A Before-The-Boom-And-After Look At The Housing Market
The Sun Times reports from Illinois. “It is THE single biggest wish in the American dream of home ownership: the ‘buyer’s market.’ Bill Basic, long time homebuilder and president of the SouthWest Suburban Homebuilders Association, has seen this time come around maybe three times in the past 25 years. ‘The time to buy is now. A lot of people are ‘down’ on housing and the (economic) times, but you can always find some bitterness. People who sit on the sidelines … if they’re going to sit on the fence, they’re going to be kicking themselves,’ he said. ‘Once that inventory is down, you will see prices rise.’”
“Lynne Austin, president of the Home Builders Association of Greater Fox Valley, said the ‘kick’ will come when a buyer sees other people living in ‘their’ home.”
“‘Assume people feel the market has bottomed. You’ll be in more competition for that house you’ve had your eye on. Now suppose (the price) fell another $10,000. What does that mean on your mortgage? Another $50 or $60 a month? Is it worth losing that house?,’ Austin said.”
“‘Some people think if they only wait a month or two, there will be a better deal out there,’ said Randal Ritke, president of Will-Grundy Counties Home Builders and Associates. ‘But I think it has bottomed out. A builder can only discount to a certain point, and I think the builders have bled everything they can bleed. I’ve been through a number of these cycles, and we all know that when it comes back, prices are going to rise.’”
“‘I don’t think anybody knows where the bottom is,’ Austin said. ‘The only way to know is when it starts to rise. And why would you want to wait until it rises?’”
“Buoy said some people are using the ‘worth’ of their homes from two to three years ago as a benchmark. But it is to their advantage to reduce their asking price because they can take advantage of current market conditions on a new home, he said.”
“Ritke provided a general example of the economics of this: You live in a house you value at $300,000 and the house you want to move up to is priced at $500,000. If you give a discount of 10 percent ($30,000) on your house and get a 10 percent discount ($50,000) on the new home, ‘you just made $20,000 in equity.’”
“‘That’s a good investment any way you look at it,’ he said.”
“The same economic value that makes home ownership the American dream applies across the buyer spectrum, whether it’s a first-timer looking at a townhouse, a family looking for a spacious four-bedroom in a clubhouse community, or someone looking for a home built exactly to their needs and specifications.”
“Basic gave this example: ‘In 1991 the average price of a home was $120,000. Now it’s around $246,000. That’s more than double. You can never lose in housing. That’s where all the nation’s wealth is sitting.’”
The Chicago Tribune from Illinois. “For 18 years, Gloria Murtaugh has served as a mediator between residents slipping into foreclosure and their lenders. But never in her career has there been a time like this, she said.”
“For-sale signs and boarded-up houses dot many communities, leaving housing counselors such as Murtaugh overwhelmed and depressed at times by the tragic stories they hear day after day.”
“‘Oh, honey, it’s overwhelming,’ said Donna Reed, director of Catholic Charities’ Daybreak Center in Joliet. ‘You have all these people come in, and you want to give them all the assistance they need to keep their housing. But they still can’t maintain because the interest rates go up, and they just can’t meet it.’”
“In Will County, the number of foreclosure filings increased from 2,742 in 2006 to 3,388 in 2007, a 23.6 percent increase, a Woodstock Institute report shows. Between 2005 and 2007, the number skyrocketed by 79 percent.”
“For the six-county Chicago region, the number of foreclosure filings has risen from 21,302 in 2005 to 38,215 in 2007, a 79 percent increase.”
“Homeowners call Murtaugh’s office, panicked and stressed, looking for guidance. And many times now, there’s little she can do. ‘I used to make the calls to the banks and lenders myself,’ she said. ‘But it’s too overwhelming now. I tell them where to go and what to say, what to do. There are so many defaults and foreclosures, and it’s just difficult to see a positive outcome.’”
“Chicago building owners would be required to secure, maintain and light up their vacant buildings under a mayoral crackdown in the works to prevent the epidemic of home foreclosures from ruining entire neighborhoods.”
“The use of plywood to cover doors and windows would be prohibited on buildings vacant for at least six months, under an ordinance introduced by Mayor Daley at this week’s City Council meeting.”
“A six-month vacancy also would trigger a requirement that buildings either be secured with steel panels or have all windows and doors installed, a functioning security system and an ‘active account’ with a private security company. Dusk-to-dawn lighting would be required at all exits.”
“‘The more foreclosures happen, [the more] people are abandoning their homes. If you live on that block, all of the sudden, no one is gonna take care of it. No one has responsibility. It’s gonna affect the value of your property, your assessment — the whole community. It’s a crisis out there,’ Daley said.”
“Vacant buildings must be secured to prevent them from becoming fire hazards and magnets for crime, the mayor said. ‘They just tear the plywood off the back and they go in the back or the basement window.’”
“The number of home foreclosures in Chicago shot up 46 percent last year –to 14,250, according to a study by the National Training and Information Center.”
The Journal Gazette from Indiana. “The nation’s housing woes have seen almost a quarter of the nation’s ZIP codes blacklisted for certain types of loans by mortgage insurance companies, including most of the Fort Wayne area and parts of Wells and Whitley counties.”
“Some local real estate professionals see the stricter regulations as long overdue self-policing by the mortgage insurance industry.”
“While the flagged areas will make it more difficult for some borrowers, Joe Weigand, president of Weigand Mortgage, calls them ‘extreme measures for extreme times’ that the industry should have employed five years ago.”
“Shelly Reberg, a mortgage loan originator at Star Financial Bank, agreed that the industry needed stricter guidelines such as closer analysis of appraisals. The changes in the industry have had the effect of real estate professionals helping buyers look more closely at what they can afford.”
“‘We are no longer originators; we are counselors,’ she said.”
The Vindicator from Ohio. “Stricter mortgage standards that mean lenders are (gasp) verifying borrowers’ financial information. The difference between the March 2008 housing market and the March 2006 market is like night and day.”
“Here’s a before-the-boom-and-after look at the housing market.”
“Then: No down payment? No problem. Now: Show me the money. Then: Want it? Make an offer they can’t refuse. Now: Take your time. Then offer 10 percent less. Then: Lots of debt, little income? That’s OK. We won’t check anyway. Now: Nothing will get past us now.”
“During the boom, some buyers pounced on houses during the first showing, skipping home inspections and bidding up the price to get in. But now, ‘home buyers can definitely be patient,’ says Edina Realty Realtor Kelly O’Neil. And with some good price data for the neighborhood, buyers can successfully offer less than the seller’s asking price.”
“Some companies were putting borrowers in home loans without verifying income sources and lending money to people with debt payments that ate up half of their before-tax pay. Today, borrowers should try to reduce what they owe so their debt-to-income ratio is no higher than 40 percent.”
“It’s like we stepped in a time machine and went back to the mortgage standards of a decade ago. Minnesota Mortgage Association President Tim Bendel said 100 percent financing has all but disappeared.”
“And don’t even think about fudging your financials. ‘You can’t tell us you’ve got $50,000 in the bank,’ said Bendel. ‘We’re going to want to see it.’”
The Detroit Free Press from Michigan. “Metro Detroit had a staggering 18.9-month supply of homes for sale at the end of 2007, and some cities were swamped with four years or more worth of housing inventory that people are desperately trying to sell.”
“Sales prospects in many spots are grim. Huntington Woods had a 45.7-month home supply, and Oakland County had a 20.2-month inventory overall, according to listing data released last week by Real Estate One in Southfield. Detroit had a 51.1-month inventory of homes listed.”
“Don Grimes, a University of Michigan economist, said buyers are here but they are waiting for prices to hit rock-bottom before they buy. Family formation is still going on. Once they start buying, inventories will fall to normal levels, he predicted.”
“‘From what I am able to tell, it may be getting down to the bottom in the Detroit area,’ Grimes said. ‘People need to see that prices have hit bottom so they won’t be kicking themselves six months from now.’”
“One of the biggest reasons for the oversupply is that sellers overpriced their homes, Grimes said. That seems to be the issue in Huntington Woods, said Greg Barnas, an agent in Royal Oak.”
“‘A lot of what is still out there in Huntington Woods is still overpriced,’ Barnas said.”
“Betsey Rubel isn’t worried about selling her 2,086-square-foot home on LaSalle Boulevard. The four-bedroom, two-bath home has been listed since January for $299,900. The Rubels, who want to move to Bloomfield Township to be closer to their daughter’s school, paid $220,000 in 2001.”
“‘We’re not in a time crunch,’ said Rubel. ‘When our house is ready to sell, it will.’”
