The Field Of Dreams Ideas Seem Destined For A Long Wait
Business Edge reports on Montana. “When Eric Watson first saw the unique chalets at Slopeside on Big Mountain in Whitefish, Montana, he thought they would appeal to companies that want to host retreats for employees and clients. ‘It’s Aspen living at Montana proportions,’ says Eric Watson, managing director of Calgary-based Ultimate Properties International, which is marketing the homes. ‘You get a lot more for your money.’”
“The 12 units, which range in price from $1.5-$1.9 million, feature four bedrooms, en-suite bathrooms, large kitchens and stone fireplaces in an open floor plan. ‘In Colorado or even Wyoming, these units would be anywhere from $3 million-$6 million,’ says Watson.”
The Whitefish Pilot from Montana. “A local real estate appraiser says Whitefish’s home-sales market has so far been insulated from problems sweeping the nation because the area is ‘maturing’ into a resort real estate market similar to Sun Valley, Idaho, and Jackson Hole, Wyo.”
“John Woods has been a professional in the real estate industry for more than 25 years, working as an appraiser for the past 15. He’s been in Whitefish since 1992. Recently he prepared a sales activity report for Whitefish’s residential real estate market since 2004.”
“While 2005 and 2006 were big years for sales of condos and townhomes, average sales prices slightly decreased. Then sales dropped nearly 38 percent last year, he reports. Vacant land sales also have sharply decreased — down nearly 30 percent from 2006 to 2007 and down by almost half since 2005.”
“Woods, who lived in Ketchum, Idaho, in the late 1980s and witnessed its transformation into what he calls a ‘mature’ resort community, said Whitefish is following a similar path. Homes that sold for $300,000 to $800,000 in 1990 now sell for $2 million to $8 million.”
“Hailey, Idaho, about 15 miles away, became a bedroom community for the resort town’s workforce. But small homes that sold in Hailey for $150,000 to $250,000 in 1990 now sell on average for $350,000. Some sell for $1 million.”
“‘Only about 13 percent of Whitefish home sales are over $1 million today,’ he said. ‘In the mature, competing markets, the total reverse is true — a small percentage is less than $1 million. So if Whitefish does mature as a resort real estate market, where will real estate prices be in 8-12 years?’”
The Daily Interlake from Montana. “Flathead County’s first-quarter housing starts are down 44 percent from last year and are down 53 percent from the 2004-07 average. The shrinking number of housing starts is part of a three-year trend in the Flathead.”
“In spite of the current downturn, Flathead leads the state with 100 housing starts in the first three months of 2008. Nearly all of the state’s most populous counties posted declines in housing starts ranging from 20 percent to 48 percent.”
“Separate numbers for Kalispell weren’t available, but senior planner Sean Conrad said the building department hasn’t been as inundated as it has been in the past. ‘Houses are going up, but definitely not as quick,’ Conrad said. ‘We’re down from previous years, but we’re still way up.’”
“Local builders are feeling the crunch. ‘There is definitely a slowdown happening,’ said Merna Terry of Ron Terry Construction. ‘It’s a tough one.’”
“‘A lot of builders have stopped building spec homes,’ she said. ‘There will be less homes on the market, and that will create more demand. It’s a buyer’s market. Prices are down; interest rates are low. People are going to get a good deal right now. But it’s going to change, though.’”
“Terry said the Flathead home-building situation has been affected by the national economy, the national media and a longer winter here in the valley. ‘People are a little bit afraid and thinking if they wait they’ll get a better deal,’ Terry said.”
“‘It’s definitely been slower this year,’ said Laura Gardner of the Flathead Onestop Workforce Center. ‘We probably had one of our slowest winters in quite a few years. Our hope is that it’s going to pick up and do well. Time will tell.’”
“Sliverbrook Estates recently received final plat approval for 107 lots on the first 73-acre segment, which means the lots are available for immediate construction. Lot prices start at $129,000.”
