Underwater In A Way We Have Never Seen
The Denver Post reports from Colorado. “David Craig knows how draining it can be to make payments on a home that is worth less than the mortgage debt on it. The Brighton-area resident and his wife have struggled the past two years to carry not one, but two, homes valued at less than what’s owed on them. ‘You hear about how bad the economy is,’ said Craig, a truck driver. ‘Until my housing situation stabilizes, there is no way I’m going to spend a lot of money on the house.’”
“Denver ranked 41st out of 163 metro markets for its percentage of homes with negative equity, said Zillow spokeswoman Amy Bohutinski. Of the 425,000 homes purchased in the past five years in the metro area, 144,000 are underwater. The problem is a result of overbuilding in a superheated housing market as easy mortgage money was extended, beginning around 2003, to people unable to repay over the long term.”
“‘This housing market is underwater in a way we have never seen, not even in the 1980s and 1960s,’ said Jim Spray, a licensed Arvada mortgage broker who specializes in difficult home financing situations.”
The Post Independent from Colorado. “The Garfield County commissioners on Monday signed off on a request to allow the developers behind a 48 townhome-lot subdivision in Spring Valley to delay moving forward with their project for up to one year. The people behind Eagle Ridge Townhomes, slated for construction near Colorado Mountain College, sought the extension ‘due to the current economic conditions, which have affected potential marketing and financing opportunities,’ wrote David McConaughy, a Glenwood Springs attorney representing the developers of the project.”
“In July, the developers behind the 577-housing-unit Spring Valley Ranch development, southwest of Glenwood Springs, sought and received a one-year extension on their preliminary plan from the county commissioners. A few months later, the commissioners approved a request to delay a preliminary plan for the Lexie Meadows Estates subdivision, a 37-lot project west of Silt. In an October letter seeking the delay, a planner for the subdivision wrote that ‘market conditions have changed substantially in recent months and the housing market has essentially dried up.’”
The Arizona Daily Star. “The Barrios de Marana was supposed to be a new town core, mixing and matching residential and retail development on 38 acres in the heart of Marana’s rural landscape. But like many planned developments during these turbulent economic times, Barrios de Marana has been put on hold. The development group behind the plan filed for Chapter 11 bankruptcy Sunday.”
“Jack Neubeck, a member of the limited-liability company, said that while the Marana Town Council had given the project the green light, his group simply couldn’t get financing. Despite the bankruptcy filing and credit crunch, Neubeck said he is confident the development will go ahead once the housing market stabilizes.”
“‘It’s possible,’ he said. But ‘right now, boy, it’s tough.’”
The Arizona Republic. “On two parallel streets in south Tolleson, residents are struggling to hang on to their homes. Others are stuck, unable to sell because they owe more than their home is worth. The same story is playing out across the Valley today. So far this year, about 35,000 homes have been lost to foreclosure. Thousands more are headed in that direction.”
“Gloria Sanchez is among those stuck. She and her husband bought their house last year from the builder for $255,000, paying less than some of their neighbors who bought before them. The couple made a down payment of $50,000, money from the sale of their last home. ‘I’ve already lost the $50,000 I put down,’ she said.”
“Rocio Monteil lost her job as a secretary a few years ago but didn’t worry about their $1,800 monthly mortgage payment. Her husband’s wages as a plumber could pay the bills. But now his hours have been cut, so Rocio is looking for a job. So far, she hasn’t had any luck. Their adjustable-rate mortgage payment is about to climb, too.”
“The Monteils bought their home from the builder for $244,000 two years ago. Rocio Monteil thinks it’s worth about $140,000 now. The couple are among nearly one-third of Arizonans who now owe more on their mortgage than their house is worth.”
“‘We can’t afford to keep this house,’ she said. ‘We don’t have equity.’”
“Real-estate agent Sheri McBroom is trying to sell a house in the neighborhood for a couple hoping to avoid foreclosure. The owners of the home paid about $300,000 in 2006, put 20 percent down and paid to have the yard landscaped. The house is listed for $155,000, and still other homes in the neighborhood are selling for less.”
“‘Values have dropped so drastically,’ McBroom said. ‘I think it’s all about the timing of the homes being built at the peak of the market.’”
“The National Bureau of Economic Research on Monday reported it had determined the United States officially entered a recession last December. Scottsdale-based economist Elliott Pollack said Arizona still suffers from problems that are going to take years to resolve.”
“‘People have too much debt. They don’t have enough savings. Their asset values in their stock portfolios and the house are way down, so they feel poorer and will spend accordingly,’ he said. ‘The international economy is weakening, so exports aren’t going to be as strong. Industrial markets will be weak. And the housing market again is still in decline because of all the foreclosures and the excess supply. So, there are a lot of things that have to be corrected.’”
The Herald Journal from Utah. “Cache County homebuilders are feeling the impact of what the U.S. Department of Commerce has reported is the lowest level of construction of new homes nationally in about 50 years. ‘It’s down more than half for us,’ said Mike Carlson, president of Mendon-based Brent Carlson Construction. ‘We’re trying different advertisement methods — magazines, the Internet, bigger ads in phone books, but right now people don’t want to spend money.’”
“Carlson said his perception is that for most restrictions have returned to what they used to be 10 to 15 years ago. ‘My first loan I had to have a certain amount of equity down. I had to have so much money up front, had to have a job that was bringing in income,’ he said. ‘That’s what they’re going back to.’”
“That doesn’t mean people shouldn’t build, he said. It just makes sure those who do will be able to pay it back.”
In Business Las Vegas from Nevada. “What’s the good news about the housing market these days? At least it’s not commercial real estate. That’s the sentiment expressed by Tim Sullivan, president of San Diego–based Sullivan Group Real Estate Advisors. While experts on retail, office, industrial and other commercial development lament the state of their industry on panels he has appeared on recently, Sullivan says he has the best news to deliver.
