hughes said.”
“‘Obviously, we’re seeing falling prices in a falling market. We know what these homes are worth, but if the public’s not willing to buy at that price, it doesn’t matter,’ he said.”
The Arizona Capital Times. “Home foreclosures have skyrocketed, gas prices have spiked, unemployment has risen and the stock market has teetered like a drunkard. Sara Wedeman, an economic psychologist, said consumers are feeling frightened by the negative reports about the housing and credit markets, which leads them to be cynical about the likelihood of a quick recovery.”
“‘Fear-mongering of any type tends to cause people to hunker down and not invest and circle the wagons,’ she said. ‘That’s the worst thing for the economy.’”
“Doug Clark has witnessed the psychological impact that a sour economy can have on potential homebuyers. As a real estate broker, he has had many clients balk at buying houses in reaction to news reports about a struggling housing market, opting instead to wait to purchase the property at the best possible price.”
“‘Sometimes, I think it’s a self-fulfilling prophecy,’ said Clark, who is also a Republican state representative from Anthem. ‘If buyers would just buy the house, (the market) would turn around.’”
“Even more frustrating, he said, is that delaying a purchase by a few weeks will lead to minimal saving for the buyer. Stalling for a month or two may result in only a $5,000 savings on a $300,000 house.”
“‘Unless you are a flipper, a house value isn’t going to change that much in two weeks that it’s going to impact you negatively,’ he said.”
“Wedeman said that irrationality is a hallmark of economics, in both good and bad times…even if the clichéd mantra of ‘buy low, sell high,’ is the logical course of action. That irrationality is on full display in the scenario Clark mentioned, she said.”
“‘The risk that they might lose $5,000 is nothing compared to the fact that they will buy a house at a great price that will rise in value,’ Wedeman said. ‘It’s that refusal to take a risk that makes this cycle perpetuate itself.’”
“Clark said he expected the housing slump to be over by now. ‘Instead of coming out of it, we’re actually worse than we were a year ago,’ he said, estimating client traffic at his firm is down about 75 percent from last March.”
“Elliott Pollack, a Scottsdale-based economist, said the credit crunch means about 25 percent of potential homebuyers can’t qualify for loans now. The oversupply is so acute that it could take more than three years for the excess homes to be absorbed and the market to return to its equilibrium, Pollack said.”
“The supply of homes listed for sale in the Phoenix area will take up to 18 months to dry up. Tucson has enough homes for sale to keep buyers busy for the next 12 months.”
“‘The only thing the government could do (to fix it) is go out and buy 1.7 million homes and blow them up to restore supply and demand,’ Pollack said. ‘In the absence of that, we simply have to live through it.’”
“Arizona had the fourth-highest foreclosure rate in the nation in February, according to RealtyTrac. The 9,540 foreclosures for the month were a 210-percent jump from the prior year.”
“The housing market is the cornerstone for what University of Arizona economist Marshall Vest calls the ‘growth industry’ that employs 20 percent of the state’s workforce: construction, mortgage lending, title companies, home inspectors, architects, landscapers and the like.”
“‘They’re all downsizing, consolidating at this point,’ he said.”
“Vest said the same psychology that is now creating a negative pull on the market is also the same thing that will help the economy recover. After all, he said, part of the reason for the situation we’re in now was the market-induced frenzy of home buying.”
“‘At a point, the psychology will turn and people will decide they can afford a house now,’ he said. ‘You’ll find it’s like a light switch. After all, Arizona’s the state where growth is good and too much is just right.’?”
The Review Journal from Nevada. “Median existing-home prices have fallen to $237,000, below the $240,000 threshold that local housing analysts predicted would be the low point. Las Vegas made national headlines again this week with a 19 percent decline in the January Standard & Poor’s/Case-Shiller index, tied with Miami for the biggest drop among 20 cities measured in the index.”
“New-home sales in Las Vegas are down 49 percent for the first two months of the year, existing-home sales are off 37 percent and home building permits have plunged 70 percent, housing analyst Dennis Smith said at Las Vegas Housing Outlook 2008.”
“‘Obviously we’ve got tight credit and qualifying requirements,’ Smith said. ‘Those are factors, too. I could go on and on. I think we’re close to the bottom, but it’s going to be an extended bottom.’”
“‘It almost couldn’t get any worse. I hate to say that,’ Bernard Markstein, director of forecasting and analysis for the National Home Builders Association, said at forum. ‘The tough times are not over, but we may be reaching the bottom. Of course, affordability remains an issue, but prices are starting to adjust.’”
“‘What’s going to get us out of this? Demand needs to stabilize and improve before there is a recovery,’ he said. ‘Again, we’re talking about a modest rebound. We don’t want to get back to 2004.’”
From KVBC.com in Nevada. “Nearly half of all the resale homes being sold in southern Nevada are foreclosures, but analysts believe the worst of the housing slump may be over.”
“‘Now it’s not going to happen overnight, we’re going to be at the bottom for a while, but at least it’s stopped going down,’ Home Builders Research President, Dennis Smith, said.”
“‘I can’t tell you when the prices are going to stop going down, but right now they’re as low as they’re going to get,’ Smith said.”
