‘The Spring Tells All’ In New York
Some housing bubble reports from New York. “For home buyers and sellers, this spring is telling a very different real estate story, one the region hasn’t seen in nearly a decade. It may be the heart of the selling season, but the frenzy of years past is gone, replaced by a far more tentative market. ‘It will tell us how the housing market will perform over the next year or so,’ said Pearl Kamer, the chief economist with the Long Island Association. ‘The spring tells it all.’”
“Far more houses are for sale now, but sellers are trying to get the prices their former neighbors got and buyers are waiting for rock-bottom prices. Nassau, Suffolk and Queens had a total of 25,156 listings in February, compared with 14,653 a year ago.”
“Sellers are listing now in an attempt to beat market declines. And buyers are being choosy. ‘You have a sense that there are two homes on nearly every block that are either for sale or coming for sale,’ said Judy Markowitz, broker in Flushing.”
“If a weaker spring is followed by an even weaker summer or fall, that may put the market on notice. And that’s when the reality check will come, said appraiser Jonathan Miller in Manhattan, because there’s seasonal ’static’ now. ‘We’re not seeing the gloom and doom at this point that had been anticipated,’ Miller added. ‘But we’ve got rising inventory, and potentially rising mortgage rates, and when you put those things together, that is not a good thing.’”
From the Times Herald Record. “The mid-Hudson building boom just got very quiet. Orange County municipalities issued 618 single-family building permits last year, fewer than half their output in 2004. Ulster County permits fell by more than 40 percent last year, and Sullivan County permits dropped by a quarter.”
“The 618 permits issued in Orange is the lowest total in records, which date back to 1987, adding to mounting evidence that the region’s once-white-hot housing market is approaching room temperature.”
“Builders who can’t sell the homes they’ve already built aren’t about to rush out and build more. ‘I just did (a) lease with an option to buy on a new construction. I haven’t done one of those in years,’ said Paula Meloi, broker/owner in Port Jervis.”
Here’s a blurb from this a.m.
Real Estate Glut?
4/10/2006 9:20 AM EDT
I received the following info on real estate in Martin County, FL — a previously very hot market located just north of Palm Beach County — courtesy of Mike Morgan of Morgan Florida Real Estate Group. His data and anecdotal information show a glut in that market.
The Numbers - 580 New Listings, 253 Price Drops, 71 Pending Sales
Open Houses - Very slow again. No buyers, just lookers. The comments are all the same, “we’re waiting.” We only had one visitor to our Open Houses today by 2:00, so I sent the girls home.
Sales - I was starting to get a little worried, since I had not sold a home since the end of March. That was the longest dry spell I have had, as I sell an average of a home a week. However, today, Sunday, I sold a small home in Port St. Lucie and took another offer over the phone from a second client that has been on the fence for quite some time. The offer was a low ball, but things might work out. Hopefully, this is the start of something.
Showings - The worst week yet. We went five of the seven days with no showings at all. We have been seeing 2-6 showings a day. One home had three showings, and that was it for our 30+ listings. The three showings were all one buyer, coming back three times. Although I thought they would surely write a contract after the third visit . . . their agent called me last night to tell me they’re going to wait.
Listings - We turned down all new listing requests this week because of the price the sellers “think” they can get. We have also implemented a $298 listing charge for all Full Service listings we do accept. We had one buyer withdraw his listing this week, after he realized it was going to be tough to sell for the price he needed to move. He decided to stay put and cancel his plans to move.
Inventory - Still climbing. The highest ever recorded and record home start numbers from the builders. Our Board of Realtors reported a 21.9 month supply of inventory based on February inventory and the rate of February sales. Once things pick up, this number will fall dramatically, but in areas like Port St. Lucie we have a 36 month supply of inventory at current sale rates, even if homes sales pick up.
Home Builders - The home builders are competing aggressively with huge discounts from 10-25% and double/triple commissions to agents. It is tough to compete with that.
Suggestions - Selling Agent Bonuses. These are the homes that are being shown. It is the best way to get the Selling Agents to focus on your home versus the thousands of others on the market. The only showings we had this week were for homes with huge selling agent bonuses.
Marc here again — Interesting to note that just months ago realtors were advertising 1.5% or 2% commissions, now in this market at least, you need to pay a bonus to an agent to get your home sold.