“Developer Howard Mann, who was a developer in Las Vegas, said the housing-market woes sweeping the nation have not hit the Flathead as severely.” “‘Las Vegas, Phoenix and Florida have been decimated,’ he said. ‘People in Las Vegas were buying homes so fast the builders jacked up the prices and it got to an unsustainable level. Something had to happen. When the price of a house doubles in five years, you know something is wrong.’”
The News Tribune from Washington. “Facing fewer buyers and many, many homes for sale, South Sound builders are pulling back and getting extra promotional. Builders have slowed construction schedules in recent months, cut prices, offered their biggest-ever incentives and even rented out finished homes that couldn’t find a buyer.”
“Sales of new homes for the first three months of the year are down 45.3 percent in Pierce County compared to the same period in 2007, and compared to a 36 percent drop for all home sales in the county, according to Northwest MLS.”
“New-construction offerings, however, have also shrunk, with such homes comprising 18.5 percent of what was for sale in Pierce County last month, compared to 24.7 percent the same month the year before.”
“Still, builders are looking to unload even more of what’s built and empty. In March, 1,485 new homes, excluding condos, were listed for sale.”
“It used to be that half of the homes sold by Soundbuilt, one of the area’s largest builders, were properties with homes either under construction or yet to be built, said Gary Racca, owner of the Puyallup company. Uncertainty about the economy, however, means consumers are holding off, and now 90 percent of the company’s sales are on ready-to-move-in homes.”
“The company has launched a first-time promotion: a price guarantee, which allows someone to buy a not-yet-constructed home at a locked-in price and ensures that if Soundbuilt lowers prices on other similar houses in the subdivision, the buyer will get the same discount. ‘We didn’t do that six months ago. We didn’t do that three months ago,’ he said.”
“There have been some price drops locally to entice buyers and clear out inventory. In the past six months, Soundbuilt has sliced as much as $30,000 off prices on homes in Pierce County, Racca said. ‘We dropped them so low to get the momentum, and now the momentum’s back,’ Racca said.”
“Jerry Mahan, an agent who is also a developer and builder, said the new-home market was oversold in the South Sound. Market adjustment includes lower prices, but on a time-limited basis, he said. Nine months ago, Mahan’s construction company had 60 homes for sale. Now it has about 10.”
“‘On these next 10 houses I’ll give some good pricing. But after that, my prices go back up,’ he said. ‘Every time there’s a slow market, a stronger one follows. There’s only so much land.’”
“Bennett Homes is building about 30 percent of what it expected to be putting up at two Gig Harbor projects, Harbor Crossing and Chelsea Park, said Gayl Van Natter, the company’s VP of sales and marketing. It’s also holding off on four other projects for which it owns land in the harbor area.”
“Chelsea Park’s grand opening takes place this weekend; Harbor Crossing, an urban village concept near the new Costco and YMCA, went on sale in September. While she declined to say how many have sold, Van Natter said the response has been ‘very disappointing.’”
“‘The industry as a whole right now is severely depressed, and all of us who are building now bought at absolute top dollar, so what that means is we have to price accordingly,’ she said.” “Harbor Crossing homes start in the mid-$400,000s; Chelsea Park prices are in the high-$600,000s and up.”
“But building slower doesn’t mean Bennett Homes won’t do more in Gig Harbor. ‘We’re very bullish on that area. Once the market recovers, we think it’s a real sleeper. We think it’s the next one to explode,’ she said.”
“‘We’re seeing traffic out there, not as much traffic. We’re making sales, not as many sales. We get cancellations as well; that’s a typical part of the process,’ said Bellevue-based Quadrant Homes President Peter Orser, who declined to give specific numbers on traffic or cancellations.”
“He pointed, as many in the real estate industry do, to a seven-year time frame – the amount of time an average homeowner spends in a house – as still good for reaping a sound investment off a home purchase. ‘What goes up must come down, and what went down must come up. This is a cyclical industry. We’ve seen it before; we’ll see it again,’ he said.”
“Some builders are offering lease-to-own options for homes sitting empty longer than they anticipated. ‘It’s kind of a backup plan, but you can only do it where you’ve got strong population and employment growth,’ said Bill Riley, VP of government affairs for the Washington Association of Realtors.”
