From A Buyer’s Perspective, The World Is Their Oyster
The Denver Post reports from Colorado. “While there are plenty of resale and foreclosure options out there, homebuilders are enticing buyers with brand-new smaller and less expensive homes. Floor-plan sizes and home prices have dropped since the beginning of the year. The resale and foreclosure markets present strong competition to new-home builders. ‘Our pricing and product offerings need to be competitive with those markets,’ said Rusty Crandall, division president of KB Home Colorado.”
“In response, the 50-year-old company, one of the nation’s largest homebuilders, is downsizing floor plans to 900 to 1,400 square feet, starting in the low to mid-$100,000s, in several of its communities.”
The Steamboat Pilot from Colorado. “Besides the obvious, there’s a very practical reason independent building contractors in Steamboat Springs aren’t in the planning stages for new spec homes to launch in 2009. ‘We’ve made every (spec house) loan request we’ve had in the last four months, which is none,’ banker Paul Clavadetscher told a local audience of real estate and development professionals.”
“Most construction loans for spec houses are for 24 months, he said. That allows 18 months for construction and a six-month selling period. With robust inventory in most housing categories on the local market, as well as a slow pace of sales, there isn’t much room to think a spec house will be sold within that timeframe, he said.”
“Realtor Shelley Stanford asked Tom Ernst, of Catamount Mortgage, to describe how the current real estate environment is affecting lending. Ernst responded that it might be more appropriate to examine the way loan underwriters are impacting appraisers.”
“‘The appraiser community is under much more scrutiny,’ Ernst said. In particular, Ernst said, appraisals in mountain communities are leading underwrites to ask specific questions about local markets. ‘Underwriters want to know much more about our town,’ Ernst said.”
The Arizona Daily Star. “One in four Tucson homeowners who bought during the last five years now owe more on their mortgages than their homes are worth. A large chunk of those homeowners who are ‘underwater’ on their mortgages bought between 2005 and 2007, says a third-quarter report. In the last year 28 percent of Tucson homes sold at a loss, about 20 percent of transactions involved homes in some state of foreclosure and roughly 83 percent of Tucson’s homes have lost value.”
“Tucsonan Mikka Cady, for example, says she probably owes $177,000 and change on the Southwest Side home she bought last year, but added that someone ‘would be insane’ to pay that much for it today.”
“Veronica Contreras, 26, bought her home south of Reid Park at the height of the housing bubble for $132,000 with only about $2,000 down. She owes about $127,000 — far more than the 750-square-foot home is now worth. To make matters worse, her first mortgage is an interest-only loan, and the rate, which is adjustable, is at 9 percent. She has a second, smaller mortgage for about 5 percent of her loan that has an interest rate of 13 percent.”
“In many ways Contreras is a poster child for the housing crisis. She bought her two-bedroom home at the peak of the run-up, thinking she could sell the house for a profit after a few years. ‘We bought the house before everything got super-bad, thinking we were doing a good investment,’ she said. ‘If we do sell it, we are going to have to pay to sell it, and we don’t have the money to pay to sell the house.’”
“Cady bought her three-bedroom home in January 2007. She thought the market had bottomed out and saw a chance at the American dream. She liked the neighborhood, close to her mom’s home, and she was sick of renting. She put no money down on the $179,000 home. Now she says she could probably sell the home for $145,000, and she’s worried about losing it.”
“‘It is so stressful,’ she said. ‘And everybody you ask for help, they say, ‘No.’”
“When told about Contreras’ situation, Long Realty CEO Rosey Koberlein, said steps need to be taken to keep Contreras and others in their homes until the housing market rebounds. ‘Society needs her to be a homeowner,’ Koberlein said. ‘Because what will happen is, if she has to let go of her house, then all of a sudden she pushes the neighborhood down.’”
“Koberlein said the solution may be as simple as changing the terms of loans like Contreras’ to 40-year fixed rates, or at least lowering interest rates on 30-year loans just to keep people in homes until values work their way back up and they are able to sell for something other than a loss. More broadly, Koberlein said, there needs to be some kind of bailout for homeowners and stimulus for buyers.”
“‘I personally believe that we are at the bottom, and I think we have been bumping along this bottom here for the last few months,’ she said. ‘The future, I think, is dependent on what government does to put a safety net on this slippery slope that’s going on here for people who are facing foreclosures.’”