“Rubel said she has seen houses linger on the market in the city over the past several months, but she said she believes some of them have been overpriced — like one down the street that sat for about a year, listed at more than $800,000.”
“Charlie Lutz, a realty agent in Roseville, said it’s all about price. He has had a Macomb Township home listed for six months that’s gotten two offers in the past three months. But the home has been on the market for more than two years with different agents and had no offers until this year.”
“Seller Jackie Odbert won’t budge off the current price of $249,900. That’s down from the original price of $329,000 for the four-bedroom, 2,600-square-foot home.”
“‘After over 40 showings, Jackie is one of many sellers who are in shock when they understand the market controls the price, not the seller or the Realtor,’ Lutz said. ‘The buyer is the market and they don’t negotiate on an overpriced property.’”
“Odbert built a new house in St. Clair County just before putting her home on the market in August 2005, just when the market started to slow. She’s working overtime to take care of both homes.”
“‘As we keep going down with the price, it’s disappointing,’ Odbert said. ‘The people come in, and it seems they want everything for nothing. They want you to pay closing costs, they want a finished basement, a three-car garage. They don’t seem to realize how much the owner put into it, and we won’t get it back.’”
“‘I just might have to let it go to the next person who makes an offer of $220,000,’ she said. ‘Who knows if it’s going to get better in Michigan?’”
Ohio: ‘During the boom, some buyers pounced on houses during the first showing, skipping home inspections and bidding up the price to get in.’
Michigan: ‘The four-bedroom, two-bath home has been listed since January for $299,900. The Rubels…paid $220,000 in 2001…she said she believes some of them have been overpriced — like one down the street that sat for about a year, listed at more than $800,000.’
‘Seller Jackie Odbert won’t budge off the current price of $249,900. That’s down from the original price of $329,000′
And I still have posters and reporters tell me there was no housing bubble in these places. I’ve found report after report that shows otherwise. It was a mania folks, and only a handful of towns and cities were spared.
Home owner stupidity is to blame for much of this.
Senators Barney Frank and Christopher Dodd cannot artificially prop high home prices unless they artificially prop up higher wages. Without income to support the purchase of these highly overpriced homes, there won’t be any sales. You can say bye-bye to higher wages - its not going to happen.
Debt-to-income ratios will be brought back to underwriting in some form. This will kill a lot of potential buyers needing high leverage loans.
Mortgage originators will have a hard time dumping liar loans and stuntman loans into the secondary market especially at time where the credit markets have seized up, ratings companies have rubber stamped AAA on toxic waste and the confidence has evaporated on the part of investors because of this. With so much losses and capital preservation on the mind of institutional and individual investors, no one is going to be so free with lending money - not as easily as previous years anyway.
Higher underwriting and ratings standards have to be brought it to bring back confidence in the secondary markets and thus will eliminate a lot of potential buyers that do not have the income or the higher down-payment. These will knockout a lot of potential buyers for that overpriced, ugly, Troll Bros. McMansion.
A family’s monthly mortgage (PITI - Principle/Interest/Tax/Insurance) should be no more than 1/3rd their gross household monthly income. That’s your front-end ratio which should not exceed 33%. Your back-end ratio (car loan, student loan, credit card etc) + PITI should not exceed 40% of you monthly household income.
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.
If sanity and prudence is brought back to lending (it will be forced to), then many buyers will be eliminated and thus the demand.
Do not buy an overpriced house today. They will come down. You will be stuck with an upside-down mortgage. Houses today are too overpriced based on appraisal/mortgage/realtor fraud as well as home buyer foolishness in the past 4 years or so. If the house price increased more the 4% YoY from 1997. The house price will correct to meet the historical trend line.
I agree 100%. 1/3 is the most it should be. This I know from personal experience. It just amazes me when I see people with mortgages that eat up 50%+ of their gross. How can they pay for anything else?
I am always puzzled by the statement of gross income? Dont you really mean net income after taxes??? Whats the use of basing anything on gross when the gov’t is taking the first 40%. It should be no more than 1/3 of net income thats what wage earners should consider. Basing anything on gross is a new way of “liar” loan.
I thought the same thing. You will be paying your mortgage out of your net income. Some tax advantage but you need to also pay property tax and all the other things that go into “owning” a home like gardner, alarm system, maintenance, utilities, …
…. not necessarily. Different people file different ways. I ‘may’ have 6 dependents, you may have none. You may file a Shedule C and I may be a straight W-2. There are a lof of variables there, but I tend to agree. If you have special circumstances let those be known. Also MB’s should have been looking at all the applicants that were claiming NINE dependents so they’d get a ‘bigger’ check to afford the bigger payment! ( Old trick )
Dave Ramsey suggests no more than a 15 year mortgage, 20 percent down, and 25 percent of your take home. That’s damn hard to do imo, but if you can you can be relatively assured that you will own your house, it won’t own you.
I agree with that…’the 15 year loan is great but only for second time buyer. First timers probably will be fine with 30yr loan. Just because you take out a 30 yr loan doesn’t mean you have to pay on it for 30 years. Your finances can grow into it and pay it off sooner without having to restrict yourself to badly on initial purchase.
1/3 of Gross is a Rule of Thumb. Using a rule of thumb for net income is just too hard. Really do most people know what their net income is? And is that before you take out your “church contributions” or after?
“I am always puzzled by the statement of gross income? Dont you really mean net income after taxes???”
This has always been a curious thing to me as well but I do know that that is the way it was before the mania began so I suppose it worked then and should work now. Indeed, 1/3 of your GROSS income was the metric used for as long as I can remember.
Better yet don’t use net or gross, use take home pay. That’s what really matters. That usually catches your health care if it’s from work, taxes you have being deducted, etc.
FWIW I don’t ANYONE who pays 40% of their income in income ay FICAS taxes. Maybe someone who makes well over 100K. But even with no Schedule C I doubt that the average J6P pays 40%. The 2008 US tax brackets are:
10%: from $0 to $8,025
15%: from $8,026 to $32,550
25%: from $32,551 to $78,850
28%: from $78,851 to $164,550
33%: from $164,551 to $357,700
35%: $357,701 and above
And these apply to net income. The new standard deduction is 10,900 for couples.
Say a couple (no kids, no deductions) earns a “medianish” income of 60K in 2008, their tax bill breakdown:
60,000
- 10,900 standard deduction
- 7,000 dependency deduction (his and hers)
42,100 net income
taxes:
10% - 802.50
15% - 3678.60
25% - 2387.50
Total federal income tax owed: $6868.60
Which is 11.4%. Add FICA and it approaches 20%. If you live in Colorado add another $1900 or so for state income tax. Nowhere near 40%, and they don’t itemize.
Now add two kids: Net income drops by $7000. Between dedictions and tax credits the federal bill drops to about $3000, which is only 5%.
60,000 and 2 kids? Of course they dont pay 40%. However you forgot sales taxes, city taxes, etc. Try 6figure income, dual incomes, 1 kid, low debt….you get fleeced!!!!!!!!
Like I said: Maybe someone who makes well over 100K.
Sure, if you factor in stuff like sales tax and the collection of hidden federal taxes, it goes up. But we were talking gross vs. net (take home) pay.
Gets worse if you have kids and don’t like government schools. Our ratio in those days was always 2.5x and we never had a lot left over for fun things.
How can they pay for anything else?
They can’t. Neighbour of mine is a fireman. Gets called to
“good” part of town (600K houses). A homeowner has hung
himself. The living room has a thrift store couch and an old tv on a crate. Bedroom has a mattress on the floor. Nothing
else in the house- except for expensive closed curtains on the windows. That’s genuinely sad and I don’t understand why people put themselves in that predicament.
I’m happy that I can be happy with my wife, 2 kids, 2
cats and the paid-for starter swamp hut.
The great thing about the paid-for starter swamp hut is that if you fix it up nice, and then choose to buy a nicer house you can always rent it out for great cash flow.
1/3rd? Isn’t that a little high? I thought the traditional maximum was 28% for PITI — maybe 30% for those with an exception credit history — and no more than 36% for all debts.
I have experience with 30% PITI. It was doable, but I was a bachelor at the time.
Ben,
We just renewed our lease for another year, and hubby is furious with me.
Granted, I simply have not found the right home, but more to the point:
-Overpriced
-Seller Heloc’d, ARM (insert whatever) and simply cannot lower the price
-Don’t *need* to sell (get it off the market then, idjit)
-No money to close with (unbelievable - actually happened on an offer we made a few months ago)
Hubby will warm up in a day or two. This market is just nuts here in WI.
