Are We There Yet? Are We There Yet?
Some housing bubble news from Wall Street, Washington and the world. AP, “Red Bank, N.J.-based Hovnanian posted a fiscal second-quarter loss of $340.7 million. That compared with a loss of about $30.7 million in the same period a year earlier. Quarterly revenue fell 30 percent to $776 million from $1.1 billion in the same period last year. Hovnanian said its net contracts for the second quarter, excluding joint ventures, declined 29 percent.”
“Some homebuilders are looking to Congress to help ease the housing doldrums. In a conference call with analysts, Toll Brothers CEO Robert Toll called on Congress to give would-be homebuyers a tax incentive to buy a new home, saying that should be a higher priority than addressing problem mortgages that are leading to rising foreclosures.”
“Chad Dreier, CEO of homebuilder Ryland Group Inc., is also looking for Congress to dole out some relief to the homebuilding industry. Believe me, we need some tail winds,’ Dreier said.”
“Asked when new home sales would bottom out, Dreier responded: ‘I don’t have a clue.’”
“The CEO of Toll Brothers Inc., the nation’s largest luxury-home builder, said Wednesday the housing industry is in a ‘depression’ and any recovery could be two or three years away.”
“In candid remarks at the JPMorgan Basics & Industrials Conference a day after reporting a second-quarter loss, Robert Toll said he’s not ready to call a bottom yet since the housing market could still get worse. ‘Can the market go down another 10 or 20 percent? Sure,’ said Toll.”
The Philly Burbs. “Toll said Congress should ‘jump-start demand’ by offering temporary tax incentives for homebuyers. …With a little motivation, the new-home market could turn around.’”
“Toll said Congress should concentrate on driving up the demand for — and prices of — homes, rather than shoring up people’s mortgages.”
“‘Going about it by trying to give money to [the Federal Housing Administration], we’re attacking it backwards,’ he said. ‘To try to attack the credit and mortgage problem first is the same as trying to get rid of strep throat with lozenges as opposed to antibiotics. The problem is the down price in homes. If home prices go down, it doesn’t matter if you’ve given the guy a new mortgage.’”
The St Louis Post Dispatch. “It took decades for Taylor-Morley Homes Inc. to become a perennial top 10 builder in the region, but less than two years for its downfall. The 56-year-old Creve Coeur-based homebuilder shut its doors Friday, becoming the latest - and one of the largest - local builders to fall prey to the turmoil in the housing industry.”
“CEO Bill Taylor blamed the market - and himself - for the reversal in the company’s fortunes. ‘About 70 percent of our problems were related to the market and 30 percent was because we were too slow to react,’ Taylor said. ‘We were too slow to see the downturn, and the six or eight extra months it took us to react, really hurt us.’”
“‘I couldn’t pay the banks, the staff, the rent and insurance and all that,’ he said. ‘We had too much land inventory and too much debt.’”
“Taylor said he has paid more than 95 percent of the money he owed to his subcontractors. While a few liens remain outstanding, some subcontractors say they never doubted they would be paid. ‘I had the option to simply close the company and walk away,’ he said. ‘But I wasn’t raised that way.’”
The Review Journal. “Are we there yet? Are we there yet? Are we there yet?”
“That’s not just an endless series of queries from road-weary kids on summer vacation. It’s also become the plaintive cry of local homeowners desperately seeking the bottom of a housing market that has shed more than 20 percent of its value in the last year. Las Vegas homeowners could have their answer soon.”
“A Monday report, plus a few springtime indicators thrown in for good measure, hints that the city’s housing market may be at or near its nadir.”
“‘I know what it costs to build a home, and these homes can’t be replaced at the prices they’re being sold for,’ said local home builder Tom McCormick. ‘We builders have been arguing for a long time that we can’t build homes at the prices they’re being sold for. By definition, (the decline) can’t go farther.’”
The Bunbury Mail from Australia. “Bunbury has the 20th worst postcode for missed mortgage payments in Western Australia and sits just below the national average.”
“REIWA Bunbury chairwoman Roslyn Ierace said she saw a house sold for almost $90,000 less than the price the owners had bought it for and valued another for close to $100,000 below what it cost to build.”
“Meanwhile, there are about 2,500 homes up for sale with some being sold for about $100,000 less than the price owners paid for them in the past two years.”
The Calgary Sun from Canada. “Over the past 10 years, the price for a Mount Royal condo has shot up by more than 363% to $555,833, while the price of a bungalow in Scarboro has risen by more than 271% to $595,000.”
“Condos in Edmonton’s Castledowns area hold the national record with a 633% increase over the past decade.”
“Such figures don’t surprise Ted Zaharko, owner of Royal LePage Foothills, who said most of the spectacular rise in prices over the past decade is due to price spikes in the past two years.”
“‘The city is very flush in many respects. The oilpatch has made it very flush. And so the activity that we’re getting on large-priced homes is tremendous,’ he said. ‘Those aren’t signs of people … nervous about the economy.’”
The Calgary Herald from Canada. “In 1998, single-family homes in the Calgary census metropolitan area averaged $167,555 while condos were $118,218, said Lai Sing Louie, senior market analyst in Calgary for Canada Mortgage and Housing Corp.”
“‘It’s hard to imagine that prices were that cheap back then,’ he said.”
“By 2007, the average price for a single-family home was $451,034 and for condos it was $314,959.”
The Ottawa Citizen. “The price of Ottawa condominium housing has jumped faster than the national average in the last decade. A new study by Royal LePage Real Estate Services predicts that demand for condos in the urban core will continue to grow as a result of rising gas prices and the appeal of downtown living.”
“Royal LePage spokesman Pierre de Varennes said in a statement ‘with a high proportion of Ottawa’s workforce employed by the government, with offices in the downtown core, it’s not surprising that house prices in city’s urban neighbourhoods have appreciated as much as they have.’”
“He said that minimizing travel to work increases family time and lowers gas costs, making the urban choice attractive. ‘Many people view the higher cost of living in urban areas simply as the price tag for increased personal time.’”
The Toronto Star from Canada. “It’s no secret that Torontonians have flocked back to the downtown core for housing over the past decade. ‘Home prices in urban areas have gone up more than in suburban areas, but both have shown significant appreciation,’said senior VP of Royal LePage Gino Romanese. ‘But from a purely investment perspective you would have done well to put your money downtown.’”