“Agent Gary Hendrickson, who specializes in new construction, said today’s builders need to know their market. ‘If you’re building it just because you own the lots, it will be much more difficult than it has been the last couple of years,’ he said.”
“Affordability will continue to be a strength that builders can use to lure buyers, he said. ‘It was always ‘Come to Pierce County because it’s more affordable than King,’ and it still is,’ he said.”
The Olympian from Washington. “An increase in funds needed to cover potentially bad real estate loans cut into Venture Financial Group Inc.’s first-quarter earnings, the company announced. The company’s net income fell in the year-over-year period because of a decision to increase funds needed to cover potential problem loans as a result of a slower real estate market.”
“Venture Financial’s loan loss provision was raised to $1.5 million in the first quarter of the year from $375,000 in the year-ago period.”
“‘We are positioning ourselves to mitigate risk in the turbulent economic and market conditions, including increasing our allowance for loan losses and making adjustments to our cost structure,’ Venture Financial CEO Ken Parsons Sr. said in a prepared statement.”
“Also in the first quarter, the company’s nonperforming assets increased to 1.72 percent from 0.27 percent, and nonperforming loans rose to 2.62 percent from 0.40 percent. Venture Bank CEO Jim Arneson acknowledged that the nonperforming asset and loan figures were a little high.”
“‘We don’t like to see them that high,’ he said.”
“The nonperforming loans were tied to an undisclosed builder and three real estate developments, which accounted for most of the company’s problem loans, Arneson said. Arneson wouldn’t disclose where the loans were made, except to say the real estate developments and the builder are either in or operate out of King, Pierce, Grays Harbor and Lewis counties.”
The Statesman Journal from Oregon. “The real estate slump has finally hit the Salem area. Sales in the Mid-Willamette Valley are down 34 percent compared with last year, according to statistics from the Willamette Valley MLS. That’s the slowest 1Q since…1996.”
“Average sales price in the area covered by the WVMLS was $237,1867, down 4.8 percent. It’s still a far cry from the double-digit price declines seen in other markets, but troubling nonetheless.”
The Source Weekly from Oregon. “Stephen Trono had grand plans for his new project, The Mercato, when he unveiled it back in the heady housing-boom days of mid 2006. Five buildings soaring as tall as 74 feet, with brick facades and top-of-the-line interiors. And, capping it all off, a series of top-drawer condos, complete with million-dollar pricetags.”
“But here in the muddy days of 2008, with the housing market in the tank and the banks running scared from speculative real estate deals, Trono says his land is likely to remain just what it is for another year: A flattened field of weedy gravel, waiting for better days.”
“‘There is so much fear in the residential market, I’m glad I don’t have product out there right now,’ Trono said last week. ‘I haven’t seen a market like this since the early 80s. There is a lot of confusion. A lot of fear.’”
“‘Financing is just really tough right now,’ said Old Mill District developer Bill Smith. ‘Boy, it’s just really tough. That’s not saying it’s impossible, but if the project depends on selling condos to succeed, you’ve got a rough road ahead.’”
“There’s the scraped dust that surrounds the Bend Brewing Company’s restaurant and pub on downtown Bend’s Brooks Street. Once slated to be the site of high-end condos and retail shops, it sits empty with a ‘for sale’ sign on it.”
“Empty lots dot both ends of downtown’s Bond Street. Major projects on both sides of the Old Mill District – a $127 million hotel/condo proposal on one end, and a sprawling retail and residential condo project on the other – remain unstarted.”
“Enough so that most of the Field of Dreams ideas that flooded Bend in the latter years of the housing boom seem destined for a long wait before their first bricks rise above the ground.”
“Franklin Crossing in downtown Bend was the first mixed-use building in town to come onto the market with luxury residential condos when it gained legal approval to sell them in December 2006. Real estate agent Norma DuBois solicited ‘reservations’ in the spring of that year. Investors and second-home buyers lined up two and three deep to put their names – but no cash – down for each unit, despite initial pricetags that ran between $500,000 and $1.4 million.”