If the whole country is experiencing similar conditions, than I would be concerned about my bullish thesis on Beazer Homes (BZH: NYSE). However, Beazer is well diversified in 22 different states. I continue to believe that not every real estate market is a bubble that will burst. Furthermore, there is a lot of bad news already priced into Beazer and other homebuilders.
As Warren Buffett says — get greedy when others are fearful and fearful when others are greedy.
Position: Long one single family home in South Florida. Anyone want to make an offer?
“Beazer is well diversified in 22 different states” –
I would say that when RE goes bust, being ‘well diversified’ is an oxymoron. He’ll go down in all 22 states. Bye, bye Beazer.
Big HB’s will go down in flames with their massive debt loads and over supply of land!
Wrong…..
Our Board of Realtors reported a 21.9 month supply of inventory based on February inventory and the rate of February sales. Once things pick up, this number will fall dramatically…
“Once things pick up…” i.e., this dry spell is just about over, the spring selling season will be just like last spring, and will bring everything back to normal. Sheesh.
“No buyers, just lookers.”
Darn those looky-loos. Free guacomole for everyone!
“We only had one visitor to our Open Houses today by 2:00, so I sent the girls home.”
Free girls for everyone!
“The offer was a low ball, but things might work out. Hopefully, this is the start of something.”
Like maybe a price correction back down to actual market value?
“We have also implemented a $298 listing charge for all Full Service listings we do accept.”
Sounds like a great way to drive your customers into the open arms of Goog and Craig’s list…
And it sounds a little desperate. With that at least they can buy some groceries for a couple of weeks.
BayQT~
“However, Beazer is well diversified in 22 different states. I continue to believe that not every real estate market is a bubble that will burst.”
The WSJ today had separate articles discussing the extension of the bubble to Iceland and South Africa (the latter has homes valued at 4X the late-1990s price level). Sorry to say, but there is no place to hide.
I am in South Africa at the moment. In two weeks I will visit one of the other great bubbles, Dubai. I can say this - the entirety of the bubble in South Africa is due to foreign investment. The native population don’t have the money, the colonials already own property and many have left over the years, so that leaves foreigners causing the crazy prices…
Cool –
I posted a few weeks back about Dubai’s imploding stock market, and was flamed for dragging the discussion away from housing, but in the current environment with lax or nonexistent controls on where money flows, you generally cannot separate a country’s stock and housing markets. I am guessing the Dubai housing market will go down in flames with their stock market, but will look forward to hearing what you see on the ground level.
Which RE market will make national news?
No question IMO that Phoenix will be ground zero of the bursting bubble. Unlike places like SF, SD, even LV that at least have a good quality of life, the quality of life here in Phoenix sucks and is getting worse (traffic all over but especially in places like Queen Creek is completely UNUSEABLE!!! - spending hours on the road on 110+ temperatures days- And that’s with gas prices now approaching again $3/gal).
In addition (and probably due to the proximity to Mexico’s border), the Phoenix area is full of low paying (legal and illegal) immigrant workers. That puts pressure on wages and Phoenix’s wages are amongst some of the lowest.
Add to that that this is still a freaking desert with summer temperatures that kill many people each year and a housing inventory that at this rate will hit 50,000 or a 1000% increase from a year ago by sometime in August.
Speaking with 3 different appraisers with history in the Phoenix market, they are telling me they are expecting a crash of monumental proportions here in Phoenix over the next 24 months.
The loser idiots that are still buying in this market (and they can’t be many given the huge increase in inventory week after week) will soon (if not already) be begging for their bank to get that pile of sh*t of their hands.
I agree with your 50K inventory number. I wonder what effect $4/gal gas and probable fuel shortages this summer will have on PHX RE?
http://money.cnn.com/2006/04/07/news/economy/gas_supplies.reut/index.htm
“As Warren Buffett says — get greedy when others are fearful and fearful when others are greedy.”
And most are still greedy, so you better get fearful.
gosh,gee the suspense
it’s over you doufusses
why does anyone pretend anymore?
There is still money to be made (and losses to be delayed) by pretending…
“Port St. Lucie we have a 36 month supply of inventory at current sale rates”
Holey moley….that’s some inventory. Now if only Phoenix’s almost 50,000 houses turns into a 3 years supply, we are on to something.