The East Valley Tribune from Arizona. “Existing home sales across the Valley fell slightly in October compared with the month before and so did prices on non-foreclosure properties, according to the latest report from Arizona State University’s Realty Studies Department. Through October, the 2008 year-to-date resale total includes 39,055 traditional sales and 28,755 foreclosure sales.In every East Valley city, foreclosures made up a significant portion of overall sales last month.”
“From a buyer’s perspective, ‘the world is their oyster, they have lots of different choices in areas all over the Valley,’ said Dee Kepp, associate broker in Tempe and president-elect of the Southeast Valley Association of Realtors.”
“Kepp expects another round of foreclosures will hit the market as interest rates reset on more adjustable rate mortgages in the next few months. ‘So if people cannot afford those payments after the reset, then those possibly will become additional inventory because they won’t be able to afford the jump in their payment,’ she said.”
The Arizona Daily Sun. “It’s been said that location is everything in real estate. But in recent months, local Realtors contend it’s been price — and the lower the better. In October, the median price was $328,000, down $58,000 from the same month the year before. But that price remains at least $75,000 more than what a median-income family in Flagstaff can afford.”
“33 of the 56 homes sold were priced below $350,000, even though homes in that price range account for just 31 percent of the 867 homes currently listed on the Northern Arizona Association of Realtors’ MLS. There is nearly a 15-month supply of homes listed between $350,000 and $500,000.”
“The news is even grimmer for sellers of homes priced above $500,000, with an average of 11 homes sold per month..(and) 349 homes currently listed at that price range.”
“Realtor Hal Stern said many buyers are waiting until they see signs that the local housing market has bottomed out. He said some sellers must consider price reductions in order to get skittish buyers interested. ‘The question is how do we motivate buyers and the only way to do that is to bring the prices down, in many cases significantly, to create the motivation to buy these homes,’ Stern said. ‘Would you buy a home knowing full-well that the home could drop another 5 or 10 percent over the winter months?’”
“Stern said second-home owners are playing a role in the decline in sales of more expensive homes on the market, especially during the winter months. ‘They say, ‘Hey, I’m going to wait. What do I need (a second home) for now when I live in Scottsdale and I’m enjoying playing golf right now,’ Stern said.”
“One bank-owned property Stern is selling, built less than two years ago, could sell for less than the amount owed on the house. He said pricing needs to be aggressive to give buyers an incentive over other similar properties. ‘The bank wants to sell it, they need to get it off their inventory list and they are willing to dump it for maybe $120,000 less than the indebtedness,’ Stern said.”
The Mojave Daily News from the Arizona/Nevada/California border. “It’s a good news-bad news situation for the Tri-state’s real estate market. Home sales are picking up, but most of those transactions are foreclosure or short sales. Bob and Sandy Port operate SB Port Investments, which markets Laughlin Ranch Properties at the master planned community and golf course on the Bullhead Parkway. ‘It is, of course, a buyer’s market, so there are buyers coming in the door,’ said Sandy Port. ‘They’re all looking for the foreclosures and short sales.”
“To illustrate how much prices have fallen, Bob Porter said houses that sold for $650,000 in 2005 now are going for $400,000. The Ports reach out to people who may have originally intended to buy homes in the Palm Springs, Calif., area. ‘The difference is, we have a lake and a river,’ he said. ‘We have 11 casinos. When you throw that in the mix, we’re a jewel sitting here in the desert.’”
“‘Our demand is starting to rise, but it’s for the foreclosures and the short sales,’ said Alysia Dewar of Keller Williams Realty River Cities Specialists. She’s also noticing more interest from investors. ‘I’m getting a lot of people who have homes in California and back east … and they’ve got some money and I’m telling them, now is the time to buy,’ Dewar said, ‘because if they don’t buy now, it is going to level out. But the interest rates are going to jump. If you can find a house that you can buy and you’ve got a great interest rate you can get right now, you better jump on it.’”
The Las Vegas Business Press from Nevada. “Southern Nevada third quarter vacant land prices have plummeted nearly 74 percent since last year, Applied Analysis, a local business advisory firm, reports. Median vacant raw land prices were $524,725 per acre at the end of September, or $1,487,932 less than 12 months earlier.”
