Housings Downside Scenario ‘Hard To Swallow’
Inman News continues their series on faltering home markets. “Lawrence Yun, an economist for the National Association of Realtors stops short of saying that homeowners in the Sunshine State and other parts of the Southeast may have become spoiled by their years of even heftier price gains.”
“But, he admits, the mere suggestion that the pace of price inflation may slow ‘might be a little hard to swallow’ by homeowners in the region who have grown accustomed to even sharper annual increases.”
“Statewide sales in February tumbled 24 percent from a year earlier, the Florida Association of Realtors says, with declines of more than 40 percent in such market stalwarts as Naples and the Sarasota-Bradenton area. There are growing signs that many of the same speculators who have helped to fuel Florida’s long price-run-up are now getting jittery about the prospects for future gains.”
“Cendant Corp. recently reported that its company-owned offices across Florida saw a remarkable 30 percent increase in cancelled sales: It placed most of the blame on speculators who backed out of deals, apparently because they think that prices may be topping out.”
“If speculators continue bailing, Florida’s condo market could be the first to feel the pain. The number of condos for sale in the Miami area is already double what it was a year ago, according to the state’s realty group. The foreclosure rate is also twice the national level.”
“Many developers just keep on building. Roughly 25,000 condominiums are under construction in the Miami-Dade area today, an amount that exceeds the total number of condo sales in the area that have been completed in the last nine years combined. ‘It’s a scary situation,’ sums up Jack F. McCabe. ‘We are going to see severe downward pricing pressures on condos in the next few years.’”
“Builder concessions are also popping up in other parts of the East. In Virginia, Brookfield Homes Corp. recently launched a ‘FastMove’ special on about 60 homes that are already finished or about to be completed: Discounts on some of its more expensive houses approach $100,000.”
“And in Washington, D.C., developer MDC Holdings Inc. is offering thousands of dollars in free upgrades in an effort to offset a sharp 60 percent drop in local sales. ‘We’re certainly not in a ‘panic mode,’ but we’re doing what we can to sell more houses,’ an MDC sales rep says.”
“Price cuts and other concessions are also spreading among new housing tracts in the key building markets of Atlanta and Dallas. Builders who’ve been active in the region for decades are taking it all in stride. ‘We’ve been around for 52 years,’ Lennar Corp. CFO Bruce Gross said. ‘So, we know that housing has a downside scenario.’”
“Housings Downside Scenario ‘Hard To Swallow’”
Ben, that’s just too easy.
Housing Bubble Not Ready to Burst
By Annette Haddad | 12:22 p.m., LAT
The median home price in Los Angeles County has just crossed $500,000 for the first time.
http://tinyurl.com/q9gsd
Really, you all waiting for L.A. need to just shut off the media for a couple of years. It will be the last to go, along with SF, NYC, etc. It sucks but it is what it is.
It may take a little longer but I wouldn’t say years. I’m seeing big price cuts an example of one is a house down the street where the owner took off 50k within 2 weeks because he was getting no play on the house. No visitors at the open house in the four days he held it open etc. He was about 10k over the last comp. I know he’s in a hurry because he has a job to get too. From talking with his broker he’s going to give it another few weeks and he’s going to drop it again and is highly flexible on the price. And there are for sale and open house signs everywhere.
L.A. sellers right now are suffering from a huge case of denial. Most folks I talk to are waiting for the spring or should I say the buying season if there’s not a lot of movement then your going to see a lot of panic. Especially among the Option Armer’s and the IO’s. It’s also interesting that that article came out today with that WSJ article in play. L.A. is very very trendy once it gets out housing is a bad thing these prices are going to drop like rocks.
And besides I’ve been having this weird feeling that I haven’t been able to shake for weeks it’s sorta like when a shark smells blood in the water. It’s not here but it’s close.
Wrong conclusion. Sales are down. Which means the lower end is shutting down ahead of the homes within reach of those who have the money to keep buying. Means nothing as far as bubble popping is concerned. Its to be expected at this point in the cycle.
Whatever. LOL. Study a little history.
I don’t have data for March, but LATimes Feb 2006 data
the median for Watts is 360k, El Monte is 450k, Compton 335-390k, East LA is 440k.
So, maybe the lower end is shutting down, but the prices paid seem to have moved up at the same time.