Simmsays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
In NYC there are amazing disparity in prices between sellers in denial vs. desperate sellers (Want a 2 family in an outer boro — well here’s one for 750, and here’s one for 529 on same block…how about a co-op? Would you pay 429 or 749 for that 2br. And I have never seen such a huges smattering of open house in the NYT classifieds as I have these past few weeks.
Unfortunately for the sellers-in-denial camp, the sellers-in-desperation will undercut their prices, and screw up the comps. Only the most attractively priced homes will sell, giving the sellers-in-denial group plenty of time to rethink their sales strategy…
Had a realtor tell me “Comps don’t matter, real estate is an emotional purchase. The seller doesn’t care about the comps.”
Which is why I no longer use a realtor.
UnRealtor;….The seller doesn’t care about the comps.”
Hell care when the appraisal comes in, the loan gets rejected and the buyer walks…Waste of 3 o 4 weeks with the property off the market while inventory contined to increase and prices continued to fall….MOST of the time, they need to learn the hard way…
I see the same thing! I saw someone advertising a studio for $250,000 in a doorman building on the UES. Now, I still think that’s an absurd amout to pay for a studio. But, that’s the first time I’ve seen a listing like that below $400,000 in quite a while! Also, seeing 1BRs in good buildings in the low $400s, whereas in prior months they’re usually in the $600s. I think prices will come down considerably over the next few years, so I’m gonna wait. But still, I echo your comment about desperate sellers vs. sellers in la-la land.
OT but interesting for some. I heard a 26yr old unwed mom of a 2 yr old call into a radio program yesterday. Her grandma died and left her a home valued at $800,000 so what’s the big deal. Well the big deal is that the grandma was paying $800 a year in CA property taxes and now her property taxes where assessed at $9000 per year. She didn’t think that was fair. The host explained that if the house had gone to the mother the property taxes would have remainded at $800. If the mother died and passed it to the daughter then the $800 property tax would have been passed along to the daughter; or if her mother had already been deceased, the grandma could have passed it to the grand daughter and the property taxes would have remained at $800.
$9000… is that all? In Texas $800,000 in a good area would get you $12k or more in taxes.
Sheesh!
I don’t think texas has state income tax thus property taxes are a little higher.
My folks were paying $12-13k/yr property tax on a 3br quarter-acre house.. Michael Jackson was paying the same for the ENTIRE F–KING NEVERLAND RANCH!!!!
Oh, and NY State _has_ a sales tax _and_ an income tax too, hooray!
Homes on the lake here worth $500-$900,000 pay in the $20s.
The low prop 13 tax rate can only be maintained if the family member has a major disability or has a dependent status on the gift giver’s federal and state tax papers. Otherwise, the property is appraised at current value and taxed accordingly.
Time to sell granny’s ‘ol house.
Not true.
I believe that, under certain conditions, transfers from grandparent to grandchild may be excluded from reassessment in California, like transfers from parent to child.
In general, under Prop 13 properties are reassessed only upon change in ownership or new construction. Over the years, however, many intrafamily transactions have been excluded from change-in-ownership reassessment by legislation. It’s become a big loophole, imo. Not only does the initial owner benefit, but he or she can pass that benefit down through the family. Some say this works to create a landed gentry that benefits from low taxes forever.
The situation in LI is the same in the entire NYC metro area. I can only speak for NJ, but it seems that the same standoff is taking place here as well.
Homes are selling, but only if they are priced aggressively.
grim
Northern NJ Real Estate Bubble
“We’re not buying stocks; we’re not buying heads of lettuce,” said Michelle N. Cohen, an associate broker for Century 21 Laffey in Greenvale, who is working with Rajber and Chotin-Zemachson. “We’re buying homes. … There’s still a need. People always move.”
True, Ms. Cohen, people always move. The problem I see for you is that many are starting to move out of NY. Check the outmigration stats.
Portland, Mainer:
Can you provide a link to those outmigration stats? I’d be very interested. Thx
Here’s one link, including a map of the U.S. showing the migration status of each state. NY is a “high outbound” state.