“‘Fundamentals within the residential, commercial and resort markets have slowed, resulting in elevated vacancies, less consumer demand, and more tentativeness,’ Applied Analysis principal Brian Gordon said. ‘The new realities of the market have price points resetting and those who purchased property during the past two years trying to make financial sense of their investments.’”
“‘”We are starting to see increased incidents of foreclosures, and many of those highly-leveraged properties are now entering the market again,’ he added. ‘Volumes are still down significantly from where there were two or three years ago.’”
The Review Journal from Nevada. “In Clark County, preforeclosures and REOs have increased 69.2 percent and 157.6 percent, respectively, from the same month a year ago. Tim Kelly Kiernan, REO specialist with the Brodkin Group at ReMax Pros, said prospective buyers of foreclosed homes are making offers on four or five properties at a time to increase their odds of getting one approved by the bank.”
“‘A lot of people are low-balling the banks, which is not very smart,’ he said. ‘They hear everything on TV about foreclosures and they think they can get it for less than it’s listed for. Banks have done their homework. If they list it for $100 a square foot, they’re not going to take $75 a square foot.’”
“Nevada ranked No. 8 in the nation with 3,176 foreclosures, down from 4,020 in September. ‘I still think there’s another 10,000 to 20,000 REOs sitting there waiting to be released on us,’ Kelly Kiernan said.”
“A separate report from Credit Suisse said new foreclosures outpaced sales in Las Vegas, leading to higher inventory and lower prices. Foreclosures continue to drive home prices lower and inventory increased as foreclosure sales slowed, but the pace of new foreclosures didn’t, the report said.”
“You know things are heading south when a 5.44 percent decline in Nevada’s monthly gaming revenues during September isn’t considered a bad performance. ‘While these results are lagging and less significant as gaming operators already reported third-quarter results, we are surprised the decline was not greater based on recent commentary,’ Deutsche Bank gaming analyst Bill Lerner told investors.”
“The taxes collected by the state based on September gaming revenues were $63.5 million, a 14.5 percent decline from the $74.3 million collected a year ago. Each of 2008’s nine months have shown declines, including 15.2 percent in May and nearly 13 percent in July.”
“The news was also bleak in Northern Nevada. Washoe County casinos had gaming revenues of $77 million in September, a 20.5 percent decline from a year ago. Gaming Control Board senior research analyst Frank Streshley said the figure was the largest single month drop by the Northern Nevada county, which includes Reno, since the state began keeping records in 1984.”
In Business Las Vegas from Nevada. “Clark County’s population dropped during the past year after decades as one of America’s fastest growing counties. Clark County’s most recent population estimate in July showed the county lost about 10,000 people since its last estimate in July 2007. Observers, looking back through records for nearly 40 years, said they are not aware of the county having another population loss.”
“‘It is a real important reflection of the breadth and depth of the recession we are seeing today,” said John Restrepo, an economist and principal at Restrepo Consulting Group. ‘Clark County has been one of the fastest-growing counties in the country for 20 years, and now we are not seeing growth.’”
“A reversal of the longtime growth trend is yet another shock to the foundation of the Las Vegas economy, analysts said. Experts have long believed that the lure of jobs fueled by the regular addition of giant Strip resorts and increasingly luxurious casinos in the locals’ market would ensure continuous growth.”
“The belief in the power of the gaming industry’s growth to spark economic expansion isn’t the only myth to be shattered by the economic crisis gripping Las Vegas and the nation. People who believed gaming was immune to recession learned otherwise.”
“And those who believed the rapid appreciation of home prices and demand for new homes would continue indefinitely, boosted by increasing prosperity and rising population, have seen those assumptions crumble. For the number crunchers who have spent years studying the rapid rate of Clark County population growth, the decline is a jolt to the system.”
“‘It shocked me it was so large,’ said Jon Wardlaw, county assistant planning manager. ‘I expected more that we wouldn’t have any growth. It tells us that we are much more connected to the national economy than people have thought in the past.’”
“‘I think given the current situation that it is in the realm of possibility,’ said Jeff Hardcastle, Nevada’s state demographer. ‘Because of the housing market (in Las Vegas), and the current situation on the Strip and the downturn in tourism, it is more than highly possible that (the county) could have lost population.’”
