The Short Market Downturn Turned Into A Free Fall
The East Valley Tribune reports from Arizona. “In the first quarter of 2008, there were 310 resales of homes in Maricopa at a median price of $170,000, according to a real estate report issued by Arizona State University. In the same quarter of 2007, there were 90 resales with a median value of $246,500. Paul Jepson, an assistant to Maricopa’s city manager, said that about 31 to 34 percent of resales in the city have been of such underwater, or ‘distressed’ as he called them, homes.”
“One of the market casualties is Daryl Fox, a recently unemployed cosmetics salesman. After his divorce several years back, Fox and his ex-wife sold their home in Chandler. It took a while to sell the house, and they had to reduce the price to find a buyer in the already-slumping Valley real-estate market, he said.”
“In April 2006, Fox took his half of the equity from the Chandler home and whatever other savings he had scraped up through the years and used them to pay 15 percent down on a three-bedroom home in Rancho El Dorado. The $212,000 purchase price was down from the home’s highest value.”
“He thought he was hitting the market at the right time, getting the most bang for his buck. ‘I thought the market had bottomed out when I bought it,’ Fox said. That’s why he was willing to take out a 2/28 adjustable rate mortgage from Chase Bank.”
“He did refinance right after closing, drawing the equity of that 15 percent down out of the house to finance a few renovations, he said. He owed the full $212,000 now. ‘My intention was to live in that house as my primary residence, that’s why I remodeled it,’ Fox said.”
“In June 2006, Fox met Teri Parks, his future wife, at the Native New Yorker. Parks soon moved from Minnesota to Maricopa, buying a home in Acacia Crossings. Parks’ house was the larger of the two, so it made sense for Fox to move in there and sell his place.”
“But the short market downturn Fox had expected turned into a free fall. ‘The median housing price in Pinal County ‘has steadily eroded from $220,000 in fourth quarter 2005 to $193,000 in third quarter 2007 and $156,160 for the current quarter,’ stated a report released by Jay Butler, director of Realty Studies t Arizona State University.”
“After spending thousands trying to hang on, Fox was staring down the barrel at foreclosure. A lawyer advised him just to walk away from the home, but he decided that he would try to sell the property in a short sale. Fox has a buyer willing to pay $90,000 as of early May…if the bank accepts that offer.”
“Fox said the bank told him that the house would be foreclosed upon on May 19. Even if the short-sale offer was on the table? He referred me to his real estate agent, Rita Weiss, broker in Maricopa.”
“‘I’ve spoken to Chase but they won’t tell me,’ Weiss said. ‘If there’s an offer on the table, they’re going to try to make it work. There’s a flood of homes on the market. They don’t want to take back the houses.’”
“‘Forty-two percent of all houses that are actively on the market in Pinal County are either foreclosures or short sales,’ she said. ‘There are 56,000 listings in the MLS right now. When we were in the big boom in 2005, there were only 8,000 houses on the market.’”
The Tucson Citizen. in Arizona. “Between 2003 and 2005, the Tucson real estate market went gangbusters - homes sold within days of being listed and values kept going up. Thousands of homeowners cashed in on rising values, refinancing their home loans, sometimes repeatedly, and taking out the increase in value in cash.”
“When ARM interest rates began resetting to higher rates in 2006…they began defaulting on the loans, the housing bubble burst. In 2007 there were nearly 4,500 foreclosure filings in Pima County, according to RealtyTrac. Foreclosed homes can be found in every neighborhood in the metro area.”
“When Ricardo Heredia signed the loan agreement for the home he and Claudia Estrada live in, the assistant tile setter and native Spanish speaker didn’t know what a teaser rate was or even understand the language the contract was printed in - English.”
“Now the couple face…loan resets every six months and the loan servicer they are working with is threatening foreclosure. Their teaser rate was set at 7.5 percent in 2005, which was relatively high then. Now the loan carries an 11.5 percent rate and could increase to as much as 13 percent.”
“The difference is about $200 a month, enough to keep the young couple from dining out, renting movies or fixing up their house, which they say is overvalued at $73,000.”
“Claudia Estrada said her mother took out a loan on the home they have lived in for seven years in order to fix up the place. Increasing interest rates have forced them to put it on the market to avoid foreclosure.”
“‘We thought about our kids, we thought about getting the best things for our house, and it’s just going down the drain like nothing,’ Estrada said. ‘There’s nothing we can do about it. This is the consequences of what we’ve done but we did it because they assured us everything was going to be fine.’”
“Cris Poor, director of homebuyer programs at the local non-profit Family Housing Resources, said that there is more than enough blame to go around for effects of the spike in subprime loans and the spate of home purchases by underqualified buyers in 2005 and 2006.”
“‘It was not whether or not you can get a loan, it was which loan you can get,’ she said. Borrowers ‘went on the goodwill of what someone was telling them or what someone was not telling them. They share a part (of the blame), but I think a majority of them were misinformed.’”
“It is possible to work out a solution and stop the process right up until the home is on the auction block. ‘It just depends on what you want to do,’ Poor said. ‘Do you want to keep your home or do you want to walk out?’”
“David Guthrie, a real estate agent specializing in foreclosures, said that although inventory may be overstocked, that doesn’t mean homes aren’t selling.”
“‘I see it as a natural correction in our market, which has been needing to happen for the last couple of years,’ Guthrie said. ‘Average people with regular jobs and regular families just had trouble buying a home to live in before. Now there’s plenty of homes.’”
The Arizona Republic. “Home sellers in the West Valley have slashed their asking prices up to 30 percent since February, and the price cuts are spurring sales in Surprise, El Mirage and Goodyear, according to a report from ASU.”
“‘You really got two sets of communities: Glendale and Peoria are older, more mature communities. And then, there are the new ones under development like Surprise, El Mirage to some degree, and Goodyear . . . those are the ones that really got hit hard (by the housing slowdown),’ said Jay Butler.”
“The number of Phoenix-area bankruptcy filings more than doubled in April as the soft economy and lingering housing ills came home to roost.”
“‘Housing is really the main thing right now,’ said Ericka Young, a personal-finance coach in Mesa. ‘Most of my clients having money problems are at least a month or two behind on their mortgage payments.’”