Two dynamics to be aware of on Long Island:
1. A second round of white flight is getting underway as the exploding Hispanic population moves into onetime havens for those who fled from the five boroughs 40 years ago.When 30 people occupy a house, they generally don’t have any trouble with the mortgage payment. And in the past, such occupancies have been to blame for deteriorating property values, enabling more of the same. Conversely, the absolute creme de la creme neighborhoods become even more exclusive and expensive. But there are very few of these.
2. Equity nomads are leaving in droves, headed for far less expensive places with far superior quality of living - mainly down south. This was accelerated by 9/11, but took a few years to really take root. At first Manhattanites ran for weekend homes in places like the Hamptons and the Hudson Valley. Now they are moving to entirely differnt parts of the country.
http://www.unitedvanlines.com/mover/united-newsroom/press-releases/2005/2005-united-migration-study-01-06.htm
Portland;..Thanks..That was good info…
My understanding is that one of the favored locations for these upscale migrants is Portland. A wealthy widow I know of just evacuated her Berkshire estate for a Portland townhouse and large sum of cash in her bank account. No fool, she.
Meanwhile, if you are a lawyer or some other upper-middle-class professional you will find it very hard to get a job in Portland… the ground is thick with highly educated unemployed.
As for me, I am quitting Boston for Western Mass. Maybe not far enough away.
For the most part, Maine lacks high paying jobs. Some of the companies that may offer good positions are L.L. Bean, National Semiconductor, Fairchild Semi Conductor, Wright Express, Banknorth, MBNA, CitiGroup, IDEXX Labs, Cole Haan, Tom’s of Maine/Colgate and the Jackson Lab.
The best job site in Maine is: http://www.jobsinme.com/home/home.aspx
Every year more and more people are coming up here from out of state, taking the profits on their homes in more expensive places, getting nice abodes and fat bankbooks. On the interest, you can take long winter vacations in the little latitudes.
My wife is an exercise instructor with an upsacle clientele and 75% of her clients are relatively recent transplants - many from NY and actually, a good number from California if you can believe that. We have a very nice four seasons, but we sure can’t compete with California’s weather!
“Selling Agent Bonuses. These are the homes that are being shown. It is the best way to get the Selling Agents to focus on your home versus the thousands of others on the market. The only showings we had this week were for homes with huge selling agent bonuses. ”
Or, you need to pay us to show your house in these tough times. Do Real Estate agents have any shame?
It used to be that working with a buyer was more effort and with a seller you listed the house and waited for the offers. Now they really have to compete for the buyers who have figured out they are worth their weight in gold. Therefore the sellers NOW must compete with each other to get the Realtor’s attention over and above the commission. It’s gonna be dog eat dog out there!
It’s amazing the length people will stretch to slam realtors on this board.
Home Builders - The home builders are competing aggressively with huge discounts from 10-25% and double/triple commissions to agents. It is tough to compete with that.
Eye Toll Ya thay would do this….
It is a race to the bottom from here. Trade Theorists might refer to the HB pricing strategy as “beggar thy neighbor.”
And wait for them to combine the discounts with cheep financing….
Mish Shedlock has a great post on the dreaded “D” word (discounts, not deflation:-)):
http://globaleconomicanalysis.blogspot.com/2006/04/dreaded-d-word-surfaces.html
NYC is still relatively strong. My mom just sold her house in Flushing…wasn’t even on the market for two weeks and she only gave a minor (2%) price concession on a high asking price (in line with last year’s comps). Friends in Manhattan and Brooklyn agree that things here are still OK. Manhattan is firmly in the $1,000 per sq ft range for a decent co-op.
The market is not going thru the roof anymore in NYC but it certainly doesn’t seem as bleak as the picture painted by others with respect to Florida, Phoenix, SoCal, etc. Those markets seem like a mess.
I think history has established that places like NYC and SF will be the last to drop. Like years from now.
Keyword is realtively. Last year your mom probably could have had a bidding war. I think right now things are averaging flat, but I wouldn’t take anyone’s word for the co-op market until we can see real data. From my Brooklyn perspective, co-op and condo prices are being reduced - and I think they are the first to suffer in a decline.
I did not use a broker to sell my place last year, and so factored in a more competitive price, but even with that in mind, I can now move back into my old neighborhood for substantially less than I sold for. And I also can move into manhattan for a same sq ft place than what I sold for in Brooklyn. Not scientific, but quite interesting. Especially with inventory ballooning all around NYC.