“‘We were the deepest into it, and we will be the first out of it, but the commercial guys … we have retailers who are going out of business, and people not renewing leases. (They) are feeling contraction. As for residential, we have been going through that for two or three years,’ he said.”
“Sullivan characterizes the housing market as hitting the bottom, but there are plenty of issues to overcome before there is a recovery. The challenge at this time is to get prices to stop eroding, but foreclosures are contributing to that problem, he says. For the market to turn around, there needs to be fewer foreclosures, less home inventory, more job creation, more liquidity in the market, increased consumer confidence and less debt.’
“‘We have the fundamentals in place. Will they happen, and will they march us into a recovery the first quarter of next year? No, but we have Southern California next to us with 25 (million) or 26 million people. It is a feeder market and still higher priced. It’s relatively affordable here compared to the rest of the Southwest,’ Sullivan said.’”
“New home prices can’t fall any lower because they are below their replacement cost, Sullivan say. He says he sees builders constructing even smaller homes of 1,000 to 1,800 square feet and not the 3,000 to 4,000 square feet built in the past.”
“Dennis Smith, president of Home Builders Research, reports 842 new–home sales in October to bring the yearly total to 9,134, a decline of 7,758 or 46 percent. There were only 19 high–rise closings in October to bring the yearly total to 1,044 or a drop of 1,342 or 56 percent, Smith says.”
“Smith even took a veiled shot at Las Vegas housing analyst Steve Bottfeld. ‘It is pretty obvious how the change in the credit markets have devastated the high–rise industry,’ Smith says. ‘It seems like only a short time ago, there was a story in the local paper that an expert predicted the death of the local single–family (home) segment. That was a good one.’”
“Falling home prices and economic turmoil have softened demand for new homes, so it’s fortunate that Coyote Springs won’t see its first residents until at least the end of 2010. A year ago, the planned city-from-scratch in the middle of the Mojave Desert, 55 miles north of Las Vegas, was expected to welcome its first residents by the end of this year or first half of 2009.”
“Pardee Homes is the master developer for the project’s single-family and multifamily homes. The first phase of the plan calls for about 10,000 homes, with other phases adding to the total of 160,000 units on 43,000 acres - eventually making it one of the largest cities in Nevada.”
“Coyote Springs developer Harvey Whittemore…said he was unconcerned about falling home prices, saying the numbers released by research firms are misleading and don’t tell the story about the housing market. If most of the homes selling are at the lower end of the scale, that’s going to drive down that median price, Whittemore said.”
“Coyote Springs is well positioned to be affordable by land prices that are $500,000 an acre below prices paid in the valley, he said. Homes are expected to cost $200,000 to $400,000 in the first phase, Whittemore said. ‘If you take nothing but the average of Volkswagens selling, you are going to get a lower price,’ Whittemore said. ‘The bulk of the homes $500,000 and above are not going down by 35 percent to 40 percent.’”
The ee from Nevada. “Jeremy Aguero, a principal in Las Vegas research firm Applied Analysis, pegged the start of Nevada’s economic shrinkage to 2007’s fourth quarter, right before the nation’s slump began. Nevada beat the nation to recession because of its reliance on retail and home-building — the two key sectors that drove the country into its tailspin.”
“‘Our economy was uniquely positioned to take advantage of the run-up in consumer spending and construction activity between 2003 and 2007, and now, it’s uniquely positioned to get hit by the downturn in those areas,’ Aguero said.”
“Nevada suffers along with other high housing flyers of the last half a decade, most notably California, Arizona and Florida.”
“Joe Hules and his daughter-in-law, Cathy Hules, co-own SavvyLux Furniture and Design. The family owned two local Thomasville Furniture stores until earlier this year, when both locations closed. Cathy Hules said the family noticed a slowdown in traffic and sales as far back as September 2006. The Huleses have been using the ‘R’ word for months, she added.”
“‘You only have to go up and down the street to see the vacancies, not only in the homes, but in the businesses that have closed up,’ Joe Hules said. ‘I would say people weren’t paying attention if they couldn’t see it (the local recession).’”
The Reno Gazette Journal from Nevada. “In the past nine months, Sam Patel has seen obvious signs of the slow housing market and economy from behind the counter of his convenience store in Cold Springs. ‘As soon as you see people coming in and paying with change, you know they’re getting their piggy banks out,’ said Patel, owner of the Spring Mart for two years.”
“The slow real estate market and large number of home foreclosures has hurt local businesses throughout Nevada and the Cold Springs area, about 15 miles north of Reno, is a prime example. Dozens of bank-owned or real-estate owned homes are on the market, and while sales have increased since June 1 compared to the first six months of this year, the average sale price has gone down.”
“That could be a good thing for people who are looking to buy, but not so good for sellers. ‘When we say the sellers, we’re talking about the banks and REOs (real estate owned),’ said Dickson Realty agent Michael Mentaberry, a 24-year real estate professional. ‘A significant number of these (North Valleys) properties that are for sale are these types of properties.’”
“Three years into the collapse of the housing market, the sight of foreclosure and for sale signs isn’t exactly shocking for people in Washoe County. But even the most jaded resident would likely be surprised to witness five such signs in just one block. Take a walk down Stead resident Adam Cobert’s street and that’s exactly what you will see.”
“Since moving into his neighborhood two years ago, the next-door houses have been like a virtual revolving door, the 26-year-old said. ‘That house has been empty for about a year,’ said Cobert while looking at one of the nearby homes. ‘That other one, I don’t know if it was a rental property but people were just coming and going. (The last residents) were just there one day and gone the next. It’s been empty for at least six months.’”