“Las Vegas-based SalesTraq reported a median existing home price of $250,000 in February, down 13.2 percent from the same month a year ago. That followed a 14.1 percent decline in January.”
“SalesTraq President Larry Murphy said he was doing research on the housing market in Pahrump, about 50 miles southwest of Las Vegas, and found stories from 2004 about how land prices had doubled and developers were selling more lots in three months than they had in the previous 10 years.”
“‘It gave me pause to think here we are four years later and it’s hard to believe the attitude and mind-set of everybody back then, that it would last forever and you’d better get on the bandwagon,’ Murphy said. ‘Four years later it’s doom and gloom and we feel like this is going to last forever. We’re just in these real estate cycles. What’s it going to be like four years from now?’”
The Associated Press on Nevada. “In Las Vegas alone, nearly half the homes currently on the market have seen their prices reduced at least once, according to an analysis by ZipRealty.”
“Greg and Barbara Abbott have already cut the price twice on the two-bedroom condominium they are trying to sell on the Las Vegas strip. They’re asking $669,900 now — and an offer in the $650,000 range means they’ll lose money.”
“Abbott thinks hesitant buyers don’t realize how reasonable the current price is. ‘They’re not really being realistic about what the place is worth,’ he said.”
“His broker, Bruce Hiatt said there was no shortage of interested buyers — but none had decided to buy. ‘They’re all waiting for the magic bottom,’ he said.”
“Abbott, the condo owner in Las Vegas, is asking a monthly rent of $2,300, down from the $3,500 he had originally wanted. ‘It’s empty at the moment,’ Abbott said. ‘We’d intended to rent it, but the timing, of course, was bad.’”
I disagree with the notion that simply blowing up all the empty houses would fix the housing market, and it gets to the heart of the housing bubble; price. If people can’t afford the payments, the problem is there, inventory or no.
Yep. Theoretically price declines could be slowed somewhat by doing such a thing - but in the end it would settle in the same place as it otherwise would. Blowing up the houses would however create a gigantic new economic problem of lost revenue to the homebuilders - this problem would be of *much* larger scale than the small amount temporarily saved by artificially keeping prices inflated.
The problem with all the empty houses is - all the work to build them is already done. Blowing them up won’t bring back the lost productivity.
In the long run the empty houses will get occupied, due to natural population expansion - so it’s worth keeping these houses around. Sure it’ll take work to fix them up, but certainly less than to build them new again (in most cases anyhow).
In the long run the empty houses will get occupied, due to natural population expansion - so it’s worth keeping these houses around
Empty houses require maintenance. Without someone taking care of them they will quickly become dilapidated. I think the cost to make them livable would exceed the cost to build pretty quick.
OK…so I screwed up the italics
“So I messed up…SHUT UP!”
Eddie Murphy, SNL
die italics die.
It off?
“blowing up all the empty houses”
Something similar happens to California harvests in years of great abundance. The fruit is left to rot on the vine if the cost of picking it exceeds the revenues that could be gained by selling it. Such a waste.
Similar? A perishable consumable and a durable capital good are about as different as you can get. There can be situations where it may be a rational economic decision not to harvest a perishable crop, but to destroy a house which has absorbed a substantial investment and has a positive market price? No way.
The kind of houses that sprang up all over here don’t look too much more durable than a heap of excess pears.
Blow em up! Blow em up reeeal goood!
It’s amusing to watch the realtors desperately run away from the “It’s a great investment!” pitch of the last 5 years. You made your bed, folks, now you get to snooze in it.
“‘I can’t tell you when the prices are going to stop going down, but right now they’re as low as they’re going to get,’ Smith said.”
That should be someone’s tag line.
“‘I can’t tell you when the prices are going to stop going down, but right now they’re as low as they’re going to get,’ Smith said.”
This has got to rank near the top of the stupid comment list.
love the whining, bitter, doublestandard statement;
treasured “investors” when you benefit.
hated “carpetbaggers” when you don’t.
as usual, it’s all in the perspective of the situation.
The builder should be required to back that up with a written no-loss price guarantee.
This mathematically impossible comment was my favorite too. But I also loved the one about saving “only” $5,000 on a $300K house by waiting “a month or two.” Jeez, that’s “only” $30K-$60K saved by stalling for a year. Jeez, one might have to wait five to ten years for the price to go to zero. Sounds OK to me…
Exactly. I caught that one too! The doofus must think those who listen to him are idiots.
Damn those buyers…always wanting to save money!
“‘Despite being an idiot, I say things that are self-contradictory,’ Home Builders Research President Dennis Smith explained.”
Blowing up homes? What a tragic waste of labor and natural resources.
May as well waste a little more than were already wasted on building homes which are a very poor fit for local market needs — what the heck…
This reminds me of when dairies poured their milk into the gutters during the Depression in an effort to increase prices. Didn’t work then, won’t work now.
I disagree with the notion that simply blowing up all the empty houses…
I LOVE this idea! It’s so “Vegas”
Blowing them up would be so much more dramatic and exciting than just bulldozing them. Sometimes these analysts really have great ideas.