We now have YoY price declines in Washington, DC Proper. [these numbers include condos].
In Washington, DC for the month of March 2006 the median sales price was $397,000 which represents a decline of .75% from March 2005 when the median sales price was 400,000.
See bubblemeter.blogspot.com for the latest scoop.
David
Bubble Meter Blog
“Nonetheless, if a weaker spring is followed by an even weaker summer or fall, that may put the market on notice. And that’s when the reality check will come, said appraiser Jonathan Miller, with Miller Samuel in Manhattan, because there’s seasonal “static” now”.
The reality check will be around July 15th. Once you get much beyond that, you’ve blown it as far as moving into a new house in time for school. If the market is still slow come mid-July, the pressure to buy quickly will be off and the selection of homes will be more daunting than a Chinese restuarant menu the size of the phone book.
How about a new Schwarzenegger movie: “Appraiser 3, Judgement Day - July 15th”?
Possible line: “I’ll be back — with $100,000 less”.
lol
Beautiful!!
GOOD ONE !!!
Show me the way to go home…..(While I still have it)
I’m tired and I want to go to bed….(in my 6000SF 20/4 mansion)
I had a couple drinks about an hour ago…..(in the bar next door)
And it went right to my head… (Darn it WHY did I buy this ^*%$)
Gee, maybe instead of multiple offers we’ll see multiple contingencies on home sales stacked some 6 deep….that’d make them RE agents as nervous as the sheep up in Montana….not saying that Montana women are ugly, just those working the road crews.
Or straight cowboys in Wyoming…
“Far more houses are for sale now, but sellers are trying to get the prices their former neighbors got and buyers are waiting for rock-bottom prices. Nassau, Suffolk and Queens had a total of 25,156 listings in February, compared with 14,653 a year ago.”
“Sellers are listing now in an attempt to beat market declines. And buyers are being choosy. ‘You have a sense that there are two homes on nearly every block that are either for sale or coming for sale,’ said Judy Markowitz, broker in Flushing.”
As the word gets around about falling prices, buyers will have greater incentive to wait, as deflationary psychology lays to rest the Realtor (TM) mantra of “buy now or be priced out forever,” and second-home owners who did not even realize they were investors will panic, flooding the market with underpriced homes. This does not sound like the makings of a soft landing to me.
Wall Street seems to be losing the faith in the “soft landing” scenario as well. Eventually, if not today, the eroding fundamentals will catch up with the big HB stocks, and send their prices back down to fundamental value (look at the prices around 1998 if you don’t know what that is, and be sure to do the division to reverse all the pump-and-dump stock splits that took place with the bubble runup!).
http://tinyurl.com/o7skt
The only people selling who will make it in this market are HB’s with room to maneuver and long time owners who are not overleveraged and can still make money on their sale. Last fall I knew a very active couple in their early 90’s who had owned their home for at least 40 yrs (The “I paid 16K for this house in 1952″….).
They priced to sell, did quite well, and couldn’t have cared less that they didn’t hit the peak
HBs may be able to keep selling profitably for a while into the downturn (if rising construction costs don’t kill their margins), but big land holdings reflected in the inventory items on their balance sheets will sink them as land values revert to fundamental (i.e., sane) levels…
If I was in my early 90s or early 70s for that matter I would not have a care in the world.
I don’t want to sound like an elitist, but we’ve still got many people here in Cali who will buy at almost any price as long as they can get the financing, and they don’t really evaluate, or care about, how that financing might adjust down the road. They ask one question: Can I afford the current monthly payment?
These folks, largely financially ignorant, will keep the market from falling too far and too quickly here in Cali, imo.
I agree skipintro, here in Socal (Long Beach), the low end of the market is being sustained in large part by immigrants (legal and illegal). My friends gardener (illegal) just bought a townhouse, in the condo complex I live in another legal family bought a 2 bedroom unit and they have 5 kids! Also, the msm and realtors are saying there is no bubble here and with the easy money still readily available the market is still going strong. I sold my place last summer as I too think something has to give but unless the psychology changes or the easy money dries up this could go on for a while. By the way, a 2br 1ba 1,000 sq ft house on a 5 to 6k sq ft lot in a decent area is selling for a minimum of $525k!