“Gilbert attorney Chris Dutkiewicz says many people have been trying to save their homes by racking up credit-card bills or borrowing from retirement accounts to meet other payments, with rising gas and food prices making things worse.”
“‘Eventually, some will realize they still can’t make it,’ he said. ‘They now have high housing payments and high credit-card payments’ and turn to bankruptcy as a last resort.”
“While a new national survey says Arizona’s economy is in a recession, a leading economist here says our problems go even deeper — into a depression.”
“Pete Ewen forecasts state growth for Arizona Public Service, the state’s largest utility, and he says this is the worst stretch for Arizona’s economy since World War II. ‘If you’re in the construction industry it’s going to feel like a depression,’ Ewen, chief economist at APS, said in an interview.”
“The housing market is choking on a year’s supply of unsold homes, the state is losing jobs for the first time in a 25 years and governments are starving for the tax revenue generated by the Arizona growth machine.”
“Even if you have no direct connection to the industry, you might feel the housing depression. Take the example of the Power Ranch neighborhood in Gilbert. Homes there that sold for $875,000 less than two years ago are now selling at a $400,000-plus discount.”
“Most have good incomes, says Ericka Young, a financial advisor in Gilbert, but they’re desperate to save their homes. ‘If we’re going to be in this state for three years, a lot of people won’t be able to make three years,’ Young says. ‘Six months is a long time.’”
The Las Vegas Sun from Nevada. “In a sign of how the mortgage crisis is rippling through Nevada and across the national political landscape, the state’s two Republican House members broke ranks with their party Thursday and defied President Bush’s veto threat to vote for the main provisions of a Democratic housing rescue package.”
“‘My constituents who have met their payment schedules and my constituents who are seeking assistance are all negatively impacted by the crash in housing prices,’ said Republican Rep. Jon Porter. ‘The subprime mortgage crisis has been a major catalyst in triggering the economic challenges Nevada is facing.’”
“Democratic Rep. Shelley Berkley, who voted for all provisions of the package, said the bills are designed ‘to help ordinary working families who are in danger of losing their homes so they can keep a roof over their head.’”
“‘You cannot have row after row of unoccupied homes in neighborhoods,’ Berkley said in an interview. ‘It drives down values.’”
“Elliott Parker, an economics professor at the University of Nevada, Reno, said he understands the complaints of those who say taxpayers should not help buyers who overreached for homes they could not afford. But he said the package could aid Nevada, where home prices are continuing to drop, affecting the housing market and the state treasury.”
“‘What people tend to forget about bubbles is they can happen downward, too,’ Parker said, explaining the need to avoid letting prices dip so low that homes are undervalued. ‘The Great Depression was a great example’ of a downward bubble, he said.”
In Business Las Vegas from Nevada. “As home prices and interest rates keep falling in the Las Vegas Valley, more and more buyers are snatching up houses. The Greater Las Vegas Association of Realtors reported May 6 that 1,794 homes were sold in April, a 21 percent jump over March’s 1,478 home sales. The sales are 30 percent higher than April 2007.”
“Properties owned by banks and other lenders accounted for more than half of the homes sold in April and that has created bargains since those homes are being sold below market prices, said association president, Patty Kelley.”
“The increase in sales comes as prices continue to fall. The median price of single-family homes sold in April was $235,875, down 3 percent from $243,169 in March. Prices are down 23 percent from April 2007.”
“Las Vegas housing analyst Steve Bottfeld said the valley will have to deal with thousands of foreclosures in 2008, but the increase in sales is a good sign. The Federal Reserve’s reduction in interest rates has been the difference, he added.”
“‘It is not about price, not about floor plan and not about design or location,’ Bottfeld said. ‘It is about the monthly payment.’”
“The increase in sales, however, has prompted an increase in the housing inventory, which had been dropping in previous months. There were 22,942 homes listed for sales in April…3 percent higher than it was in April 2007. Of those new listings, the median price was 3.6 percent lower than March and 23 percent below April 2007.”
Business Week on Nevada. “Banks—particularly in hard-hit real estate markets such as Arizona, California, Florida, Michigan, and Nevada—are slashing prices to entice buyers and clear away rising inventories of homes. The banks are competing with desperate builders and sellers facing foreclosure and, as a result, bargains are abundant.”
“At the end of 2006 a new 4,000-square-foot home with a three-car garage in a small gated subdivision in Las Vegas sold for $1 million. On May 6 the bank that owns the now foreclosed property at 7604 Noche Oscura Circle agreed to sell it for $500,000 ($32,900 below the already discounted asking price).”
“‘It’s an exceptionally good deal,’ agent Dillon England, said of the house, which is listed with his company. ‘What holds a lot of people back is when they walk into a small, 20-home subdivision like this one that has eight foreclosed houses.… It would scare you, wouldn’t it?’”
The Deseret News from Utah. “Most Utah homeowners are coping in the current housing market, but some people who have adjustable-rate mortgages say they are having difficulty making their house payments, according to a recent poll.”
“Results from the Deseret News/KSL TV survey of 404 Utah residents…showed that nearly 60 percent of respondents said they have fixed-rate mortgages on their homes, while 3 percent said they have adjustable-rate home loans. The poll had a margin of error of 5.2 percent.”
“Among those surveyed, 87 percent said they were current homeowners or in the process of purchasing a home, while 10 percent said they were renters. Of those with adjustable-rate mortgages, 45 percent of those people said it was not difficult to meet their house payment, while 45 percent said it was somewhat or very difficult to do so.”
“The number of respondents identifying themselves as having adjustable-rate mortgages was small — just 11 people — so the margin of error for the question was high, at 20 percent, making the statistic less reliable, said Dan Jones and Associates research director Diane Meppen.”
“The number of foreclosures in the Beehive State increased 34 percent from the fourth quarter 2007 to the first quarter of this year, according to RealtyTrac.”
“Brian Miller said he and his wife purchased their Herriman home in 2005 using an adjustable-rate mortgage. At the time, it made the most sense, he said, because it was their first house and they were newlyweds.”