“Even as he maintained that everything will eventually work out, Cobert said it would be nice to see people moving into his neighborhood again largely because of what it means in the big picture. ‘I’d like to see all these houses fill up,’ Cobert said. ‘That means people can afford things again. It means we’re finally getting out of this crisis.’”
‘Of the 425,000 homes purchased in the past five years in the metro area, 144,000 are underwater.’
‘Gloria Sanchez…and her husband bought their house last year from the builder for $255,000, paying less than some of their neighbors who bought before them. ‘I’ve already lost the $50,000 I put down,’ she said.’
‘The Monteils bought their home from the builder for $244,000 two years ago. Rocio Monteil thinks it’s worth about $140,000 now. The couple are among nearly one-third of Arizonans who now owe more on their mortgage than their house is worth.’
This is what happens when the people in charge ignore the fact that we’ve had a housing bubble. And the people paying retail prices today will probably be in the same boat. Is that really a solution, Washington? When half of the people are underwater?
It isn’t the solution for the buyers. Its the solution for the sellers. What’s the average age and ownership status of the average elected official anyway?
you got it. LOL. I mean it’s just really hitting home with people, right? Just think of all the pols, pundits and news readers are themselves underwater. That makes for real clear objective thinking, not.
“Is that really a solution, Washington? When half of the people are underwater”?
I don’t think anyone in their right mind ever though any bailout would work. However, also knew that would not stop the D.C. circus from gumming up the works. Someone posted the other day a plan some clown up there has, they want a two year moratorium on foreclosures. I say go ahead try it. That would bring the housing market to it’s knees. With financially illiterate folks running the show, we’ll keep right on getting insane proposals like that. Not to mention the moron realturds who think these are good ideas, or home builders who are begging for a bailout. These folks do not get it, never have never will, even when they are run over and gutted by this train wreck
I wonder if they even consider this a bailout of our financial system?? Or has it always been a raid on the treasury disguised as a bailout with federal dollars handed out to select individuals and Hedge funds to buy up stocks land ect when the deflation bubble collapses.
Function: abbreviation
“et cetera” - usually punctuated, “etc”
“& etc.”
“‘We can’t afford to keep this house,’ she said. ‘We don’t have equity.’”
How does having equity have anything to do with affordability?
Yeah, I enoyed that equity line too. I tried placing a couple of lines and a link to the Tolleson article early yesterday in Bits, but it never showed.
Equity is how you pay for the house, stupid. You know… HELOC. Where have you been?
I will never, ever get this either–they can’t afford the house because they don’t have the income to support it, not because “they don’t have equity.” Why does the media never clarify this rather simple proposition?
This jumped out at me too. I have no idea what the market value of my house is, because I don’t plan to sell it (or use it as a four-walled credit card).
Can’t these people just stay put, pay their bills and live their lives without all the drama? Someone forgot to tell these crybabies that this is Earth, not Heaven.
I have to be a “me too” here. I mean, somehow it never bothered millions of people that they were underwater on their multi-ten-thousand-dollar vehicles the minute they drove them off the lot. Why is it any different with their houses?
I don’t know about that…
My brother bought a brand new Harley Davidson. He told me that “they never go down in price: they are an ‘investment’”.
Oy veh.
“Of the 425,000 homes purchased in the past five years in the metro area, 144,000 are underwater.”
Only one third of the homes purchased in the past five years is underwater? Two thirds are above water, meaning there are ready and available buyers out there to pay at least as much as the original buyers paid? That sounds like a wishing statistic, the kind of wishing statistic that moved mortgaged backed securities off balance sheet so that they would not have to be marked to market.
Denver’s bubble started in ‘94, and peaked around 2000, it’s been a very slow decline and many people who bought in the last 5 years likely had some downpayment from another house or savings. I think out of state bubble money delayed the drop as did “creative” mortgages.
The national bubble didn’t have the same symptoms everywhere.
I’d guess that in the Denver area at least 1/2 of the underwater owners did it to themselves with a cash out. The thing is that Denver folks should have known better too Colorado has always been highly cyclical. There’s hardly any native business here, it’s mostly branch offices (of companies with coastal HQs).
I saw a chart the other day that showed that in most of metro Denver that about 50% of all who bought in the last 5 years are under water.
Today’s knifecatcher = tomorrow’s victim.
Keep those bailout trillions a’coming Washington. Problem is, who is going to bail out Washington?
You and I are….
“In the past nine months, Sam Patel has seen obvious signs of the slow housing market and economy from behind the counter of his convenience store in Cold Springs. ‘As soon as you see people coming in and paying with change, you know they’re getting their piggy banks out,’ said Patel, owner of the Spring Mart for two years.”
=============================
The past year i’ve seen a number of people cashing out their $40.10k’s @ Coinstar in the supermarket.
There are oh so many people living on the razor’s edge…
Patel, make me a squishy”
Homer S
The Patel’s have a monopoly on Quickie Marts nation wide!
What makes you think the Patel’s have monolpoy in quickie marts?
Ask any non-Patel indian.
The only Patel I know is a corporate attorney. But please don’t mind me stepping on your stereotype.
Umm…I use change at the market all the time, if I have the correct coins in my wallet to cover part of the bill. It’s money. The store gives it to you as change when you pay with cash. Why should I be embarrassed to use it to pay what I owe?
Ever pay for a 6 pack of beer in Nickels & Dimes?
Isn’t that one of the 20 questions in the AA pamphlet?
LOL!!
I paid a 50 cent toll with a stack of nickels once. It took what seemed like an eternity for the machine to count the damned things..
i do too… it’s either that or pay coinstar 8% to gobble up the change.
I imagine that this convenience store guy, like everyone else, sees what he expects to see.
