An Extraordinary Price In Texas
The Houston Chronicle reports from Texas. “After avoiding many of the problems suffered by other housing markets across the country, the Houston area finally began to feel some sting last year. ‘We’ve gone from a period of people talking about Houston being an island to the recognition that we’re indeed being affected,’ said Evert Crawford of Crawford Realty Advisors.”
“The University of Houston’s Institute for Regional Forecasting looked at 66,828 single-family homes sold through the MLS in Harris, Fort Bend, Montgomery, Galveston and Brazoria counties. Most of the homes were existing, but 18.2 percent were new. Of the 2,127 subdivisions surveyed, almost half posted price declines.”
“Philip and Marilyn Taylor, who moved here for a job this year, are experiencing two very different housing markets. In February, the empty-nesters bought a new three-bedroom house in the Eagle Springs subdivision for $251,500 after relocating from the Chicago area.”
“Sales in their Humble neighborhood have been strong. But they’re still trying to sell their townhouse back home that’s been on the market since December. ‘I wish the market up in Chicago was as good,’ said Marilyn Taylor.”
“John Geddie felt the slowdown last year when he took his four-bedroom, 3,400-square-foot house in West University Place off the market after trying to sell it for six months. He was asking $770,000, or about $226 per square foot.”
“Geddie still thinks the West University market is strong, and that he was just asking too much for the brick house, which was custom-designed by an architect in 1998. ‘I didn’t need or want to sell the house, but thought if I could get an extraordinary price, I would,’ he said.”
“‘There are good values out there, good interest rates. But we don’t have buyers to take advantage of it,’ said real estate broker Ronnie Matthews. ‘Until that gets to a more equitable playing field, we’re going to have a weaker market.’”
“Foreclosures in Harris, Montgomery and Fort Bend counties soared 21 percent in 2007.”
“‘The combination of us having an affordable housing market and growing economy is offsetting to a large extent the problems of foreclosure,’ said economist Barton Smith, director of the Institute of Regional Forecasting at UH. ‘The foreclosure problem shouldn’t be dismissed in Houston, but at least we’re at a better position to handle it if we have the will.’”
“A growing share of home sales in the Houston area are foreclosures. And that’s putting downward pressure on the sales prices of existing homes, according to a survey.” “Foreclosures accounted for 16.5 percent of home sales last year, with a median sales price of $100,000. That’s compared with 9.6 percent in 2006 at nearly the same price.”
“‘This is the first year in a long time the foreclosures are driving the home resales down in value,’ said Michael Weaster, an agent who specializes in selling foreclosures for banks. ‘This will be the first time Realtors who don’t do foreclosures realize they are going to have to tell Mr. and Mrs. Smith selling their home, ‘Look, you’ve got foreclosures you’re competing with, and we need to price competitively.’”
“Though the trend is sprinkled throughout the Houston area in pockets, it is most notable in expanding or newer subdivisions outside the Beltway. Neighborhoods with homes below $150,000 near areas where builders are still putting up new houses are feeling it more than others, said Timothy Verge, an agent in Katy.”
“‘They have to sell their houses for less because you can buy a brand new house or a foreclosure that’s newer for less,’ he said.”
“Take, for instance, Teal Run in Fresno, which saw more than 100 foreclosures. Of its 180 sales last year, 61.5 percent were foreclosures, helping to push the median sales price per square foot of homes there down 7 percent. Nearby Estates of Teal Run had 47 sales, 73.2 percent of which were foreclosures, pushing the price per square foot of homes sold in the neighborhood down 3.8 percent.”
“Craig Hayes, who has lived in his current house in Teal Run for six years — 11 total in the neighborhood — has watched his home’s value decline by $10,000 as foreclosures mounted.”
“Hayes, the pastor at a local church, considered selling his house but figured he’d end up selling it at a loss if he moved. ‘Even if I wanted to move, I couldn’t, because it’s not worth it,’ he said.”
“When homeowners can’t sell, they also can’t buy, noted real estate agent Shad Bogany.”
“‘If you can’t sell your house, you can’t move out,’ he said. ‘It’s frustrating because a lot of lenders are just giving the houses away and dumping the properties, so people who live there can’t sell and move up.’”
“Real estate broker and investor Mario Guzman Jr. had to rent one property because it couldn’t sell. He has had another house in the Cypress neighborhood of Lancaster on the market for three months and figures it will take much longer to sell because of foreclosures and short sales.”
“Of Lancaster’s 39 sales last year, 27 percent were foreclosures, which helped push the median sales price per square foot down 5.5 percent.”
“Guzman’s offering a $2,500 bonus to any agent who can sell the house, and he’s offering to contribute to the buyer’s closing costs and down payment.”
“‘Usually people put a $500 bonus. I’ve been investing for a while,’ said Guzman, who has 21 properties for sale. ‘Now I have to be more aggressive.’”
“Almost 800 buyers paid at least $1 million for houses in 2007 through transactions handled by agents in places like Stablewood, Memorial and River Oaks. That was up 23 percent from the year before and 64 percent over the sales for 2005, according to the Houston Association of Realtors.”
“Home values are spiking in upscale neighborhoods where builders are scrapping outdated properties to put up amenity-filled McMansions, according to a study.”
“The inventory of such homes, however, is growing. It would take slightly more than a year to sell all the million-dollar homes that were on the market at the end of February, the association estimates.”