Of course, we call it “imploding” or “dropping”, but either way, it’s still a crowd pleaser.
“’The only thing the government could do (to fix it) is go out and buy 1.7 million homes and blow them up to restore supply and demand,’ Pollack said.”
Now that’s one job I want in on. what a blast. NYDJ playing the music, AZSlim patrolling on her bicycle, Roidy calculating the necessary charge, Lostcontrol calculating best dynomite placement, Palmy setting the fuses, Prof Bear figuring out the economics of the thing, Olygal doing the countdown, Ben pushing the lever, and Aladinsane writing commentary. What a crew. Count me in.
Ex-Habitats for Humanity
I disagree with the notion that simply blowing up all the empty houses…
I LOVE this idea! So much more dramatic and exciting than simply bulldozing them.
It’s so “Vegas”. Of course, here we refer to it as “imploding” or “dropping”, either way it’s a crowd pleaser.
“Even more frustrating, he said, is that delaying a purchase by a few weeks will lead to minimal saving for the buyer. Stalling for a month or two may result in only a $5,000 savings on a $300,000 house.”
“‘The risk that they might lose $5,000 is nothing compared to the fact that they will buy a house at a great price that will rise in value,’ Wedeman said. ‘It’s that refusal to take a risk that makes this cycle perpetuate itself.’”
I wish I was so well off that I didn’t care about saving $5,000.
so by waiting a month i’ll save $5,000? that is nearly double what I net in a month. you said so yourself. $5,000. 30 days. just by waiting.
of course i’m not going to buy now!
everybody talks about house prices declining but no mention is ever made of falling salaries. A house is only worth at what it will sell for. People will not be in the mood to buy houses with declining salaries and fears of job loss.
Quite correct. My paper this morning carried an unfortunate piece from the WSJ in which the author suggested that, to save the economy, the federal government might have to “put a floor under home prices.” Who’s going to put a floor under my paycheck?
I’m seeing no evidence of declining salaries, in fact, salaries have gone up — albeit marginally.
Salaries and wages are effectively cut when a downsized worker replaces a $30/hr job with a $10/hr job.
No evidence of falling salaries????
The government effectively cuts your salary everytime they flood the world with dollars. Let’s see, they’ve done that 2 times in the last two months trying to bail out companies that are “too big to fail” ( read cronies)…
Try measuring your salary in gallons of gas…
My income varies, since I work overtime and I’m a contract engineer. In some years my income is lower than previous years. It does not bother me. But I’m going to have to bid up my hourly rate when airline ticket prices double. Higher gas prices will force me to raise my rates, and it’s going to happen.
Hmmmmmm, lets see, 5,000 X 12 months= 60,000. Mr Realwhore, are you frustrated now?
One month = $5K
Two months = $10K
Three months = $15K
Etc., etc. etc….
To take that risk, it better be a pretty great house.
With a $300K mortgage, it takes over 10 years to get the principal down $50K.
With a $267K mortgage, it has taken us 5 years to get the principal down to $248K.
$5000 is not chump change.
Moron…
Yeah, just go ask the average Joe/Jane on the street if they can come up with $5k cash and you’ll find out how valuable $5k really is…
I didn’t know economic psychologists existed, but Ms. Wedeman has a website and a blog, complete with videos of her explaining various topics. She calls herself “the contrarian consultant.”
http://www.becgllc.com
‘If buyers would just buy the house, (the market) would turn around.’
Can these REIC hacks utter so much as one sentence that does not demand that people not look out for their own self-interest?
The people in that profession, in their mounting desperation to make any sale, are digging themselves a deep hole. For one, they’ve convinced me not spend another dime on real estate ever. Life is too short and there’s other ways to get ahead with dealing with this scum.
If sellers would just keep lowering the price, the buyers may consider making an offer after chopping off more from the wishing price.
This game will end with only one party (buyers) winning.
There is a possible way that more than the buyers can win. In fact the company that I work with only work with win-win-win situations for everyone. The investors win, the buyers win, and the sellers win. By using title owning equity land trusts all of the interests are protected.
The under-pinning of the NEHTrust system is the “Illinois-type” land trust which is defined as a [an artificial] legal instrument for holding both the “legal” and the “equitable” title to real property by an unrelated third party, for the benefit of another.
Within itself, NARS EHTrust System is a simple, convenient and legal way to position the title to Real Estate so as to eliminate many of the difficulties associated with Real Estate ownership, acquisition and disposition.
This is the only real solution to the problem that is currently going on in the real estate market. You don’t have to be qualified through a bank to purchase a house, there are no credit checks, background checks or other “catches”. It’s simple you pay a title transfer fee, a couple months of payments get put into a contingency fund, and if you can make the monthly payments the house is yours. Simple, easy. And everyone wins
Uh, Mr. Wederman…you neglect to mention the number of months these $5,000 saving may last. Maybe a 100K makes more sense?
Your slip of fear is showing.
‘Carpetbaggers drove the market up. And, now, they are driving the market down.’