“‘One reason for the spike in appreciation is maturing baby boomers looking to downsize their empty nests to something that requires less maintenance’ while staying in their neighbourhoods, says the study.”
“The top suburban location in Canada was a condo in Sherwood Park in Edmonton at 417 per cent, while a standard two-storey home in Warman in Saskatoon is up 305 per cent in the past 10 years.”
The Edmonton Sun. “House prices have taken a hit but the Realtors Association of Edmonton says there’s good news on the horizon. ‘Our view of the market is that it is stable and is slowly rising,’ said association spokesman Jon Hall.”
“Compared to May 2007, the average price of a single-family dwelling in Edmonton has dropped $42,861, from $426,028 to $383,167.”
“But the numbers show a massive increase in prices from two years ago, when the same house would have been worth $282,208. Prices began a sharp rise two years ago, hitting a peak late last spring before settling, said Hall.”
“‘It’s like overrunning first base. Prices kept climbing for a while, then they stopped and fell back to around the $380,000 range, generally, and they’re stable around that rate,’ he said.”
The Scotsman. “Scotland has seen a 20 per cent slump in the number of new home loans, according to the first in-depth report from the Council of Mortgage Lenders on the housing market north of the Border.”
“John Brown, director of DTZ in Scotland, has created a radical ten-point plan with which he plans to lobby the government and says would give the market a boost.”
“Mr Brown said: ‘We are in a cycle of property prices now. We have had a brilliant ten to 12 years. Everybody has got used to continued house-price growth, and that cannot continue. However, if the government put some of these measures in place, it would give the struggling market a boost.’”
The BBC News. “Residents in the picturesque seaside village of Llanrhystud in Ceredigion gave their impressions of the rural housing problem. Carer David Power said he was renting a privately-owned home because he could not afford a mortgage.”
“‘I’m renting because I can’t afford to buy,’ he said.”
“Bus driver Colin Evans and his hospital office manager partner Bethan Williams have a mortgage on a property they bought a couple of years ago in Llanrhystud. ‘Costs are going up and I can’t see how first time buyers are going to get on the property ladder,’ said Ms Williams.”
“Mr Evans said: ‘Even professional people who are earning high wages, like doctors, can’t afford mortgages. I have a property in Aberystwyth which I rent to a doctor who is in that position. If professional people can’t afford mortgages then how can a person on an average wage be expected to?’”
The Independent. “The idea that yesterday’s collapse in Irish banking shares comes as a shock to the markets is nonsense. Anyone with a basic knowledge of how economies work should understand that banks get hammered when housing markets go into reverse.”
“The banks, by lending recklessly in the boom, will now bear the brunt of the slump. During the boom, anyone who questioned the logic of betting the nation’s cash on the housing market was dismissed as a crank.”
“Now it is becoming apparent that the banks in Ireland ceased being banks some year ago and transformed themselves into leveraged gamblers on property.”
“This process ultimately turns into a Ponzi scheme, where the entire system is based on getting more and more people to borrow money so that the valuations can be sustained.”
“It’s the middle of the work day, but Iveta Vitkovska’s notary office in the heart of Riga’s Art Nouveau shopping district is dead calm.”
“Just a year ago, there was a waiting list at notaries throughout the city as Latvians hustled to seal promising real estate deals. But an economic malaise in the Baltics has put an end to that.”
“‘Things have definitely slowed down in the last few months,’ said Vitkovska, reduced to organizing files in her office, located on a cobblestoned street where streetcars rumble past designer-name boutiques - dozens of which are now closing due to rampant rent increases and sluggish sales.”
“Over at Paus Konsults, a debt collection firm in the same neighborhood, business is booming. Director Marcis Katajs said Latvia’s banks submitted more than 6,500 new overdue debt cases in April, up 45 percent from February. There are about 200,000 such cases in the firm’s database, extraordinary for a country of 2.3 million people.”
“Little Latvia, along with its neighbors Estonia and Lithuania, is in an economic free-fall…after four years of thunderous expansion.”
“While the boom lasted, it was astonishing. From 2004 to 2007, Estonia’s economy ballooned 42 percent, and Latvia’s grew by an incredible 50 percent - by far the best results in the European Union.”
“Baltic consumers embarked on a borrow-and-spend binge by taking advantage of cheap, accessible loans. They bought new Toyotas, refurnished their apartments and vacationed on the Mediterranean. By the end of 2007, bank lending in Latvia skyrocketed to 93 percent of gross domestic product, up from 39 percent four years earlier.”
“Just as in the United States, rising housing prices created a feel-good environment of perpetual wealth, and Latvians returned to the banks to borrow more. Amazingly, many borrowed from several banks at once. Very few even thought of saving.”
“‘It is our common problem. The savings cushion for hard times is very small, if there is any at all,’ said Ainars Ozols, chairman of SEB Banka, Latvia’s second-largest bank. He said that only 10 percent of SEB Banka’s customers have savings.”
“But it was real estate that really fed the tigers as Latvians bought land, homes and apartments. The construction sector boomed - and property values were propelled skyward.”
“The price of a new apartment in suburban Riga tripled in four years, according to Ober-Haus Real Estate. And since capital gains on property deals in Latvia were not taxed, Latvians and foreigners alike jumped in on the action.”
“‘We have cab drivers who are real estate specialists,’ Katajs said.”
Ask what your country can do for you, not what you can do for your country…
“Some homebuilders are looking to Congress to help ease the housing doldrums. In a conference call with analysts, Toll Brothers CEO Robert Toll called on Congress to give would-be homebuyers a tax incentive to buy a new home, saying that should be a higher priority than addressing problem mortgages that are leading to rising foreclosures.”
So clearing your inventory should take precedence over keeping “families” in their “homes”, that is what you’re saying Mr. Toll, isn’t it?
Toll Brothers just doesn’t get it..you can’t buy a new home if
1)You CAN’T SELL your old one
2)You can’t qualify based on a pulse only
3)You don’t have GOOD credit
4)You don’t have a decent downpayment
5)And you don’t have proof of employment and income
We are not only back 20 years in lending, we are even worse…the banks have a HOLD right now on the market and the entity that does not need to sell its paper and can hold it wins..there will be more mortgage shops going out of business..