“‘Once you get to a million, you limit your pool,’ said agent Suzann Richardson.” “At the beginning of the year, a local energy trader in his mid-30s spent ‘between $1.5 million and $2 million’ in cash for a parcel just under 20,000 square feet in River Oaks.”
“‘Relative to other investments I could make, it seemed a little more stable,’ said the trader. ‘If I buy a piece of property and the value goes down, at least I’m enjoying it. If I buy a piece of paper, a stock or some other financial instrument and it depreciates, I’ve just lost money.’”
“In his 15 years in the mortgage business, David Zugheri had never seen a first-time home buyer spend $1 million on a house in the Houston area until last year, when he saw three — all in the energy industry.”
“Still, University of Houston economist Barton Smith worries about what could happen if the energy market weakens.”
“‘These energy booms never last forever,’ he said in a recent interview. ‘What happens when the energy boom softens and their incomes go from seven- to six- to five-digit levels? All of a sudden, that million-dollar home may be a significant burden to them.’”
The Beaumont Enterprise. “The owners of two housing developments in Beaumont’s West End say their developments are on track and moving forward, despite national problems that have halted some new-home building. The Crescent on Walden and Metropolitan Park on Dowlen Road both have sold lots and have homes currently under construction.”
“Richard Guseman, president of Guseman Homes and of the Home Builders Association of Southeast Texas, said national troubles of foreclosures, a weak economy and the credit crisis still have not taken a toll on Beaumont.”
“The number of single-family home building permits issued in Beaumont increased in 2003, 2006 and 2007, according to the city’s building codes division. ‘We’re the bubble in the country that’s not affected,’ he said.”
“Metropolitan Park owner Bryan Lee said two and a half years after starting work on the $80 million project, construction of 104 condominiums and completion of the neighborhood’s streets are in the works. The condominiums, Lee said, start at $185,000.”
“Mary Jane Mouton, who is leasing some of the houses in Metropolitan Park, said a small number the 40 lots have been sold, and she suspects more sales once construction gets under way. ‘There isn’t really anything there for people to look at,’ she said. ‘We need to have something there for people to touch and feel.’”
“Hayes said he doesn’t think national foreclosure and credit problems have caught up with Beaumont. ‘I think Beaumont has been blessed with the fact that we’re unusual from the national housing market,’ he said.”
The Temple Daily Telegram. “According to figures from the Temple-Belton Board of Realtors, the number of home sales are down 13 percent, and dollar volume 8.11 percent, for first quarter 2008, compared with first quarter 2007. The median price of homes sold also dropped, $118,500, for the first quarter 2008, compared to $123,350 for the last quarter 2007.”
“Local builders say they are keeping busy, and the numbers support them. Staff at city hall stays busy processing builders requests for plats and lots for their subdivisions.”
“The city of Temple for the first quarter 2008 has processed requests from builders for 1,283 lots in the first quarter, more than 10 times the number for first quarter 2007. Troy Glasson, director of government affairs at the Temple Area Builders Association, said the Temple-Belton area has sustained steady growth for a variety of reasons.”
“‘Number one is that our builders are very conscientious of local market drivers and don’t tend to over build,’ he said.”
“Brenna Diggs with Stillwater Custom Homes said they are ’staying very busy’ building custom and speculative homes and remodeling jobs.”
“Susie Lovett, assistant manager at Monteith Abstract & Title, said business is strong for both Belton and Temple. ‘I think we’re doing fantastic,’ Ms. Lovett said. ‘I don’t think this negativity in the news is reflecting what’s going on in Temple.’”
The Tyler Morning Telegraph. “Through March, buyers had closed on 399 homes, according to the Greater Tyler Association of Realtors. Last year during the same period, the number was 454 units.”
“This year, at the Texas Association of Realtors winter meeting, TAR officials called the local association presidents into a room for reports on how their regions were faring, Jason Wright, GTAR 2008 president said.”
“‘It was overwhelmingly positive, even to the extent where Randy Jeffers (TAR board chairman) said, ‘We knew Texas was still in good shape; we just didn’t know that it was in this good of shape,’ Wright said. ‘The only struggles that you hear about are the national new home builders who literally just went out there, took investment capital and built these housing farms; they just threw rooftops all over the place.’”
“That is not hurting the local real estate business, but Wright said he imagines some of the national builders are feeling a pinch because of a housing glut.”
“Fellow Realtors locally and statewide are telling him their businesses are doing well. And, he added, Realtors are honest with each other. ‘Whenever we’re in those (TAR) meetings, it’s all about no sugar-coating, here’s what’s going on,’ he said.”
“Wright said he is noticing homes are appreciating at a slower rate, because the margins that were once in new construction have dwindled somewhat.”
“‘Even Tyler, with a market as strong as we have, I think that anyone would agree that the $400,000-$500,000 price range became overbuilt,’ Wright said. ‘A new home that a builder used to get $130 a (square) foot for, now he’s selling for $115 a square foot, thus making that existing home that you could sell for $110 a square foot harder to sell, because now for $5 more I get a brand new house.’”
“Wright said many people are moving up to other homes in Tyler, making the competition to sell their current homes stiffer. He said he also believes people are pulling back slightly - maybe about 1 percent - on the asking price because they believe they must in order to sell the house.”
“‘The psychology is, ‘The market is bad, so I can’t get as much for my house,’ he said.”