FWIW the 8% coinstar cut is not mandatory… if you take an Amazon voucher instead of cash there is no charge
Many of the banks here in Boise, e.g. Zions or Idaho Central CU, have no-charge coin swallowers. They print out a paper stub which you take over to the teller for deposit or redemption. Oh, you don’t have an account with us…that will cost you.
I found a silver quarter (worth about $2) a couple of weeks ago. A lot of long buried money is coming back out.
This is so true…
polly,
I’ve found that to be true pretty much myself. I’ll start out the week with a $20 bill and by Friday I have enough change that if I fell in the river ( I’d drown! )
That and I find that I make the same purchases week after week. So why not have the exact change ready? After all the incredibly expensive commercials MasterCard has produced, nothing moves the line along quite like exact change.
Oh please, I’m hardly living on the razor’s edge, and I cash in my change all the time with no embarrassment. It’s good stewardship. If others also minded their pennies carefully and spent within their means, they’d be living comfortably, too.
“Denver ranked 41st out of 163 metro markets for its percentage of homes with negative equity,
when were the good years for Denver
99 to 2004 ?
the oil bust was big there in 86
We recently visited folks who live in the Highlands Ranch area south of Denver. I was amazed at the LACK of for sale signs on all the streets close to them. They said a house at the end of the block sold in October after being on the market for only about two weeks.
Any Denverites care to add info?
I believe I’ve seen HBB’ers report the telecom bust in early ’00s cut house prices in Denver.
The market laid low for a while while rest of metros nationally went all out with Kool-Aid in ‘04-’07.
So I would guess they didn’t get as much of the last bump and are better off presently.
If it hadn’t been for HELOCS and cashout refis I’d agree with you. CO ( driven by Denver) was #4 in the nation for toxic loans around 2005 (+-).
Check out foreclosure.com. Denver, Adams and Arapahoe counties are toast. Highlands Ranch is more stable and most of the folks there should have loads of equity, but we’ll see.
It is weird how there are pockets of Denver that have been completely unaffected by the bubble burst, while other equally nice areas went pop!
I don’t think there is anywhere in the metro area that is unaffected. Even in very desirable neighborhoods, the lack of credit has brought home sales to a halt. Additionally, homeowners who don’t have to sell have taken their properties off the market, which appears to lower the absorption rate and makes things look better than they really are. This is particularly true in areas with long-term owners who have lots of equity.
In my own suburban neighborhood (Centennial, CO), I’ve noticed that there are only a few houses available right now, and many properties that didn’t sell in autumn have been removed from the market. Seasonal lull? Perhaps, but I think most people, buyers and sellers alike, have just given up. Potential buyers either can’t find financing or are loath to part with the cash, while potential sellers are afraid to lose their equity, especially with the stock market in a nose-dive. We’re all afraid of our shadows, no matter what our situation.
Is Denver in a good place? I think things may be slightly better here than on the coasts (my old stomping grounds in northern California is down almost 40% from peak), but we’re hardly immune from the crisis. It’s still a scary time to buy or sell.
“New home prices can’t fall any lower because they are below their replacement cost, Sullivan say. He says he sees builders constructing even smaller homes of 1,000 to 1,800 square feet and not the 3,000 to 4,000 square feet built in the past.”
Wrong. There is no law of economics that says that home prices cannot fall below their replacement cost, particularly when there is a massive excess supply of vacant homes with more going into foreclosure by the day. Lots of the MSM-quoted experts could sure use a little refresher course in Econ 1.
There may be no economic law that says you cannot spend $300K to build a home that has a fair market price of $100K, but it’s still not going to happen very often.
All that means is that people will stop building houses, not that the $100K house will magically become worth what it cost to build.
i think that’s what the writer meant to say.. that if there is no profit in building new, they won’t be built. And if they are not built, the current price cannot fall.
If it costs $1 to manufacture a widget it cannot be sold for less than $1. So, no widgets can be built. However, the price will remain at $1 to make one because manufacturing costs have nothing to do with the sales end of the market and are not directly influenced by it.
“New home prices can’t fall any lower because they are below their replacement cost, Sullivan say”.
Uh, huh. So, homebuilding is somehow the only industry in the world that is promised a profit on EVERY single product they make?
Tell Ford/GM that products “can’t” fall below their replacement cost. I’m sure they will be VERY interested to hear the math behind that genius.
What all these people are neglecting is the NEED for the homebuilders to build. They can’t just close up their companies and go home. They build; that’s what they are here to do. They will continue to build until they go out of business, or (much more likely) CONTAIN their costs until they can bring a profit when they build a home.
Besides, in my area (S. FL) we are so far from replacement cost it’s not even a valid argument. A decent home is about 100/sq/ft to build (and that’s coming down). We still are far above that number (on land that is effectively worth nothing).
This guy obviously does not understand the difference between investment (i.e. housing) and consumption (i.e. tomatoes). All MSM-quoted experts should be required to pass a high school economics proficiency exam before being allowed to make comment.
Even comsumption commodities can go below replacement cost for long periods of time (up to forever). Some things are not on the market at all because their replacement cost is higher than their market value and will be for the forseeable future. (like horse buggies say)
If food and energy costs keep going up as a % of disposable income the amount people have left over for housing will decrease as well. That means that large houses may never be cost effective to build again no matter how efficiently they are built.
My wife and I are looking at houses right now. We’re seeing houses priced at well under $100 per square foot and well within our ability to “afford” them. Even so the future may be different from today, so we’re trying to decide how much we’re likely to be able to afford given the recent trends in the global economy. Very large houses don’t look good. Land for a garden is a plus.