Example, my father in law, with good credit and income wants to take some cash(not a huge amount has NO LOAN on property) to do about $25K in repairs(doesn’t want to break his CD)..house is worth about $250K(plans on paying back whatever he uses in the loan as soon as CD comes due)..went to a mortgage broker friend of ours to see what he could do..since my father in law pays everything for cash and had no tradelines THE BROKER COULD NOT DO THE LOAN..my father in law walked into his local bank..closing is next week..
“Ask not what your country can do for you, but what you can do for your country…”
The last guy that said these words got a bullet in the head.
However, no one here but you is saying this. Alad has it the other way around to mock Toll’s request.
Seeing as I had to edit Alad’s sentence, I probably already knew that, right?
“Toll said Congress should concentrate on driving up the demand for — and prices of — homes, rather than shoring up people’s mortgages.”
I propose that Congress allocate $1m to any individual who is interested in buying a Toll Brothers home. This way, the price of Toll Brothers homes will be guaranteed to never drop below $1m dollars, which would only be fair since Toll Brothers being able to sell $1m McMansions is in the interest of all Americans.
I think this is a great idea. Anyone that can qualify to buy a home (a positive net worth and a good credit score) should receive a tax rebate of 50% of the home purchase price. Above the line preferred.
Bring on the rebates but I am still going to lowball your dumb, greedy, doubling down, no business plan, loser, a**holes.
“Some homebuilders are looking to Congress to help ease the housing doldrums.
Corporate welfare!
Perhaps congress should tell the CEO and it’s corporate officers to pay the company back the bonuses and perks and reduce their salaries they received during the boom years. That should help out their bottom line!
NO BAILOUT FOR THE BUILDERS!!!!
‘Toll said Congress should concentrate on driving up the demand for — and prices of — homes’
At least this SOS comes out and says it. But if this is what he is counting on, he’s toast. Think about it; what happens next year and the next? People still can’t afford the houses, so any measure to prop up prices is doomed to fail. And IMO, there aren’t enough funds to do that anyway. Who are we gonna borrow the money from, the Latvians?
Ever have to deal with a Latvian loanshark?
Wasn’t Casey Serin from Latvia? Or somewhere nearby…where the heck IS Latvia, anyway???
Latvia is on the Baltic Sea and is between Lithuania and Estonia. I believe that Serin was from Kazahkstan which is nowhere near the Baltic States. The Baltic States gained some world attention in interwar, European politics as well as the early part of the cold war.
The quality of post-1980 primary and secondary education in the US is obvious.
In all honesty until about 1990, all those countries were taught as one huge country called the USSR.
Granted most people would have major issues with pointing out where some of the recent african nations in turmoil are located, or even where Montreal QC is.
Well, tux, I used to know a lot of that kind of stuff, but all the things I NEED to know took precedence in my RAM.
But can you to tell me which plants in the high desert are edible, or how to calculate how much sunlight’s left in the day w/o a watch, or what direction you’re going w/o a compass, or how to establish a meridian line via Polaris? These are things I do know and that are important to me, so not really knowing where Latvia is doesn’t embarrass me. We all know different things, that’s what makes the world go round.
“The quality of post-1980 primary and secondary education in the US is obvious.”
Could be, but at least I know one important fact about Latvia: The women are top notch.
Good for you Lost! you can also write a good story and have a great sense of humor. BTW, the videos are wonderful.
With all the respect due an Emperor don’t even joke about that. I, an American, have spent several weeks in Riga. Latvia is a beautiful place filled with beautiful people that bravely managed to keep their language and culture through a half century of foreign occupation. I long to return.
But the real estate bubble has caused immeasurable pain to the locals. Readers here understand the misery caused by the bubble in the states. Now imagine it 100x worse. Pensioners in Riga managed to frugally, and poorly, live on US$60/month. Today real estate prices approach those of Paris.
Latvia makes a good case study. Economically, every thing happens very quickly, and more severely than in larger European nations.
And Honorable Norton, no disrespect, but if you borrow money from Sasha, be prepared to pay when he comes a calling. He’s very polite, but his second visit, should you survive, will be memorable.
Said Latvian loanshark was named Riga-Tony, and I think his associate Mostacolli was in charge of rearranging kneecaps, but that’s all in the pasta, now.
People still can’t afford the houses, so any measure to prop up prices is doomed to fail.
I agree that the affordability issue will always be the issue if home prices do not fall. It appears to me that we are still deeply into the denial stage and many just cannot accept the fact that home values are dropping.
In fact the consumer mentality has come to believe that home prices will always keep rising beyond the normal appreciation trend rate despite a decline in their wages over the past several years. Until this mentality is broken, the housing correction will continue to limp along and put a drag on the economy.
Heard a radio talk show over the weekend. Some young lady calls in and says she is looking at a REO and to make a long story short she is @ 55% DTI. She asks the host what should she do. He tells her “get a cosigner. That will help the lender favor your application.” I thought sure the first words out of his mouth would be “buy a cheaper house!!!” You know who your are Real-Talk on KMJ580. You should be ashamed of yourself with that kind of advice, but hey old habits die hard don’t they?
But the problem is that they are still trying, and their efforts are leading to massive inflation. So we are all paying anyway. They ran the printing presses to prop up Wall Street. By the way, in giving the gangsters cheap money, the Fed also took away any incentive the banks had to give you and I a decent rate on our deposits. If the government is going to give them money all day long at 2% why should they pay you and I any more than that?
Prices may not be propping up, but the damage is being spread far and wide.
Actually, it’s working the other way around in a “through the looking glass” fashion. The 2-year loss carryback tax provision for corporations was amended for homebuilders so they can carry back losses for 4 years. That means income taxes paid in the boom years of 2003 and 2004 can be refunded to the homebuilders in 2007 and 2008. This in effect increases the after-tax profit for the boom. This handout apparently isn’t enough for Toll and his colleagues, but then again for many more is never enough.
I thought they gave up on it.
“Now it is becoming apparent that the banks in Ireland ceased being banks some year ago and transformed themselves into leveraged gamblers on property.”
“This process ultimately turns into a Ponzi scheme, where the entire system is based on getting more and more people to borrow money so that the valuations can be sustained.”
That was just in Ireland?
‘Baltic consumers embarked on a borrow-and-spend binge by taking advantage of cheap, accessible loans. They bought new Toyotas, refurnished their apartments and vacationed on the Mediterranean.’
Sound familiar?
Get ready for a new summer 2008 trend: The canceled vacation. This is already affecting the travel/leisure industry.