“Experts said the biggest culprit for any drop in population is the loss of construction jobs, which fell about 10,000 in the past year. Casinos have also been trimming jobs as the jobless rate rose to 7.3 percent in September. The emigration of Hispanics is at one of the highest levels ever seen, said Jeremy Aguero, a principal at Applied Analysis. Much of that is attributed to declines in residential construction, he added.”
“‘The economy is down overall, and restaurants and hotels and casinos are laying people off,’ Aguero said. ‘They came here for economic opportunities, and when those opportunities are gone, they are going to search somewhere else.’”
“Clark County calculates its population based on the number of households and their occupancy rate. Wardlaw said the housing vacancy rate rose from 4.5 percent to 7 percent. ‘There are more houses and apartments with nobody in them,’ Wardlaw said.”
I wasn’t sure about this line from the Daily Sun, so I modified it:
‘The news is even grimmer for sellers of homes priced above $500,000, with an average of 11 homes sold per month. With 349 homes currently listed at that price range, there is a 2Ö-year supply.’
Maybe the writer is counting the amount coming on the market? At any rate, readers at the N AZ thread on the HBB forum know I have been warning about the disaster approaching in the Flagstaff high-end market. Crimminy, there are lots priced over $500k!
‘Southern Nevada third quarter vacant land prices have plummeted nearly 74 percent since last year, Applied Analysis, a local business advisory firm, reports. Median vacant raw land prices were $524,725 per acre at the end of September, or $1,487,932 less than 12 months earlier.’
Who’s dreaming now? And keep in mind that the BLM and the Arizona State Trust basically stopped auctioning land years ago when prices fell like a rock, or nobody even bid. I’ve been saying for a long time that the solution to our problems lie in these groups releasing this land for whatever it takes to get prices back down to where we can grow again. AZ and NV killed the golden goose with this housing bubble, and only by getting back to cheap land and houses will people start moving here again.
AZ and NV had stunning job growth that was fueled by relatively low taxes and a “lifestyle” oriented community of golf courses and warm weather.
So what are the growth industries now? Foreclosure prevention and bailout lobbying, notwithstanding…your guess is as good as mine.
IMHO, the parts of the country that have the best chance for a fast recovery (i.e. in the next 2-3 years) are the ones with the lowest cost of living, the most skilled and educated populace, and most willing to make tax concessions to budding industries, such as the Rust Belt and New England.
For the foreseeable future, the Sun Belt is done.
I’ve come to this same conclusion the past year. If we really do get to a situation of extreme inflation and significant scarcity of basic goods and services, people living on land that only sucks resources and doensn’t produce are at a great disadvantage. That pretty much describes all western land doesn’t, unless you own enough water rights to grow, and there ain’t much of that to go around.
The Sun Belt can’t exist in it’s present form without cheap and abundant electricity to run air conditioning everywhere. Nothing is built for passive cooling anymore. At least in colder areas, there are numerous options for heating, both purchaseable and self-harvestable. Air conditioning pretty much requires large doses of 240/120V@60Hz, and solar, wind, and biofuels aren’t going to close that gap, not with the present generation of building structures in place.
People lived for years without air conditioning in the South. They can adjust if they need to. I say bring back the 12-4pm siesta!
Not in the types of structures we build nowadays, that was my point. Even with structures designed to most effectively use passive means of cooling, there still weren’t that many people willing to live and work there.
Skroodle, that’s true. My husband and I had a house in Stuart FL from 1972 to 1981, no A/C at all. The outdoor temperature was 89F-91F every single day from May through October. You hope to have a job at an air-conditioned facility, and then you just don’t move around very fast when you’re at home.
I was just in Bali for a month with no ac. Temps there were in 90’s every day with high humidity. I didn’t see anyone suffering.
I can’t really see New York or Michigan suddenly becoming low tax states. They’re at the top of the league tables now, and will be for the foreseeable future. Changing that culture will require massive changes and probably outright collapse. Maybe not even then–there will be a lot of support for economic initiatives and unemployment support as the existing industries fall apart.
The sunbelt states are already low tax and much more flexible from a regulatory standpoint. They don’t have to make changes to get there. The rustbelt states do.
OTOH, the rustbelt states will probably have really cheap real estate. They might become a retirement haven.