Leigh
Just show him this:
‘More than 2,000 properties were put into foreclosure in the state last month, an increase of almost 30% from March 2007. Milwaukee County led the state in foreclosures in March with 503, a 28% increase from a year earlier. The largest percentage increase was in Vernon County, where foreclosures jumped from one to seven over the period.’
‘These numbers are staggering,’ said Robert Jansen, president of ForeclosuresWI.com. ‘we expect foreclosures to remain at escalated levels through 2008.’
‘through the end of March, 6,592 properties in the state have been put into foreclosure this year, a 36.4% increase from the 4,834 that were foreclosed upon in the first quarter of 2007. In March, 2,069 state properties were foreclosed upon, compared with 1,594 for the same month a year earlier.’
Thank you, will do.
Leigh
Thinkin ’bout applying for a strawberry picker job so’s I can git me a house.
Sure, dont fret none, I promise to feed the squirrels … to my dogs. they cook-up right tasty!
People in my town can’t believe we rent, there’s no educating them either. Even with the horrible market here, people here in Hicksville equate renting with not being able to afford buying. Which is pretty obviously not the case for us. Soooo folk don’t know WHAT to think and we’re bombarded by realtors and FBs trying sell a lipsticked pig… NOT going to happen… Thanks Ben!
JWhite,
Most of us have long abandoned the role of “edjumacater” and have settled for venting here. Not sure where “Hicksville” is… but please be aware “bubble-sitting” isn’t as easy as it looks. I have not one but TWO landlords sell out from underneath me. The first time was WAY… too early and the second time I had to bite the bullet. ( It’s just a 200k condo anyway ) but I still regret it. Never… really wanted to be part of an HOA and we were perfectly happy renting the same unit for considerably less.
It’s surprising though how the other “owners” attitude changed toward me and my wife though? Dude, we’re the same people we were before only now we’re just as dumb as you are! Oh! Or maybe that’s it!?
“Screwed ( like me )”
DinOR,
Nothing wrong with buying a unit for 200K, if your mortgage payments + HOA fee + insurance is +/- 10% of what renting costs. If the costs are essentially the same what does it matter if you rent or own, other than hanging pictures or doing demo work on the unit? Maybe your condo appreciates at 3-4% over a long period of time. If it doesn’t, you didn’t lose. Eventually you’ll be done with your payments after 30 years and can live rent free.
Our landlord (the builder) has a 25% mark-up on this house and you can’t use the 2 car garage (you have to back onto the neighbors lawn to get out of the garage), there is an unfinished foundation 9 feet away from the kitchen side that she wants to build on and permanently cut sunlight from half the house, the front steps don’t exist - too expensive - imagine a quarter of a coffee can lid seen from the side as your front walk to the street, and the whole tiny lot “has to be re-platted a little” since it’s partially owned by the next door neighbor. Even here you can get a new 2200′ brick home with a huge fenced backyard for about $220,000.
Not bad you’d think until you realize that 90% of the town makes less than $50,000 a year (100 families make more than $100,000 a year according to the last census info) in a town of 8,000 (50 percent of whom are on government assistance). Out of 30-40 home over $200,000 on the market - 5 have sold in the last year. Even the realtors admit the market is 40-50% overpriced. “But it’s different here” is the sellers attitude, this is “paradise” (it is compared to the rest of the county).
We’re here for 3 years to gain experience for the Wife and then “Poof” Bye Bye! Nope, NOT gonna buy… Yet they keep trying since we’re probably the only upper income family in town that rents.
Ed,
Thanks but somehow it doesn’t necessarily make me feel all that much better? I was very content on the sidelines and actually continuing to rent here in OR and bottom feeding in the LV/PS area after the “minesweepers” went through. As is we are either going to sell (if we can) or pay it off in 3-5 years because “I” want to control the situation, not the LL or anybody else. I even talked with the owner at length and he assured me he had NO intention of selling! A number of different times. I mean other than getting it in blood..?
There are worse places a guy could be “stuck” but I also will have an office with the same view of the creek so all of a sudden, the “view” part isn’t nearly as important to me as it once was?
But here’s the thing. Although there was always something of a causative effect between family formation and home-buying, this effect is not some kind of natural or universal law. Ultimately, affordability decides whether or not a house will sell. If a family is forming, the last thing it wants to do is spend 50% of its gross income on housing. Instead, the family just rents a nice place at 20% of gross income and is able to save and provide a stable life for their family. If prices don’t change, a paradigm shift will simply mean that families don’t see owning a house as necessary.
“If prices don’t change, a paradigm shift will simply mean that families don’t see owning a house as necessary.”
With very young children, it really isn’t necessary. You’re not going to let them pay outside alone anyway, might as well take them to the park where they can spend time with other children. A good time of day to do that is when the landlord or his landscapers show up to do some gardening.
We bought a home a few years before our first child was born. Keeping up with the housework, never mind the yardwork, was often impossible.
I have three young children 15 mtns 3 and 51/2 I’m verry happy living in a decent 2 bedroom condo style apt. About 1100sqft. They are hard on the rug, draw on the walls etc.
No time as you mention. My oldest is to the point that playing in a backyard would be good but he will survive another year or two. And at that point I can decide to rent a house or buy. No rush. Even then I’m debating a 3/2 or 4/2 1500-2000 sqft. I like the idea of the smaller home just it would be sligthly cramped and you really don’t get a good deal pricewise on the smaller home.
But I can’t imagine buying a house with my kids this young its stupid. I don’t need the stress.
Jwhite
you’re that last single person that those busybody elderly matrons at the reception just HAVE to circle & tell you about their wonderful nephew Elroy the sax player, or the niece with a great personality. Such a catch - don’t let them get away!
(Elroy should be out of Joliet any day now, with time-off for good behavior.)
ROTFLMAO…
Just go on a nice vacation and show them all the pictures.
jwhite, just keep on pasting that big ole grin on your face and saying, “oh gee, that just doesn’t work for us at this time.”
the house sounds a bit….interesting, by the way.
If I were your hubby, the only thing I would find frustrating is having to sign a year lease…again. Sounds like you live in a very competitive (ie sellers) rental market.
NSO,
It’s a very nice 3/2/2 for $1050 SFH in an FB neighborhood!
The ‘hood is about 10yrs old, family oriented, and fairly stable. We’ve seen some foreclosures, but not nearly what Milwaukee county is experiencing.
The year lease is a drag, but I understand the LL position.
Leigh
‘We just renewed our lease for another year, and hubby is furious with me.’
Stand firm, Leigh. You’re in the right. Anyhow, he will soon re-succumb to your charms. Heckfire, just bat them pretty green eyes you got and he’ll probably even go buy you a new gun! Maybe two! And some venison jerky. Have him get you some of that. I like venison jerky. I’m eating a clump right now. Soon my jaw muscles will be big as canteloupes.
LOL Oly, my eyes are green and one of the first things he said (after learning I wasn’t jumping through the hoop) is “I’m getting a couple of guns”
OK baby, hurt my feelings - NOT!
Chuckles,
Leigh
Hi Leigh;
Hey, don’t sweat it. The river DENIAL runs deep through Minnie-Sootah (Minnesota) and Wisconsin too. Up here in the Twin Cities, it is much the same. Sellers (their really not sellers until they sell?) can’t cut price because of the same reasons you mentioned. And yes, I agree, don’t be an idiot if you “don’t need to sell right now” and take it off the darn market!
My wife and I have been looking at vacation property (lake cabins or cottages for you Michigan readers…) in NW Wisconsin (Burnett County- Webb Lake area) and in Minnesota (30-45 miles south of Duluth). One property near Webb Lake the owner is wishing for $145,000. House has been on-off market for the past 18 months. I called the county and got the property tax info… county says market value is only $72,000. I confronted the used-house salesperson and her response was: “that’s great!, See, you have built-in equity right away!” STEP AWAY FROM THE KOOLAID AND PUT DOWN YOUR CELL PHONE NOW!
Similar situation with a lake cabin in MN… owner wishing for $134,900, county estimated market value is only $54,000. What are these people thinking? Do they really think that they can get ‘05′ prices for their crap?
I spoke with my neighbor (here in Twin Cities suburbia) about the recent 2009 proposed property tax bill and estimated market values telling him that the values do not accurately reflect reality. I called the assessors office who told me that the values are based on sales comps from 3rd quarter 2006 through 1st quarter 2007 and that the 2009 taxes/valuations WILL take a big hit when they factor in the comps from 3rd quarter 2007 through 1st quarter 2008. I was able to get them to shave $5000 off our abode’s valuation for this year. My neighbor was shocked when I told him this, responding: “why would you do that? Don’t you want your house to be valued as high as possible? I replied with: “no, I want my property taxes based on a more realistic valuation which better reflects the market and not some assessors target value”. There is just no help for some people I guess.