What are people doing instead? Staying at home. If they’re taking time off, it’s called a “stay-cation.”
My first ’staycation’ starts next week. I was supposed to fly to Baltimore, but I’m going to be putting in some time doing household chores and errands.
My apartment looks like a disaster because I have spent more time at work than at home.
I just built myself a backyard patio since I’m planning to spend my time off at home this summer. I also discovered that the Jenni-O turkey processing plants sell a variety of turkey products at a nifty discount. I picked up a ten pound box of turkey ’steaks’ (breast meat cuts) for $18, and almost fifteen pounds of marinated turkey tenderloins for five bucks. Between my smoker and my gas grill, my garden and cheap meat, I’m all set for an enjoyable summer at home. And if I get bored, I can go to the lake. It’s only across the street.
Whoops, correction there. An eighteen pound box of turkey steaks for ten bucks. How can I go wrong with meat priced between thirty and sixty cents a pound?
“How can I go wrong with meat priced between thirty and sixty cents a pound?”
If only I had a nickel for every time I’ve heard that.
LOL @ CityBoy!
On the same topic, I had a guy approach me at a Stop-N-Go trying to sell me steaks. He had a truck full of them. I did not however, take advantage of the cost savings.
LOL.
Only in New York would a nickel suffice.
With air fair on record levels I’ll spend vacation in Backyardia.
Backyardia — Isn’t that close to Backlotvia?
I think the US oil consumption numbers are the best barometer of the US economy. The gov statistics can be manipulated in all sorts of ways, but I believe energy use is proportional to economic activity and makes a big statement about the consumers financial health. Smaller cars, fewer vacations, fewer business trips all add up to one thing. If it walks and quacks like a recession it’s a recession.
I am preaching to the choir here but this is a global credit bubble. I wrote in a few weeks ago about Bulgaria. Same exact thing (worse actually, because Latvia is much nicer than Bulgaria): In a country where the average salary is about $3,000 USD per year (yes, that’s 3,000, I’m not missing a zero) house prices in some of the regional cities are in excess of $200,000USD for unfinished apartments, and even more than that in the capital.
Now, I like Bulgaria, but I go in with eyes open. This is essentially a semi-failed state, controlled by crime syndicates, with no real rule of law, widespread corruption that impacts daily life, with a neglected infrastructure that at best (and I’m not exaggerating here, I’ve lived and traveled extensively in BG) rivals the dilapidated sections of Chicago or Detroit, and they are asking for prices that you can see in modern, clean, western cities.
My wife, absolutely amazed, flabbergasted even, told the real estate agent, “Do you know we could buy a bigger condo than what you are selling here 100 meters from the water on Maui for that much?” And you can. It is literally insane what is happening, and anybody who thinks that this contagion is over, or that it will end well, or that there is going to be some safe haven someplace, is deluded.
“ceased being banks”
got to admit the irish have a talent for putting things succinctly. that is it in a nutshell — the banks became betting parlours. (and by extension our banking class are a bunch of idiot gamblers who persuaded themselves they were geniuses)
–
“Are we there yet? Are we there yet? Are we there yet?”
“That’s not just an endless series of queries from road-weary kids on summer vacation.”
No, Timmy, go back to sleep. I just found out that we took the wrong freeway. Hell, the Welcome sign says that we are in the wrong state.
Jas
“Toll said Congress should ‘jump-start demand’ by offering temporary tax incentives for homebuyers. …With a little motivation, the new-home market could turn around.’”
“Toll said Congress should concentrate on driving up the demand for — and prices of — homes, rather than shoring up people’s mortgages.”
“Tax breaks” for consumers as an underhanded bailout so that you don’t have to lower prices. I have to hand it to you Mr. Troll, you are as ingenious as you are devious.
Erin go broke…
“Now it is becoming apparent that the banks in Ireland ceased being banks some year ago and transformed themselves into leveraged gamblers on property.”
“This process ultimately turns into a Ponzi scheme, where the entire system is based on getting more and more people to borrow money so that the valuations can be sustained.”
Slightly off topic but I just got this from a friend who happens to be a tax attorney at a very large Wash DC firm. I asked how his kitchen renovation of 2+ months was going and he responded. Delusion runs thick.
“All walls that needed to be removed are removed. Floor is 95% installed. Cabinets are ordered and will arrive in 2 weeks.
So, now, he has to take out floor squeaks, drop a big voltage line for the wall ovens, reseal all walls with sheetrock and prime for paint. I then paint. He then installs cabinets, stovetop, wall ovens.
Then, I hire a guy to do countertops.
My cousin is doing GREAT work and is charging me a really low rate.
Amazing the value he’s adding to my place. It will be the best kitchen in the townhouse neighborhood by far, making resale a virtual snap, and I’ll recoup all costs later.”
“It will be the best kitchen in the townhouse neighborhood by far,”
People really need to rediscover meaningful hobbies. Tweak your bike, rescue a dog, collect stamps - anything but fetishizing the “home”.
One of my hobbies is tweaking my landscape. And one of my great joys is finding free stuff that I can use in the yard.
Case in point: Big tree branch fell across the sidewalk in the next block. And it’s a native tree branch. Perfect for cutting up and using as mulch around the plants.
Since the branch had broken into pieces when it hit the sidewalk, I took ahold of one particularly big piece and dragged it home. It’s sitting out in the front yard, waiting for me to cut it up into mulch-bits.
This is big on my list:
http://guerrillagardening.org/
But it looks like I won’t be around to see if my projects hold up.
How did the interview go?
Did they offer you the job in St. Louis?
Guerrilla gardening’s already happening here in Tucson. May it spread far and wide.
BTW, my mother’s maternal grandfather was a WWII Victory Gardener. He fed the extended family quite well.
AZ,
There was just a nice on Apartment Therapy on the resurgence of Victory Gardens. AT is a design blog aimed at young renters with lots of cost cutting ideas. Recycling, DYI, and handmade items are very popular with the under 30s and the greenies.
SF, Thanks for asking. No formal offer yet. Mr. Jane has already accepted so, regardless, it’s a done deal.
Personally, I don’t trust a kitchen built by a non-cook. In order to optimize the workflow, sanitation, and minimize costs, the person doing the cooking should have a hand in designing it before someone puts in a bunch of expensive and hard to replace crap.
Sing it! Thank you, for making the obvious argument.