“When they initially took out the adjustable-rate loan, it had a lower interest rate for the first five years of the loan, and they believed that the lower payment would allow them to strengthen their financial circumstances as the adjusted to married life and paid off wedding expenses.”
“Since then, Miller said, they have watched the housing market change and believe it is time to pursue a more stable financial option.”
“‘We did a five-year ARM thinking we weren’t certain we were going to be there longer than five years,’ he said. ‘We were kind of looking at it as a possible investment opportunity, but we’ve loved it out there and decided we’ll be there awhile.’”
‘In-migration to Arizona from other states continues to slip, according to…Motor Vehicle Division figures. The report says Arizona’s slowdown in employment growth weakens in-migration because of reduced job opportunities. The report also cites the effect the national housing slump has on moves by people having trouble selling homes elsewhere.’
‘Statewide gaming revenues fell for the third straight month in 2008 with casinos winning 1.52 percent less from gamblers during March than they did a year ago. Strip casinos took a nearly 5 percent hit compared with their results in March 2007. The numbers also marked the fourth month out of the past five that gaming revenues have declined.’
‘Is this a trend? I’d have to say so,’ said Frank Streshley, senior research analyst for the Gaming Control Board.’
‘Those gaming tax numbers were bad. Worse, even, than the state expected them to be just a few weeks ago, when the governor’s budget office made new budget projections and announced round two of budget cuts. What Friday’s gaming tax numbers mean to the state budget: The state is another $60 million in the hole this biennium. Gov. Jim Gibbons has already cut $914 million from the budget in January and April.’
‘The Las Vegas Convention and Visitors Authority reported more of the same today: fewer visitors, especially convention goers, are coming to town. The downward trend is indisputable. Four of the last six months have shown a decline in convention attendance, which was down 7 percent in March.’
‘Room nights booked by conventioneers were down 16 percent in March and 11 percent for the three months ended March 31 compared with the same period last year. Expense-card-wielding convention attendees have propped up Las Vegas room rates for years, so it’s no surprise that average room rates are down 3 percent in the first quarter. Rates fell 1 percent in March.’
I predicted long ago that the gaming industry would contract with the end of easy home equity cashout financing.
The rise of Indian casinos in the past 20 years has been mind numbing. They sprouted up like weeds. It is amazing that they could all be making vast fortunes without credit being extended willy-nilly to all of the wannabe high rollers.
Yes, and we were told over and over about the LV specialness and the bullet-proof economy. But think about it; every area had a reason they couldn’t fall. Florida; sunshine, boomers and in-migration. DC; government jobs. NYC; Wall Street. Arizona; boomers and in-migration, especially Californians. California; sunshine, boomers and everybody wants to live there. The PNW; in-migration, tech-jobs, Boeing, and they never boomed in the first place.
Right! Real Estate is getting “deader” every week! This society is going to become much more mobile as people do like I do and go to temp jobs with no benefits but with much higher pay. We renters can proudly look down our noses at FBs as we have the flexibility to take on lucrative opportunities thousands of miles away from our base address.
Owners could effectively be trapped in their houses for a decade or more, yet employers still want a flexible labor force. It’ll be interesting to see how much those that are still mobile are able to extract from employers.
Funny just saw this morning a home in a community where the houses at peak sold for $2 Million dollars.. this 6500 sq ft beauty is at a short sale of $875k..imagine the price when the bank actually gets it back!
“I predicted long ago that the gaming industry would contract with the end of easy home equity cashout financing.” Ford and GM stock price would spike up 100% if they reported sales loss of -1.5% for the last 12 months. Gambling is a $7 billion dollar industry. 1.5% is chicken feed. Gambling execs must be breathing a sigh of relief with that little shortfall.
Well I got a job and tried to put my money away
But I got debts that no honest man can pay
So I drew what I had from the Central Trust
And I bought us two tickets on that Coast City bus
Well now, everything dies baby that’s a fact
But maybe everything that dies someday comes back
Put your makeup on, fix your hair up pretty
And meet me tonight in Atlantic City
Yes, well.
I predicted long ago that someone was going to lose their temper, anoint their face with pretty ointments and then run out and scalp someone. And now just look!
Oh, wait…I’m flipping ahead in my day-planner. That’s in a month or so, when I can schedule some days.
Meanwhile, yeah, ummm, that gaming industry thingie thing.
Worked with a gentleman who thought gaming would build communites.
I engaged the conversation.
Me: So you really do believe gaming will help (x) community?
He: YES!
Me: What about the economical fallout?
He: WT Hey do you mean?
Me: For instance: crime; elders spending future; low wages; blight.
He: (Face red and several years my senior), This will help small town America!
Me: OK - if you say so.
Funny, the year 1995.
Me: (Under my breath; 2008) HOW IS THAT WORKING OUT FOR YOU GENIUS???
Ya just can’t make this stuff up!
Leigh
Gaming is parasitic. It produces nothing and takes from the poor to give to the rich. Keep it in Vegas and Atlantic City.
“He’d walk away with no financial return on the biggest investment of his life, the $30,000-plus down payment and the thousands more he’d spent in monthly payments.”
WTF squared? They are acting like this moron’s monthly payments were somehow extra. This guy must really be special because his payments were an investment, not the same monthly living expenses all of us face. To all of the two-faced f-cking dumba$$ morons out there that keep saying, “renting is throwing your money away” I say this. “Housing is an expense. It is no different than food, transportation or clothing.” That is what the drones just don’t understand when they mindlessly drone the propaganda they have so pleasantly swallowed.
If you are wearing comfortable clothing, getting from point A to point B, eating well and living in a place that makes you happy then you are very fortunate. It doesn’t matter if you compete with friends and family or whether or not the sheep look down their noses at you. The mere act of breathing comes with expenses. Housing, like food and clothing is only an investment in the sense that it should help lead to a comfortable quality of life.
I love the fact that one of my Minnesota sisters rushed down to Arizona to end up at the bottom of the desert with this fool. I was so sick of the snowbirds spouting their nonsense before I left the land of 10,000 lakes. I hope the hunters have a good snowbird season for years to come. Retirees plopping down hundreds of thousands of dollars for “investment” homes in the desert was always a fun idea to me. I hope they are enjoying their earthly tombs.