Just a quarter mile away from some land I own in Orange County, FL are boarded-up houses that are only a few years old. Those houses, and others in that development–some of which have been listed on MLS for nearly two years–are effectively worth zero. Nobody would buy a house on a block where there are boarded-up houses. Eventually, some “investor” will buy it for back-taxes and use it for section 8 or something…
so my point is….houses can be worth much less than construction cost. All the way down to $0!
Another issue….you may as well have your own house built which, by definition will cost “construction cost” rather than take a house that was slapped up during the boom, or part of a restrictive HOA with CC&Rs, etc.
Many of these houses will be sold at less than construction costs.
reuven,
Excellent points. One way to find the true value of a home is to make payments on the same one for about a decade or so and then tell me if you still feel the same way about it as the day you bought it?
The “Boom Era” homes will be remembered right along with the Edsel, Vega and Pinto. And no, I would *not be interested to buy a home ( to live in ) on a block w/ boarded up homes.
An even better way to figure out the value of something is to sell it, lowering the price until a buyer is forthcoming. If Mr Sullivan understood what market value means (the price at which a willing buyer will purchase an asset), then he would also realize that there is no reason an asset cannot have a market value below replacement cost, particularly when there are so many assets on the market with so few qualified prospective buyers.
“so my point is…houses can be worth much less than construction cost. All the way down to $0!”
Alaska in the seventies was a prime example of this zero value syndrome. Entire neighborhoods stood empty until they were bulldozed.
repoe’d cars or repoe’d houses always sell for less money. It’s that simple. It’s called “trickle down and gushing up economics.”
You beat me to it, and you are spot on. Even as the economy returns to reality and house prices return to realistic levels, there are still plenty of Lereah followers spewing garbage like that. I suppose the person who made this comment would like to buy up whole neighborhoods in Detroit for fifty grand per house when they are being offered at a few hundred dollars a piece.
The American media are corrupt and incompetent. Americans should stop watching television and stop buying newspapers and magazines until the media start reporting accurately and truthfully. All this excitement over percentage drops or homes underwater makes for headlines but completely ignores the basic underlying story. The crux of the matter is not that homes dropped by fifty percent, but that they went up two to five-fold over seven years, outstripping incomes and affordability. Every reported drop in prices should be accompanied by a comment related to affordability. That way we will keep hearing that houses are unaffordable until the median US price is somewhere around $125k (versus $183 right now).
America, you are getting everything you deserve and more. Now you are even the lucky benefactors of military troops policing the country to protect you from terrorists! Ask yourself how many terrorists attacks have taken place in the US since the sham of 9-11. How many attacks have been foiled? How many terrorists arrested and convicted? None. The troops are not there for the terrorists; they are there for you. For when you realize that your home is worth about forty percent of what you paid for it and that it will not rise in value for twenty years. That you have lost your job, your savings, and your 401k. That Washington and Wall Street don’t care and are still rich. Then when you get angry, then you will find out what the troops are for.
When news of Coyote Springs was first announced I actually thought it ‘might’ make sense. After all the builders stressed “affordability”? But not now, after everything that’s transpired Harvey Whittemore is going to cite defective numbers coming from research firms?!
Harvey, tell us you’re kidding right? His comments and observations are just beyond ridiculous. Someone here mentioned that project had been in the works for years and it just seems they are so committed to it, they just can’t watch their dreams go down the cr@pper.
Where would the people of Coyote Springs work? And, more importantly, where would their water come from?
I like master-planned communities, personally - but Las Vegas just doesn’t make a whole lot of sense to me. Think of the energy and water required simply to exist there.
And the fact that despite REwhore’s best lines, the shortage of land in NV takes a real deep commitment to denial, one that I am stunned anyone can muster. LV is surrounded by NOTHING. 100’s of miles of empty, desolate land in every direction. That’s going to be horrible for housing prices in both the short and long term in that area.
Originally my understanding was that it was to be primarily a retirement community. When I visited their website and they had the typical REIC/Boomer-driven model of “attracting wealthy retirees” I dropped the whole issue.
When the home page spews garbage like “Starting in the mid-$300’s” ( sorry dude, you’re on your own ) They claim to have addressed the water issue and I was told that the family starting the project is well connected in Carson City, former AG w/ money or something. As far as employment that too appears to have been built on the “groovy retail” model.
Coyote Springs will take about 40 years to complete if things go as planned.. and with all the large caliber money and political grunt behind it and invested in it, I think it’ll do ok.
Part of the design was to de-centralize NV’s (2) heavily concentrated areas and give them ’some’ geographic diversification. As I mentioned I was initially onboard, assuming they were talking 75-125k homes, some industrial expansion along w/ all the usual amenities?
They realize they’ve been dependent on tourist dollars and economic cycles for too long. But when builders say “affordable” I’ve learned to ask myself “To whom?” I happen to love NV so I wished them success, but when you start to hear the typical “We can’t make ___ a sq. ft. pencil out..?” Beware.
The debtpeople in Coyote Springs don’t work anymore. They just face Washington and howl at the moon.
A$$ume the position
“The National Bureau of Economic Research on Monday reported it had determined the United States officially entered a recession last December. Scottsdale-based economist Elliott Pollack said Arizona still suffers from problems that are going to take years to resolve.”
I heard NBER president James Poterba quoted on NPR last night suggesting the recession would soon be over. I remember quite well how the ‘end’ of the 1990s recession went, as I was personally caught in the middle of it. Though the NBER officially dated the end of the recession as March 1991, the job market in the midwest was still in the crapper through most of 2004, and the California manifestation of the recession lingered on into at least 2005. This time looks much worse, due to a far more extreme credit binge and subsequent hangover. Have fun painting lipstick on the pig!
I could believe what another economist was saying on NPR last night (I do not think it was Poterba; around 650 pm PST last night in the Alt-A Bay).