Crimminy, there are lots priced over $500k!
Lots in VT start somewhere around $100K. It takes $20 to $30K (conservatively) to develop to the point where you could put a house on it.
That’s $130K for land, a septic system, a well, and a driveway. Given VT’s median income, that price should be about what building the whole house should cost. My thoughts are that lot prices should actually be in the range of $10K to $40K to be inline with wages. (And many VTer’s think the housing bubble passed us by…*sigh*)
And keep in mind that the BLM and the Arizona State Trust basically stopped auctioning land years ago when prices fell like a rock, or nobody even bid. I’ve been saying for a long time that the solution to our problems lie in these groups releasing this land for whatever it takes to get prices back down to where we can grow again.
I’m not sure I wholly agree with you here. A tiny state like VT has plenty of lots, they are just insanely priced. I’m sure your area has the same and with the same type of people who seem to believe there’s a gold mine sitting under their little piece of the planet.
Also, I think government agencies are as prone to stars in their eyes pricing as anyone else. Unless they hold no reserve public auctions, they are going to want to get close to comps or barring that, sell to their buddies. I’m not sure auctions would have much effect.
‘The news is even grimmer for sellers of homes priced above $500,000, with an average of 11 homes sold per month.’
I am wondering how the high end of the price range is doing in coastal California? With wild fires ravaging homes in the $1m+ price range and financial conflagrations drying up securitization of loans above the GSE conforming loan limit, I am having a hard time envisioning a great deal of demand propping up this end of the market going forward.
I have grave doubts about continued “growth” in a drying desert region, but I guess we’ll see… Some realtor, somewhere, will try to sell abandoned homes with no access to water for a fortune, I am sure!
‘Society needs her to be a homeowner,’ Koberlein said. ‘Because what will happen is, if she has to let go of her house, then all of a sudden she pushes the neighborhood down.’”
Funny to see people now pulling out the what’s good for society card, as well as the guilt trip card. No one questioned what the bubble was doing to “society” when everything was on its way up, nor did they chastise people pushing the comps higher by buying overpriced houses.
Rosey, you need to have another sip of Kool Aid. Let Veronika fail. If enough Veronika types foreclose, and the bank takes it back.. Only then will housing get back to ‘normal’, whatever that is.
“In response, the 50-year-old company, one of the nation’s largest homebuilders, is downsizing floor plans to 900 to 1,400 square feet, starting in the low to mid-$100,000s, in several of its communities.”
Who is going to buy the myriad vacant nearly-brand-new super sized McMansions if the builders start downsizing floor plans? I guess it will be up to the foreign investors to purchase yesteryear’s McMansion at foreclosure sales.
Heh. I predict that McMansions will be tomorrow’s “multi-family units”, just like what happened to the old Victorians.
Or even half way houses for ex cons or mental handicap people It would be like a group home setting
Very little would need to be done, you already have 4/5 bedrooms plus a family room or den or media could be made into another bedroom or two But what the neighbors think????….
we have a 2 fam house just up the block…live in attendants..never a problem except they forget to look when crossing the street…but you drive slowly.
That may literally fit in with my story, if foreign investors beggar the neighborhoods by purchasing foreclosure homes then subdividing them into multifamily units. Sounds to me like a business plan…
Why? There are far better ways of making “fast money” and/or “tons of money”.
What you’re talking about is what the local entrepreneurs will “ultimately” do not foreign investors. Your premise doesn’t make sense for a large or even small foreign entity.
I’m suspecting that many McMansions will house “skilled nursing facilities” for retired boomers, who will no longer be buying Florida condos but still want to live in the Sun Belt. Some will be devoted to child care facilities for the baby boomlet and to doggie/kitty daycares for all the divorced/childless/gay people who work during the day.
They won’t be able to get the zoning for the halfway houses and adult foster care home ( skilled nursing homes are another whole field, and McMansions aren’t laid out for the job. I was a biller in one for about 6 months before my mother died of a subdural hematoma. The plan was that she would take up residence in the one I was working in so that I could make sure she was getting good care and that she could a loving face every day, but she died a week before she was scheduled to move in. I gave my notice fairly soon after, because they’re not my favorite place to work. I’d rather make money for a hospital. ) Skolled nursing facilities = yuck. Shoot me first, oh Lord.