WTF squared? They are acting like this moron’s monthly payments were somehow extra.
I’m there too. Housing is an expense and it won’t be until that is common knowledge that we can purge this bubble from the system.
As for the guy you’re quoting. Let’s start off with a JT festively decorated with Cayenne pepper…
As far as the retirees. They’re overbought. Every well invested retiree I know of at work already owns their retirement home! (Ok, for some it was their work home as it will be with me one day.)
Got Popcorn?
Neil
“‘You cannot have row after row of unoccupied homes in neighborhoods,’ Berkley said in an interview. ‘It drives down values.’”
Ha Ha !
“‘You cannot have row after row of unoccupied homes in neighborhoods,’ Berkley said in an interview. ‘It drives down values.’”
You could occupy them with gang members or squatters. What would that do to your precious values? Or you could lower prices to sustainable levels and have stable owners. That’s not so hard, is it?
As a native Minnesotan, myself, who has lived on the upper west side since ‘78 living out in the middle of the desert surrounded by nothing is about as scary a scenario as I can imagination.
I lost my shirt in NYC real estate in the early 90s but New York City is still the best place to live in the world (at the right price, whatever that is, of course!)
‘As a native Minnesotan, myself,… living out in the middle of the desert surrounded by nothing is about as scary a scenario as I can imagination.’
That’s just silly talk. You’ve clearly never been out there with you and your imagination in the desert. If you was out there and it was a long fine lavender–colored afternoon, shading into a darker blue evening and the wind was blowing the the sage with that special shooshing sound it makes in the evening, and you were to see me and losty or AZ Slim, for instance, come busting over the rise with a jeep full of us and some dinosaur bones that losty found and some good dogs and plenty of tin-foil dinners and extra kindling for a nice bonfire, and loads of extra chilly cold beers in the coolers, why, you would know why Baby Jeebus bothered to make people.
Anyone know how the Ahwatukee area of Phoenix is holding up? My bro talks like the area has a firewall built around home equity. I know that’s BS, but Zillow’s guesstimates on home values are BS too.
Funniest housing term of the week - “California screaming”.
I have a friend who lives in a very nice part of Ahwatukee (right up against the South Mountain preserve). He tells me there are 3 foreclosures on his street.
I go back home to my apartment in Ahwatukee every two weekends. I have not noticed as many for sale signs as months ago. I think people are taking a breather and the signs will be up again (like mushrooms on a dewey lawn) in October when the snowbirds return. Kind of depressing that Albertson’s grocery store closed. They are putting Sports Authority in its place. We’ll see how that plays. The area of Ray and 48th is as congested as ever on weekends.
Off Knox were I live I have seen 2 foreclosures. Also one house on my street has sold and 2 more just sit.
Prices have dropped substantially from the peak. You still have sellers asking 2005 prices but those homes just sit there and either the sign comes down or you see the default notice taped to the door. Have seen two of those on my street alone. Not as many foreclosures and walk-aways as the outlying areas but I see quite a few. I am seeing “lipstick on a pig” flippers buying “deals” at auction and putting the signs up before the work is even done. Those will probably add to the foreclosure inventory shortly judging by the asking prices.
Still a relatively safe and pleasant area to live.
Just my observations.
You ask about Ahwatukee? One of the guys that plays Rolling Hills Golf Course on Thursday night put his large home 3,000 to 4,000 sq ft up for sale in Ahwatukee over a year ago. He bought a smaller condo before the house sold. I remember telling him not to buy before his house sold. He kept telling me about all the houses around him that were selling in a matter of days. His realitor told him to buy the condo and move all his stuff out of the house before they put it on the market. Dispite my warning he followed the realitors advise. The result? Two house payments for over a year. When I saw him last week I said “have you dropped the price?’ Sounds like he already has with no results. Don’t believe what you hear - Ahwatukee is getting hit hard.
In Equestrian Estates there are numerous houses for sale. Also, looking at the ads in the AFN, it appears that alot of houses are still ridiculously over-priced. Cheapest rent you can get for a house (older part of Ahwatukee) is about 1200/mo.
Wonder how many of those Equestrians can afford to keep actual horses? Or do they ride sawhorses?
–
“In the first quarter of 2008, there were 310 resales of homes in Maricopa at a median price of $170,000, according to a real estate report issued by Arizona State University. In the same quarter of 2007, there were 90 resales with a median value of $246,500.”
Am I to read that the resales are up 245%? Or, is there a typo in “90″ resales in 2007?
Jas
Yeah…. sales are way UP!!! But they are all post foreclosures.
Everytime there is a foreclosure, the first lien holder has to “buy” the home back at the courthouse auction. I guess that qualifies as a resale.
I was happy to see yesterday’s Texas thread, but I didn’t have internet access then. I sympathize with Masstexodus & wife and their friends looking around for a house in Austin now (I and most of my friends and neighbors that own, bought affordable places in the 90s).
I don’t know who is supposed to buy all these $500,000+ houses. People I know who probably could afford it, don’t live in enormously expensive houses - having other priorities.
“People I know who probably could afford it” - that is the VERY FEW people I know who probably could afford the prevailing high prices.
Most people I know $120,000 - $150,000 would be a good house price. A few, $200,000.
And a few, $60,000 would be a good price, for a decent but not great place.
Yeah, I didn’t have a chance to post this blurb from the weekend edition of the Austin Business Journal; surprised the the ABJ came out so bearish on the Austin Rental market:
Reports: Too many apartments
Decrease in occupancy, surge in concessions expected as Austin fares worse than most
Austin Business Journal - May 12, 2008 by A.J. MistrettaABJ Staff
Austin’s apartment market could be heading into troubled waters, two recent reports indicate.
Developers eyeing optimistic job forecasts and tightening restrictions for homebuyers are building an unprecedented number of apartment communities across the area. There are roughly 17,000 new units under construction in and around Austin, the majority of which will come online over the next 12 months, according to the first-quarter Multifamily Trend Report from Austin Investor Interests LLC.
It will be interesting to see what happens when home prices in Austin, Seattle and Charlotte start to fall back to earth….the NAR and MSM always like to showcase those cities in their press releases/articles on the current state of the housing market as cities where home prices have held steady b/c of strong local economies and other B.S….I think Ben has mentioned a couple times that Austin may end up getting hit harder than other places in Texas and I’d agree with that, too….