“Local authorities said many of these borrowers bought houses with subprime loans because they could not have qualified for a prime loan. But lenders have since toughened their qualifying standards, which Wright said is a good thing because borrowers who are well qualified for a home loan now will more likely be in a position not to default on it later.”
“‘What we’re seeing is that borrowers have to bring some money to the table,’ Wright said. ‘You had people literally moving into houses and just picking up payments, going to closing with no money and getting into a house.’”
The Amarillo Globe News. “Maybe the housing woes of other urban markets haven’t hit Amarillo, but the resulting mortgage lending restrictions can be felt here. ‘I think we’re seeing it harder for some borrowers to find a mortgage loan,’ said Mindy Jackson, a broker and past president of the Amarillo Association of Realtors.”
“Mortgage lenders will be checking income tax returns, bank statements and credit scores to evaluate an applicant’s income, assets and whether they pay their bills on time, Jackson said.”
“‘A late house payment is a killer,’ she said. ‘Who wants to loan money to somebody who makes their house payment late or doesn’t make it?’”
“Even those with good credit should expect to have a down payment, Jackson said. ‘There are no 100 percent loans out there, or very few,’ she said.”
“Housing market crises in other parts of the country have colored some perceptions of the local market, Jackson said. ‘The general perception is, ‘Why are there so many houses on the market?’ Jackson said.”
The Dallas Morning News. “North Texas pre-owned home sales slid 25 percent in March from a year ago. Last month’s decline in home sales – one of the steepest so far – was enough to put the entire first quarter into a double-digit downturn, according to preliminary statistics.”
“During the first three months of 2008, pre-owned home sales in North Texas dropped by 18 percent from the same period last year, according to sales through the Realtors’ multiple listing services.”
“Much of the decline in home sales is being attributed to tougher lending standards that have locked some potential buyers out of the market. Investors who had purchased thousands of houses are also on the sidelines.”
“The first-quarter drop in pre-owned single-family home sales – while significant – was less than the 30 percent-plus decline in new home sales in Dallas-Fort Worth during the same period.”
“Sales of condominiums and townhouses have fallen even further – down 40 percent in March from a year earlier, according to the latest Realtor numbers.”
“The outlook for the period ahead is clouded. Pending house sales were down 30 percent last month from a year earlier. The number of pending condo and townhouse sales was down 37 percent.”
“Economists don’t expect a quick rebound in the local housing market. ‘My best guess is no real market improvement until latter 2009,’ said Dr. James Gaines with Texas A&M University’s Real Estate Center. ‘This year and next will be trying for everybody.’”
“‘2009 probably may show some slight improvement, but nothing to get real excited about,’ he said. ‘It’ll take that long to work through the excess new home inventory plus sell off all the foreclosures, which won’t slow down until later next year.’”
Reality Island
“After avoiding many of the problems suffered by other housing markets across the country, the Houston area finally began to feel some sting last year. ‘We’ve gone from a period of people talking about Houston being an island to the recognition that we’re indeed being affected,’ said Evert Crawford of Crawford Realty Advisors.”
No market is immune to the excess.
1. Home prices will come down no matter what and they will come down to meet incomes. If jobs are shed to other countries, it will come down even further.
2. Even if they inflate it will leave buyers with devalued dollars in the bank account and less purchasing power anyway.
3. The price of a home is dictated by one thing .. income and that will dictate what they can buy. High leverage loans defeated this for a while … where a $12k/yr Mexican migrant worker can leverage a $700k home purchase. That is why you had the insane house price appreciation.
4. The high leverage, no-down, stunt man loans are disappearing because secondary market investors have come to realize that they are unsustainable and the investors will have their heads handed to them.
5. Without such, it comes down to real income and incomes are not rising in the US.
6. The only safe way to lend is to limit the loan/PITI/mortgage payment to less than 3x their monthly household income. Anything more and you have potential default on your hands. Anything more and it is not sustainable. It also puts a homeowner in stress considering that rising price of consumer staples, gasoline etc. He will have less money for the other niceties in life such as a vacation, tree house for kids etc. He may also have to get a 2nd job, further increasing the likely hood of stress and divorce and further increasing a likelihood of default.
7. Saddling a homeowner with more than 3x household income for mortgage payment is a recipe for default and failure and pain and suffering. But hey.. the mortgage brokers and Realtors make high commissions, so why should they care? It should almost be considered a felonious crime.
8. House prices are TOO HIGH relative to incomes.
“The only safe way to lend is to limit the loan/PITI/mortgage payment to less than 3x their monthly household income.
Waaay less, I’d say.
The only safe way to lend is to limit the loan/PITI/mortgage payment to less than 3x their monthly household income. Anything more and you have potential default on
I meant to say less than 1/3. Just change 3x to 1/3.
PITI should be no more than 1/3 their monthly household income.
I am guessing that that number is too aggressive in the modern world with Chindia online.
I personally think it should be lower given the risk of continuous substantial upheavals in the labor market but I don’t have very strong feelings about it.
I rarely see discussions of how income instability and stagnating/declining wages will effect the viability of the 30 year mortgage, which was a product of the post-WWII economy. Even in a “healthy” and “growing economy,” fewer and fewer people will have the resources in this country to sustain the income to service this kind of debt for decades on end. Even the older, more conservative guidelines probably don’t make sense in today’s economic landscape.
You won’t.
It would be called a reality check something that even my smartest friends refuse to indulge in.
MSM? Fuggedaboudit.