“Banks have done their homework. If they list it for $100 a square foot, they’re not going to take $75 a square foot.’””
…yea, they will, in 6 months. Only problem will be that the bidders will be down to $55 by then.
There are still people stuck in the mentality that everyone must buy a house. Unfortunately for them, a growing number of people are realizing that renting is a perfectly fine choice.
Another real estate “professional” there. Of course it make sense to low ball. Nobody has to buy, but banks have to sell. Better become a real bank-owned specialist if you want to deal in this market.
“Banks have done their homework”
Yeah right! That’s hilarious. Just like they did their homework on the way up. This guy would like to make you believe there’s someone behind the scenes really sweatn’ out decisions on each and every deal. God I love these guys!
“If they list it for $100 a square foot, they’re not going to take $75 a square foot.’””
Uh, here’s the way they do it you dumb-ass realtard. They have someone in house or an actual appraiser appraise that bad boy. They’ll list it low-end of market and wait. If a couple of weeks go by and all they’re getting is $75 a square foot bids, guess what? - they’ll take it. You want to know why? ‘Cause banks don’t give a sh*t about you or your neighborhood. No emotions here - just move on. I’m pretty sure you know that too Mr Realtard, and what we’re seeing here is just another one of your proganda tricks to convince the unwary that we’ve reached absolute bottom.
In particular, in the case of the FL flippers I was posting about this a.m., Deutsche Bank priced the house at $65/sqft but sold it to my flipper-borrowers for $57/sqft. The flippers did some minor repair work and are trying to get the $65. They just aren’t aware that Cape Coral hasn’t Bottomed.
Around here they’re pricing low enough to get a few bids. They generally do a pretty good job; the REO houses _are_ selling at market-clearing prices. They’re just really low prices compared to a year ago. (And high prices compared to where I think they’ll be a year from now.)
“added that someone ‘would be insane’ to pay that much for it today.”
But it made perfect since in 2007 in Tucson, AZ.
“Cady bought her three-bedroom home near South 12th Avenue and West Bilby Road in January 2007. She thought the market had bottomed out and saw a chance at the American dream.
She liked the neighborhood, close to her mom’s home, and she was sick of renting.
She put no money down on the $179,000 home. Now she says she could probably sell the home for $145,000, and she’s worried about losing it.”
But you were sick of renting because you were throwing money away. With almost two years of not throwing money away under your belt, you should be in great financial shape.
“The future, I think, is dependent on what government does to put a safety net on this slippery slope that’s going on here for people who are facing foreclosures.”
Rosey Koberlein of Long Realty, you are deadbeat advocating for deadbeats. We can argue about to what extent there should be a societal safety net, but not one penny is needed to prop up houses prices in Tucson, AZ or anywhere else.
perfect sense
I guess I don’t understand her thinking, since she put only $2k down on it, and didn’t seem to worry about paying for it at the $132,000 price, with $130,000 principal plus probably the closing costs folded into the loan. Why is she having such a hard time now ? They left out whether she lost her job, or had an adjustable loan, etc., in the newstory. That being said, I think $ 130,000 plus closing costs is a helluva responsiblity for a 27-year old single person to take on. If she has student loans, a car loan, or cc bils as well as her no-doubt adjustable home loan, then she will have to file bankruptcy sometime in the future. Our daughter is 28, makes close to double what this woman makes ( Contreras ), has $ 22K in student loans, will be working on her masters in the spring, and has a fairly small car payment, and she’s in no way interested in taking on a home loan on top of it. Right now, she’s renting a basement from some strapped homeowners in her new school district. Next year, she’ll move into a regular apartment with a roommate. That makes more sense then taking on a fancy home loan on top of it all.
Well said. I caught a few minutes of Obama on 60 Minutes saying that we need banks and homeowners to come together and negotiate to make home loans affordable.
The negotiations were already done before the closing. Both parties agreed to the deal. If the homeowner(and I use the term loosely) wanted the house at $X price three years ago what is different now? Oh I know what is different. Their dreams of quick riches have been dashed, and they now realize what kind of blood, sweat and tears it is going to take to actually pay for their home without appreciation wiping out their loan balance if they sell the home.