My wife and I go for walks virtually every day, and I enjoy pointing out the foreclosures (she always asks, “how do you know they’re forclosures?”- check out the furnishings you can see in the windows (a few pieces here and there), no lights on at night (ever), kids play gym in backyard, phone books/newspapers/flyers piled up on porch, etc.). Easy to spot! Remember, these are in pretty nice neighborhoods ($300-$500k mcmansion types back in the “good ol’ days of 2005″. Copper hasn’t been stripped out (yet).
Good luck to you and your husband Leigh. I too am x-Air Force (retired in 2005 after 23 years total time in service- active duty, reserve, air ntl guard. Retired as a Major, was prior enlisted way back when).
Congrats!
I’m retired USAF too (2000) Just left Plymouth last year. The market there was really starting to nosedive at the time, bet it’s a LOT worse.
Thanks Jwhite!
Ah, yes, the good ol’ days of 2000… We had a place in Maple Grove (I was the general contractor and did much of the work myself- electrical wiring, insulating, vapor barrier, painting, staining, etc.). Built in ‘96′ on a nice size lot for under $200k (over 3000 finished square feet!) not counting my “sweat equity”. Sold in 2002 (was sent to Andrews AFB on active duty in ‘01′, then to Georgia in ‘02′ before returning to the Twin Cities in ‘03′). Sold the place in Maple Grove for $365k. Upon returning, we settled in Champlain with a nice house for $280k. Finished the basement, now I have a great man-cave!
I can say without a doubt the market today is significantly worse than 2000 (sales activity, wishing price declines, foreclosures, copper stripping, you name it).
Good luck to you wherever you are now Jwhite. Don’t forget us here in the “great white north”.
To you to! My Wife worked in Maple Grove till we moved. We never bought in the area, wayyy too bubbly, but MN is still a nice state (my kid still misses the lunch menu at Wayzata Central MS. It was like a 4 star establishment compared to here!
tgun,
Salute! Flew to San Antonio in Feb for my nieces graduation from Basic-Honorgrad!
21 for me 24 for hubby, retired in 01.
Your spot on with those northwood cabins.
We used to fish in Spooner at McKenzie years ago. Breathtakingly beautiful - give it a year (that’s my hunch).
Best,
Leigh
Great find, Ben. This Odbert woman was fabulous. A full presentation of glorious dumbassery. Ahhh, I love to start my workday laughing and clapping and bouncing up and down in my chair with merriment. It sets the tone for a good morning.
The ‘kick’ will come when those other people get foreclosed on, because they bought too early in the endgame, and paid too much…
“Lynne Austin, president of the Home Builders Association of Greater Fox Valley, said the ‘kick’ will come when a buyer sees other people living in ‘their’ home.”
“‘Assume people feel the market has bottomed. You’ll be in more competition for that house you’ve had your eye on. Now suppose (the price) fell another $10,000. What does that mean on your mortgage? Another $50 or $60 a month? Is it worth losing that house?,’ Austin said.”
I’d be more concerned about what people can afford rather than what people feel. Fact it that housing is even more unaffordable now than it was a year ago due to stricter lending standards and economic slow down.
Correct. It won’t matter how they feel if they can’t qualify for a loan.
I love the FUD they spread. Bidding wars are about to return? I think not.
I would love to go to a bidding war. That BullS^&8t with multiple offers is a joke. Everytime they say, “multiple offers”, “Counteroffer”, “market value”, “quick equity”, just drop your price another 10% to shut them the hell up.
In the central valley of California (in the heart of one of the worst foreclosure areas), where price have dropped about 35-45% from peak (Turlock, near Modesto to be specific). You are seeing something very interesting, when something pops onto the market below $110 per suqare foot, you see a feeding frenzy, which bring in a very large number of offers very quickly. Saw one with over 15 in a period of 24 hours. Over that level the same house just sits. Saw one REO that started listing $136 per square foot, no response, dropped to $127, no response, dropped to $113, attracted multiple cash offers. Final selling price at the $136 per square foot level. Kind of crazy out there. There is certainly money setting on the side lines here, looking for a good price point.
Drop 20% for every utterance of “instant equity”.
“Is it worth losing that house”?
Why, yes it is worth $10,000 to me not to buy an overpriced house when they are literally hundreds just like it to choose from.
That’s what gets me - and I don’t think its quite filtered through to the seller’s psychology yet.
Why would I hang around and haggle with you, when there’s many, many other houses I can move on to?
The BUYER isn’t at risk for losing the house. The FB with the bank breathing down his neck is the one worried about losing his house.
People who sit on the sidelines … if they’re going to sit on the fence, they’re going to be kicking themselves,’ he said. ‘Once that inventory is down, you will see prices rise.’”
Yeah…well…let me know when inventory is dropping DUE TO SALES THAT WON’T BE BACK ON THE MARKET SOON.
Inventory is HUGE nationwide and dare I say worldwide.
I cannot fathom how long it will take to work through the inventory here in the US.
That is barring natural disaster(s), arson, buldozing.
Leigh
“if they’re going to sit on the fence, they’re going to be kicking themselves’…Once that inventory is down, you will see prices rise…the ‘kick’ will come when a buyer sees other people living in ‘their’ home…You’ll be in more competition for that house you’ve had your eye on…Is it worth losing that house?”
Let me get this straight…there is ONLY ONE super magical special house for me, and if I don’t act now, someone else might buy it and live in it (and sit on ‘my’ toilets)?
*Sigh*. Sorry, there are a lot more “fish in the sea”, especially with new home builders and their “cookie cutter” building techniques.
Good try with the fear aspect; however, when I eventually DO buy a house, I’ll be getting at such a price that I can spend some extra money modifying it to be the way I want it.
Indeed, indeed. Listen, would someone talk to the folks at Homeland Security and move that border fence to Illinois? An honest attempt must be made at keeping those morons in one place…to keep an eye on them.
Hahahaha! Funniness!
That and “the builders have bled everything they can bleed” comment? Really? As we’ve often said, at the end of the day a 2X4 costs what a 2X4 costs but the fact is many of these builders grossly over-paid for LAND!
Even Robert Schiller noted that in a recent interview. Unless you have “stunning ocean views” etc. a buildable lot in a cookie cutter subdivision should be put through the same pre-bubble pricing scrutiny we’ve given everything else!
In most cases I can’t see paying over 30-40k for your lot. I’m really trying *not to get negative here but call me when you builders get there, o.k?
D - that’s a point that is not exposed in the media - at all, as far as I can tell. As you note, builders overpaid for land. It is a sunk cost - dump it, with or without a house on it. Lumber is way, way down from the peak. At one point Canadian trusses were selling at just 20% of peak bubble prices. While it is true that copper and some other components are up in cost, most are down.
Many builders reach the moment when they have to decide whether to let their best subcontractors go to another builder or worse, another region or type of work, or to press on with virtually zero profit until things improve. By doing the latter, they may preserve their quantity discounts and likely can preserve their credit with suppliers. It’s happened before and will happen now. IMO, the ones who fail, or at least the ones who fail first, will not take the requisite emergency measures, either out of ignorance or, not uncommonly, out of stubbornness.
Chip,
I didn’t realize there were further motivations for builders to keep the ponzi alive, like keeping their subs captive and volume discounts? Totally new angle for me. I had always looked at things strictly from a lender’s perspective.
Ben has done a great job tracking building supplies and lumber that were more typically reported in trade pubs. than the MSM. Thanks for helping me to complete the picture!
And of course debt service, both on land that they bought and equipment. I’d guess that used construction equipment is worth alot less than it cost new a few years ago. I’d bet that some builders have negative net worth and their only chance is to keep treading water and hope for better times. THE RMS Housing Market is going down, the water is cold and there’s only room in the life-boats for the bankers from first class.
We went through the exercise of pricing out a custom built home a year ago and came the realization that home prices set construction costs and not visa versa.
To be fair, what people are willing to pay for other types of construction (government, educational, commercial) also plays a role in setting prices for labor and materials. But at the end of the day there is no intrinsic value in a 2×4, only what someone is willing to pay for it. If someone is willing to pay $600k for a crapbox, then that 2×4 starts to become quite expensive.
Groundhogday,
Very most excellent point. You could even say that 2X4’s are more expensive on opposite ends of town, even if they were MILLED in that town! Why couldn’t more people have realized this sooner?
I don’t see the sense of urgency scam working anymore. For just a millisecond, it used to work until I’d backpedal and think about it. For God sakes it doesn’t even work when trying to sell a used item. How the hell do these guys think they’ll generate confidence in potential buyers by using that BS scam?