Incidentally, you are wrong about the 30-year mortgage right after WWII.
Initially, it was 10, then 15, then stretched out all the way to 30. Then, they got a bit of a free ride with the dollar going off the gold standard in 1971.
IMO, the 30-year contract outlived its utility in the early-90’s but it seems to have lasted another 20 years, and look where we ended up!
In the modern world, 30 is not meaningfully different from infinity given how labor markets are structured. You might as well just rent but I guess I would be alone on that even on the HBB.
Given the income disparity in this country, if you disallowed 30 year mortgages, it would have to be a country of renters because only
robber barons…ahem, corportations and their exectutives could afford to be landowners.Oh no, I know the 30 year mortgage didn’t emerge immediately after WWII, only that it evovled as the post-war economy produced a large, stable, affluent middle-class. Well, that class is disappearing, especially the “stable” and “affluent” elements of it.
My paternal grandparents had a 10-year mortgage they paid off long before I was born. My maternal grandparents had a 15-year mortgage, and one of my earliest memories is of huge party where I watched them “burn the mortgage.” I haven’t heard of one of those parties in years . . .
“My maternal grandparents had a 15-year mortgage, and one of my earliest memories is of huge party where I watched them “burn the mortgage.” I haven’t heard of one of those parties in years . . . “
I don’t think this type of party would be received very well today. I imaging how the hosts might be perceived as rubbing the guests nose in their mountains of debt. Sort of a: Ha Ha, we’re debt free, and you’re not! statement. I was actually going to ask the HBB’ers about this very topic- what do you all think?
are you kidding? I can’t wait to have a “burn the mortgage” party, when the time comes…
Hahahahhaha. You don’t understand economics.
Without the How-Much-A-Month crowd, prices would drop precisely to what people could actually pay in rent which is hooked up to income.
It’s precisely because people are so trained to think in terms of “cash flow” and not intrinsic value, that we have this problem.
“‘Once you get to a million, you limit your pool,’ said agent Suzann Richardson.”
Guess there is a limit to the number of households that bring in $350,000+ year after year. Who woulda’ thunk.
I was in Houston over the weekend, and it gave every appearance of being a market that was “immune”. Lots of construction everywhere. No “reduction” or “foreclosure” signs. Nobody I talked to was the slightest bit worried. Read the article in the Chronicle, with the facts, on the plane back East…
No, it’s not immune. You see the majority of foreclosure problems in the suburbs and exurbs right now. And that HAS caused our resale prices to decline… my house is 50K reduced as a result of one of my jingle-mail neighbors. For us that’s fine because we plan to buy down in the same market… apples for apples. Despite appearances, new housing starts are down here and you can get superb painting/remodeling work right now because people aren’t as busy as they have been previously. The things that Houston has going in its favor is its plethora of skilled construction workers and its otherwise healthy job markets which continue to draw in out-of-towners. The energy/chemical sector, medical center, space/gen-tech, ship channel and service economy is healthy. We’ve taken hits before in some of these areas but rebounded.
The foreclosures are going to have to be sweated out though, just like everybody elses.
Was this linked on here Friday? Wow, growing a pair!
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/04/13/RE34101D2M.DTL&tsp=1
Yeah, people talked about it on the weekend.
General consensus seemed wouldn’t have much effect ’cause people wouldn’t qualify to buy in that time frame anyway, and they will wait until after the collapse.
Much more impact on the walkaways is the IRS thing because taxes don’t get forgiven in bankruptcy.
That having being said, I’d still say: run, fools, run; don’t walk away.
Taxes are dischargeable if they are (IIRC) 4 years old and older.
There are a huge number of people with foreclosure(s) on their credit record now and many more to be seen over the next couple of years.
IMO, five years from now, a foreclosure on a credit history will be an excluded item either by design or government regulation.
I doubt it. Although such a move might at first appear to ease and encourage lending, the opposite would happen.
If the time comes when anyone might have a (hidden) bad credit history, lenders would be even more cautious. Credit reports and FICO scores would be heavily discounted. Even those people with good credit and nothing to hide would be suspect. Blindly extending credit is suicidal. Businesses of all sorts would require cash payment.
Yeah, hopefully they’ll stick to it - something tells me that outside forces will make them capitulate.
In typical REIC-enabling fashion notice how the GSE’s don’t respond until after all of these web-sites are up, running and enormously popular! More of the 11th. hour reactionary BS we’ve grown to expect!
Sorry guys, the precedent has been set. Under water? Dump it. Since the bubble was primarily about doing what was the easiest and most beneficial (short term) how can they expect the consumer’s behavior to be any different on the down-side? Best of luck fellas.
Don’t get too excited. Read the fine print:
On March 31, Fannie Mae sent out new guidelines to lenders intended for walkaways and other foreclosure situations. Fannie will now prohibit foreclosed borrowers from getting another mortgage through the giant investor for five years, unless there are “documented extenuating circumstances.” In those cases, the mortgage prohibition is for three years.
Even after five years, borrowers with foreclosures in their files will be required to make at least a 10 percent down payment, and will need minimum FICO credit scores of 680.
Hmmm… no GSE underwritten mortgage for 3-5 years, max. (just about the time the housing crash should bottom, based on previous cycles). 10% down and a 680 FICO (still lenient based on historical norms of 20% down, even for people with “good” credit –as in, better than a lousy 680).
Keep the champagne bottles corked, boys, lending standards are *still* way below average, much less “strict”.