Kinda sucks to be them. Let them learn their lessons along with the bankers, investors and everybody else involved in this fiasco.
I would have to imagine that very few people were forced into these contracts with guns pointed at their heads, but now they want to re-negotiate, because everything didn’t go as planned. I can’t stand people that base their decisions upon every rosy scenario having to come true for their decision to pan out. Absolutely no room for error, bad things don’t happen to people like them…..Stop being so negative……I can always sell or refinance……Real estate is always a great investment……My job is safe, because my company has been working overtime for the past two years…….And on and on.
‘Would you buy a home knowing full-well that the home could drop another 5 or 10 percent over the winter months?’
Of course, no one can call the bottom. You would be a moron to buy one if you intend to make money off of it in this market.
Buyers will start buying when they know they can afford the home, when they can qualify for the loan on good terms, and if they want the house to live in for the long term. The investors will follow when prices drop low enough that they can rent the homes out to others for a profit.
Let me pull out of your comments the reasons we are not near the bottom….
“Buyers will start buying when they know they can afford the home,”
We all know what’s going down right now before our eyes. Massive unemployment! Those that have jobs are getting cut back. Even the ones that have jobs are scared to death to buy anything right now. The irony of this whole gig is that at long last, when we finally start to reach levels of affordabilty, no one will be able to buy because the old affordabilty no longer applies. Todays mid to entry level buyers are being picked off in droves by the economy with little relief in sight.
“The investors will follow when prices drop low enough that they can rent the homes out to others for a profit.”
Assuming for all the reasons just mentioned that you can rent them out. You can offer the best rent in the area, but if there’s no jobs it means nada. You wait - next year will be all about families piling in with families….or living in tents or RVs in god only knows where.
I’m not stupid enough to say we are at the bottom. I said that the conditions (on a mass scale) that I outlined were necessary to know that we were near the bottom. Obviously, those conditions exist for a very small number of people currently, but not in numbers that matter for the housing market as a whole.
I totally agree with what you say about the coming unemployment situation, but think you give some people too much credit for common sense.
A friend of mine, who is probably one of the most fiscally irresponsible people I have ever known, called me earlier today to tell me about his new purchase. He bought a new SUV, and traded in his 2005 car losing $4,000. He drives at least 100 miles roundtrip everyday to his job, which is nowhere near as steady or stable as he thinks. It makes me shudder to think that someone in his precarious financial position would go out and buy a new underwater vehicle at this point in time.
He has told me several things that make me concerned for his job, but he feels that things are better than ever. “Companies will have to spend more on advertising as the economy slows down or else they will lose business.” I could go on and on, but it would not be in good taste. Needless to say, he called to tell me after the fact, because he knows that I would have tried to talk some sense into him, and he would much rather have that “New Car Scent” than Common Sense anyday.
Gonna be one heck of a multi-family yardsale, because his whole family is the same way. Everything is based upon easy monthly payments and an occasional change of jobs to get their hands on all of their 401k money.
the median price was $328,000, down $58,000 from the same month the year before. But that price remains at least $75,000 more than what a median-income family in Flagstaff can afford.”
Wow… sense in print? I’m about to faint.
The next sign of the apocalypse will be either the LA Times or the SF Chronicle posting such an article!
And incomes are not expected to increase. Import inflation and domestic deflation. We won’t be as bad as Iceland… but expect pain ahead.
Got Popcorn?
Neil
“The taxes collected by the state based on September gaming revenues were $63.5 million, a 14.5 percent decline from the $74.3 million collected a year ago. Each of 2008’s nine months have shown declines, including 15.2 percent in May and nearly 13 percent in July.”
“The news was also bleak in Northern Nevada. Washoe County casinos had gaming revenues of $77 million in September, a 20.5 percent decline from a year ago. Gaming Control Board senior research analyst Frank Streshley said the figure was the largest single month drop by the Northern Nevada county, which includes Reno, since the state began keeping records in 1984.”
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There’s going to be wholesale closings of casinos soon, and i’ll not shed a tear for them…
Here in New Brunswick they are building a casino, because all those high-rollers are just dying to come to glitzy Moncton NB to gamble and frolic.
‘Society needs her to be a homeowner.’
‘Koberlein said the solution may be as simple as changing the terms of loans like Contreras’ to 40-year fixed rates, or at least lowering interest rates on 30-year loans just to keep people in homes until values work their way back up..’