In California, the Governator’s quote will be “I’ll be back, with $300,000 less”. Or isn’t he going to save the bubble people. To the chick that inherited grandmas house. In all fairness, grandma should have been paying $9000, but was ’saved’ by an unfair law passed before she was born. Sell the house. take your loss (profit) to you, and head to Oklahoma.
Here’s what Woody Guthrie said about this:
Do Re Mi
Lots of folks back East, they say, is leavin’ home every day,
Beatin’ the hot old dusty way to the California line.
‘Cross the desert sands they roll, gettin’ out of that old dust bowl,
They think they’re goin’ to a sugar bowl, but here’s what they find
Now, the police at the port of entry say,
“You’re number fourteen thousand for today.”
Oh, if you ain’t got the do re mi, folks, you ain’t got the do re mi,
Why, you better go back to beautiful Texas, Oklahoma, Kansas, Georgia, Tennessee.
California is a garden of Eden, a paradise to live in or see;
But believe it or not, you won’t find it so hot
If you ain’t got the do re mi.
You want to buy you a home or a farm, that can’t deal nobody harm,
Or take your vacation by the mountains or sea.
Don’t swap your old cow for a car, you better stay right where you are,
Better take this little tip from me.
‘Cause I look through the want ads every day
But the headlines on the papers always say:
If you ain’t got the do re mi, boys, you ain’t got the do re mi,
Why, you better go back to beautiful Texas, Oklahoma, Kansas, Georgia, Tennessee.
California is a garden of Eden, a paradise to live in or see;
But believe it or not, you won’t find it so hot
If you ain’t got the do re mi.
Words and Music by Woody Guthrie
http://www.woodyguthrie.org/Lyrics/Do_Re_Mi.htm
There are two things going on in NYC, one short term, one long term. In the short term you have a bubble, which will pop.
In the long term you have two waves. The first wave is the “white flight” downturn previously referred to, which seems to hit when the housing reaches about 50 years old. It nailed Brooklyn and the Bronx in the 1960s and 1970s, Queens in the 1980s and 1990s, and is starting to hit the older suburbs (other than the Garden City’s and Scarsdales) today.
The second is the gentrification wave, also moving out from the center, which is sweeping through Brooklyn and moving into Queens. Whether the “Sobro” thing will take in this upturn, or will peter out until the next, remains to be seen.
Even those buildings affected by the gentrification wave, which moves in booms, are overpriced.
But if you are on the wrong side the first wave, which moves in busts, look out. The next decade will not be a good time to sell a house in Levittown. Those better off people who don’t mind living next to immigrants and minorities are choosing to live in NYC, not the suburbs.
Something to keep in mind regarding NYC as well is that as far as property taxes go, it’s pretty mild compared to any ‘burb within 30mi. There are situations where owning a home in NYC will result in _lower_ overall taxes than living in certain ‘burbs. Also, the outer boroughs have decent old stock that have pretty low taxes (in my ‘hood single-family 3br homes are running like $2-3k/yr in property tax).
This is of course all relative, but IMHO gentrification is driven as much by the excessive (and increasing) taxing of the burbs as anything else.
“buy now or be priced out forever” is rapidly being replaced with “sell now or be underwater forever”
Well said!
“Hey, Mom, I think Grandpa’s meds are wearing off. He keeps rambling on about something called the Great Bubble and saying weird things like house prices always go up.”
Are the ‘tear down’ builders more immune from a downturn?
If they buy an overpriced house for $750K, tear it down and build an overpriced house for $2M, that’s a nice profit, and squeezes out those hoping to get a ‘fixer upper.’
Enter a downturn, and they buy a $500K house, tear it down, and build a $1M house. Still nce profit, and those hoping to buy a ‘fixer upper’ are still squeezed out.
The regular guy hoping to buy a home to live in, really has an uphill climb competing against ‘tear down’ builders, and suicide buyers with a $0 down ARM.
UnRealtor;….They will be the first ones to have their heads handed to them…Be patient right now…Most people do not want fixers and when the small builders disappear my bet is you will have much more to choose from.
But will the small builders disappear? Seems they can’t lose. They’ll make less in a slower market, but they still have an edge to win bids for houses against a regular buyer, because they know they’re going to make X profit on a house, usually about double what they paid for the house.