Subprime mortgage lending kingpins = carpetbaggers
I think the local lenders, politicos, real estate hens and such are the scalawags in this reconstructionist fable. The developer/flippers are the carpetbaggers.
The South shall rise again! In New Mexico I guess….
I’ve replied to more than one similar post that carpetbagger is used in any place to describe an outsider who comes to take some advantage. I distinctly remember New Yorkers using the term for a certain Arkansas politician.
i thought the clinton’s were originally from new york?
i remember that clearly during her senate run
And BC was the first black president. That was a really bizarre time.
Yeah. Thanks to Clowntoon, I made money off of companies that had not one dime of earnings, then lost that money in the 2000 crash. I blame GWB for the 2000 crash, even though he did not start being president in 2001. I also have a toothache now, and that is also GWB’s fault.
I understand the modern lexicon, but I really wanted to use the word scalawag. I also wanted to make a difference between the outsider (carpetbagger) and the insider (scalawag). It’s not like the local realtors were trying to stop the said carpetbaggers from buying everything in sight during the boom times.
“‘I can’t tell you when the prices are going to stop going down, but right now they’re as low as they’re going to get,’ Smith said.”
Huh? Isn’t he telling us when prices are going to stop going down - like now?
I guess logic isn’t the strong point of your usual used house salesman…
Yes, if prices are as low as they’re going to get then they have stopped going down. If they are going to continue to go down then they haven’t got as low as they’re going to get. He’s probably not the only idiot who believes in both of these contradictory statements.
That one stopped me in my tracks too. Still, I feel fine, after leaving a lengthy e-missive for the other participant in that article, Ms. Wedeman.
“Even more frustrating, he said, is that delaying a purchase by a few weeks will lead to minimal saving for the buyer. Stalling for a month or two may result in only a $5,000 savings on a $300,000 house.”
Because it’s not like $5K is real money or anything. But, heck, you could put in a lot of granite or hardwood floors for that amount of money.
More price reductions are coming. Just look at the price vs. rents here in Silicon Valley in, “Ah…the joys of owning” at:
http://www.viewfromsiliconvalley.com/id402.html
Thanks!
–
“Molly Kraft from Pulte Homes thinks it is a great time for the market, and that buyers sitting on the fence waiting for changes either way should go out and buy.”
Hey, Molly, can we count on you to let us know when it is NOT a great time for the market and when buyers should NOT go out a buy? We just want to know if we can trust you.
Jas
“‘They’re all waiting for the magic bottom,’ he said.”
Call me crazy but that “standoff” that David Lierah used to talk about is looking like a rout, with the “standing off” buyers in full victory gear.
Answer: “The Magic Bottom”
Question: What’s a really good name for a club for masochists?
Did any of these people who are now bitching about carpetbaggers refuse to sell to them or act as their realtor?
No, I didn’t think so.
Shaddup.
Rio Rancho, a bunch of crappy KB homes built five feet apart from one another, of course no room for the ten cars for all the people that are living in them. These homes will be blown down by the big bad wolf winds in New Mexico within ten years.
Criss-crossing NM in 2003-04 was one of the experiences that convinced me there was something seriously wrong with real estate prices. It was more than evident even then. And note the quote about Las Cruces being above the national median!
House prices are in decline in Las Cruces; many are owned by specuvestors who are local Real Estate agents looking to cash in on relocating retirees.
Any statements that prices here have stabilized or are not falling is a liar.
Life moves slowly here and as a result, those in denial are more slow in accepting the inevitable than in other parts of the nation.
Purchase here at your peril.
~Misstrial (88007)
Wow. Las Cruces.
Is the downtown mall (near city hall) still mostly deserted?
Did five years at NMSU back in the 90s and only visted once since then in 2005. I just can’t believe that anything of measure in Cruces is above the median.
Rio Rancho… The classic Glengarry Glen Ross flick comes to mind. RE scammers at their worst.
Coffee is for closers!
Casey Serin used to “own” a little house in Rio Rancho.
6021 Guadalajara Drive, Rio Rancho, NM, 87144, $497,000
Yep, and it looks like Mitch and Murray and their ilk are still running the scams in Arizona and Fla.
They already had serious flooding a couple of years ago. Rio Rancho is built on a large desert wash/drainage area.
I live in Rio Rancho in one of the old 1980s neighborhoods and the homes are generally ranch houses on 1/2 acres. I rent a 1000 sqft worth around 120k I’m guessing. Anyway, it was built in a flood
free area. All these new developments have cookie-cutter, more expensive, more poorly constructed houses on hardly any land at all. And they basically bulldozed over the arroyos to make the land for them, and tried to make their own, new channels for the water. Water goes where it wants, however, and I can’t see why someone would pay so much for a crappy house when there are much nicer places available all over with better land and location.
Oh right, I forgot than noone is buying these new houses to actually live in. Some areas are 50% occupied, it’s scary.
ABS news listed Albuquerque as one of the best towns to buy forclosures today. http://abcnews.go.com/Business/PersonalFinance/story?id=4538220&page=1
Most of the city didn’t see too crazy of a run-up so I’m guessing only a 10-20% decrease in prices in the older, most stable areas.