For personal reasons, hoping that the desert starts to readjust …more.Lots more.
The city just put in a new retail corner,actually two,
one on 111/Farrell that will house a Michaels, Jensens,Petco-which will be less than 3 miles from other Petco, and Walgreens. All of this is right next to a Longs,Ralphs (all redone for the upcoming competition) and yet, where is the business going to come from?
All I see and will hear is the
massively increased traffic that
will be coming down Farrell nonstop
in the middle of established residential areas.
And another Home Depot and other retail was just built on Gene Autry/Ramon right across the street from a Lowes,Walmart, the other Petco, and assorted businesses.
These are all just a short few miles from each other.
And the other businesses are starting to suffer, so when these are all finished…maybe they will all be ‘finished’ for awhile.
Even in CA they are buiding new strip malls, while ths present ones are being vacated. Weird and scary. Same thing happenning in Mohave Valley, AZ. etc. I have seen it before. Not pretty, and going to get worse.
Hondje,
What does the “surge in concessions” mean?
for residential - free parking or garage, a month or two of free rent, that sort of thing.
for commercial - free rent, lower rate on some of the space, favorable lease terms, or more renovation money
Much of what made Austin special is getting destroyed. Much of the development seems fueled by some desperate kind of greed, entirely unrelated to filling people’s need for housing (a decent thing for someone to do and to make a profit from). Sometimes it feels like watching a gang rape.
Darrell in PHX mentioned the Austin people’s dismay at hearing what’s been happening in Phoenix. When I read on this blog about dramatic depreciations in downtown condos in Manhattan and the best neighborhoods in Boston, I just want to scream “Why don’t they stop! (here)”
“Why don’t they stop! (here)”
Builders build until they go bankrupt.
That was some of the earliest sage advice I picked up off of the HBB. Silly? Yes. But true.
Got Popcorn?
Neil
My brother said something like that, but he sounded more sympathetic to the builders. I like your version better.
And thanks for graphing Austin home sales and prices on your blog a little while back. And for giving me an idea how to do it.
“Builders build until they go bankrupt”.
Too true, but that is a simplified representation.
Builders build, because that’s what they do. Build. If they don’t build, they close down their business.
One of the most important things in running a successful business in the residential construction industry is a good stable of sub-contractors and direct employees, who can construct residences properly, efficiently, and at a reasonable rate.
You don’t want to lose people like this, who really are the key to your business success. You keep building (albeit at a more measured pace, and hopefully on contract rather than spec).
The only alternative is shutting up shop, and throwing all of your key employees and sub-contractors onto the employment scrapheap. Some construction employers even have scruples.
Yes, they continue to build on a wing and a prayer, and yes, they will build until they are bankrupt. It’s the nature of the industry.
No disrespect intended, but that’s just…er…not economical: for the builder, contractors, lenders, public etc.
I’m not the brightest crayon in the box (nor the dullest), how on earth can that be a sound business model?
Ah! A new one!
Ya just can’t make up the truth no matter how it defies the law(s) of gravity?
LOL,
Leigh
I’ve got a good friend who is (make that was, till he retired) a builder. He built when the market was good. He renovated when the market was bad. He went for decades through various booms and busts. I like to think of him as one of my early mentors; I used to work for him during university breaks.
Unlike most builders we hear about (I guess), he actually accumulated the profits from the good years and used that cash stash to buy up properties in bad time. It had the advantage of letting him keep most of his crews employed, good times and bad. Well, he could keep the best of his crews, anyway. Disadvantage: because he was always planning for lean times, he was a millionaire but didn’t live much better than all of us employees! No showing off for him, no big truck or custom, huge house.
Handling boom times was easy, but the busts? He told me that he would get some great deals on houses with major problems because in bust times, nobody would touch ‘em, since decent houses were aplenty. But the dirt cheap problem houses were what he needed to keep his boys working. He usually turned these places into rentals.
And when good times return, he told me he’d stick more or less with the 1% rule: If you can’t get 1% of the property price in rent every month, get rid of it. As you can guess, he got rid of almost all of his houses (15 of ‘em last I heard) in the last bubble because the rent:price ratio was so skewed.
He actually held back from building much in the last boom, as he approached retirement with his sons not wanting to take over the firm, and now he’s over 60 and finally taking a much deserved rest.
IMHO he was a good example of how to run a building company. But his was a small, privately-held firm, and so he didn’t have the inevitable pressure from shareholders demanding growth-at-any-cost strategies and whining about mounting cash pile sitting “underutilized” in the bank for the next downturn.
I just want to scream “Why don’t they stop! (here)”
Because these projects take years from the initial financial feasibility studies until completion. And once underway, often the best financial course is to complete the project regardless. Capacity coming on the market now was probably conceived in 2003-2005 when projections were optimistic.
Indeed. They can either abandon the whole project and lose $150k per developed lot or continue on and hope to lose only $100k per lot.
I see a development on my way to work that is in that very predicament; so far, they are completing only the section where the streets and utilities were started as the bust hit, and are now in place. Whether they forge ahead with the other 2/3 of the development, though, looks doubtful. They even took down some of the signs.
———-
“Gilbert attorney Chris Dutkiewicz says many people have been trying to save their homes by racking up credit-card bills or borrowing from retirement accounts to meet other payments, with rising gas and food prices making things worse.”
That is the sad part. They should have gotten out of the high house payments and rent.
“‘Eventually, some will realize they still can’t make it,’ he said. ‘They now have high housing payments and high credit-card payments’ and turn to bankruptcy as a last resort.”
“While a new national survey says Arizona’s economy is in a recession, a leading economist here says our problems go even deeper — into a depression.”
Kudos to people telling the truth.
Jas
A lot of people on this blog predicted the last legs of this bubble will be when people max their credit cards and borrow from their retirement accounts due to their own greedy mistakes of riding this real estate bubble. Yeah, bad for stocks. It’s a dead cat bounce in stocks lately, but we could see a 9,000 Dow this Fall or next year.