This isn’t going to deter anyone for walking away.
Reminds me of the strategy being used by some walkaways, noted here in recent weeks - buy the next house first, get the mortgage locked down tight, *then* walk from the first place.
I knew people who did that in SoCal in the early 90’s.
i dont see a lot of difference between that and maxing out all the credit cards just before you declare bankruptcy.. shop till you drop. It was a very popular pastime… until the bankruptcy reform legislation was passed.
This was mentioned by the appraiser I spoke to over the weekend. He said he is seeing this same thing now.
Much more of an East Coast event as markets like FL and MA became challenged first. It all looked so innocent, right? We’re just a nice couple w/ good paying jobs and we pay out taxes so when we had our 2nd kid obviously a 3,000 s/f home isn’t going to cut it so we….
Yeah “we” all know the story from there. Let me guess? You t-r-i-e-d to sell it…! Right? Yeah pal, the only difference between you and a “midnight move-out” is the For Sale sign slapped up in the front yard! Other than that? No difference.
By the time markets in LA and certainly in OR and WA were showing stress cracks I think most of the lenders had this little stunt figured out. Good point Joey.
This is the most important part:
“Federal legislation enacted last year allows homeowners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven. Walkaway borrowers, by contrast, have nothing forgiven, and the IRS may demand income taxes on the balance they never paid, according to Migala.”
But…”may demand”? WTF? This is optional?
‘We’re the bubble in the country that’s not affected,’ he said.”
Guess I’m moving to Texas. It really is different there.
Then you must come to Austin. According to austintowers.net on April 10, “… Austin has passed Dallas to become the most expensive housing market in the state of Texas…”
So that means we’re really really immune from the bubble, right?
““Almost 800 buyers paid at least $1 million for houses in 2007 ”
Holy smokes. Texas extreme property Tax rate makes these numbers down right Apocolyptic. Them there Texan’s in the end were not to be outdone, they do it all Big, even their Bubbles.
Reminds me of the old Texas joke that ends with;
“Don’t flush it! Don’t flush it!”
Q: Why doesn’t Texas fall into the gulf of Mexico?
A - Outside of Texas: Oklahoma hasn’t flushed.
A - Inside of Texas: Oklahoma Sucks.
Congress recently debated a bill to return Texas to Mexico. Those in favor pointed out it would raise the average I.Q. of *both* countries.
Well, don’t just stand there; share the joke.
A guy visits his friend in Texas who shows him around his huge house (after all, everything in Texas is BIG). That night he wakes up and tries to find the bathroom in the dark, but instead falls into the pool…
We don’t have a state income tax, so homeowners get to carry the load.
And what a steaming pile it is!
One of the things that keep me from going insane. LOL
Debt in the heart of Texas
Just curious, all you Texas RE knowledgable crowd, has Rent in Texas ever got to the point where it did not cover the Property Tax’s?
It would seem possible.
Paid off and Cash flow negative? That’d leave a mark.
Oh, I think you could find something like that in South Oak Cliff or Pleasant Grove, Balch Springs in Dallas.
Not really. I currently rent out a house I purchased for 25K, and is appraised for tax at 27,500 for 650 a month and I pay the water bill. Tax and Insurance eat up around 2 months of rent, and I have budgeted 4 more months of rent for vacancy/maintenance. That leaves me with about a conservative estimate of 7 - 8 percent yield on my investment.
If I rented out a house in Amarillo that I paid 135K on with a taxable value of 121. I’d need 1500 bucks a month to give me a 6.6 percent yield which is too low to mess with for too much liability. The only way I see to make decent money land lording is to buy stuff for dirt cheap, fix it up nice for ten grand or less, and rent it out at an attractive rate to long term renters. I’m still a newb in the business however so I have a lot to learn.
My formula for yield if your interested is (AnnualRent / 2)/PurchaseCost.
That reflects the nonlinearity of rents relative to current wishing prices of housing. Same here in Florida — while it might be possible to rent out a house that cost $25K for $650/mo., it is impossible to rent out a house that cost $500K (20 times as much) for more than about $2,000/mo. (~3 times as much). So the rental deals most of us on the board would want to live in are on a different planet, so to speak, from the rental deals that make decent investments when you’re the owner. Around here, at least, but I suspect it’s true in Texas as well.
A house at 500K would only yield 2.4 percent at 2000 bucks a month by my formula, that’s not really enough to make it worth it, and if you have a mortgage on it your just moving an alligator into your spare bedroom.
I’ve read a TON on being a successful landlord, and not just crap from the current years, but old stuff, and the best way to make money is on cheap properties. High end stuff is too much liability if the renters trash it, and the vacancies between renters will eat you alive.
There are many ways to avoid paying high property taxes in Texas. The easiest is to have some horse or goats so that you are considered a ranch(16 hooves is all you need). If you are rich or well connected you can have your property rezoned to one with less onerous taxes ( paging Harriet Myers ).
Ohhhhh . . . that was snarky. Now be nice, that was Harriet’s old mommy’s property.
If you look on the “wanted” sections of Dallas Craigslist, you often see people wanting goats. Now why might that be????
Prostitution is illegal?!?
LOL.
Don’t know about goats, but horses make fairly good lawnmowers. I used to stake my horses out on my lawn, get me a good book, and lay back in a lawn chair, while my horses “mow” away.