“By the time all the legal paperwork was in place to finalize sales in December, though, the market had turned, DuBois said. It has taken more than a year and a quarter now to sell five of the eight units, at greatly reduced prices. One unit, once listed at $525,000, actually sold for $370,000. One of the three that remains for sale was once listed at $650,000. Now it’s priced at $590,000.”
“Meanwhile downtown, where the old City Center Motel stood on Franklin Street, Rick Skinner and his partners are trying to come up with a new idea for their now-empty lot. They originally planned to build more than 80 residential condos, according to plans filed with the city in April 2006. Today? It could become an office complex, Skinner said.”
“‘It’s always nice when there are lots of lenders,’ Smith said, adding ‘The market is saying there is more bad news to come.’”
“So are we going to be looking at gravel lots for awhile yet? ‘I’d hope not,’ Smith said. ‘But that’s my bet.’”
Oh, good grief, Ben. You would have to have a “Field of Dreams” post on the same day that our local business paper is sporting this headline:
Investors betting on condo conversions near [University of Arizona] as alternative to apartment rentals
As if it’s the end of the world to be renting an apartment during one’s college years.
If you build it, they won’t come…
Partially true. The ravers, squatters and copper strippers will come if the buyers don’t.
Copper strippers?
I’ll bring a bunch of dollar bills to insert in the G strings of the women of law enforcement…
Lad, that was BAD…
BAD would be trying to insert Dimes into said G strings.
Not bad, Aladinsane, not bad. You’re quick.
$5500 pool table free …….oh yeah!
http://newyork.craigslist.org/que/zip/669236092.html
too high-falutin fer me. no dogs playin’ poker wall sized rug to go with that hoity toity pool table. heck, the first time I took apart my harley engine on it there would be hell to pay.
and I’d have to round up some relatives & friends to move it. and I think the only one with a pickup is back in the pen on a parole violation. ah well . . .
LMAO “It’s different here on Big Mountain in WhiteFish Montana” says the WhiteFish Pilot.
Come on guys, this shit can’t be real! I remember back in the 90’s when we called such places HELL!
Another case of rich foreigners coming to save us like the Calvery. What jobs could they possible have in WhiteFish?
http://www.whitefishchamber.com/whitefish_demographics.php
HAHAHHAH, population of 7,067 and they have the key to million dollar condos!!!!!
These people are smoking some very mean shit.
There are no jobs in Whitefish, except tourist, service and real estate development related jobs. High energy prices are going to gut punch the whole area -nothing is close, finished goods & groceries have to be shipped into the area. Propane & gas are high. Fewer tourist due to gas, etc. Medical specialist 276 miles away in Spokane or maybe 130 miles away in Missoula. If energy stays high or goes higher this area is toast.
“‘We are positioning ourselves to mitigate risk in the turbulent economic and market conditions, including increasing our allowance for loan losses and making adjustments to our cost structure,’ Venture Financial CEO Ken Parsons Sr. said in a prepared statement.”
Translation: We are under water, sinking fast, and blowing bubbles. Our planning model proposes blowing many more bubbles in the future.
“‘Only about 13 percent of Whitefish home sales are over $1 million today,’ he said. ‘In the mature, competing markets, the total reverse is true — a small percentage is less than $1 million. So if Whitefish does mature as a resort real estate market, where will real estate prices be in 8-12 years?’”
*****
Whitefish may “mature” as a resort market, but it’s timing is not very good.
["mature"? The maturation he speaks of is really the result of the actions of Easy Al Greenspan and the policies of the 'Do Nothing Fed'.]
I’ve never been to Whitefish, but notwithstanding an economic slowdown, it will be very difficult to duplicate the price changes seen over the last 15 years in a place such as Ketchum.
I’ve been to Whitefish and laughed my way all the way through the first article (I read the full thing from the link) — a puff piece through and through. I picked up a native American hitchhiker, a teenager who needed to get back to Cranbrook BC after his 19-yo uncle left him stranded at a powwow in Missoula. Kalispell and Whitefish are in lovely country, but pulleezz — how many multimillion-dollar resort homes can the US use?