—-
No clue as to what history Tex is referring to. I thought this was all unprecedented.
One of the things you have to take into account when you sometimes see numbers like that in those area’s is that they are seriously lagged and distorted. And the reason for that is that these folks sometimes are being squeezed in. Ex: Recently had a client who wanted to list a rental house he was trying to dump. Active comps in the area were showing 450-475k. Previously sold comps were showing 470 to 480k and they had one that had closed maybe a week before I looked it up at 505k. So you would think that the area was on the incline when in fact that it was stagnant. The escrow opened on this deal in 9/05 didn’t close untill 2/06. The only reason deals take that long are either folks are unqualified and some is getting creative to save a deal or a them not being qualified and fraud. You throw those kind of comps in statiscal analysis and you come out with skewed and misleading numbers garbage in garbage out. They were able to get the appraisal because the market was a lot different coming of of Summer 05 than it is now. I wouldn’t trust the stats for at least another six months coming out of blue collar areas. Then I would take it with a grain of salt.
The escrow opened on this deal in 9/05 didn’t Mrincomestream said: close untill 2/06. The only reason deals take that long are either folks are unqualified and some is getting creative to save a deal or a them not being qualified and fraud.
The other possible senario is that the buyer had a contingency to sell their other home and it took that long so close. This was the case with us. We sold in October but didn’t close until February.
Angela
That’s rarely the situation in the area’s the poster posted that I responded too. Not very often are you going to find someone selling a house and moving to Watts or East L.A. It’s possible but I doubt it.
Very true, Mrincomestream.
I think the higher end is selling right now in L.A. County ,bringing the average up. In the area I sold out of last year right now they are selling bigger square footage homes for alot less . I still see a lot of homes sitting on the market now for over 4 months in the 650k to 800k range .When you see sellers waiting that long they are waiting for the selling season . Someone on the same block I sold out of listed her property 239k more than I listed for last year ,(it only has 150 sq. feet more ). The property is just sitting of course .
“There are growing signs that many of the same speculators who have helped to fuel Florida’s long price-run-up are now getting jittery about the prospects for future gains.”
Are they feeling stupid yet? I want them to feel stupid.
In general, they won’t at any stage feel stupid. They’ll feel unlucky.
How could they feel stupid? Why would they feel stupid? It’s the media’s fault. Besides, these people are too dumb to feel stupid!
I just went to my bank to use the ATM (an actual automatic teller machine, not a fake sense of security from “owning” an overpriced house).
Stuck to the outside doors of the bank branch were several copies of a word-processed notice. Just for today, if you refinanced your already-existing home equity line of credit or home loan, they would hand you a $20 bill — and *MAYBE* they would even be able to get you a lower interest rate.
You don’t suppose the banks are getting nervous about all of those high-risk loans, do you? With all of the jittery speculators, cancelled house sales, and high foreclosure rates?
I’m just asking….
Rare is the bank that holds any of the mortgages they write. They stuck $20s to the door because if you refinance they will get something closer to $5000 (of which you will get $20) and third party investors will buy the note from them. WaMu and Wells have a history of owning mortgages, but most banks dislike the callability and hold them long enough for the next pool to fill.
I’ve been watching closely for signs of liquidity drying up. I figure when the local banks start getting stingy with offers for new loans, it’s crunch time for sure.
With that said, the local credit unions are still merrily offering teaser deals for HELOC’s. Just saw one for 5.99%. Not bad, considering prime is at 7.75%! There is also no shortage of “balance transfer” deals in the junk mail - all those “0% for one year” offers. If Mr. Bernanke really means business about making money “tight”, he’s got a long, long way to go.
At the next real market bottom in housing, I suspect it will be practically impossible to shake any money down from a bank, regardless of one’s credit rating. The logic being, they’d rather invest in “safe” Treasury bonds than in “risky” mortgages and credit lines. That’s when the expression “cash is king” will take on real meaning in the minds of the general public. It happened in the 1990’s, and it will happen again.
i say - let them all eat the fruits of their labor (or lack thereof)
With regard to the sentence that sellers might find price reductions ‘a little hard to swallow’, denial is the first stage of grief. And, to the comment above, price increases mean almost nothing in terms of a bubble busting. Taken with declining inventory, they actually point to the fact that a bust is more likely.