I’m holding cash and waiting, looking to get pre-approved next month or so.
From the original post:
“The housing market is the cornerstone for what University of Arizona economist Marshall Vest calls the ‘growth industry’ that employs 20 percent of the state’s workforce: construction, mortgage lending, title companies, home inspectors, architects, landscapers and the like.”
Folks, this is the same Marshall Vest who warned of a housing bubble six years ago this month. I was there when he sounded this warning.
The housing market is the cornerstone for… the ‘growth industry’ that employs 20 percent of the state’s workforce:
I’ve said it before: for the twenty years I lived in Tucson, I swore that the economy consisted mostly of carpenters and masons building houses for electricians and plumbers. As long as people moved to Tucson to help build houses, more houses would get built.
And we need to create an economy that ISN’T based on building houses for people who will come here to sell houses.
And we need to create an economy that ISN’T based on building houses for people who will come here to sell houses.
The only reason Tucson grew like it did was because of retirees moving to the sunbelt and people moving there to build houses for them and each other.
Will the mad growth finally stop - a casualty of the Bubble fallout - or will retiring Boomers keep it going for another decade?
Inquiring minds want to know!
“‘Obviously, we’re seeing falling prices in a falling market. We know what these homes are worth, but if the public’s not willing to buy at that price, it doesn’t matter,’ he said.”
Obviously then you DON’T know what these homes are worth because they are worth what the public is willing to pay.
Who is this “we” who knows what those homes are worth? Realtors? Yeah, everyone knows how trustworthy Realtors’ numbers are. We should ALL listen to the Realtors.
Gah!! I hate them all with a purple passion!!
okay, all you Ariz. and New Mexico folks….what about water? or the lack thereof? what might that do to the RE market?
Water is a huge issue, which, strangely enough, doesn’t seem to be prominent on the radar screen of local government officials. Methinks that many of those officials have been bought off by the Growth Lobby.
NM is currently experiencing a drought. And the homes here are largely built by illegals.
~Misstrial
I don’t know about New Mexico but having lived in Arizona since 1996, I know we’ve been in a drought for over 10 years. Yet Phoenix grew by 500,000 people between 2000 and 2006 still. How many more people can Arizona provide water for? 500,000? 2,000,000?
It’s complicated, but it boils down to this.
In AZ, Indian tribes are entitled to almost 46 percent of CAP water. That, combined with another some 780,000 acre feet already given to them by the Supreme Court, brings their grand total to 51 percent of AZ mainstream water. The Indian population for the state of AZ is a little more than 1%…do the math. It appears that the tribes will control who gets what water in AZ in the future…they can lease shares to interested parties….a bad option, snese tribes are under no oblligation and in future can refuse to renew a water lease.
The tribes will control the future of communties hoping to build.
[soapbox]
IMHO, if we American people would use our “American ingenuity” to mainstream water catchment–and stop growing golf courses and engaging in water-intensive agriculture–we might not have a “water problem”. Think of all the precious rainwater that flows into storm sewers every day. Every 2000sqft roof produces about 1000 gallons of water per inch of rain. That’s a lot of water! “Drought” doesn’t mean NO water–just less.
And if people really want to build “green”, every new house built would include a steel roof with a water catchment system and an underground cistern. It could be an easy paradigm shift for peeps to accept as a standard feature–and not just something for the tree hugger crowd–just as it’s considered standard today for homes to come equipped with granite countertops, stainless steel appliances, jacuzzi tub, satellite, 3-car garage, etc.
As I posted a while back, if people could get used to (again) living in smaller homes with sustainable features like solar power, solar hot water, water catchment, composting systems with small Victory gardens in the backyard . . . I’d bet those houses would sell–and sell quickly.
If builders would just think outside of box of faceless, energy-wasting POS houses in the exurbs, they could produce some pretty inspired homes that stand apart and would SELL. [/soapbox]
I love your soapbox. And agree with everything you wrote.
Unfortunately, the allotment of water in the southwest has been so politicalized and badly mismanaged, I don’t know if we, “the people” could change the apparent course we are on…we appear to be repeating what happened to the Hohokam.
The desert isn’t meant to be populated with the millions that are already here. And there’s probably only about less than 1% who are willing to live appropriately in this environment, as you wrote.
Well . . . once the illusion of limitless water, free for the wasting, dries up like the mirage it truly is a lot of people will end up returning the desert to the desert. Stuff happens when you drink too much kool-aid while you’re watching “American Idled”. Grasshoppers and ants. We can’t save `em all.
My wife reminded me of the futility of that when I mentioned a simple cure for my BIL who is near death after a TIA. So he’ll die believing. I won’t waste my time trying to “sell” him a natural alternative, it’d fall on deaf (dead) ears. C’est la vie. Horse-water-drink, you know the routine.
Gadfly,
do you have any ideas for those of us in the northeast? Metal roofs and hardiplank siding,sure, but do we have enough sun to make solar workable? Maybe geothermal, but I don’t know who produces systems for small SFH. Your thoughts appreciated.