Phoenix entering a depression. Interesting. Wonder if that means there will be 25% unemployment in Phoenix in the next few years? Lots of white collar people who are renting in Phoenix will realize how lucky they are to be footloose. Try Boston, New York, Washington D.C., Chicago! The money’s good here in Maryland for now!
A lot of people on this blog predicted the last legs of this bubble will be when people max their credit cards and borrow from their retirement accounts due to their own greedy mistakes of riding this real estate bubble.
Folks are turning to Credit Cards en mass. One group offers a C. Card tied to a persons 401k. Not going to end well for many.
I think we can expect higher credit card defaults. In the past, due to appreciating home values, homeowners could simply refinance their home and “consolidate the CC debt” into a lower home loan payment. That is no longer the case with home values falling and lending standards tightening.
I expect higher CC defaults and with that comes tougher CC qualification standards for the future.
Did you see how GE no longer finances boats and RV’s? That’s the first hint at tougher credit standards for personal credit.
It will get really ugly.
Got Down Payment?
Capital One no longer does person to person auto loans, I was shocked. I had a car a friend wanted to buy from me and we were going to use them and emailed them when I could no longer find that option on their website. Turns out them no longer offer them. I financied two person to person cars loans through them over the years. This is another sign of how locked up the credit markets have become.
The goobermint will end up redistributing the wealth from what’s left of the middle class. Only the top 1% will be able to hide their wealth offshore.
“renting in Phoenix will realize how lucky they are to be footloose”
You are right about that !!
Take the example of the Power Ranch neighborhood in Gilbert. Homes there that sold for $875,000 less than two years ago are now selling at a $400,000-plus discount.”
Those words are poetry to me! I think in a couple of years we will see $600,000-plus discount!
“David Guthrie, a real estate agent specializing in foreclosures…”
What a trip - he’s actually a friend of mine. We were just discussing this stuff yesterday.
I thought 85701 was “Toast” or was that a different poster?
“Elliott Parker, an economics professor at the University of Nevada, Reno, said he understands the complaints of those who say taxpayers should not help buyers who overreached for homes they could not afford. But he said the package could aid Nevada, where home prices are continuing to drop, affecting the housing market and the state treasury.”
This clown is an Econ. Prof…. Sad, and to think some folks paid good money to ‘learn’ from this guy.
Remember it was filtered through a reporter. The economics professor may have given the reporter 20 minutes of “on the one hand … on the other hand … in the long run … all other things being equal …” and it became “It’s GOOD for Nevada!”
–
“‘What people tend to forget about bubbles is they can happen downward, too,’ Parker said, explaining the need to avoid letting prices dip so low that homes are undervalued. ‘The Great Depression was a great example’ of a downward bubble, he said.”
Downward bubble? No, bubbles burst and sometimes they result in a crash (I call a 30%+ price decline in a year or less a crash).
‘The Great Depression was a great example’ of unwinding of the preceding excesses and govt interventions to keep things going. I am re-reading Rothbard’s America’s Great Depression. The record of interventions by Hoover during 1920-1930 (first as Secretary of Commerce and later as President) and its aftermath is chilling. He summarizes it with the observation:
“Whenever government intervenes in the market, it aggravates rather than settles the problem it has set out to solve. This is general economic law of government intervention.”
When the govt tries to keep the prices from falling the excess production is not stopped, as was the case in farm prices during 1920s, and the problem continues lot longer than the short-term pain pf dealing with the problem. Some states in 1930s reacted by forbidding farm foreclosures.
Jas
I met an old timer a year or two ago who said that you could hardly get anyone to buy houses in the 1940s. I think he mentioned the New York area. This is why I think $875,000 houses such as in Gilbert will be going begging at $275,000 in a few years. Streets are getting bloody.
–
I estate in Greenwich, CT, that was sold for $1M in 1929 was sold for $75K in 1932.
Jas
To be fair, the dollar was on a gold standard for the period you are talking about.
However, even if you accounted for the devaluation a few years later, that’s quite a crash.
the way I see it is that salaries will fall to make usa salaries competive with globalization/outsourcing or for the coming of the NAU. houses will have to fall to the level where the mexicans that are here can afford them. Housing prioes will have to fall to the level of salaries that people are making. and salaries are staying the same or going down.
took me a while to understand what this guy meant by a downward bubble.
Picture a dome over a city. That’s an upward bubble. When it deflates it’s flat.. at ground level.
In this perfect storm he’s worried the bubble will continue to deflate past flatness, and form an inverted dome.. a depression in the ground.. a downward bubble.
This refers to his comment “prices dip so low that homes are undervalued”, meaning they are under what would be a theoretical bottoming-out of the market.
he mighta just said prices could overshoot the bottom, as people around here have been saying for a while…
I just can’t get over the FB ’s pulling out money from homes and than saying that they now can’t afford their home . Since when do you take a loan or buy a home or take out money from a home and cop a plead that you just can’t afford the home ?One should know when they take out a loan if they can afford the payment or even a potential adjusted up payment in the future .A lender should not want to set up a borrower to depend on real estate going up to get paid .
It’s clear that most of these financially stressed borrowers where expecting something other than their own income to pay for their
homes and loans . It’s clear that the borrowers were relying on the myth that real estate always goes up .There could be no other answer to the puzzle . That being said ,the borrowers were all gamblers or speculators or investors . Apparently the Lenders believed that real estate couldn’t fall either and appreciation would pay for their faulty greedy fraudulent lending also . The two parties to this loan contract deserve each other and the politicians have no business using tax dollars to bail out gamblers that got themselves in this mess .
While it is true that the myth of real estate going up was endorsed on a National level and maybe a World-wide level ,still a loan is suppose to be based on a credit rating ,income and ability to pay, and a solid appraisal ,not on the notion of future value of the asset . I would like Wall Street to prove that the notion that real estate always goes up was a solid fact that could be imputed into the models of risk ,because that must of been their main input in their models of risk .
In fact, it was built into the S&P models that were used to give the CDO’s their AAA ratings. The geniuses determined that real eastate would go up by over 5% every year into infinity. They even admitted that if RE prices were to remain flat for a year or two, that their financial models would collapse. We saw that happen in 2007 as prices leveled off and the CDO market collapsed.