-X
BubbleTrack.blogspot.com
(Each region of the nation has its own unique set of circumstances)
the thing is, they don’t. most areas seem to fall in the same patterns. interest rates are low all over. as long as you aren’t a real special case, your market will go up a long with the broader market. if not, why are there record numbers of areas classified as boom areas? it’s just like stocks. each company has it’s unique circumstance, but that doesn’t stop most stocks from following the market up or down.
Yes, but not all stocks have the same Beta.
With housing, some areas are much more volatile than others, just as some stocks are. And some housing is more closely coupled to the price/lending environment than others, just as some stocks are more closely coupled to their respective indices.
“Cendant Corp. recently reported that its company-owned offices across Florida saw a remarkable 30 percent increase in cancelled sales: It placed most of the blame on speculators who backed out of deals, apparently because they think that prices may be topping out.”
But Suzanne researched this!!
LOL. That’s what I was thinking…
Good one Ted….
MDC Holdings was cut to “sell” today by Banc of America. For those D.C.ers who don’t recognize the name, it’s Richmond American.
A stock truly has to be a dog to get a “sell” rating. Usually when investment firms indicate a sell, they mark a stock as a “hold”. Putting a “sell” on an issue is close to saying “get what you can — because this turkey will probably end up delisted”.
This quote is what disturbed me the most;
Roughly 25,000 condominiums are under construction in the Miami-Dade area today, an amount that exceeds the total number of condo sales in the area that have been completed in the last nine years combined.
I have a question. I see two listings on realtor.com mls#420854 and #393699. Both are in the same development in Miramar Beach(32550 zip). Both are obviously the same house plan (both 1820 sq ft and built in 2004). Here is the kicker…one is listed at $449k and the other at $629k!!!! Anyone familiar with this area? Am I missing something?
Not at all uncommon to see this type of disparity in pricing of same-style units. It shows, IMHO, a market which is not built on fundamentals, so nobody knows how to price a home for sale. The lower-priced on is probably someone who has more equity and can drop the price more, or someone who is getting squeezed and wants out **now**.
IOW, one person wants to sell, another wants to grow RE signs in his/her garden.
Looks like Miami will end up with plenty of Section 8 housing in the next few years.
These are the types of facts I like. It helps give perspective to how crazy things really got. Wow, 9 years of inventory.
Simmsays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
…and only 49 days until hurricane season!
BTW, more “on the ground” anecdotes…
One high-end finish carpenter we know in San Diego just commented that things have just recently slowed very significantly for him. He’s been exceedingly busy these past few years, and it just changed.
Another Realtor friend of ours in the LA area (San Fernando Valley) said things are very, very slow, and wants/needs to change careers. Mentioned to me tonight how “the economy is so bad and nobody can afford anything these days.” She wasn’t just talking about RE. Seems the “average Joes” are finding out the economy is not as rosy as they thought. It’s the first (and only) time I’ve heard her say anything negative about her business or the economy.
Another friend who is a mortgage broker in LA is really stressing about money. **REALLY STRESSING**. These past few years, he’s been talking up how much money he’s making and how the future is just soooo bright in RE. Not hearing that anymore.
Just more wood on the fire…
Did the mortgage dude there in LA save some money like the ANT did for the ‘winter’ season? Or did he think it was perpetual summer and spend it all (and then some) on BMWs, LV trips, wine, women, song, etc? Gees, I bet I can guess that answer. The higher they go, the harder they fall.
Well, if $5,000 rims for an overpriced SUV and going out all the time to bars and restaurants, multiple vacations, etc. is saving, then yes, he’s saving.
BTW, do you think they have life insurance or a trust set up for their kids??? I’ve lectured them on that over and over, to no avail. “Stupid” is an understatement, IMO.
Amazing, isn’t it?
and not to forget, his own RE portfolio. Great thinking, Mr. Grasshopper. He can sell his homes to the dead homeless dude in FL.
That FL dude now has a home. Rest his sole in heaven. Had a hard life, from yesterday’s story. Hope he has found peace now.
I am sure those now unemployed MB didn’t life insurance. I was selling LI in CA last year. DIdn’t handle too many mortgage brokers. They are the ones that need it now.