He was saying people should think about “just spending”, because by doing so they’d help everyone be better off and “you just can’t tell how much the money spent today might be worth in 30 or 40 years.”
Which may all be true. However, he was obviously neglecting the fact that there are millions in this country who definitely should not be spending even one penny more… at least until their financial position shows improvement.
I think the below analysis captures the situation more accurately.
******
“The National Bureau of Economic Research on Monday reported it had determined the United States officially entered a recession last December. Scottsdale-based economist Elliott Pollack said Arizona still suffers from problems that are going to take years to resolve.”
“‘People have too much debt. They don’t have enough savings. Their asset values in their stock portfolios and the house are way down, so they feel poorer and will spend accordingly,’ he said. ‘The international economy is weakening, so exports aren’t going to be as strong. Industrial markets will be weak. And the housing market again is still in decline because of all the foreclosures and the excess supply. So, there are a lot of things that have to be corrected.’”
Yes, but praise be to the Lard, the stock market went up a few hunnert points today and recovered some of yesterday’s losses!
sf jack,
That level of consumer debt is why I can’t for the LIFE of me figure out why the auto mfrs. aren’t screaming the obvious!
Let’s go back to making auto loan ( and c/c ) interest tax deductible!!! They should be making the case that their fortunes (over time) became irreversibly linked to MEW extraction!
The consumer’s habits were sculpted in such a way that new car/SUV purchases were MUCH more contingent on cash-out re-fi’s than they ever were based on n-e-e-d of replacement! Since we can, ahem, safely write off the possibility of MEW-based consumption for the foreseeable future… we need to get back to a tax code that served us perfectly well for quite some time!
Yes, but people were also getting into the habit of purchasing vehicles that were far more expensive than their incomes would normally merit. Same situation as the housing bubble, I guess.
Adding some tax gimmick to get people back into SUVs isn’t going to help us in the long run.
“the one-third of Arizonans who owe more than their homes are worth”
I’m thinking about my AZ borrowers, who are a majority of my clientele. About 20 Arizonans. The median amt they owe is just under $50K, and the typical asking prices for these units (lot plus MH plus access to the HOA’s clubhouse, pool, laundromat, billiard room, whatever) is $90K-$130K. Sounds like a good LTV, right? However, THIS season is the first season in which these units are simply not moving. Not moving at all. Everyone knows the prices are silly. The loans are amortizing, so I have to hope that the Reality Price just doesn’t come immediately. Probably it won’t. Of course there is no chance of a foreclosure cascade, since the only lender (me) has no solvency problems of its own, and since all the borrowers are current. There are a few people who really need to sell for other reasons, but I suppose someone will offer them $80K or something and think it’s a bargain. Will keep you posted…
The Cobert Bump?
“Since moving into his neighborhood two years ago, the next-door houses have been like a virtual revolving door, the 26-year-old said. ‘That house has been empty for about a year,’ said Cobert while looking at one of the nearby homes. ‘That other one, I don’t know if it was a rental property but people were just coming and going. (The last residents) were just there one day and gone the next. It’s been empty for at least six months.’”
So much for the idea of “We’ll just rent it until the market improves.” Seems that a lot of other people are doing the same thing. Which means that not only do we have a surplus of unsold houses, we also have a surplus of rentals.
We are getting more and more rentals in our gated HOA-ruled turf of about 80 homes. This has the board riled, and since many want to blame the decline in prices on someone or something, the renters get the wrath. Unfair in my book. Board also is raising annual dues annually (bleeve 20 percent is the California maximum without a membership vote). The reason is not for common area upkeep (we have few other than said gate, which they can take down for all I care, and a pool), or for delinquencies, but to raise the cost of ownership/renting to discourage renters… i.e., price them out of market. Unsound logic would be a polite way to put it.
The biggest impact from the upheaval: hard to know who your neighbors are. Not an issue when I lived in Ohio and Kentucky and…
Disclosure: We own, but didn’t buy during the wildfire jump of prices.
milkcrate,
Blaming renters for the slide in prices is… it’s, well, it’s just laughable!! That is the ultimate expression of denial.
Like me, for all your better judgment and considered efforts, you’re paying for the excesses of others. Don’t ya’ just love it?
Hey D:
Have to think about and do other things to keep my balance.
Such as…. I read over the weekend that Capitol Records was re-releasing some remastered classics… on vinyl.
Among them: “Band of Gypsies.”
You being a tube guy prolly remember that sound.
Now, *there* was some excess.
;>
Years ago I had a condo, and when I tried to sell it I had problems because there were too many renters. Essentially when the percentage of rental units in the complex rises to above some threshold, that FHA won’t write loans for the units. At least that’s my recollection.
At the time, I had a freely assumable loan, and we made good use of it to move the unit.
Unbelievable though it sounds, black gold prices are plunging even faster than housing prices — down to $48 a barrel with no letup in sight.
Cool, that should bankrupt several oil producing commie countries. Chavez is gonna be pissed(as will his wards) not to mention the Russians, they have already postponed a few projects. So if black gold drops to $20.00 what will the price of a gallon be? .60-.70 pennies. This will also be good for Detroit we can get back to buying big assed SUV’s.
You remember in “Titanic” the part where the front breaks away and the rear kinda goes back to being almost horizontal for a little bit before resuming drowning?
Oil production has plummeted 10% already and getting worsts… the Great Depression cut down energy use by 30-40%.
Peak Oil has been described as the horse of oil production collapse racing the horse of demand collapse due to the permanent crisis.
Oil at $20 a barrel is still 10 days of wages in most of the world… when we’re all poor and in slums scouring the dumps $1 will look like $100.