“Chicago building owners would be required to secure, maintain and light up their vacant buildings under a mayoral crackdown in the works to prevent the epidemic of home foreclosures from ruining entire neighborhoods.”
“The use of plywood to cover doors and windows would be prohibited on buildings vacant for at least six months, under an ordinance introduced by Mayor Daley at this week’s City Council meeting.”
“A six-month vacancy also would trigger a requirement that buildings either be secured with steel panels or have all windows and doors installed, a functioning security system and an ‘active account’ with a private security company. Dusk-to-dawn lighting would be required at all exits.”
______________________________________________________________
i’m a little confused…
Are we talking about foreclosed houses or prospective prisons?
I’m confused as well. If the FB has walked, who is keeping up the electricity and utilities?
Fat chance keeping these abandoned properties “lit up at night” - the only thing lit up at night will be the house fires….
““Ritke provided a general example of the economics of this: You live in a house you value at $300,000 and the house you want to move up to is priced at $500,000. If you give a discount of 10 percent ($30,000) on your house and get a 10 percent discount ($50,000) on the new home, ‘you just made $20,000 in equity.’”
Are people still falling for this crap? You haven’t made any equity. Your mortgage will be lower than it would have been, but the new market price of the $500,000 home is now $450,000. And, if at $300,000 you had $100,000 in equity, which was enough to put a 20% downpayment on the other house, you now have $70,000 to put on the new house, which isn’t enough to cover the 20%.
Sure it’s instant equity. Everyone knows that the ‘real’ prices are $300K and $500K. The 10% less is a discount that is only available now, so if you don’t move quickly….
They conveniently forgot to mention that if prices continue to drop, you’ve got the potential to lose more money on the more overpriced home (ie the $500K home).
As Al says, it’s not as if the prices mentioned are the “real” prices, instead of inflated ones that won’t be seen again unless hyperinflation occurs or real incomes rise.
What’s worse? Reading this complete bullshit or knowing it got past the editor of the rag that published it? I guess when you look at the “critical” coverage we got before going into Iraq, we shouldn’t be surprised.
My devious plan in spring ‘09 is to sell my condo in MA (valued at the top at X, minus whatever percent the market has fallen, maybe 10 or 15 percent); then buy something in CA, in a place where the market has fallen much more drastically (valued at the top at 2X, minus 30 or 40 or even 50 percent). Result, hopefully: I will have a house equivalent to the house I have in MA, only in a place where I want to live (within walking distance of the beach) for not much more than I am currently paying. Yes, I know I should have sold at the top of the market, banked the money, and rented; but I could not convince my husband; plus, we would have had to pay the dreaded capital gains tax.
““Ritke provided a general example of the economics of this: You live in a house you value at $300,000 and the house you want to move up to is priced at $500,000. If you give a discount of 10 percent ($30,000) on your house and get a 10 percent discount ($50,000) on the new home, ‘you just made $20,000 in equity.’”
Assuming you live in that condo, the first $500,000 of your gain is tax free. Yet another subsidy courtesy of the Gubmint/REIC.
“‘As we keep going down with the price, it’s disappointing,’ Odbert said. ‘The people come in, and it seems they want everything for nothing. They want you to pay closing costs, they want a finished basement, a three-car garage. They don’t seem to realize how much the owner put into it, and we won’t get it back.’”
Or, maybe, they just don’t care?
How many times, oh HOW MANY TIMES must this be said. The market determines the price not how you “upgrade it or fix it up” and right now qualified buyer can only qualify X amount and no amount of granite will change that.
It all comes down to down payment. None of this squigey financing from Countrywide and WaMu, or wrapping closing costs in the payment or what have you. Either you have the cash or not.
If our local gov’t officials want to prevent the next bubble…make investors put their money where their mouths are. And none of this buying on margin. That’s how Depressions are made.
Right, so if an owner demands a buyer work overtime and do without toys for their children that is acceptable, but turn the tables and they want something for nothing? Prices are still sky high and no one buying today is getting something for nothing!
Exactly. Does she care about how long the buyers had to live in a cheap one-bedroom apartment, skip movies and dinners out, and take PB&J for lunch in order to afford her wishing price? No. So why should they care what she put into the house and isn’t getting back? People have lost their collective mind!
But it was a sure thing. The used house salesperson and mortgage broker and appraiser and the TV shows and everyone else told her that prices ONLY go up.
Aj,
The last home we owned, we upgraded, because it added to the quality of our life, not the house.
That woman’s statement is outright idiotic!
Leigh
The wished-for “buyer’s market” won’t come until people are no longer talking about real estate, and about 2/3 of current realtors[r] have moved on to other jobs, and real estate is again the province of mix of reasonably talented professionals and some dabblers who are in it to close a few transactions and year and find a reason to get out of the house.
The bottom comes when folks have given up looking for it, and inventory finally starts to contract. There’s no chance of a bottom - zero, zilch, nada - as long as inventory expands (or even stays flat a huge level). You can’t fight inventory - you just have to wait until it eventually erodes. All of this non-sense about giving tax credits to new homebuyers or forclosure purchasers is a futile attempt to fight inventory, but it won’t make a big difference.
Unintended consequences looms big on that one. As soon as a tax credit appears, a flood of homes will hit the market from sellers trying to finally catch the brass ring. Nothing like a guvment program to screw up the desired result.
“The bottom comes when folks have given up looking for it”
Well said. There are days when I wonder if we shouldn’t have a bubble blog holiday and have Ben post articles on motorcycle and really cool rafting trips to let the REIC know even WE… are no longer talking about them! Given the pyrotechnic nature of the implosion that had to happen it’s keeping this damn thing in the headlines. Maybe this is like when you “think” you got the deer? As long as you keep chasing it through the woods ( he’ll keep running! )
Sit down and have a cup of coffee and forget about him and he’ll go a few more yards and drop!
The Sun-Times is a shell of its former self. That article is essentially a paid advertisement, devoid of any journalistic integrity.
April 7 edition of Businessweek pegs the Sun-Times gone within the year. Might as well take the REIC money as long as they can - nothing to loose at this point.
It looked like a press release from the NAR.
“Basic gave this example: ‘In 1991 the average price of a home was $120,000. Now it’s around $246,000. That’s more than double. You can never lose in housing. That’s where all the nation’s wealth is sitting.’”
You can never lose in housing. Yeah, sure a$$wipe. This guy needs to get better acquainted with a forest of JT’s followed by a soothing bucket of cayenne pepper.
JT’s? Joshua Trees?
Justin Timberlake?
Tragically, we don’t have any of the JTs in our neck of the woods. Maybe shove an army of cockleburs up his yang?
In 1997 the median price was $139 (I know because we bought a house for that amount that year), so if you compare that time frame, things look a little less spectacular. If you compare say the late 80’s to to 1997, craptacular might be the right term.
“Basic gave this example: ‘In 1991 the average price of a home was $120,000. Now it’s around $246,000. That’s more than double. You can never lose in housing. That’s where all the nation’s false wealth
iswas> sitting.’”Much better.
Now give that REIC member a JT! I like the cayanne pepper touch…
Got Popcorn?
Neil
I know someone who used to work at the Sun-Times. He used to complain about the paper’s increasingly vapid and tabloid content all the time — way too many stories on Britney Spears, porn performers, etc. On one occasion a reporter even was sent to cover an “adult entertainment” event in Chicago featuring Ron Jeremy.
It’s been pretty much a tabloid since murdoch bought it, I think in the 80s. I can’t remember who owns it now, but Mr. Conrad Black had a turn and did a nice job of ending up in jail.
Before the Murdoch years it was worth reading. Royko was there, the sports reporting was always better than the Tribune’s. Really a shame. And Kim’s right, it’s gonna be gone soon.
Yes, the whole sun-times chain of papers was notoriously stingy with their editorial teams, cutting reporters, editors and photographers left and right, talking about what a tough competitive environment newspapers exist in. Meanwhile Conrad Black, a right wing mover and shaker, was enriching himself at the company’s expense, to the tune of $32 million dollars. This is the story of many media empires in the last 20 years.
Interestingly, people, especially on the right side of the spectrum, complain about something called “the main stream media” and others wonder why reporting has become so shallow. I don’t — media historically is one of the most profitable types of businesses in America. But it’s big business, and over the past 20 years, there has been the thought that if you can cut staff, you can be even more profitable. This worked for a while, as there was a leftover veneer of respectability around the media, but at some point people they started cutting into muscle and bone, with predictably crippling results.