I once was forced to go with a friend into one of those fancy stores in SoHo out here in New York. There was a model kitchen. It was totally gorgeous, mind you, no complaints there.
I started laughing.
The designer asked me why I was laughing. I told her that this was designed by someone for looks who hasn’t ever cooked before. She looked nonplussed.
Then, I analyzed it for her benefit. Where you wash, cut; where you assemble, where it goes into the pans or the oven; where the refrigerator and cabinet play into everything.
Everything was maximally wrong if you will. She had a look that would curdle milk.
Her parting words? Well, maybe if you could afford it.
My parting words? I could afford it in cash, bitch!
Fun times!!!
I got an earful from my friend though.
Home ownership at record levels; Cdn mortgage debt headed to $1-trillion mark
Never before have so many Canadians owned homes. And never before have they owed so much for the privilege.
Interest rates at or near historical lows combined with low unemployment and recent changes that allow people to buy houses with less money down and pay off mortgages over longer periods resulted in 68.4 per cent of Canadians in the housing market in 2006.
That’s up from 65.8 per cent in 2001 and 60 per cent in 1971, according to the latest Statistics Canada data.
The increase comes despite the fact that the cost of housing in many cities across the country has gone through the roof, outstripping inflation by far, while median incomes have essentially flatlined.
But Canada supposedly doesn’t have any “subprime” lending, so it’s different there.
I saw that article, but didn’t have time to include it. Here’s your Canadian lending weakness:
‘One key factor in the rise of home ownership is the relatively new option of mortgages amortized over 40 years. Paying off loans for homes over a longer period means much higher total interest costs, but lower ongoing monthly payments. The effect is increased affordability. Growth in such long-term mortgages has been nothing short of dramatic, figures show.’
‘Between the fall of 2006 and fall 2007, 37 per cent of all mortgages carried amortizations longer than 25 years, up from nine per cent in the preceding period.’
One of the Investment Counsellors in Vancouver had an interesting comment on these 40 year amortization mortgages. About 20 years ago, a big concept advertised by one of the financial planning companies in Canada was “Freedom 55″ - with proper planning, one could retire (aka achieve freedom) at 55. The IC called the “new” and improved mortgages… Freedom 95.
Canadians are as smug as ever about impending real estate corrections.
One worry that Canadians don’t have in terms of building up their long-term savings is the ‘free’ health care. Also, they are far less litigious than Americans and therefore don’t have the same risk of losing everything if someone trips over a lawn ornament.
Once you’ve got housing covered (assuming you can still afford the loan), health care, and taxes…the only thing to worry about is living expenses, which are highly elastic and don’t require huge amounts of saved money.
Of course, many Canadian retirees want to lead the snowbird lifestyle, so still need substantial retirement plans. I don’t think that Canada will be hit as hard by their savings deficit as we will (though it’s still gonna hurt).
20k in the bank and a ticket to USA= Canadian”free-er” healthcare
The lack of universal health care in the US has severely damaged the country. It causes corporations to be less competitive (having to pay for employees health), prevents people from switching jobs (for fear of losing insurance), and bankrupts people with unexpected severe health problems.
Universal health care may cost, but, IMHO, the cost would be well worth it.
Who’s gonna pay for it? What’s left of the productive people in the global economy?
BWAHAHAHHAHAHHAHAHHHHHHHHHHHHH!!!
Health care is not “free” here; it is a single-payer system that taxpayers fund and is delivered by the provinces according to national standards (i.e., The Canada Health Act). Each province can charge “health care premiums” as part of the income tax and also EHT or employer health tax based on payroll.
It’s not perfect by any means, but one advantage of a “single-payer” system is that efficiencies can be created by buying medications and supplies in bulk, and no one is turned away regardless of their finances. Having people’s health taken care of tends to enhance their productivity (and the tax base, too). People with deep pockets are free to go elsewhere abroad, of course, to get treatments or tests faster, but, in the main, most people get timely treatment when it’s medically necessary.
Any system, ANY, is as only good as the people and the links in it. I’m not going to be smug (as Vancouver Renter puts it) and suggest it is better than the U.S.’s, or any other country’s system, but it’s what we have and we live with it.
Yes, I have mentioned that.
I’d prefer that amortizations be REDUCED to 15 years rather than increased to 40. The CMHC used to charge higher (mortgage insurance) premiums with downpayments under 20%, now I think that is reduced to 10% or even 5%. This tinkering around the edges and “creativity” has to stop.
“There is something wonderful in seeing a wrong-headed majority assailed by truth.”
John Kenneth Galbraith
It never troubles the wolf how many the sheep may be.
Vergil
“There is something horrible seeing a wrong-headed majority assailing those who disagree with them.”
me
“‘I know what it costs to build a home, and these homes can’t be replaced at the prices they’re being sold for,’ said local home builder Tom McCormick
Hey Tom, the pricing for almost all inputs to housing, including land, most materials, and labor, is endogenous, not exogenous.
Know what that means?
While I did not know the use of those terms in this context–I sure understand what you are talking about. If the house cannot be built for what CAN BE PAID–the price of the construction must go down. Is this the idea. Affordability trumps all in the market.
That’s just it Tom
There are too many houses and the houses that exist are too expensive for the average potential buyer,
ie your services won’t be needed for a while.
Guess what Mr. McCormick, I know what it cost to build too. In fact I have 2007 edition of RS Means right here on my bookshelf and it tells me I can build a house for $53/sq foot.
Now go fetch me a 2×4 you greedy pig.
“Chad Dreier, CEO of homebuilder Ryland Group Inc., is also looking for Congress to dole out some relief to the homebuilding industry. Believe me, we need some tail winds,’ Dreier said.”
I got your ‘tail winds’ aZZhole, screw you! You sniveling group of business cowards. Nobody owes you one damn thing for your POOR decisions, you couldn’t see what was coming? Tuff sh-t go bankrupt! These spineless excuses for business men need to fall and fall hard. NO TAXPAYER BAILOUT!!
I went broke in 1988 in my small business and on one ‘bailed’ me out. I made some poor moves and lost it. I spent the next 8 years rebuilding and trying to pay my debtors. Finally did!
Debtors=debts
Tell me about it, wmbz. I went through the same thing and paid back every penny plus extra and it took years. No one helped me out, it was the worst thing I ever went through. Got lots of lectures, though, from friends and relatives. Couple of those “friends” are FBs right now. I haven’t said a word.