“They even admitted that if RE prices were to remain flat for a year or two, that their financial models would collapse.”
Remember the good ole days? When even stagnant prices were an absurdity?
Welcome to the party pal!
““In April 2006, Fox took his half of the equity from the Chandler home and whatever other savings he had scraped up through the years and used them to pay 15 percent down on a three-bedroom home in Rancho El Dorado. The $212,000 purchase price was down from the home’s highest value.”
‘I thought the market had bottomed out when I bought it”
this idiot thought the market was BOTTOMING in the Spring of 2006? sales had barely started to decline. he must have bought into the Spring Bounce peddled by the used home sellers.
He’s going to lose at least 50% so lesson learned.
He also thought that the NASDAQ had bottomed in April 2000.
This is one you will like to read…..Santa Cruz specuvester defaults on 9 houses.
http://www.reuters.com/article/ousiv/idUSN0952458820080511
A Tabasco-marinated Joshua Tree suppository for this FB.
What ever happened to Casey Serin? Is he in jail for mortgage fraud yet, or did he flee the country?
OT… FB losing nine… This financial genius wants to start his own business next.
http://www.reuters.com/article/newsOne/idUSN0952458820080511
It’s about time they put up a story of somebody actually losing (or is it loosing? The Internet can confuse me on that one) his own money. The jenius lost $800,000.00 worth of stock option money. Well, easy come, easy go. I don’t feel one bit sorry for this guy. Keep the stories coming of people actually losing some of their own skin in this mess. I’ve had enough of the “victim” stories where the people didn’t lose a single nickel. I’m going to go and have a celebratory drink with my old buddy, Jack.
No point to this, other than just figured out the Maricopa County (AZ) recorder site lets you search by filing type. I decided to look at recent Notice of Trustee Sale (Final step of foreclosure).
Went to Maricopa County recorder site and looked up notice of Trustee sales starting 5/1/08.
First one was odd. Lady purchsed for $154K in 1999. No new deeds, refi’s, HELOCs, etc. There was a civil judgement, looks to me like an HOA for $1K placed summer of 2007. Zillow says the property is worth $183K. Should be able to sell before foreclosure… no?
Second: Owned by guy name Grant. Bought for $225K 9/24/2007. As planned unit development. Looks to me like he took possession in Jan 2008 with $226K loan. Doubt he made a single payment. No other Maricopa properties for this person.
Third: Foreclosing on a time share $18K loan taken out in Mar 2005. Couple lists mailing address in MI. They also owned a small office building but now paid off.
Fourth: Another foreclosure from same time share complex. $10K loan. Owners from Folsom CA.
Fifth: $13K loan on a different time share. Couple from Temecula CA.
6th, 7th: same timeshare location as 5th.
8th: $60K loan against undeveloped lot in Tollison. “Owner” address is Lancaster CA.
9th: Finally, another house. Last MLS transaction was purchased for $125K in 2002. In June 2005 loan takin out for $160K by a different person with a mailing address of Los Angeles. Libor+2.75 AMR, I.O., Prepay penalties of 6 mo interest if paid off in less than 3 years, etc. $30K second taken out same date so total owed close to $190K. Zillow shows the property is ona very narrow but deep lot. Says the place is worth $224K… The “comps” Zillow lists are MUCH nicer properties in nicer locations. Yeah… right! The name is WAY too common to know if there were additional filings (HELOC or refi the second) since 2005. Any value in this 1400 sqft shack must be the land.
10th: in my area of PHX (Glendale). $220K loan made Aug 2006, with a $41K second taken out the same day. Last sold through MLS for $142,500 in Feb 2003. Zillow’s inflated appraisal is $200K.
11th: $132K loan taken out in 2006. Was $117K in 2004 before the 2006 refi. The Refi loan is 40 year, ARM at LIBOR + 6.25%, 7.3-10.3% limits, I.O for 10 years, 12 months interest if paid more than 20% in first 2 years. Zillow shows property value of $185K.
That is as far as I got.
Make me wonder how many worthless time shares lenders are going to get stuck with!
Looks like I stopped one before the interesting one…..
The 12th is a gold mine!
12th $644K loan. WOW…
Looks like Benjamin C Brunton should go up on the hall of fame.
http://156.42.40.50/UnOfficialDocs/pdf/20080388032.pdf
$644K
http://156.42.40.50/UnOfficialDocs/pdf/20080224007.pdf
$221,600
http://156.42.40.50/UnOfficialDocs/pdf/20080180957.pdf
$205,600
http://156.42.40.50/UnOfficialDocs/pdf/20080082326.pdf
$240,000
http://156.42.40.50/UnOfficialDocs/pdf/20080374263.pdf
$268,000
http://156.42.40.50/UnOfficialDocs/pdf/20080327215.pdf
$208,000
http://156.42.40.50/UnOfficialDocs/pdf/20080256466.pdf
$238,000
Those are the first mortgages…..
I count 24 Deed Trust and only 12 release. I’d guess there are 4 2nds, HELOCs, or more 1st going bad!
I wonder if it is worth looking up the current Zillow values on this disaster!
in 1921 the government did nothing -in 1930 it did everything
japan 1990 same deal
2009 ?
After that, the 13th was pretty boring. Guy buys a $340K house in Anthum in June 2005 using a LIBOR + 2.25% ARM, I/O, using the planned unit as his mailing address.
The 14th is Jesus. He has 3 foreclosures notices, but 2 are for the same property, same lender, same amount, so duplicate….. One for $217K, one for $274.5K.
15th is $199K loan from Nov 2006. Looks like she bought for $98K in 2002, then took out a HELOC later that year. They added a $15K second and paid off the HELOC Oct 2006, the month before the refi to $199K. Maybe some tragedy there since when buying the loan was to her and a guy as unmarried couple. Later it shows her as the surviving spouse of a marriage with the guy.
16th, BORING… Oct 2006, Planned unit purchased by a single woman with an ARM. 6 mo LIBOR + 7.34%. First change scheduled for Nov 2008.
17th, $183K on a house purchased July 2006. Name too common and I don’t feel like soending the time investigating this guy.