Well said. Real journalism would at least include a few quotes from someone with an opposing viewpoint.
People with an “opposing viewpoint” don’t get airtime because they don’t spend millions on vapid commercials on local TV stations yammering about how “now is a good time to buy”.
“Now suppose (the price) fell another $10,000. What does that mean on your mortgage? Another $50 or $60 a month? Is it worth losing that house?,’ Austin said.””
This must be an NAR talking point somewhere - I’ve seen it once before on Ben’s blog, and I’ve seen a real estate agent in Seattle try this argument out on a blog as well.
My response - “I don’t know about you, but to me $10,000 is a lot of money”, didn’t seem to go over too well. (And in Seattle, it may end up being more like a 50-100K loss.)
The RE agents are still trying to keep one tenet from the bubble - the “who cares if prices drop another 10K” argument has the hidden assumption “at some point house prices will be able to zoom back up, and you’ll be able to refinance”. If people actually thought that they’d argument have to pay back the extra $10,000 by skimping on cars, vacations, etc., the argument seems quite ridiculous.
(The argument also reminds me of the old Cheech and Chong routine about the Hispanic used car salesman: “‘57 Chevy! Fifty dollars down and fifty dollars a month for fifty years!”)
Well actually 10k wouldn’t be so bad. 50-100k seems at least as likely in bubble areas though.
Non-compliance would trigger a declaration that the property is a public nuisance. That could allow the city to compel absentee owners to sell or lose their properties.
“The more foreclosures happen, [the more] people are abandoning their homes. If you live on that block, all of the sudden, no one is gonna take care of it. No one has responsibility. It’s gonna affect the value of your property, your assessment — the whole community. It’s a crisis out there,” Daley said.
While I applaud Daley’s stance on empty or abandoned buildings, I think he and our aldermen have a lot to answer for when it comes to the pace of development, the glut of development, the scale of development (Belmont Ave., anyone? — it’s like a freakin’ Condo Canyon now), the quality of development, and the long-term impact of that development on the character of individual neighborhoods.
In other words, Mayor, a little more foresight circa 2000 or so would’ve gone a long way toward mitigating the unwanted fallout of overdevelopment.
“I think he and our aldermen have a lot to answer for when it comes to the pace of development…”
I nominate this for understatement of the year.
An Alderman never met a developer they didn’t like. Case in point: my neighborhood is fighting a planned 45 story schmondo tower. I posted a few months ago that the deal appeared dead due to lack of financing. At a meeting with the Alderman a resident pointedly asked that status of the project. The Alderman’s response: “100% dead”. Recently, however, there’s been more stirrings.
All Chicago posters should subscribe to Crib Chatter. Have a look at the garbage condos they are peddling. How did such an affordable city become home to people who think $300k and up for an apartment is good deal? SFH has always been “the dream” here - this is the Midwest for Pete’s sake!
BTW - if I see one more condo overadorned with 19th Century French advertising posters I’m gonna hurl. Yuppie scum have no originality whatsoever.
BTW - if I see one more condo overadorned with 19th Century French advertising posters I’m gonna hurl.
(Laugh, without comment.)
How did such an affordable city become home to people who think $300k and up for an apartment is good deal? SFH has always been “the dream” here - this is the Midwest for Pete’s sake!
A damn good question. Chicago’s “affordable” compared to many of its urban peers, but prices clearly spun out of control here, too.
I’d like to know this: Why did our fair city, with one of the proudest architectural heritages in North America (and the world), allow so many beautiful buildings to be razed and allow so many craptacular buildings to go up, with so little foresight? What happens to all those Ugly Monsters now that the bloom is off the rose? Will these boom buildings blight certain areas for the next two decades?
I did a little informal walk around study of my area’s “four plus ones”. You know the buildings, I remember you posting about them too.
“Four plus ones” - for those other HBBers - are the blandest, cheapest, crappiest form of housing imaginable. In the 1960s they sprouted like weeds on the north side of Chicago. I counted some 70 within four blocks of my place one summer - 70 of a single basic design!
That was our local clue - that the mania has occurred here before. What we see today is a repeat - only the details differ. The new buildings are different shapes, they have high speed internet, granite, and stainless but otherwise - in character - they are the same as the “four plus ones’.
History is repeating itself, we’ve been here before.
I’ve always thought it would be interesting to pull just the North and select West side neighborhoods out of the overall statistics to see what happened there. My sense is those areas look a lot like Boston in terms of appreciation and thus have farther to fall.
edgewaterjohn,
And there are White Sox fans like (?)… that feel the let down in ‘06 was caused by the “ownacondo.com” sign over A.J’s right shoulder. I say bring back Falstaff!
Own a Condo sign was still at Sox park last year too.
I love that first story…
If prices go down $10K, it is only $50 a month….
Oh, but you MUST buy now before prices go up!
Well if a price drop of $10K is only $50 a month…. then wouldn’t a rise of $10K only be $50 a month?
Now, which is the greater risk? That prices will continue to fall at the historic and increasing rate.. or that magically they will suddenly stop the falling and instantly turn around and see big gains?
I have yet to hear a compelling arguement based on fact that would indicate prices going up.
I suppose at some point (being the bitter renters we are) we will look at prices and decide the economics of buying are worth while, at which point others may do likewise, but at least here in San Diego, prices still have a long way to go before we can begin to have that conversation.
Of course, his entire argument is predicated on the far-fetched assumption, “Assume people feel the market has bottomed.” Yes, let’s assume that’s happened. While we’re at it, let’s assume those people also all won the lottery. We’d better buy now before they bid up housing prices with their newfound wealth!
Let’s assume he isn’t talking out his backside…
If you give a discount of 10 percent ($30,000) on your house and get a 10 percent discount ($50,000) on the new home, ‘you just made $20,000 in equity.’
This sounds an awful lot like when my wife goes shopping with her sister and they come back telling me about all the great stuff they got. Then, when I ask “how much did you spend” they (usually her sister pipes up first) say “Well, we SAVED xxx dollars!”.
I know this one well.
wife: ” I Saved xxx dollars”.
me: “But you wouldn’t have bought it before, so you lost $YYY, the full price of it”
Are we such idiots that we have to be told we saved “$” on everything we buy, and if that’s not enough, you have to circle it with a pen and announce it to everyone around.
I can’t wait to see this tactic used when buying a house and signing a contract. “Mr. & Mrs Smith, you saved $180,029 over the FB price, it shows right here at the back of the contract. If you sign up for the Club card you get an points that can be used to earn landscaping and swim pool buck”.
I’ve been married about a year now and I’ve learned not to ask.
Word to the wise; you better start asking. Especially if she has an accomplice. My SIL is real good at saving money. She saves tons of money all the time. She showed me a receipt once where she saved over a hundred dollars on shoes. My problem is when my wife gets around her, she likes to start saving money also.
I always leave all the lights on in the house all the time, because I use energy saving lightbulbs. Think of all the energy I’m saving!
Al,
The same logic entitles one to drink even MORE “light” beer! Good one Al.
“The Rubels, who want to move to Bloomfield Township to be closer to their daughter’s school, paid $220,000 in 2001.”
Even if they priced this home at the $220,000 that they paid in 2001 it likely wouldn’t sell. Michigan’s economy was a lot better in 2001, and I’ve not seen any real price increase since then. They avoided the bubble if you will.
I agree with you Bad Andy.
I just don’t understand how people think the prices can have gone up at all since then especially with all the job losses & population loss in Michigan. see: http://www.detnews.com/apps/pbcs.dll/article?AID=/20071227/METRO/712270389
That, and I still see houses being built. For whom?
Jim
“For whom?”
That’s the question today. In SE Michigan, people would rent houses in Detroit, when they got money they bought…often times in the suburbs. People who sold the house to the former renter needed new houses farther and farther away from the city, so they built.
Today no one is moving anywhere except out of the state. I don’t know who will end up in all of the new houses.
“Sales prospects in many spots are grim. Huntington Woods had a 45.7-month home supply, and Oakland County had a 20.2-month inventory overall, according to listing data released last week by Real Estate One in Southfield. Detroit had a 51.1-month inventory of homes listed.”
“Don Grimes, a University of Michigan economist, said buyers are here but they are waiting for prices to hit rock-bottom before they buy. Family formation is still going on. Once they start buying, inventories will fall to normal levels, he predicted.”
Do any of those “families” have the financial resources to buy any of those houses? What does he consider a “normal” inventory for Detroit - three and half years?
“‘From what I am able to tell, it may be getting down to the bottom in the Detroit area,’ Grimes said. ‘People need to see that prices have hit bottom so they won’t be kicking themselves six months from now.’”