The term “Native American” is no longer considered PC, because so many for whom it was used said it was offensive. The safe term now is “American Indian.”
Who cooks up these things?
Jack - I think your point illustrates the massive amount of fantasy that spawned and grew during the bubble - the illusion that everyone could own and enjoy what once was only the province of the rich - the privileged few who were welcomed each season to Ketchum, Idaho, to shoot birds or other game with Ernest Hemingway and Gary Cooper.
Most of those people were exceptional in their own way. None, that I know of, were able to purchase a nice ranch in the area by way of collecting fees from mortgages they sold to people who could not afford them.
I suppose there will be many new phrases coined, to mimic “Paradise Lost.”
“Woods, who lived in Ketchum, Idaho, in the late 1980s and witnessed its transformation into what he calls a ‘mature’ resort community, said Whitefish is following a similar path. Homes that sold for $300,000 to $800,000 in 1990 now sell for $2 million to $8 million. . . . Only about 13 percent of Whitefish home sales are over $1 million today,’ he said. ‘In the mature, competing markets, the total reverse is true — a small percentage is less than $1 million. So if Whitefish does mature as a resort real estate market, where will real estate prices be in 8-12 years?’”
I am totally lost with this one. Why would one assume bubble appreciation would continue? Why ignore current trends in sales? Why would one assume that demand for this type of product will increase (note if demand is the same the extra supply would mean that prices should have limited appreciation if any)? What does “mature” even mean in this context? Varying resort areas start off the same and end up the same after many years? What about global warming limiting ski seasons? What about the recession and changes in lending? What about max affordability? What about reality? . . .
Why? Why? Because…well, because someone has to play the fool. Apparently Woods prepared his entire life for the role and is really into it.
I have wondered about how the timing of the second home collapse in prices would correlate to other sectors. My guess is that since these homes are purchased by the wealthy, there may be a lag because, unlike those living pay check to pay check going into foreclosure as rate resets hit at the lower levels, they can afford to carry it (or at least a higher percentage). Eventually, however, the depreciation at the lower levels will limit the number of new entrants in the extreme luxury market. As for the hope that baby-boomers will keep the market alive, I can see this to some extent with respect to waterfront properties, but how many baby boomers have snow skiiing on their mind? I would welcome any insights on the timing and price adjustment differences people expecting between the primary residence single family market and the second home market.
Tim, it’s already hitting in the ski areas in Colorado. Ben posted an article recently stating Aspen’s slowing down, and I know from friends that Telluride and Steamboat Springs are. As well as other resort towns like Moab and Park City. Remember the post about Wall Streeters selling their vacation homes? It’s like solar irradiation, no place is immune.
Methinks that they’ll shy away from sports where they might fall down and go boom. (Yes, I know. Bad pun.)
Yes, by all means, Whitefish should try to emulate Ketchum!
High-end Ketchum subdivision files for bankruptcy
There are many resort/second home areas in the Northern Rockies in trouble right now, if you look around a bit.
“‘On these next 10 houses I’ll give some good pricing. But after that, my prices go back up,’ he said. ‘Every time there’s a slow market, a stronger one follows. There’s only so much land.’
…and you’re getting desperate now because there’s only so many FOOLS
Well, here in Oregon, second homes were touted as a fabulous investment that would pay for itself via rentals. That’s one reason Bend has cratered. That shoe is about dropping in Bend (4000 places for sale in a town of 80,000) and is also dropping in So Cal, so I hear - at places like Big Bear Lake and Lake Arrowhead.
This Woods guy is typical for Montana right now. There is evidence every where things are slowing down. He even has has a whole list of things that indicate that. But it’s not going to effect us any. Why when prices get back to normal in California all those rich people are going sell there homes and buy here. Never mind the the shole worlds finicial system is melting down right now.
What???? WHAT???
No FL thread in the morning, no CA thread in the evening. AND this thread is up for 21 min and counting with NO comments? Something is WRONG!!! Everyone drunk from Cinco de Mayo?
“Everyone drunk from Cinco de Mayo?”