Oil production has plummeted 10% already and getting worsts… the Great Depression cut down energy use by 30-40%.
Wow. I didn’t know that. Peak Oil mets huge demand cuts. Did people stop driving, etc?
Oil at $20 a barrel is still 10 days of wages in most of the world… when we’re all poor and in slums scouring the dumps $1 will look like $100.
The key here is to keep a cheery thought. “It’s a big, bold beautiful tomorrow…”
Nearly all the jobs in Kern County that pay well (aside from thousands of education administrators) are in the oilfields. If the oil price sinks and sinks, the tumbleweed will really start to blow in Bakersfield. Maybe the kit fox will return as the pump jacks creak to a stop.
Of course, some of their mega-deep drilling for natural gas could pay off some day.
I am thinking this boom-bust industry may have morphed from boom to bust in record time this go round. Any thoughts?
Prof…
The charts say the same thing as boots on the ground. The question I would have is how the price spiked so high in the first place. And how voters think the state is going to pay for high-speed rail… and why, in the last several years, the biggest fuel refinery under construction in this car-centric heaven, located near Madera, is designed to use corn as a feedstock. And no, they don’t have enough corn to power it unless they railcar it in from the Midwest.
But no, the plunge is unprecedented.
“The question I would have is how the price spiked so high in the first place.”
Perhaps this was wishful thinking on my part, but I had a hunch at the time oil prices were rocketing skyward that somehow lots of helicopter drops of cash from the Fed found their way into the hands of hedge funds, then on into the commodities market (esp. oil), as commodities are an obvious inflation hedge, and many folks had concluded the Fed’s plan was to inflate away all their problems. Obviously if that was the plan, it did not work out so well…
47.26
Drill, baby, drill!
I’ve been searching for an answer to this amongst my ghost investor friends who all think it’s a great idea…
Why hasn’t anyone created a “buy option” gas card? Instead of buying gas at retail, how about the option to buy X amount of gallons at the current futures price, and redeem it for gallons based on the month you allotted at that price?
So I could buy gas up to 11 or 18 months out or whatever at a set price, say 50 gallons per month, and then redeem for them for that time frame. This would let us hedge against a rising price, set our budgets realistically, and not worry too much about the upward/downward pressures. We could also “invest” this way by selling those cards at a profit to others should the price go up.
If Exxon or Shell or anyone would sell these futures cards, I think they’d also see initial cash flow increases that might let them spend more on discovery costs, and it might even help to level gas prices a little bit over time.
I know I could theoretically just hit the futures market myself and gamble on my own, but if they made it easier through retail gas cards (buying gallons redeemable at a given month), I think it would open that particular market to millions.
Any thoughts?
I suppose there’s a faint glimmer of hope that the global economy may bounce back soon.. What’s your bid on 50 gallons Dec ‘09?
As an aside, if i were a gas station i would commit to purchasing the very least amount I could because price of oil is falling fast.
This smaller “old” stock of gasoline will be used up more quickly, new purchases will happen more often and, instead of waiting months for a gasoline price reduction, we (consumers) should see prices at the pump falling more often.
A. B. Dada,
Well see? There you go. This is the exact type of synergy the internet was -supposed- to have aspired to. Basically “Buyer’s Unions” that were “infinitely scale-able” to achieve greater efficiencies etc. etc.
Instead ( for the most part ) it’s sunk like a rock to the lowest common denominator with everyone clamoring for “eyeballs” and market share ( however thin ) Most blogs simply don’t have the level of discussion we enjoy here.
According to some analysts from that era, consumers would have been doing “pooled purchases” of say a particular appliance and enjoying bulk discounts. Didn’t happen did it?
I believe that idea has already been floated around, though I don’t think anyone has actually successfully implemented such a program. mygallons.com comes to mind.
And pretty free of political partisanship too…we know they ALL are clueless.
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Most blogs simply don’t have the level of discussion we enjoy here.
I’ve personally only seen that happen on a very small scale on hobby related boards, sometimes a dozen or so people will do a group buy and get a decent discount
Why hasn’t anyone created a “buy option” gas card? Instead of buying gas at retail, how about the option to buy X amount of gallons at the current futures price, and redeem it for gallons based on the month you allotted at that price? I believe it’s already been done. About 18 months ago there were several items on TV news networks about a group who did exactly as you propose. Buy options to purchase a certain amount of gasoline over a certain period of time. I believe this was somewhere in the Midwest, Iowa perhaps. They were quite happy to buy their gas at $1.60/gal when all their neighbors were paying over $3. They were all limited to purchase their gas at the same station, might have been a farmer’s co-op.
Drill, baby, drill!
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that’s what she said!!!!!!!!!!!!!!!!!!!
Oil Falls More Than $100 From July Record on U.S. Recession
By Mark Shenk
Dec. 2 (Bloomberg) — Crude oil tumbled, capping a decline of more than $100 from July’s record, on speculation the U.S., the world’s largest energy consumer, may be in the longest slump since World War II.
Oil prices have tumbled 68 percent in New York since reaching an all-time high of $147.27 a barrel on July 11. Fuel demand dropped as the U.S., European and Japanese economies slowed. The U.S. first entered a recession in December 2007, the panel of economists that dates American business cycles said yesterday.
“It’s all about demand, demand, demand,” said Kyle Cooper, an analyst at IAF Advisors in Houston. “Until we see signs of better economic times, the market is going to move lower.”
Crude oil for January delivery fell $2.32, or 4.7 percent, to $46.96 a barrel at 2:41 p.m. on the New York Mercantile Exchange, the lowest settlement since May 20, 2005.