More than four years of supply and the bottom is near? - only if Detroit has the second coming of the Great Chicago Fire in the next few months. Devils Night every night through the summer anyone? In six months they’ll be kicking themselves because they’re still in Detroit and another cold winter is on the way.
And what happens to the properties that these buyers-in-waiting vacate? Not all of them can be living with their parents.
I know in my market (Minneapolis) I am getting calls everyday from people who haven’t missed a payment yet but know they can’t make it long term… I know we’re not at the bottom yet! And as far as buyers are concerned, it really doesn’t matter where prices are if you can’t get a loan!
“Lynne Austin, president of the Home Builders Association of Greater Fox Valley, said the ‘kick’ will come when a buyer sees other people living in ‘their’ home.”
Once again, never ask a barber if you need a haircut.
RE: “‘We are no longer originators; we are counselors,’ she said.”
These people remain pathological liars and con artists.
It’s still the same scam…sales agent brings client to originator who in turn picks up the phone and starts calling around to appraiser’s to ask whether or not they will fudge on the declining value box and not include any negative commentary in the appraisal report body which would bear close scrutiny by underwriters and prevent the loan from being sold at a later date.
Anybody see any legislative proposals which prevent the coercion and influencing of reported values by appraiser’s by the withholding of business and reputational back-balling?
I haven’t.
hd74man,
Damn right. I have a friend in CO that kept all of his old clients bus. cards and many were mortgage brokers from the boom times. He said virtually everyone said “Financial Consultant” or “Mortgage Planner”. WTF? Well that’s ONE way around getting securities registered! And pffftt, who needs the hassle? Besides this pays better and there’s ZERO scrutiny.
Remember these were the guys that were telling people *not* to put that extra $100 bucks into their 401k as it would be much better applied to a house payment! Dude, you’re so totally unqualified to make that statement. Now their “clients” have zero in their ret. acct. AND a foreclosure on their credit report!
Nice going… Chad!
Alright, fess up. Who wrote this and offered to Yahoo? Some useful ideas. We have some great cheapskates here.
http://finance.yahoo.com/banking-budgeting/article/104811/Extreme-Savers-Share-Their-Secrets
Saving on groceries by buying whole animals! Now there’s coffee all over my screen. That’s a little crazy even for me!
What’s so surprising?
As I understand it, people in rural areas of the Midwest do this all the time. They would buy a whole X, and then store the stuff in their outdoors icebox all winter.
Same for storing apples in the cellar, and all kinds of other stuff. Food doesn’t grow out of the ground enclosed in plastic, you know.
Absolutely.
I’ve known lots of people who store large amounts of beef or pork in a deep freeze.
Very cost-efficient, and usually much tastier.
That’s pretty common in smaller towns here in the Panhandle of Texas. You go in fourths with some buddies and buy a cow from a rancher at an attractive price to him, have it slaughtered, and everyone gets a full packed freezer. Not only is it cheaper, you get the choice cuts of meat that typically only go to restaurants with contracts to the slaughter houses.
It’s not like we are out there killing the cow ourselves or anything, we just go to the butcher and pick up our stuff :).
Common here too, Alberta Canada
Yep, small town AL …
“Saving on groceries by buying whole animals!”
Must be those “bitter” small town folks reacting to their plight.
Now, now…
Well only if they shot the animal out frustration?
Who said anything about shooting, we beat them to death with our bibles out of frustration.
my father bought a 1/2 cow once. Once is the operative word here…we went through the “good” stuff pretty quickly, but the odds and ends, they lingered on in the old freezer. Think the neighbor’s dog finally lucked out with some UFOs (unidentified frozen objects).
I’m down with them on the Freecycle idea. But whole animals? I dunno about that one.
Arizona, apprently us city folk are in the minority. I don’t think I’m going to buy the whole cow when I can have it pre-cut into steak on sale for $4.99 per pound. Sorry guys.
The butcher shop processes it for you. You end up with hamburgers, roasts, steaks, etc., and it averages around $3.00 a pound
A good ribeye from the local butcher shop (a stand alone shop, not part of a grocery chain, or Wal-Mart) runs about $8.99/pound.
Why does a steak from a true butcher shop cost so much? Because it is worth it.
Totally agree - I don’t shop at Wholefoods much because its so overpriced, but every once in a while we treat ourselves to a nice joint of meat for a sunday roast.
I’ll go to Wholefoods for it, because it will be local, often organic, and will be wrapped up in brown paper before my eyes, by a guy in a bloody apron with a cleaver in his hand….
Lund’s and Byerly’s in Mnpls had a great meat dept, I would often go and get their prime grade hamburger meat for grilling out. It was heaven on a bun… A deal as well at $4.99 a pound too. For the real deal prime steaks, I used to go to Forsters in Plymouth for a 2″ prime T-bone for a serious dining experience…
Bad Andy… I’m with you. I wait for one of the grocery stores to run a Rib Eye or Sirlion for 1/3rd the normal price, then run in and stock up…. Limit 4.. yeah, PER visits.
Starting today Safeway and Frys are both running rib eye for $3.99. Time to restock!
“Starting today Safeway and Frys are both running rib eye for $3.99. Time to restock!”
Pubix and Albertson’s got into a price war two weeks ago. Sirloin was $3.99 per pound. I’ve got steak to last until the next hurricane when it becomes necessary to cook out.
‘But I think it has bottomed out. A builder can only discount to a certain point, and I think the builders have bled everything they can bleed. I’ve been through a number of these cycles, and we all know that when it comes back, prices are going to rise.’”
I have seen several of these cycles too. Usually only aboyt 30% of the builders survive it…
“A builder can only discount to a certain point, and I think the builders have bled everything they can bleed.”
But after the builder has bled out and died, the creditors can discount even further. Their stupidity does not necesitate ours.
I made a cash offer for a house listed as 299,000 (the seller has come down from 324900) at El Paso, TX. I offered at 279,000 and I said it is final. The seller countered at 288,000. The seller also requests a quick one month closing and no opt out option. I simply replied to the seller, I am not interested and walk away from my offer. Anyone who knows if El PAso, TX market has hit bottom?
Don’t know, but can guess: virtually NO market has hit bottom, the only exceptions being those with very unusual events, like the new or expanding Air Force base in the Dakotas. You offered more than 85% of asking price. That is not close to a lowball offer, IMHO - though you did not say if it was your intent to lowball or get a great deal, nor what the comps are in the neighborhood.
I would wait until the drug cartel wars from Juarez leak over the border and the chief of El Paso police department is assassinated. Then I would call a bottom in El Paso.
“‘Assume people feel the market has bottomed. You’ll be in more competition for that house you’ve had your eye on. Now suppose (the price) fell another $10,000. What does that mean on your mortgage? Another $50 or $60 a month? Is it worth losing that house?,’ Austin said.”
Hey idiot, most houses in inflated markets need to fall at least $100-200K
“Basic gave this example: ‘In 1991 the average price of a home was $120,000. Now it’s around $246,000. That’s more than double. You can never lose in housing. That’s where all the nation’s wealth is sitting.’”
Liar liar liar!
“That’s where all the nation’s wealth is sitting.”
Uh, was sitting.
combotechie,
Good point. I can’t imagine why we didn’t take offense to that sooner? Assuming we’re still a super power how pathetic is it that our “wealth” resides in tract homes built w/ particle board?
“‘As we keep going down with the price, it’s disappointing,’ Odbert said. ‘The people come in, and it seems they want everything for nothing. They want you to pay closing costs, they want a finished basement, a three-car garage. They don’t seem to realize how much the owner put into it, and we won’t get it back.’”
whine whine whine. Can never forget how badly i was treated back 2-3 years ago looking at over inflated crack boxes and thye wanted a small fortune. And these @$$wipes did not want to hear anything about repairs or anything else.
Absolutely no sympathy here. Face the free markets @$$Hole.
I just heard an ad on the radio for a builder in Plainfield: buy a house this weekend and get $99,000 in options and a Lexus. That doesn’t sound like the bottom to me.
BTW - not that I think that that is a deal. It just means that the really serious price drops haven’t begun in the Chicago area yet. We’re still in the incentives stage that many earlier bubble places were in a year ago. I don’t expect to see serious price drops until this fall at the earliest.
Minneapolis is in deep denial too, prices are starting to drop, by the time we left last year the downtown condo market had basically ground to a halt. Just not that many “hipsters” willing or able to pay $300-800,000 for urban living in dicy areas - even just off Eat Street… Lots of developers were being foreclosed on for big projects.