No, out tagging McMansions in honor of Cinco de Mayo. Then, maybe, I’ll have some strawberries or cabbage. Got to keep those field workers in their houses.
No, I’m still fuming about this crap article in yesterday’s SLO Tribune:
http://www.sanluisobispo.com/news/local/story/350569.html
Sales are down, but buyers are coming back … all nonsense. I did do a quick search and found out the reporter bought a $700K lot (no house) in February 2007. She is in her 30’s and married to a local pathologist (also in his 30’s), but the numbers still don’t pan out.
I need some tequila.
Florida? California? Here, I’ll sum it up for ya - Florida sucks, California blows, and every Joshua tree is owner-occupied!
“Florida? California? Here, I’ll sum it up for ya - Florida sucks, California blows, and every Joshua tree is owner-occupied!”
Now here’s the guy who should be working at Cravath for big bucks…he can bottomline it for you in one sentence.
Not happy with news from the Northwest? Well then, chew on this for a while. It’s the transcript from Bernanke’s worthless little speech tonight….
http://www.federalreserve.gov/newsevents/speech/Bernanke20080505a.htm
I’m warning you, it’ll make you sick. Not one friggin word about imbalances caused by prices that got way to high in the first place. Every other lame excuse in the world is used, but not a word about healthy price levels. On second thought, you may not want to read it at all. I’ll be going to bed pissed!
we are all waiting for Olympiagal response to set the tone.
She’s out rounding up frogs.
‘What goes up must come down, and what went down must come up. This is a cyclical industry. We’ve seen it before; we’ll see it again,’ he said.”
Umm…have you seen what happened to the dot.com stocks, at least some of them.
Is Microsoft still not 1/2 its prior high, EIGHT years after the implosion?
Prices will certainly appreciate again. But even then, I would bet big money that peak prices will not be seen for decades.
At least with equities, if the price rises again at some future point one might actually see some benefit as there aren’t any carrying costs but the lost opportunity. With RE there’ll be rising taxes, insurance and HOA to pay during the long wait for prices to begin to rise. Besides, we all know that even if house prices fall insurance and HOA will continue to rise - and so will property taxes for those remaining owners - as state and local gov’ts can only cut so much.
a cyclical industry and were still in the first syllable
As in “the market is “cyc” (sick)?
“‘The industry as a whole right now is severely depressed, and all of us who are building now bought at absolute top dollar, so what that means is we have to price accordingly,’ she said.” “Harbor Crossing homes start in the mid-$400,000s; Chelsea Park prices are in the high-$600,000s and up.”
So if I understand this, the builder pays top dollar and therefore the buyer has to do the same? Good luck on that one.
Reminds me of the comment a couple weeks ago:
Realwhore: ‘Prices can’t fall anymore. People owe that much on their loans.’
As if the Mr. Market cares about their loan balances.
You can price whatever you want, the market may have other ideas.
Someone hand these idjuts a book on economics, with helpful arrows to the section on “demand curves” and “supply curves.” See the nice lines? See that cute little spot where they intersect? See how shifts in demand curves to the left make them intersect at a lower price that “clears the market”?
Aw, what the heck. It’s like trying to teach a goldfish quantum mechanics.
“The 12 units, which range in price from $1.5-$1.9 million, feature four bedrooms, en-suite bathrooms, large kitchens and stone fireplaces in an open floor plan. ‘In Colorado or even Wyoming, these units would be anywhere from $3 million-$6 million,’ says Watson.”
So you’ve essentially got a nicer 4 bed/4 bath unit for $1.5+M. Even on great land, I don’t think so.
BTW, I understand the last article was written by the reporter who was fired by the Bend Bulletin.
I had to look:
The official line going around The Bulletin newsroom is that Fisher was fired for lying about being sick and taking two days off. Not so, said Fisher in his e-mail: He didn’t claim to be sick, but wanted time to cool down before confronting Stearns about the butchered story and asking to be transferred to a different beat where he could cover the news “without what I perceived to be the editors’ emotional desire to slant coverage of the real estate market.”
Interesting story here.