They even knock down nice houses, not necessarily fixer-uppers, if the lot is large enough (1/3 acre or more). A ranch on a decent lot is a prime target. You’ll have an old lady who’s been living there for 40 years, and it’s a perfect opportunity for a young family to buy and fix up over time. Problem is, these builders buy the house (aying asking price or more), knock it down, and build a house costing 2 times as much.
Do you think this will subside if the market slows down? And if so, why?
UnRealtor;….No question about it “If” this downturn materializes like we are all suspecting…
The margins are only their when the buyer demand is at its greatest….From a investment standpoint, it does not make sence to purchase a million dollar home in a 500K neighborhood…It has happened recetly due to “Easy Money”…This process is expensive, time consuming and risky in that you will need to project out 12-18 months what the market will be like….When the lenders for these spec houses disappear, the price comes tumbling down…
Well, I don’t know where you’re from (South Carolina?), but the nicer suburbs around NY City have a wide range of home prices. So on one street you may have houses priced from $700K to $3M. So the builders buy that $700K ranch, knock it down, build two-story colonial, and sell it for $2-3M.
The net result is the whole neighborhood changes as these new larger homes go up — ‘normal’ people are priced out of the neighborhood, and only millionaires remain.
I agree that in a $500K neighborhood, it doesn’t make sense, but in nicer neighborhoods, I don’t see a downside for builders.
Worst case, a builder may break even if they bought that ranch at bubble peak, and then sold after a steep decline in prices. But after the decline is in progress (say, 12 months in), a builder can still purchase these smaller homes, knock them down, build larger homes, and make a profit.
I hope you’re right that I shouldn’t worry, but I have a feeling it will take a lot of luck for us to find a fixer-upper in the neighborhood we’re shopping.
I live in Cali (Sacramento). I think we will see a “spring bounce” here in Cali the strength of which will surprise many housing bears. The real estate frenzy here is still very high and, despite reports of tightened credit standards, there still seems to be plenty of facilitative financing for those who want to buy, and will buy, at almost any cost. There’s still a strong sense, held by many, that if you don’t grab a house now, you will be a loser forever.
By the way, I’m not trying to pump housing; actually, I’ve been waiting for prices to drop for the past few years so that I could get a better place. Waiting in vain.
Skip;…..Go see DR Horton….
I hope to hear many screams of pain from California. The place has become unlivable. It will be interesting if the levees (held by bailing wire) will uphold against the Sac river, until the Governator is able to extort the money from the crooked Legislature to fix them. The best use of a flood would be to wash away the Capital building and putting a whole new crew in. Then the Governator will be able to get more Hollywoodization done his way. Ciao to the “Dirty Brown State”.
YOY median price declines in 2 sections of Seattle proper and one section of Eastside (over 520 bridge between Bellevue and Kirkland).
This according to the Sunday April 9 Seattle Times Real Estate section:
The 2 in-city neighborhoods went from 339K>325K and 439,900>439K.
The Eastside location went from 646,675> 449,500 (yes, that’s a 30% drop in median).
However, the debate about whether or not prices will ever decline in Seattle still rages on (!!??).
God only knows how much proof these people need around here. It’s gotten so ridiculous that I’m beyond caring. This market’s going down with or without the RE cheerleaders (which we have a LOT of around here and they used to really bug me!)
Inventory in one of Bellingham’s zip codes increased from 146 on April 6 to 246 on April 10. This is a smallish town- population@100K, with over 1,000 properties on the market!
I’m going to just sit back and watch this whole thing slide into oblivion. By the time this is over, there are going to be a lot of absolutely stunned people in this neck of the woods.
garcap,
It is not true that the New York City RE market is holding up! Here is the most recent market report from a major broker (prepared by an economist) here which covers February:
http://tinyurl.com/p82be
The median price fell from a peak in June, 2005 of $831,000 to $720,000 in February, a drop of 13%!
The reason that you and others may think the market is holding up is the news blackout on this information being carried out by the Times and the rest of the usual gang. The media are not reporting this and people are not talking about it. They only report year-over-year price changes.
I await eagerly the March report on the same site.
The trouble with media blackouts is the big surprises that occur when undeniable deterioration in market conditions eventually forces them to confess the reality of the situation. If they do not, then rumor and blogs will get the word out, and they will lose credibility.