Good for you. Integrity is a lost virtue these days. People sure do romanticize owning a small business, don’t they.
Yes, and as a longtime small business person, it really galls me. Not much romance in it, quite frankly.
Bull, Slim. You and I both know it’s the best job money can buy.
“Toll said Congress should concentrate on driving up the demand for — and prices of — homes, rather than shoring up people’s mortgages.”
If any other industry said this, there would be outrage!
“Congress should concentrate on driving up the prices for Oil! Corn! Milk! Wheat!”
It’s such nonsense.
“Congress should concentrate on driving up the prices for Oil! Corn! Milk! Wheat!”
You mean they weren’t ? Fooled me !
We have an affordable housing crisis!
The crisis is that the housing is becomming affordable. Stop it!
The crisis is that the housing is becomming affordable. Stop it!
The consumer wants to buy a $150K house for $350K so they can brag about being in a $350K house they cannot afford. We cannot let affordability get in the way of these types of consumers! Now that is a crisis!
I think you’re right. J6P liked overpriced housing! I think the Gilroy Strawberry Pickers who had mortgages on 5 200K condos thought of themselves as “millionaires”
“By definition, (the decline) can’t go farther.’”
Boy are you in for a surprise ! This all reveals these homebuilders to be less than the geniuses they were portrayed to be.
I loved this statement from the homebuilder. *Everyone* knows that it is simply illegal for a buyer and a seller (or more precisely, a buyer and a foreclosure auctioneer) to agree to a price that is one penny less than the replacement cost of the structure (including a tidy profit for the homebuilder). If they try to do so, then as with the combination of matter and antimatter, the property simply disappears off the face of the earth.
I’m sure in a lot of areas, properties are selling ONLY because they are coming in significantly below replacement cost. And it’s going to be that way for a LOOOONG time.
JH
And these very same builders are selling finished lots for far less than the hard construction costs.
I agree with one thing–
At some point, finished lots will need to sell for more than their replacement cost. To believe otherwise is to believe that new homes will NEVER be built again.
Now costs could come down….which is the gamble…
“‘I know what it costs to build a home, and these homes can’t be replaced at the prices they’re being sold for,’ said local home builder Tom McCormick. ‘We builders have been arguing for a long time that we can’t build homes at the prices they’re being sold for. By definition, (the decline) can’t go farther.’”
______________________________________________________________
One could make the same argument about the relative value of 3 year old SUV’s, vs. their current production cost.
A good comparison, but not perfect.
The home has the land underneath it, which doesn’t lose it’s utility with time.
The advancement of home technology is far slower than cars (so existing cars will depreciate faster than homes).
Homes last longer than cars, so they will depreciate slower.
In other words, a 3-year old house is far more comparable to a new house than a 3-year old SUV is to a new SUV.
All that said, if the homebuilder is talking about 1-year old homes that are selling at far below their hard construction cost, then they may have a point. Those homes should snap back in value once development begins again in that market (if development begins again).
if the homebuilder is talking about 20-year old houses selling at less than replacement cost, the builder is full of it. Those homes SHOULD be selling for less than replacement cost.
..and it’s not as if replacement cost is a fixed amount.
Materials and labor are pretty easy to come by these days. Sub contractors are most competitive lately. Lumber got so cheap they are shutting down mills. My guess is prices on all building materials have dropped significantly.
A friend told me he can get granite counter top for something like $50 for an 8 foot length. I’m not up to speed but that seems really cheap.
Yeah, it’s all market dependent on the labor side, but generally the rest is true except for some significant items associated with finishing lots–asphalt, concrete and steel (and the fuel that goes into the macinery).
Overall, I’ve heard that construction costs have come down by ~15% or so. More in some cases, less in others.
“The home has the land underneath it, which doesn’t lose it’s utility with time.”
try Libby, Montana or Pripyat (Chernobyl) Ukraine just to name two places where land can be devalued for some time to come
Cinch
Yes, and if I take a torch to the SUV, I can make it worthless much more quickly than simply by letting time go by.
The point is this. Equal utility should give you an equal price. A 2007 SUV will lose relative utility compared to a newer SUV even if never driven and kept in a sealed vault. Same story with a 2007 home (excluding the land) will lose relative utility compared to a new home, even if never lived in or exposed to the elements.
New homes and new SUVs will have more modern features, and thus will have more utility than the older product (upgraded nav system, better fuel efficiency, better appliances, more modern wiring, better insulation/energy efficiency, etc.)
By and large, dirt ready to build a home on in 2007 will have the same utility as a newer lot prepared for construction in 2008, or 2009, or 2010, etc.
“By and large, dirt ready to build a home on in 2007 will have the same utility as a newer lot prepared for construction in 2008, or 2009, or 2010, etc.”
Yes, a vacant lot will continue to have the same use, i.e. it can be built on. But that in no way implies that a vacant lot will retain it’s 2007 value. Most lots that came on line in 2007 were developed on land where speculative developers paid a price for the property that only really made economic sense if the land was developed as commercial space, not as residential housing. These lot prices are currently falling dramatically( 20-30 cents on the dollar from 2007 prices is the going rate for REO lots in Atlanta). Vacant land generates no income; it only generates holding costs. That is why land prices are always the first to fall, and the last to recover in a real estate downturn. Lot prices comprised the majority in the run up in cost of new homes during the bubble. AIso, the treeless postage sized lots that were so prevalent during the bubble may quickly go out of style, at least in the sun-belt, as they make homes built on them more costly to cool. ( One shade tree in a yard=40% lower utility bills) I think anyone who believes 2007 lot prices will return is sadly mistaken, however, I do know quite a few folks who would be glad to unload their lot inventories to you at a small discount
or Cleveland, or Detroit…
You convinced me. I’m now off to buy a house in Cleveland with a brand-new crisp one-dollar bill.
Land certainly can lose its utility over time — at least if you’re measuring “utility” at one specific moment.
The utility of desert scrubland far from job centers declines when the price of gas rises, for instance. The highest and best use for marginal parcels then goes from providing a residence for commuters, to grazing goats or something.
True point.
However, I’m talking about relative utility for similar items over time, and I’m not talking about raw land (which can go to $0), I’m talking about finished lots in areas where people want to live. Two lots in the same area of desert scrubland will have the same general utility, regardless of when the lots were finished. They will both go down in value with increase in gas prices, not one more than the other.