Not sure if it’s too late to keep writing on this thread, but I understand that Germany uses quite a bit of solar and I don’t think they get any more sun than the NE USA. Germany subsidizes solar heavily, so I can’t give specifics numbers on how cost-effective it really is.
Generally, I would think that wherever people happen to live, they can find ways to produce energy: solar, geothermal, wind power, tide power, methane . . . it all comes down to harvesting what source of energy is most abundant.
Personally, I live in northern Arizona where sunshine is the most cost-effective energy source to harness. Water is the challenge here, but–as I said previously–water catchment with sufficient storage capacity is the solution to living in a dry part of the country. It just requires thinking and adapting–not the old paradigm, ham-fisted approach of “let’s run some power lines, let’s dig a well–or tap into [insert river/lake name here], let’s build a coal-powered (or nukoolar) power plant, let’s build another landfill”. If you get my drift.
Specifically, spike, I get alot of my info from Home Power Magazine and similar sites online. This is pretty new stuff and we are all on a learning curve, but it’s also pretty exciting when you do something to improve your own situation. Good luck!
I knew a guy in Australia who implemented most of your ideas, but Australia is a country that has had a perpetual drought, and where “livable” land is extremely precious.
By the way, the rainwater collected on his metal roof was far tastier than the bottled water I have sampled from the vending machines.
Rio Rancho? What is this Glenglarry Glen Ross brought to life?
It’s not about sub-prime, or Alt-A, or even AAA, or credit cards, it’s about income and reality. ‘No doc loans’ and ‘No Quals,’ and people raiding and trading the false equity in their homes for real debt was a daydream turned nightmare. Those crippled by this credit implosion may never recover. Those not in the home ownership group now will have a tougher time getting one at 50% off current prices. Banks and Lenders are going to revert to time tested qualifications that will return home prices to there historical Price to Income norms. Any REIC individual who suggests we are at a bottom is still way in denial.
25% of your income used to be considered the maximum a lender would allow a borrower to expend on his mortgage. If the average household brought in $80,000 a year, that would limit maximum payments to roughly $1,700 a month, or what has traditionally been a $200,000 mortgage. A 20% down of $40,000 on their purchase places that income range squarely in line for a $250,000 home. That income range in the go go bubble would have got you a $5-600,000 property. 50% percent off and more, at a minimum, of todays prices is what it would take to start seeing some stability in the housing markets. Even then those figures are simplistic and do not take into consideration the inflating prices of essential consumer needs like food, fuel, clothing… further degrading disposable income. The Pollyanna’s are doomed because they are who they are. The awakening population is screwed by the damage this fantasy has already caused which will wound many for a lifetime, and the Realists have a long wait ahead if they want to buy at the bottom, and that’s if the dollar has any value left, or their jobs still exist. People this is the perfect storm.
I doubt many people in Wiemar Republic of Germany could possibly have believed it would take a wheelbarrow of Marks just to put a marginal meal on their table. The clever bottom buyers, though closer to reality than the Pollyanna’s, believe they will still have purchasing power when the time comes, and that in itself is seriously arguable. No one likes being a pessimist, but neither does it do any good to ignore the real possibilities of what’s on the horizon.
“25% of your income used to be considered the maximum a lender would allow a borrower to expend on his mortgage. If the average household brought in $80,000 a year, that would limit maximum payments to roughly $1,700 a month, or what has traditionally been a $200,000 mortgage.”
What people really fail to consider, is that the more you make the longer it tends to take to find a job if you should lose yours. The people making $80k / year need to plan on at least 1 year between jobs. It’s not good to leverage yourself to the max no matter how much you make.
Also your not considering how many potential prudent borrowers are now out of the market for a home once they lose at speculation. And over building and helocs gone bad bring more homes on the market.
What I think has been missed big time is how many real potential buyers actually exist ?
In the move up crowd they have to sell before they buy or they will be a new FB. So even if they think they can afford a home they have to complete both transactions. These are not qualified buyers setting on a fence. On the entry side your left with either people who just got the nesting urge or prudent people. So the real number of potential buyers in the current market is quite small its simply a percentage of the number of people that think because they are starting a family they must buy a home.
You know, it occurs to me that the very best indicator of a market bottom are realtors themselves. As the Center of Marketing Sunshine, this current price and sales contraction will have hit its nadir when the Clarks and Smiths of the industry finally admit there is no magic market bottom, just a return to market fundamentals.
Poetry!
Now what I want to know is, is scum like that promptly reported to Sean Hannity by the good Representative? You have to buy a house, or the terrorists win!
Is this guy for real?
“‘Sometimes, I think it’s a self-fulfilling prophecy,’ said Clark, who is also a Republican state representative from Anthem. ‘If buyers would just buy the house, (the market) would turn around.’”
Damn buyers. Its all their fault not buying at these exorbitant wishing prices.
“Even more frustrating, he said, is that delaying a purchase by a few weeks will lead to minimal saving for the buyer. Stalling for a month or two may result in only a $5,000 savings on a $300,000 house.”
I don’t see the point in that either. Much better to stall 10 to 11 months and see $50000 savings.
Stall for 60 months and you get the house for free.
Stalling for a month or two may result in only a $5,000 savings on a $300,000 house.”