18th: Oh… this could be interesting. $409K Ona Gilbert house to a couple that lives in a condo in Fountain Hills.
YEP!!!! 6 notice of trustee sales!
http://156.42.40.50/UnOfficialDocs/pdf/20071072349.pdf
$400K (Their mailing address)
http://156.42.40.50/UnOfficialDocs/pdf/20080133014.pdf
$230K
Dupe of #1 above.
http://156.42.40.50/UnOfficialDocs/pdf/20080345128.pdf
$247,500
http://156.42.40.50/UnOfficialDocs/pdf/20080345129.pdf
$224K
http://156.42.40.50/UnOfficialDocs/pdf/20080388625.pdf
$406K that lead me to them.
So, only 5 real foreclosures totallying about $1.5 million.
Okay, I’m tired of this….. That was most of one one page (2- results per page) from 5/1. There were 10.5 pages from that date!!!
I drove through Johnson Ranch today from Florence west to the airport and back on the 202 just cruising around , yikes what a mess out there. Looks as bad as Maricopa I can see were all the dirt suspended in the air comes from, old farms.
they don’t eat out !!! the horor
“Democratic Rep. Shelley Berkley, who voted for all provisions of the package, said the bills are designed ‘to help ordinary working families who are in danger of losing their homes so they can keep a roof over their head.’”
tell BUSH “NO BAIL”
you’d be surprised how little fax/ email they get
I’m in Rockport on the Texas coast. I heard that a big SFH and condo development the other side of town (perhaps in Fulton), The LaSalle, has gone into bankruptcy proceedings.
Guess they should have called it the LaBelle.
“‘You cannot have row after row of unoccupied homes in neighborhoods,’ Berkley said in an interview. ‘It drives down values.’”
_______________________________________________________________
My secret weapon to tell if a house is occupied or not, is the tv satellite dish on the roof.
We were driving to Boulder city last month and did a drive-by of Henderson & environs, and either people don’t watch tv there, or there’s a bunch of empty houses.
Other tells, besides brown lawns, locks on doors and this months color coded notices: a notice of some sort in widow or some spiked placard saying “this property is protected by”, on garbage day, no garbage cans, a broken window, no cars in the driveway. The no cars thing is only short term as neighbors will park there rather than on the street. Just some thoughts and observances.
I just listened to an excellent one-hour radio piece on This American Life, an NPR program, entitled “The Giant Pool of Money”, about the inflation and meltdown of the mortgage market. They start with two vignettes, one at a Wall Street dinner giving an award to a leading creator of CDO’s, and the other of a recently returned Marine in tears as he describes his struggle to keep up with a $5,000 mortgage payment. They spend the hour fleshing out the context of the global credit expansion, explaining the evolution of the mortgage market and deteriorating credit standards as they do so. Then they connect the two vignettes. It was a great program, I believe thorough and accurate, and yet accessible and understandable to the average person. BTW very early on they blame Greenspan for keeping interest rates too low for too long.
Recommended! ***** Two thumbs up! Link: http://www.thisamericanlife.org/Radio_Episode.aspx?episode=355
I was laughing while driving and listening to episode. I’m sure a few passing by thought that I was crazy! My favorite was the mortgage broker guy who at his height made $50 to $70K per month and is now living with his dad.
Cinch
The Global money supply is another concept that isn’t discussed very much as it relates to screwing up the balance of money supply in America .
While the Corporations brought in all these products from slave labor over seas ,the investment sector also brought in all this money from all over the world that needed a place to be invested .
The money supply in America use to be locally related to the economic conditions of any given area . A area would prosper and that local Bank would obtain more deposits ,therefore a area would have more money for expansion based on true conditions . A global supply of money (just looking for a place to rest )results in markets being created out of thin air ,which has nothing to do with true demand and real economic conditions . A example would be the hundreds of tracks in locations in which there aren’t even jobs to support those tracks .
I contend that the World is way to big to even attempt to mix labor markets and money supply markets without upsetting the balance of economic forces in any given area .
Thanks for that. That’s a great show, but I don’t always catch it. I’ll download this one.
Potemkin Village, American Style
“‘It’s an exceptionally good deal,’ agent Dillon England, said of the house, which is listed with his company. ‘What holds a lot of people back is when they walk into a small, 20-home subdivision like this one that has eight foreclosed houses.… It would scare you, wouldn’t it?’”
Once again, stupidity strikes. Daryl Fox bought too much house with an ARM which would make his payments unaffordable because he thought it was the bottom of the market. Ok, so he was speculating, right? Wrong! He bought the place AND remodelled it because he wanted to live in it. Moron! What possible difference does the price make if you are not going to sell it?
Greed, stupidity, collusion, fraud. The RICO act should be applied to the entire mortgage industry. There are probably ten thousand people in the US who should be arrested under the Patriot acts for attacking the US economy. Honestly, people like Greenspan, Prince, Thain, and Mozillo have done much, much more damage to the US than Bin Laden. In the end, they will be responsible for just as many deaths (suicides, stress related disease, crime).
If I launched a plot to rip off Wall Street and drive the Dow Jones Index down by twenty five percent, you better believe I would be arrested and shipped to Guantanamo. I think we should do the same to Greenspan, Paulson, Bernanke, Lereah, Mozillo and most of the rest of Wall Street and the mortgage banking industry. Testifying in front of Congress is a waste of time unless waterboarding is involved.
“Properties owned by banks and other lenders accounted for more than half of the homes sold in April and that has created bargains since those homes are being sold below MARKET prices, said association president, Patty Kelley.”
“You keep using that word. I do not think it means what you think it means” Inigo Montoya, Princess Bride
or even understand the language the contract was printed in - English.
I have no pity; well, little pity. I have lived in other countries. In every case, EVERY case, until I knew the language and legal/financial system well, I found a local translator or (for legal matters) bilingual attorney to work through these papers for me. I even do that for “American English” transactions when it comes to buying real estate.
He11’s bells, what are these people doing anyway, buying a house without an attorney to review the paperwork? Even native English speakers ought to be doing THAT! Sure, it adds… uh, 0.1% to the cost. But so does any “insurance”. Hazard insurance to recompense you in case your house burns; lawyer as insurance to help prevent YOU getting burned.