I wish my SE Oregon friend would get literate and read this blog (she can’t even turn a computer on). She makes me wonder if some people really aren’t hardwired to own property, no matter what. Maybe hardwired for self-destruction would be the term. She sold her old POS house at the top of the market, moved into a new community and bought a house within the first hour of being there, a FSBO. After 6 months there, she wants to move already and is ready to repeat (she can buy with cash w/o selling that one).
She’ll agree with everything you tell her about the economics, then call the next day saying she found another possible place, only 300% over what it should be, but she’s going to go look at it. She just called almost crying, saying she’d found her dream place but it was just sold. I asked if she’d looked at it - nope, but it was her dream.
I give up. You know, some people really are deluded into thinking a house will bring them that elusive happiness.
The words “dream” and “house” need to get a divorce.
but of course…just like they’re deluded that this pair of shoes/this car/this outfit/this whatever will bring them happiness.
“Hailey, Idaho, about 15 miles away, became a bedroom community for the resort town’s workforce. But small homes that sold in Hailey for $150,000 to $250,000 in 1990 now sell on average for $350,000.
Well, think about that. That’s EIGHTEEN YEARS. If you had put $150K in the stock market in 1990, you would have about $900K. So - you tell me - which is the better investment? Oh, yes, you got to live in the house.
i dont get that.. Not alot of people have 150K cash to put in the market. Anyway, is it such a good deal?
So, you gotta figure the home buyer invested only the down payment in ‘90.. say, 15% or 22,500.
If the appreciation was from 150K to 350K, that’s $200K ‘profit’ .. nearly 10X what you invested in the house.
But when 150K cash invested in the market goes to 900K .. a return of only around 6X.. that’s not as good a return as the house was.
What about all the interest they would have paid during that time? Since 1990 a fixed loan of $127,500 at say, 8%, would have meant paying some $161,000 in interest. That whittles the profit down to under $40k. Meanwhile $15k in stocks would produce $90k.
Maintenance, taxes, insurance all make it an even worse deal.
heh.. i’m too late..
we should calculate the comparative risk factors between stocks and houses in any given 18 year period… adjust for inflation.. calculate everything.. My guess is the best investment choice is not so cut and dried. bbl.
What your example also brings up, however, is the distorting effect of our tax policy. The gains on the stocks are taxable, while those on the house would not be - even for a single person in this case. Although, it’s not enough to make up for the difference it did help shape the perception of housing as a competitive investment during this period.
since i’m stepin out for a while and someone might bring it up, i forgot to add that the monthly payments on the mortgage do count as 18 years of unavoidable “rent” ..
The guy who bought stock will have to pay rent somewhere too. They don’t let you sleep on the floor of the exchange for free.
The leverage a mortgage allows can be hard to beat.
“The leverage a mortgage allows can be hard to beat.”
It can also be deadly. As many are finding out.
OT: Just got back from NYC… much to discuss, including the insane amount of retail available there. I’ll be busy this week at work getting caught up, but I’ll swarm the bits and slug coffee on Saturday morning per the usual.
I had a lawyer from Cravath let me in on a secret, “they aren’t making any more land in Manhattan.” Tell your friends!
“I had a lawyer from Cravath let me in on a secret, “they aren’t making any more land in Manhattan.” Tell your friends!”
So,that’s why they pay the guys at Cravath big bucks…for just this kind of insight.
Kind of stupid though, you might have asked him about Battery Park City, a nice little addition to the island, from the original excavation to build the WTC. Of course, that was probably before his time, and you can’t expect the guys at Cravath to know everything.
Muggy — I considered that, at your request and at length. No offense … I’ll pass.
“The company has launched a first-time promotion: a price guarantee, which allows someone to buy a not-yet-constructed home at a locked-in price and ensures that if Soundbuilt lowers prices on other similar houses in the subdivision, the buyer will get the same discount.”
does anyone still think this builder, with their army of lawyers, accountants, and other support systems, will actually honor this type of proposal?
Of course not.
the sales contracts will have so many loopholes & be so builder-biased as to be practically worthless for any buyer recourse.