Yea, just don’t leave them on it too long, dang horses just turn everything to dust with all that running around they do.
You also wind up with some very green spots where your lawn has been over-fertilized!
Watch where you step!
Maybe they have a stubborn infestation of Bermuda grass. Out here in Arizona, Bermuda grass is considered to be an invasive species.
And it’s a real PITA to get rid of.
I deal with it coming in from two neighbor’s properties, and I just reported one of them to the city. (Reason: They REALLY need to pull their weeds.)
One of my friends has quite an infestation in her yard, and a landscaper recommended that she rent a couple of goats. He said that the goats will eat that B-grass right down to the roots.
From what I have seen of Arizona, any grass (green type) is an invasive species.
Before I met my now wife, her sprinklers went on the fritz… (valuves went bad and started leaking/wouldn’t shut off). So, she just turned it off at the main shut off. The front of the house she watered with hose, but the back let go unwatered for 3 years.
Well, I fixed up the sprinklers and put out some grass seed with a bit of mulch. The old bermuda that had been there years ago sprang to life, quickly over powered the new seed, and was a full lawn within a couple weeks.
In half the front, we took out the sprinklers and put down heavy fabric then 3 inches of gravel. 1 wet winter, and I can’t kill the dang bermuda that keeps coming up through the gravel. I spray with ground clear, and the grass laughs at me. I spray again with double strength, and it dies… for a couple weeks before it is right back again.
As for weeds, they are insane in my neighborhood this winter/spring. Every front yard is infested, and most are not attacking back like I have.
Of course, there is more than one house in the area where nothing has been done about the weeds, a couple I am sure are vacant.
16 hooves and what do you get?
another year older, and deeper in debt!
Another day older and deeper in debt?
“16 hooves and what do you get?”
I know a guy who rents goats for that particular tax break.
‘I didn’t need or want to sell the house, but thought if I could get an extraordinary price, I would,’ he said.”
Wait til Mr Geddie finds out that even a “less than ordinary” price still wont move his custom-designed by an architect house.
This is not who you would want to buy from, but exactly the type who hundreds of thousands did buy from during the bubble.
From the “answer desk” at MSNBC:
Why Bailout Homeowners Facing Forecluser?
By John W. Schoen
http://www.msnbc.msn.com/id/24073367/
“The problem is that the lending boom — and in its latter stages it was a lending bubble, not a real estate bubble — swept up a lot of people whose only mistake was trusting a mortgage broker or lender who promised to get them started on the path to homeownership and then wrote them a loan that they knew was unsustainable. Is it really plausible that a novice homeowner could somehow dupe a chain of financially sophisticated players that included mortgage brokers, lenders, Wall Street firms packaging these loans into securities and the investors who bought them?”
Dupe? WTF? No matter how ‘novice’ a first time home buyer is, they are still consumers. You have x amount of dollars and the price of what you want is x (or is it y?) amount of dollars. Either you have the income/savings to be able to afford what you want or you don’t. It’s not that tough.
Feel like letting the “answer desk” know your opinion? Here’s his email:
JOHNSCHOEN@FEEDBACK.MSNBC.COM (it’s posted with the article)
I’m not suggesting flaming the guy. I just think there are enough intelligent, well informed people on this blog who can help point out to this gentleman that affordable home prices in the long run are a good thing.
Damn! Now my coffee is cold… this is going to be a bad day…
“The problem is that the lending boom — and in its latter stages it was a lending bubble, not a real estate bubble — swept up a lot of people whose only mistake was trusting a mortgage broker or lender…”
Wrong.
They also trusted the media, which constantly reported the upside to the bubble, and used almost 100% real estate people as sources in those articles.
They trusted the government, which constantly gave public assurances that this was a normal market, so keep buying. They trusted that someone in charge was regulating the markets.
They trusted the Fed, which also gave many assurances that things were fine.
And finally, they trusted family, friends and co-workers that gave them horrible advice.
BTW, how many billions will be given to people that lied on their loan applications? Are we really going to give relief to these liars? When our taxes start going up rapidly, I for one am going to view it as my money going to bail out the lying gamblers.
The moral hazard this is going to create will dwarf this bubble. Don’t expect many people to stand by and do the right thing the next time things get going. I know I won’t be. Nope. Going to step up to the trough with the other assholes. Why not? I am paying for it anyway. Might as well get some upside.
Don’t forget the real estate agents who told them they had better buy now, or be priced out forever. They trusted them, too.
Yep. They were bombarded from many directions.
“‘If you can’t sell your house, you can’t move out,’ he said. ‘It’s frustrating because a lot of lenders are just giving the houses away and dumping the properties, so people who live there can’t sell and move up.’”
ROTFLMAO
We discussed ‘geographic lock’ due to this bubble for years. Heck, I think the discussions started before I found the HBB. If you overpaid by a factor of 2X during this bubble, its 15 years until inflation catches up. (Assuming no hyper inflation.)
I think by mid next year the attitude that homes are a source of wealth will be gone. Then and only then, will we see a return to sane home pricing. Sadly, layoffs haven’t really even begun.
Got Popcorn?
Neil
Actually layoffs are a lagging indicator. Unemployment peaks well into the recovery.
Take a look at this graph.
Being chained to an overpriced POS must suck.
Being chained to an overpriced POS in a declining market must really suck.
Being chained to an overpriced POS in a declining market built on quicksand must super suck.