I’m just trying to say that in some circumstances, the builder has a point.
The builders generally have stopped construction where it cost more to build the home than it would sell for. So, you have subdivisions that have finished lots right next to recently completed homes. No new homes will be built as long as it costs more to build the home than you can sell the home for. Ultimately, costs will need to come down or prices will need to go back up to a point where someone can make a profit building and selling homes, or else no new homes will be built.
If you are living in an area with population growth, assuming that no new homes will ever be built is a poor assumption. If you are living in Detroit, that could be a great assumption.
“It’s no secret that Torontonians have flocked back to the downtown core for housing over the past decade. ‘Home prices in urban areas have gone up more than in suburban areas, but both have shown significant appreciation’”
That’s what people in Brooklyn think.
There has been a structural shift in favor of central locations that was already going on as a result of generational preference before energy prices made the exurbs uneconomic.
But it is overwhelmed by the cyclical effect of the housing bubble and bust. As I’ve said, housing prices are going to stay high in my neighborhood, but it’s a long way down to “high” from where we are now. Perhaps 40% down in real dollars.
As I’ve said, housing prices are going to stay high in my neighborhood, but it’s a long way down to “high” from where we are now.
What will support those prices: Have wages increased or living expenses stayed flat in Canada? It hasn’t for the US. Quality of life in urban rabbit warrens may not be so marketable if there is a severe downturn. Especially as the levy expensive assessments when the buildings age. God forbid that the explosive growth also included shoddy construction.
As I’ve said, housing prices are going to stay high in my neighborhood, but it’s a long way down to “high” from where we are now.
What will support those prices: Have wages increased or living expenses stayed flat in Canada? It hasn’t for the US. Quality of life in urban rabbit warrens may not be so marketable if there is a severe downturn. Especially as the levy expensive assessments when the buildings age. God forbid that the explosive growth also included shoddy construction.
Oops! Sorry for that double post….
“‘I know what it costs to build a home, and these homes can’t be replaced at the prices they’re being sold for,’ said local home builder Tom McCormick. ‘We builders have been arguing for a long time that we can’t build homes at the prices they’re being sold for. By definition, (the decline) can’t go farther.’”
Since when is every asset supposed to be worth its cost?
Ever heard of the film GIGLI? Don’t think that is worth anywhere near its cost…
“‘I know what it costs to build a home, and these homes can’t be replaced at the prices they’re being sold for,’ said local home builder Tom McCormick. ‘We builders have been arguing for a long time that we can’t build homes at the prices they’re being sold for. By definition, (the decline) can’t go farther.’”
But it was fine to sell them for far more than the cost of production a few years ago? If you hadn’t paid bubble prices for the land, would there be this issue of production costs exceeding market prices?
Tell Mr. McCormick to wander into one of these spec houses and open up his wrists with a rusty drywall knife… when the odor of his wasted self finally reaches the distant neighbors of said tumbleweed strewn tract-house in AnyTown USA, please Mr. McCormick, leave a note for your discoverers reminding them why their homes won’t decline any further…
It’s just a supply and demand argument. The builder is missing one important point. Costs are not fixed. The more costs fall, the more home values can fall.
If a house won’t sell for it’s cost, then generally, no new houses will be built. (if they are built, they will only be built until the homebuilder goes out of business, which will be inevitable).
Generally, even with just a stable population, if no new houses are built, existing homes will eventually go up in value, and the cost of construction will come down.
Once the cost of construction is less than the new home price, new homes will be built again.
That damn invisible hand at work again…
“That damn invisible hand at work again…”
In the interim, a visible hand needs to b*tch slap Mr. McCormick.
“Now it is becoming apparent that the banks in Ireland ceased being banks some year ago and transformed themselves into leveraged gamblers on property.”
“This process ultimately turns into a Ponzi scheme, where the entire system is based on getting more and more people to borrow money so that the valuations can be sustained.”
Why am I not reading this from a paper in the states? Why does the logic and the common sense always show up outside our borders?
Have you been to the Sierra Madre lately?
All kidding aside, I know what you mean. Seems like the corporate media complex in the US is full of utter drivel.
He can’t possibly mean tax credits only for “new” (as in just-built) homes, can he? I mean, that would be beyond the pale.
By the way - the federal govt. gives a $10k tax CREDIT (not deduction - CREDIT) to any first-time home-buyer purchasing in the District of Columbia - this has been in place for quite a while - a friend of mine bought her first condo in 2002 and this really helped (it was a 130k or so efficiency, and a great deal).
Of course, she got the RE bug — and had to sell and move up to a $350k unit a few years later. And she is otherwise pretty smart and successful.
Just thought all you good folks would just LOOOOVE knowing you were already subsidizing purchasers in DC.
The only areas of DC that I liked outside of Georgetown were the gay areas. That’s usually a sign that there was some serious gentrification going on.
Preach it! Not only are they a harbinger of gentrification, they also make great neighbors. Some of the best I’ve ever had.
Federal Reserve Chairman Ben Bernanke said Wednesday he does not believe the United States will experience the out-of-control prices seen with 1970s oil shocks.
Back then, the economy suffered from a dangerous combination of stubborn inflation and stagnant growth. There are fears today that the U.S. may be heading in that direction again.
“We see little indication today of the beginnings of a 1970s-style wage-price spiral, in which wages and prices chased each other ever upward,” Bernanke said at Harvard.
He’s right. This time it will be much worse. In the 1970’s wages went up because businesses had no choice but to fork out the raises. This time the solution is China or India. So Ben is right. It won’t be like the 1970’s. That is too good of an outcome this time around.
Heliben doesn’t know what to believe. He spent his life worrying about preventing deflation, and now he has to worry that he has been successful. ‘Be careful what you wish for’.
I do find it ironic that someone can spend their entire life trying to figure out how to stop things from getting cheaper.
“”It’s a positive sign that the market is headed in a direction where we might see some stabilization,” Perlman said. “It suggests buying a home in Las Vegas is becoming more of a reasonable proposition. I do agree the biggest price declines are behind us.”
History shows that market prices were overvalued by more than 20% for a period of three years. But when the market corrects, he expects it to return to the equilibrium price immediately? Based on history, the market could overcorrect by -20% for several years.
“I know what it costs to build a home, and these homes can’t be replaced at the prices they’re being sold for. We builders have been arguing for a long time that we can’t build homes at the prices they’re being sold for. By definition, (the decline) can’t go farther.”