I’d suggest a graduated payment to the builder at sales close, instead of a lump sum payoff, to keep some buyer leverage for the future, lilke maybe 1/2 of total, then 1/4 in 30 days, then maybe the remaining 1/4 in say .. 90 days or longer. but yeah, good luck getting ANYONE who reaps a huge single sum paycheck to volunarily forego or modify their instant income structure!
see, thats the main problem with this current financial structure regarding home purchases; too many people have an interest in keeping the sales price as high as possible to support their instant windfall paychecks, due & payable in full ASAP. insteaad, if you just tied everyones salary into a series of payments, then it removes a lot of ability to defraud.
if the buyer has to make payments for 30 years, why is it too much to expect the army of commission & fee based people to wait for their paychecks over time?
remove the instant large paychecks & you remove the ability (and motive) to defraud.
“Jerry Mahan, an agent who is also a developer and builder, said the new-home market was oversold in the South Sound. Market adjustment includes lower prices, but on a time-limited basis, he said. Nine months ago, Mahan’s construction company had 60 homes for sale. Now it has about 10.”
“‘On these next 10 houses I’ll give some good pricing. But after that, my prices go back up,’ he said. ‘Every time there’s a slow market, a stronger one follows. There’s only so much land.’”
Oh, oh…omg. I know this f*ck. I HATE this f*ck. Oh, oh, oh…please. Let this end bad. Let it end SO bad.
Wait..wait… why am I murmuring sincere pleadings into the void? This IS going to end bad. In fact, it probably already is heading right towards bad.
Whoo HOOO! Bye, bye, Mahan! Hey, is that your wide azss on fire that I see right there, with the little orange lights glittering away? Yes, please! How much are you leveraged, after all? Tell me one more time?
Oh, oh, seriously, my head hurts, all the veins are in a riot of joy. I gotta stop now, before the gloatings get downright unseemly and I get either filtered by Ben, or I fall off my office chair into a heap.
Please. Don’t. Stop. Bring on downright unseemly!
Is there a way to find out how many people got helocs based on last year’s market?
Would there be some kind of an indicator of how lopsided the lending got. Sort of like, 10 million families borrowed 100 million dollars based on peak home price and now they are sca rood.
The first and only time I ever used a margin accout was to pay my flippin’ taxes, and you betta believe they kept track.
Ouro - it’s late and that might be influencing my judgment, but I think that would be a pretty interesting statistic to know. Must be dropping at terminal velocity by now.
It’s a mortal lox
“A local real estate appraiser says Whitefish’s home-sales market has so far been insulated from problems sweeping the nation because the area is ‘maturing’ into a resort real estate market similar to Sun Valley, Idaho, and Jackson Hole, Wyo.”
“Once again Bernanke is calling for mortgage servicers to reduce the principal amount of underwater loans.”
I respectfully request that Olygal rev up her little car, attach the trailer with the small swimming pool, abscond with bernanke, placing his face carefully into said pool, and slide his mortal remains into a green, murky pond. He’s not a veteran, nor a patriotic American, so let him sleep with the frogs.
the problem with reducing principal, is it has to be not tied to income and saving no matter the form….its either tied to income and savings, or its a SCAM on those paying to live in their homes. settle my mortgage debt tomorrow at 30 cents on the dollar…check and mate.
If this comes before the FEDERAL courts, I will take my case….. it does not matter the JURISDICTION.
In the past, said Bernanke, lenders and companies that service loans were “used to dealing with mortgage delinquencies related to life events such as unemployment or illness. . . . A widespread decline in home prices, by contrast, is a relatively novel phenomenon, and lenders and servicers will have to develop new and flexible strategies to deal with this issue.”
Ben is an outright liar. Banks are very familiar with the term “jingle mail” which is NOT new. The know damn well the risks and ignored them. Now they have their little bitch out whining for them - he is nothing but a whore to bankers/builders/wall street. He should be run out of town - we need to stop him now.
“…we need to stop him [Bernanke] now.”
Would that we had another cigar-chomping Volker on the scene, not that I favor an environment that would have fostered the rhetorical choice in the first place. We be skrewd.