Whooa Nelly! Now, what a minute here. Its NOT society’s fault she rolled the dice and lost.
If both the mortgage holders decide to change the terms that’s between her and them. If they do decide I hope it a 99 year mortgage.
Contreras needs to become an indentered servant to the mortgage holders if they give her a break.
Mortgate+death pledge
This is where our government’s thinking has become very muddled. Home ownership is overwhelmingly a private consumption good, and efforts to make one group in society (let’s call them “renters and upper-income home owners” for a reasonable characterization) pay for another group’s (”marginally qualified borrowers’ “) private housing consumption is an instance of robbing Peter to pay Paul.
In what may be classified as the ultimate “academic” Bernanke-esque “vision”, you are trying to shore up economic losers against economic winners.
I have never seen an example in the history of the world where that has ever worked out without total destruction.
Uh, I think it’s called socialism PB.
“‘Society needs her to be a homeowner,’ Koberlein said. ‘Because what will happen is, if she has to let go of her house, then all of a sudden she pushes the neighborhood down.’”
“Koberlein said the solution may be as simple as changing the terms of loans like Contreras’ to 40-year fixed rates, or at least lowering interest rates on 30-year loans just to keep people in homes until values work their way back up and they are able to sell for something other than a loss.”
What possible motivation do people have to stay in homes with underwater mortgages even if the loans are modified? It may be years before these places are worth what the mortgages cost them in the first place. I’m no expert but I would be willing to bet that most people in this situation will eventually walk away from their loans rather than continuing to make the payments.
“More broadly, Koberlein said, there needs to be some kind of bailout for homeowners and stimulus for buyers.”
Yes, so that home prices remain artifically high and people who actually want to buy a place to live in still won’t be able to do so. Brilliant idea! Study some basic economics people.
Actually, you don’t even have to study basic economics. Just having a smidge of common sense will do.
“Just having a smidge of common sense will do.”
That is all the better.
“More broadly, Koberlein said, there needs to be some kind of bailout for homeowners and stimulus for buyers.”
“Yes, so that home prices remain artifically high and people who actually want to buy a place to live in still won’t be able to do so. Brilliant idea! Study some basic economics people.”
This is why the bailouts won’t work. Okay, so a FB gets to stay in their overpriced POS thanks to some loan modification that keeps them making their payments.
But who will ever be able to buy the house from them? How will the FB be made “whole” financially when they want to sell? How many buyers are willing and able to pay the FB’s “wishing price” in the face of tightening, conventional lending standards??
And bottom line, I have to believe a lot of the mortgages made with little or no down payment are just going to fold in the face of multiple years of price declines.
Lisa, right on. The FBs are in an impossible situation. They’re so far underwater, light at the surface is no longer visible.
This type of thing has happened before in American history. Not during the Depression, but during the panic of 1819. Many of those who accumulated debt they could never repay left their homes on what was then the frontier, and emigrated to the region of Mexico called “Texas.” Once beyond the reach of U.S. debt collectors, they were able to obtain land grants and start over from scratch.
The really interesting thing about this period was that “money” became almost meaningless. What mattered was land itself, and trade goods, like horses and rifles.
If you’re wondering how this is going to end up, here’s a preview:
http://www.star-telegram.com/news/story/1030630.html
Eventually, I think homes and tracts of land in some locations will simply be granted to anyone who is willing to occupy them, and industrious enough to maintain them for a period of time.
Maybe it’s a buyer’s market out west or in the worst-hit states, but here in Maryland, it is still the Land of Delusions.
We have “great deals:” nasty rowhouses in Baltimore that are basically shells still selling for 5-figures, 90+ year old 3 bed, 3 bath “farm houses” on 0.25 acre that NEED flood insurance selling for $280,000 - almost 5 times median household income for the area, Post War II 3 bed, 1 bath shoeboxes in poor condition and near a gang-infested walking trail that has had several beating attacks in the past few weeks selling for well over $200,000, etc.
In Maryland, “everyone is rich because of DC” - or more precisely, everyone lives over their head in debt, so sane people are priced out. Never have a seen a place with so much delusion and so many Donald Trump wanna-bes who “own a few investment houses to make money in their free time?!”