Suck it up…Suck it up and WAVE Bye Bye
It’s frustrating because a lot of lenders are just giving the houses away
Wow! Lenders are literally “giving away” houses now? Great. Where are they –I want to go collect my *free* house!
“If you overpaid by a factor of 2X during this bubble, its 15 years until inflation catches up. (Assuming no hyper inflation.)”
Even at that, it’s unlikely that the inflation would be matched by wage / income increases. In your example of 2X overpayment, how can it be any less than 15 years under any realistic assessment of what will happen? Toast. ‘Bout like marrying the wrong man or woman - you’re gonna pay one way or another for a long, long time.
“‘These energy booms never last forever,’ he said in a recent interview. ‘What happens when the energy boom softens and their incomes go from seven- to six- to five-digit levels? All of a sudden, that million-dollar home may be a significant burden to them.’”
Saw that when I was in Houston at V&E. The ultimate crash and burn, John Connally, had to sell his personal possessions in a bankruptcy liquidation. Of course some of his wealthy friends “bought” the items and gave them back to him. Would that we were also so blessed with generous “friends.” Guess it helps to be a big shot politician.
And don’t forget that great Texas homestead exemption…wish we had that here in Montana.
Tx, are the homestead exemptions still as generous as they used to be? From what I remember when I was in Houston, it seems like he got to keep his ranch, but I do recall them coming in and getting some of his artwork, etc.
No, they’re a little more onerous with the bankruptcy law changes. I think you have to live here now 3 years (?) or so prior to bankruptcy to get the full benefit. In the old days, it was common for sleazebags from other states to come here with their stolen money and put it all into a house here before schtupping their “investors” or creditors.
I answered once but it didn’t make it. I think you now have to be here 3 years before filing bankruptcy to get the full state exemption and prior to that, have to take the federal exemption. Guess that’s the end of the out of state sleazebags coming in with their bags of ill gotten gains and putting it all into a property before pulling the plug on their creditors.
Yea I think in Texas through BK you get to keep your house, 2 horses, 2 dogs, 2 burial plots, and a car or two I can’t remember.
In my TX govt class the professor told us all how furniture stores bilk the system by staying in business long enough to get good credit, then have a “going out of business sale” while they continue to purchase on credit and liquidate the stuff they purchase. Since they have like a 60 to 90 day net, they can make an insane amount of money before the creditors come looking for the money. They in turn take all the money they make and sink it into their mortgage, and debts on funeral plots etc which are exempted. By the time the creditors drag them into court it’s past the time the courts look back into finances and the store owners file BK. I know they have been trying to close these loopholes for a long time, but I don’t think they have since I still see year old furniture stores going out of business for 6 months all the time.
If that scam is true, it wouldn’t surprise me. Many modern Alaskans call many Texans who came up here for the initial oil boom “southern bootleggers”, who practically raped what were once generous social welfare & tax laws and corporate policies and walked away from the state with billions in oil money. Thank God for the Permanent Fund because otherwise all this state’s money would be shipped directly to Houston once it was made.
I don’t understand the need for a federal bankruptcy law anyway…if state bankruptcy laws can have arcane loopholes and quirks that allow for abuse, it makes a joke of the entire system.
Imagine that, another Fresno, another tale of out of control foreclosures…
“Take, for instance, Teal Run in Fresno, which saw more than 100 foreclosures. Of its 180 sales last year, 61.5 percent were foreclosures, helping to push the median sales price per square foot of homes there down 7 percent. Nearby Estates of Teal Run had 47 sales, 73.2 percent of which were foreclosures, pushing the price per square foot of homes sold in the neighborhood down 3.8 percent.”
What puzzled me when I read that is why the per-s.f. price dropped so little. If the great majority of sales in a neighborhood are foreclosures, I’d have thought the per-s.f. prices could drop well below replacement cost - and WAY more than 4-7% - due to the lasting negative effects on the neighborhood.
There may be some difficulty getting a mortgage, but the building continues unabated here in Amarillo. Builders continue to crank out new homes, and commercial construction seems even busier than ever. Of course, it’s definitely different here and we will never see a decline in home prices in our area. There’s also no need to worry about conserving water or any reason to quit driving Hummers, either… The brilliant leaders of the local water district just approved buying more pumps to finish draining Lake Meredith (local reservoir) which is already down 50% in the last 8 years. Wonder how we’ll support all these homes with no H20? I guess we’ll pray for rain, believe we will never run out of oil, and hope DOD never cancels the V-22 or any of the helicopter udgrades at Bell which everyone says will support our economy for years to come.
I have seen a lot more lots for sale though which used to be held for home building like over on 58th and Travis. I never really saw the huge spikes in prices that were all over the rest of the nation here, so I think we’ll see a slight pullback in price, but since we were so far behind the price spike curve I doubt we’ll see a crash in re here. I think a 10 to 15 percent haircut would put us right back to where we should be adjusted for inflation. It’s hard to tell though, because oil and gas in Borger and Pampa are booming, and rent prices are spiking in Pampa from what my parents have told me.
I do share your concern about the water though. When we lose the aquifer this place turns back into a grassy desert.
When I was biking across Kansas in 1987, I saw areas of desert. There was some sort of effort to prevent the desertification from spreading, but I don’t recall what government agency was leading it. I suspect the desertification had been caused by overpumping from the aquifer.