Right… First come the incentives. The builder has delusions this is temporary and doesn’t want to mess up his own comps…
Won’t buy the house for $500K? Well, instead of dropping the price to $400K, I will add $100K in closing costs and upgrades like granite and stainless in the kitchen, travertine and soaker tub in the bath, and a free swimming pool. That way the house went for $500K protecting the builders comps for when “the market recovers in a couple months”.
When that doesn’t work, THEN the price slashing starts.
Now that underwriting standards are getting back to pre-bubble standards, I know a lot of people are going to claim additional regulation of the housing industry is not needed, and that the market has imposed discipline.
I totally disagree. When an industry gets completely out of control, you answer that conduct with heavy regulation. The message you want to send to everyone, even outside the offending industry, is “you act like assholes, we’ll treat you like assholes.”
You cannot simply allow them to get away with it. Otherwise the shit is going to happen again, in this or another industry. Making their life miserable should be job one.
We need heavy regulation for Wall Street. realtors, brokers, appraisers, rating agencies, banks, home builders, lenders, etc.
Regulate the shit out of them. If my tax dollars are going to be used to fix their messes, they are going to pay as well.
Before promulgating new rules relating to mortgage paper, thousands of indictments need to be issued and trials held for the the liars, cheats and thieves who boostered and their co-conspirators, and those who stood by and said NOTHING for 6 long years. But yes…. Heavy consumer protection laws need to be written on a national scale.
Amen buddy!
Preach it, Rob!
I’m not sure what new regulation would achieve. There undoubtedly were cases where literal fraud was committed by mortgage brokers, and perhaps there is some regulation that can prevent that, but I think the number of those cases were few relative to the total number of mortgages that in past times would not have been up to standard. As far as I know fraud is already illegal and while there might not be regulation to prevent it, there is certainly recourse for victims of fraud.
With regard to the majority of cases, there were a lot of people that either cashed out or paid exorbitant amounts of money for a house and just financed it all. Those people are now losing their ass. So are the retards who gave them loans. It sucks that housing prices got inflated as a result, but other than that I don’t see a problem. I don’t think the “credit crisis” is much of a crisis except for those who engaged in the behavior to begin with and to the extent that our govt will show up to “help” (via inflating the currency or whatever). People who save and spend wisely will be fine.
And exeter, respectfully, what consumers were not protected in this case? Even in cases where there was fraud, doesn’t the onus rest with the person who signed the papers at the end of the day? I’m imagining a scenario where some bait and switch was pulled and at the end of it someone signed for a neg am arm or something when they were told something else. Even in such a case, the person signing could have averted that by simply reading the papers first.
To heck with regulation, just stop the bailouts, subsidies, etc.
BP, you’re reputation for cloaking an ideological twist with needing an explanation for such obvious circumstances follows you closely.
nuff said.
No need to take things so seriously.
By the way you give me too much credit. Asking questions is a reflection of my insecurity and tendency to assume I’m wrong. It might seem like a weakness of chacter but I tend to think people should ask more questions, not fewer.
But I’m flattered you think I’m so cunning.
“It is THE single biggest wish in the American dream of home ownership: the ‘buyer’s market.’ Bill Basic, long time homebuilder and president of the SouthWest Suburban Homebuilders Association, has seen this time come around maybe three times in the past 25 years. ‘The time to buy is now. A lot of people are ‘down’ on housing and the (economic) times, but you can always find some bitterness. People who sit on the sidelines … if they’re going to sit on the fence, they’re going to be kicking themselves,’ he said. ‘Once that inventory is down, you will see prices rise.’”
“Basic gave this example: ‘In 1991 the average price of a home was $120,000. Now it’s around $246,000. That’s more than double. You can never lose in housing. That’s where all the nation’s wealth is sitting.’”
Is this guy a time traveler? He sounds like a visitor from 2005.
Voodoo eCONomics
“Ritke provided a general example of the economics of this: You live in a house you value at $300,000 and the house you want to move up to is priced at $500,000. If you give a discount of 10 percent ($30,000) on your house and get a 10 percent discount ($50,000) on the new home, ‘you just made $20,000 in equity.’”
If he said, “you just decreased your cost of switching houses by $20K” it would have made sense. Also saying “if you wait until prices drop 30%, you’re even better off” would have made this guy look halfway smart. Of course he’d just be pointing out that low prices are good for buyers, which we already know.
“‘As we keep going down with the price, it’s disappointing,’ Odbert said. ‘The people come in, and it seems they want everything for nothing. They want you to pay closing costs, they want a finished basement, a three-car garage. They don’t seem to realize how much the owner put into it, and we won’t get it back.’”
That’s what us sideliners are counting on. We didn’t live in rentals (when we are qualified to buy), thinking it would end up being a break even deal. Bring on the freebies!
This was too funny! It reminds me of me. I won’t even look at a house without a finished basement AND 3 car garage AND a great yard. We rent and are totally qualified to buy at anytime - but we wait like sharks for a foreclosure with all the trimmings!
I had a realtwhore call me the other day and asked what it would take for me to buy. I told him I wanted the same kind of savings on a foreclosure that the rest of ‘them’ made on flipping during the rise. He said he would get back to me, but didn’t. No wait, he DID mail me a list of homes, none of them foreclosures. Guess he didn’t want my business by not listening to me.
rusty,
Good answer! (Best Richard Dawson imitation)
No, absolutely damn right. When jumping through the hoops to own a foreclosure will ultimately net me out the same caliber of profit flippers got, well then now we’re talkin’! Until then..? Btw I’m not referring to the kind of flippers that were on TV shows trying to do this in 6 weeks or whatever.
I want to buy it, zero down preferably? put a minimal, half-hearted effort into a few “projects” like cutting the lawn and maybe a little edging and then sell it for 100-200k higher in 2 years. Why not? Those are the “good times” you were alluding to right?
“‘I don’t think anybody knows where the bottom is,’ Austin said. ‘The only way to know is when it starts to rise. And why would you want to wait until it rises?’”
This is a big problem out there..even the Realtors cannot get past the fact that even if prices stabilize when they do start to go up again, it will not be by 30 or 40%, instead you will see the normal appreciation of 3-5%..so if you wait on that house that stabilizes at $200K and it goes up by 3%..that is 6K…and that means how much more on your mortgage payment????
lol
Ann, you’re not playing nice. You’re making them do basic math.
chuckle.
Got Popcorn?
Neil
But they’re small numbers.
Numbers, small numbers, any numbers, Realtors, never mind…
‘But I think it has bottomed out. A builder can only discount to a certain point, and I think the builders have bled everything they can bleed. Naah, most of ‘em are still breathing. Let the exanguanations continue!
“Ritke provided a general example of the economics of this: You live in a house you value at $300,000 and the house you want to move up to is priced at $500,000. If you give a discount of 10 percent ($30,000) on your house and get a 10 percent discount ($50,000) on the new home, ‘you just made $20,000 in equity.’”
you’re on crack with math like that
OT: a look at the thought process of a homeowner is going to walk away despite being able to pay:
http://www.city-data.com/forum/florida/306467-walk-away-almost-have-point.html
after reading that renting is pretty sweet
talk about a haircut
“talk about a haircut”
This dude is a preview of the untold waves of prime defaults on the way…
This is a perfect example of why price/rent matters a little more than price/income.
His income was fine; and probably continues to be fine.
He’s going to take a massive hit, and for what? The illusion of “owning”?
Some serious jerks posting on that city-data thread. I hope he walks away and moves on with his life. I’m surprised no one mentioned renting or buying in NC first and then sending the jingle mail.
What kind of appraiser appraises a house being sold for $242,000 as worth $300,000? Is 23% supposed to be some sort of rounding error?
“Lynne Austin, president of the Home Builders Association of Greater Fox Valley, said the ‘kick’ will come when a buyer sees other people living in ‘their’ home.”
“‘Assume people feel the market has bottomed. You’ll be in more competition for that house you’ve had your eye on. Now suppose (the price) fell another $10,000. What does that mean on your mortgage? Another $50 or $60 a month? Is it worth losing that house?,’ Austin said.”
—————————————————————————–
Well now, Lynne - if that’s your real name - I saw “The Bad News Bears,” and it clearly stated what happens if I ASSUME.
And it sure looks to me as though you’re making a lot of ASSUMPTIONS. In the movie / novel biz we do this- we get the audience to WILLINGLY SUSPEND DISBELIEF.
“Ritke provided a general example of the economics of this: You live in a house you value at $300,000 and the house you want to move up to is priced at $500,000. If you give a discount of 10 percent ($30,000) on your house and get a 10 percent discount ($50,000) on the new home,
‘you just made $20,000 in equity.’I just made $30,000 in commission.