My rent = $1500/mo.
Net savings: $3500/mo, plus another $6000 in saved interest that I won’t be paying on that $5000 in principal.
From the NY Times today:
And one major impediment to spending – the soaring price of consumer products like food and gasoline – may be receding. The “core” deflator rose at an annual rate of 2 percent in February, returning to the so-called comfort zone.
The “core” gauge excludes volatile prices of food and energy products…
So let me get this straight – one of the major impediments to spending is the soaring cost of food and gasoline, but that may be receding because the “core” inflation rate is 2 percent, but we arrive at the “core” by excluding those pesky volatile things like food and energy.
Boy, I’m glad I figured that one out. Now, it’s time for the market to jump higher on all that great news.
It’s very simple. Just stop eating and food prices go down. Just stop driving to work and gas prices go down.
I love how they exclude these supposed “volatile” prices. In my eyes these prices have been trending in one direction for the last 8 years….not much fluctuation that I have seen.
“Molly Kraft from Pulte Homes thinks it is a great time for the market, and that buyers sitting on the fence waiting for changes either way should go out and buy.”
“‘It will not get any worse,’ Kraft says, ‘or any better for the buyer.’”
The last sentence has me puzzled. I feel like that robot from Star Trek who was told by Mudd that everything he says is a lie.
Since it’ll never get any better or any worse, why bother buying? You’ve got eternity to select a house.
B..b..but Molly, it’s really, really FUN perched upon THE FENCE pretending to be a patient, happy VULTURE looking for REIC ROADKILL
The Fed just pumped another $100 Billion into the system. Where did this $100 Billion come from? Did they just have it lying around for a rainy day, or did they crank up the printing presses again?
In unrelated news, inflation continues to soar.
They cranked up the printing presses. Problem is no bank is lending now. No one qualified to borrow wants to borrow. So this excess cash, if going to banks, does not inflate. But if going to J6P, yes creates inflation.
I can see China dumping U.S. Treasuries soon. In turn, I can imagine the U.S. making a deal with China to blow the snot out of the middle east and split the spoils. Imperialist China needs oil. The US imperialist needs oil. I’m sure it would be an entangling alliance we will deeply regret. Yeah, we will stomp out the Arab race and Islam, but China will turn against the weakened U.S. in the end and gobble its resources and possibly enslave us as well.
Greg and Barbara Abbott have already cut the price twice on the two-bedroom condominium they are trying to sell on the Las Vegas strip. They’re asking $669,900 now — and an offer in the $650,000 range means they’ll lose money.”
“Abbott thinks hesitant buyers don’t realize how reasonable the current price is. ‘They’re not really being realistic about what the place is worth,’ he said.”
Well let’s see - purchased 4/07 for $584,000; current asking $669,999. That would be an $85,000 increase over last year (after two “price cuts”). Yeah, SOMEBODY’S not being realistic about what the property is worth!
$399,000 anyone? Anyone? Hello? Anybody there?
“$399,000 anyone? Anyone? Hello? Anybody there?”
Too much. If they were able to rent for 3500 a month, then maybe it could be worth 300K or so - I’m assuming that the condo fee is going to be pretty big, so I’ve got to go lower than 120*rent.
At 2300 a month, assuming it rents for that, maybe it would be worth 200K.
At 2300 a month, assuming it rents for that, maybe it would be worth 200K.
I’ve actually got a craigslist “tickler” set up on the Panorama for a 2bd for $1500/mo.
If it hits before July, it’ll be my new home - Yahoo!
My 2 bedroom 2 bath apartment in Ahwatukee (part of Phoenix) is $1003 per month. Rather than Starbucks being on the first floor, I can hop on my Mountain bike (when I’m back home from my Maryland work) and ride a mile. Or I can just walk into my kitchen and grind Safeway’s gourmet (”Essensia?) coffee beans and brew my own cup of joe for a much lower price.
“‘I can’t tell you when the prices are going to stop going down, but right now they’re as low as they’re going to get,’ Smith said.”
Whhhaaat????
How about, now? Um, now? NOW? Boy this waiting thing is fun, is it not?
How about now!
“The supply of homes listed for sale in the Phoenix area will take up to 18 months to dry up. Tucson has enough homes for sale to keep buyers busy for the next 12 months.”
I wonder how they come up with these guesstimates ? Given new household formation you’d still have a lot of now occupied houses that would have to drop in price so the owner could sell and move to a newer home.
I drove through the neighborhood of my former Phoenix workplace last weekend. Same for sale signs that were there more than 18 months ago. Homey Claus (thanks “In Living Color”) don’t think it’s only 18 months.
“But Pérez said he does not expect the value of property to actually decline. ‘The Las Cruces area will still increase in value,’ he said. ‘It may not be as high as other years, but it’ll be higher than the national average. We’re still booming, we’re still a desirable area.’”
Same old story. Portland, Seattle, New York, Ft. Lauderdale, Atlanta. I don’t care where you go, everywhere is a “desireable” area and prices won’t decline. Is everywhere “special”???