Water = Health = Wealth
Saw an interview of T. Boone Pickens a few months ago on TV. His current “project” is buying up all the water rights he can lay his hands on in North Central Texas
Yea, we put the brakes on him from doing that to the best of my knowledge. Then he pulled all the funding from the colleges around here in spite.
It was essentially desert before they started irrigating it.
The former Kansas Governor Mike Hayden (now the head of Wildlife and Parks) has bought into the idea of the “Buffalo Commons”…basically letting the High Plain revert back to what it was 150 years ago.
His take on it is that (eventually) the water in the Ogallalah Aquifer is going to be more valuable than any crop that is grown by depleting the aquifer…..so we should be starting the transition now.
I agree we haven’t had the run up some places have and a small correction is probably all that is in order here. However, I get tired of the constant cheerleading that Amarillo is utopia and not subject any outside influence that might be negative. I actually believe this area is a good place to live; I just wish our local leadership had the foresight to address some looming problems such as water usage and be more proactive in trying to head off problems rather than assuming all will be well forever. I’ve also heard the Celanese plant in Pampa is shutting down within the next year. Perhaps Mesa’s wind project will offset the loss.
Amarillo is utopia? Dude I want some of what you are smoking. 50 mile an hour winds aren’t uncommon, no trees, baking summers, bitter winters, and the occasional tornado. It’s not an awful place, but the only reason I hang my hat here still is because I have a 4 minute commute, and my kids are less than an hour from their grandparents. I’m a programmer and the demand and pay for programmers here is awful.
The only reason we were more immune to the last bubbles is that in the tech boom we didn’t have a lot of really smart tech workers, in the housing boom unlike a lot of the areas of the country where it was “everyone wants to live here” well nobody really wanted to live here :).
Is Pantex going to expand their mission?
Don’t forget the Trans Texas Corridor aka the NAFTA Super Highway
Ah, well, there’s still the Ogallalah Aquifer…um, isn’t there? Or has that already been pumped dry?
No, it’s still here, and it’s still HUGE, but it’s being depleted by dry land farming faster than it’s being replenished.
Dry land farming isn’t the problem; that’s farming without irrigation. It’s all the irrigation that’s the problem. There is no reason to drain the aquifer here to grow crops that can be grown in abundance in other areas without irrigation. With regard to my previous post, I know Amarillo is closer to Hell than utopia by far. That’s why I get so tired of what I perceive to be our one sided, head-in-the-sand media that does nothing but hype how supposedly great Amarillo is and why everyone wants to come here. The only reason I live nearby is my family farm.
Sorry.. told you I was a programmer not a farmer ;). I do know something about the oil business though since I worked as a grunt for a while in it.
I took a drive around Orange Country, CA over the weekend to get an update on the current housing condition. Although very subjective, here is what I saw:
The nicer areas have not cracked. Whether in Riverside, Corona, or Huntington Beach, the good family neighborhoods still have very low inventory.
The slightly less desirable areas, regardless of area, are getting hit pretty good. And anything built in the last 2-3 years has lots of signs, regardless of the neighborhood. The more mature neighborhoods are fine so far.
Most of the good areas in Huntington Beach are holding up well, with only an occasional foreclosure sign. But Main Street near the pier (which I don’t care for) has a lot of signs up. I counted 6 on one street alone. Every street had them. These have to be flipper zones.
This reminds me of the early 90’s in So Cal. The less desirable areas got smoked, and then it started to infect the better areas. I think we are 6-12 months away from a major correction in the good areas.
I will spot check a few locations in a few months to see how things are progressing. But based on what I saw in several areas, I would have to say the shit has not hit the fan, even in the less desirable areas.
Not yet.
In Sacramento I think every area is feeling the pain. There have been a rediculous number of luxury homes being built in the area. And I keep spotting areas where luxury homes are still under construction —many I think in areas that (IMHO) wouldn’t be appealing to someone who intended to spend a milllion on a home. Homes that were going for over a million a couple years ago are going in the 700ks today.
I think everything is still overpriced. And looking at houses the other day, I didn’t see a lot of consistency with pricing. There are some nice upper middle class homes dropping into the 500k range. But there are a lot of just plain non-special middle class homes still trying to sell around the $500k range, which I just don’t get at all. I’m curious what sellers are thinking. Do they really think that if they hold on for a few months, the thousands of homes they’re competing with will start selling and prices wil start going back up? Fewer people are qualifying for loans. New homes are still in the middle of construction and have yet to go on the market. And when I check trulia, I see more forclosures that still haven’t hit the market.
People are really only just starting to feel the pain. Prices have only just started to really fall. My mom’s beautitian was just telling her about her sister who bought into a high priced house. When she saw she could get the same house, or better, for much cheaper, she bought a house for cheaper and let the bank have her old house. Tighter lending should prevent someone from buying a second home so easily like that now. But as prices drop, and as the general economy lags with unemployment and high gas and food prices, I think we’ll keep seeing people who bought homes at the top of the market just walk away and leave the problem with the banks. I just wonder, though. A lot of banks are in trouble and getting bailed out in one way or another. But if forclosures continue, how much loss can the lenders take before they go belly up?
Since there’s nothing about Austin, here is a link to a year-old story. Two reporters for the local alternative weekly paper pose as (LA) “hipsters” and go condo shopping.
http://www.austinchronicle.com/gyrobase/Issue/story?oid=oid:458459
I live in Austin and I still don’t get the 500k downtown condo thing. The taxes and association fees alone will be rather onerous …