This reasoning is just about as ass-backwards as it can get. The fact that he cannot build something cheaply enough to sell it at a profit means that he’s got no business building it. This is the market’s feedback that industry needs to stop building or else improve their business in order to become profitable. There isn’t an industry in the world that doesn’t face the challenge of rising costs and shrinking profit margins in the absence of innovation.
“There isn’t an industry in the world that doesn’t face the challenge of rising costs and shrinking profit margins in the absence of innovation.”
Nor few industries seemingly less lacking in innovation than the big builders.
Quote:“Some homebuilders are looking to Congress to help ease the housing doldrums. In a conference call with analysts, Toll Brothers CEO Robert Toll called on Congress to give would-be homebuyers a tax incentive to buy a new home, saying that should be a higher priority than addressing problem mortgages that are leading to rising foreclosures.”
Okay, let’s see–five years of boom, during which homebuilders experienced record profits. Now that they’ve overbuilt and houses stand empty, they want incentives so that they can sell their excess and build more? WTF??? There are empty houses going to waste!
Aren’t businesses supposed to sock away a portion of massive profits during hot times to survive the cool phases? Or did they just piss away all those millions?
Screw em.
Latvians and foreigners alike jumped in on the action…
We have cab drivers who are real estate specialists,’ Katajs said.”
..and you’ll soon have real estate specialists driving cabs.
“real estate specialists driving cabs”
Quite a coincidence …..in 2005 when I came back from a business trip a cab driver was telling me how much money he was making flipping condos. Raised a big red flag for me (later decided it was one of the many reasons we should sell our place - did shortly after and have been waiting since).
Fade em.
“Over the past 10 years, the price for a Mount Royal condo has shot up by more than 363% to $555,833, while the price of a bungalow in Scarboro has risen by more than 271% to $595,000.”
“Condos in Edmonton’s Castledowns area hold the national record with a 633% increase over the past decade.”
It’s a good thing there was no bubble in Calgary and Edmonton! HaHa
At this rate, condos in Edmonton will sell for $10,000,000 in a couple of years.
..the activity that we’re getting on large-priced homes is tremendous,’ he said. ‘Those aren’t signs of people … nervous about the economy.’”
The people’s not being nervous about things is the seminal element in bubble creation.
How could a country so dissimilar to us, be so much like us?
“Just as in the United States, rising housing prices created a feel-good environment of perpetual wealth, and Latvians returned to the banks to borrow more. Amazingly, many borrowed from several banks at once. Very few even thought of saving.”
“‘It is our common problem. The savings cushion for hard times is very small, if there is any at all,’ said Ainars Ozols, chairman of SEB Banka, Latvia’s second-largest bank. He said that only 10 percent of SEB Banka’s customers have savings.”
Human nature?
You gotta love these “Free Enterprise” corporations and individuals who continually blabber on about how a “free market” is the best system.
Actually, it IS the best system if it isn’t riddled with corruption in places like Wall Street.
One of the main promoters is Larry Kudlow. However, when the financial crap hits the fan (as it has now) the first ones to come out of the box and start crying are the “free enterprise” and “no government interference” crowd with their, “Government (the taxpayer) needs to step in and do something.” As in the mortgage crisis. Of course, these same a*sholes they don’t want government (tax payers) spending $35 billion for health insurance for kids. They only want government to bail THEM out with billions of dollars - then they can gear up to start blabbering again about “free enterprise” as they rape, steal and plunder the 401k’s, etc, - until the next financial meltdown created by their corruption and they can start crying again.
i know what you’re saying but imo, what is popularly viewed as corruption is just another part of free enterprise.
Everyone is trying to manipulate public opinion in their favor.
Government is always under pressure to move in favor of some type of enterprise and against another. Segments of the public have interest in steering public opinion and in manipulating government. This is where decisions, laws and regulations originate and it’s where they should come from.
When government, in it’s almighty wisdom, does not respond to the will of the market and the people.. when it does not feel and respond to pressure.. when it acts on it’s own.. That’s when we are in trouble.
It’s government for and by the PEOPLE, not for and by CORPORATIONS.
Democratic governments should respond to public pressure from voters. It’s a “free market” for politics.
Democratic governments should NOT respond to pressure from private industry. Companies don’t get to vote for good reasons. They don’t need one; they’re run by people who already have votes, and they market to people who already have votes. If they have legitimate need to influence government, they can do so by convincing voters.
Neither should democratic governments respond to the “will of the market.” That’s the job of private industry. “Free market” means just what it says.
“Toll said Congress should concentrate on driving up the demand for — and prices of — homes, rather than shoring up people’s mortgages.”
How could anyone read that and not interpret as nothing more than a company, that makes a product, which happens to be houses, trying to increase their sales? This would be no different than Acme Toy Company whining that congress should give parents tax incentives to buy more toys. The government is supposed to uphold the values of the free market, and these dolts know this. Of course Congress has made some surprisingly stupid decisions of late, so perhaps they feel that asking wouldn’t hurt.
Houses and real estate are sacred, and are part of the “American Dream”, and Bobby buddy is hoping that that fact will smokescreen his otherwise shameful plea for congress to subsidize his company with taxpayer money.
How else can you explain that most people feel that falling house prices are “a bad thing”? Would falling food or energy prices be a “bad thing” as well?
Real estate is sacred, it’s the anchor, it’s the “one constant in a turbulent world”…at least in the common man’s mind. Bobby is just trying to capitalize on that fact to force us, the taxpayer to (in the end) to give him and his company money.
Toll Brothers CEO Robert Toll called on Congress to give would-be homebuyers a tax incentive to buy a new home
There is already massive tax incentive to buy - is there really anything to be gained by further government-induced distortion of the real estate markets in this country??
The real problem is that Toll and others borrowed the next 5 years’ worth of future buyers and stuck them into houses that they cannot really afford. That will and must correct itself, and there is no way to prevent it.
‘We builders have been arguing for a long time that we can’t build homes at the prices they’re being sold for. By definition, (the decline) can’t go farther.’
There’s no rule that the cost that the market will bear can’t go below replacement cost. See Detroit for a good example of this.
“We builders have been arguing for a long time that we can’t build homes at the prices they’re being sold for. By definition, (the decline) can’t go farther.’”
Wrong.
By definition, you’re going out of business.