Syndrome from The Incredibles:
I’ll sell my inventions so that everyone can have powers. Everyone can be Super! And when everyone’s Super…no one will be.
If every place is “special”, then no place is.
“Just remember you’re unique. Like everybody else” — unknown
Love Canal was pretty darn special as well! Location, location, location.
I truly do feel bad for the folks that went through that hell though. When the ooze comes bursting through your yard it’s time to get out.
I was in Los Cruces once for four days for a horse judging contest when I was in college. All I remember was barren fields and blowing dust for as far as I could see. Oh, and some really ratty-looking horses to judge.
It was *the* worse and least prepossessing place I have ever,ever visited.
I grew up in Bakersfield, CA. Bakersfield is a paradise compared to Las Cruces.
Ehh, I’ll take Las Cruces over Bakersfield. Love those Organ Mountains, the green chiles. But agreed that it’s not Eden.
Recently I have been looking for homes for when I move back to AZ from UT in the summer and I can’t remember being more appalled ever in my life when I look at these asking prices. 300k for 2500 sqf that is an hour from the airport? That is after all of the incentives from the new home builder. Even the rentals are insane. $1200 for a 2000 sqf crapbox in chandler? I might go insane trying find a suitable dewelling this summer. I am not going to be separated from my 50k downpayment because some fool thinks that i “just need to buy”
(rant off)
“Even more frustrating, he said, is that delaying a purchase by a few weeks will lead to minimal saving for the buyer. Stalling for a month or two may result in only a $5,000 savings on a $300,000 house.”
The same should apply to the seller. What’s a 5k loss on a 300k house if you could sell this month.
“The supply of homes listed for sale in the Phoenix area will take up to 18 months to dry up.”
$5k *18= $90k So i guess the seller should go ahead and cut the 90k and save the 18 months.
“an offer in the $650,000 range means they’ll lose money”
A “range” is exactly what it means, an interval. So the range can be “from 620,000 to 680,000.” A point is a specific number such as “the median was 650,000″. Saying “in the 650,000 range” makes as much sense as saying “for exactly 620,000 to 680,000.” I immediately dismiss the opinions of anyone who calls a point a range. They are either hiding something or are not too bright.
I believe housing cost will fall the largest percentage in home that where sold in 2003-2007 for around 300k. My theory is base on what is currently happening in my area of Victorville CA. I think this will apply in any of the suburbs that have grown so fast in the last 5 years The homes I use for my research had at least 1400sq.ft with 3/2 bed and bath built and sold between 2003-2007. The search return showed over 200 homes for sale on the MLS listing. There are 44 homes price at or below 199k for sale at the price point. The lowest is price for sale at 139k purchased new in 2006 for 293.5k it has 3/2 and is 1500 sq ft sale price is almost a 52% drop.. Next there are 101 homes for sale between 200k/299k. Again one of the home for sale is at 199k which is REO foreclosure the price was 242k on 12/07 when GMAC go it back. The home is in a nice area it’s 2009 sq.ft. 3/3 bed bath built in 2004. There are also couple for sale that the owners must be in never never land the asking price is 399k it was built in 2004 sold for 263k and sold again in 2006 for 310k it’s has 5/4 3100 sq. ft nice are but Zillow listing estimate is 304k and the comps seem to reflect that as well.
What I see here is they need a lot of middle income first time buyers to coming in to the market. Most existing home owners who are trading up will want more for there second home than is offer in the high desert communities unless they are moving here for the weather . But the ones we need to turn this market around can’t get qualify for FHA loan of 200k+ with 3% down and a good FICO score. Plus they must be willing to commute 100+ miles a day with $3.25 gas if there jobs is in LA or Riverside county. Price will have to get below 144k on average (48k median Cal. income) for the number of buyers to come into the market to turn it around and bring sales number back to historical averages. I just don’t see where the number of people are coming form to accomplish this. Everyone saying where is the price bottom, that’s not the question it is where are the potential crop of home buyers Most of the young buyers got sweep up in the last four years and are now upside down or back renting because they loss there home they never could offer in the begin
The example that you pointed out also applies to the entire mesa/gilbert/chandler area of phoenix. Although the commute times and the home prices are not exactly the same, the end result will be the same. A greater precentage of one’s income must be used to for gas to commute to work,shopping and other various trips. This is the exactly reason why these outlying areas are declining so fast.
“‘I can’t tell you when the prices are going to stop going down, but right now they’re as low as they’re going to get,’ Smith said.”
Huh? The dude wasted his breath contradicting himself.
“‘Sometimes, I think it’s a self-fulfilling prophecy,’ said Clark, who is also a Republican state representative from Anthem. ‘If buyers would just buy the house, (the market) would turn around.’”
It may not be a panacea, but perhaps if Arizona voters stopped rejecting a modest legislative salary increase every two years, we would be able to attract more capable individuals to the State House and Senate. An Arizona superior court judge makes about $150K, a justice of the peace makes about $120K, and an Arizona state representative or senator makes about $24K (approved in 1998), plus a modest per diem for the first 120 days of session, so about $28K.
It is a part-time legislature, but that is still full time more than half of the year, plus some year-round obligations.