It has been about 5 months now since July 11 (12 - 7 = 5). The approximate annualized rate of oil price decline since then is given by
((46.96/147.27)^(12/5)-1)*100 = -93.6 percent annualized
CostCo has gas in the San Diego area for as low as $1.69/gal (101 Town Center Parkway near Cuyamaca St). Don’t get run over on your way to the pump!
P.S. My lovely wife reminded me that gas was as high as $4.80/gal within the last year.
Freaky.
It’s been interesting how quickly all of has been deflating. (Deflation, tee hee..) $2 plus a gallon negative.
What’s interesting was before the dam broke, I could see us going to deflation or run away inflation. I was on the Motely Fool for a while - Mish Shedlock had a board there for a very long time. It seems like another life almost that he was talking to the board about global economics and the coming deflation.
My crystal ball is broke, so I’m not even going to pretend to know what happens to all the lovely money being printed right now. It’s just weird to get to the point of deflation and living it.
And remember: Deflationistas do it for less.
Deflationistas will do it for less next month than today.
The Barrios de Mañana…
“The Barrios de Marana was supposed to be a new town core, mixing and matching residential and retail development on 38 acres in the heart of Marana’s rural landscape. But like many planned developments during these turbulent economic times, Barrios de Marana has been put on hold. The development group behind the plan filed for Chapter 11 bankruptcy Sunday.”
Soon to be flushed down Los Baños de Mañana…
“‘We can’t afford to keep this house,’ she said. ‘We don’t have equity.’”
Income, not equity, determines affordability. Clearly if you’re an FB waiting for a miracle, you have a different p.o.v.
Actually, neither income nor equity defines affordability when there are external factors you can never account for.
In terms of housing, the colluding elements of the State create a situation where a homedebtor or even a homeowner will never know what is affordable in even the near term future. When the tax rate for a home is equal to the mortgage costs just 7-10 years ago, it makes little sense to buy a home in any market where the bartering medium (”standard money”) is being inflated at a horrific rate. Monetary inflation, i.e., the growth of the money supply by the central bank, creates a heightened need by the State to expand the tax rates, which causes those who own tax-recurring assets to cost more over the lifetime of ownership.
Even though I own property to live in and rent, I think it is the absolute worst idea for those who want wealth. Being mobile, as I am now, makes far more sense, and I can afford to move annually if need be, even across the country or to another country. Being restricted means an even bigger burden on the so-called “affordability” equation. Add in the unknown of insurance costs, and you’re really up a creek as a property asset owner.
Right! These people were speculators, gamblers. There’s no difference between what they did, and what the investment firms selling credit-default swaps did.
My grandma can’t afford her house and she has 100% equity. The taxes and heat eat up most of her SS check.
Have she considered a reverse mortgage? I heard that RM lenders can no longer charge the exorbitant up-front fees they used to be able to.
How about a regular mortgage? She gets the lump sum and makes payments out of that.
Or she could sell the house, and live in a reasonably comfortable apartment off of the interest, depending on what her house was worth.
For the record, I already know this sentiment makes me fall into the class of people known as baby killers, mother beaters, and Young Republicans and such but..
Why is it so important to keep grandma in her house? (This random rant is not direct at you climber, you were just lucky enough to trigger the thought.
)
I get the memories and jazz, but it wouldn’t it be sadder to hang out in an empty, detoriating house and spending every last dime to do it? Even with the tax breaks and my Aunt living there, I remember how much my grandmother fretted about maintaining that house. Is that the way to spend your last decade or two?
I wonder how much of the general appreciation in housing prices (before credit craziness) has been from the “Save Our Homes” effect of senior tax breaks. (CA and FL are the headliners but VT has them and it wouldn’t surprise me if most states have some variation of it). If Grandma was forced to sell, wouldn’t that create a more normal and affordable market? Would that be more efficient on the whole *and* easier on Grandma?
Please flame away for thinking about old ladies and efficiency in the same breath. I probably deserve it. Please also send a donation into Young Republican groups…
My mom got out of her big house, and bought a two bedroom condo in a cheaper area.
I asked her “Do you REALLY want to be doing yardwork at your age/health condition?”
It works out great…..she doesn’t have to do or pay for any exterior maintenance, she has condo fees to complain about, a whole new collection of neighbors to spy on, and a meeting once a month with the condo association to bitch at the directors.
Life is Good.
My uncle spent the last half of his life in the house he was born in. He hired out the basic home maintenance activities, which weren’t much, & enjoyed his life until just before the end at age 92, when a stroke combined with long-standing and severe trouble swallowing did him in. Life was good to him after he made it through the attack on Pearl Harbor.
Looking for an excuse to walk away, they are… without damage to their credit. Bite me… and pay up.
“The Monteils bought their home from the builder for $244,000 two years ago. Rocio Monteil thinks it’s worth about $140,000 now. The couple are among nearly one-third of Arizonans who now owe more on their mortgage than their house is worth.”
“‘We can’t afford to keep this house,’ she said. ‘We don’t have equity.’”
Reporters never learn! They can’t afford to keep the house because they bought a home they can’t afford! The upside-downness of it is just an interesting footnote.
Translation: We don’t want to make payments on a depreciated asset. We bought this turkey because it was supposed to appreciate. Oh, and now that the teaser rate has expired we can’t afford the payments either.
“Sullivan characterizes the housing market as hitting the bottom, but there are plenty of issues to overcome before there is a recovery. The challenge at this time is to get prices to stop eroding, but foreclosures are contributing to that problem, he says. For the market to turn around, there needs to be fewer foreclosures, less home inventory, more job creation, more liquidity in the market, increased consumer confidence and less debt.’
Yeah, sounds like it’s hitting bottom to me…Just those minor problems and we’re off to the races again.
Being very familiar with Northern, NV, specifically greater Reno/Tahoe, I can assure everyone here that the north valleys areas such as Cold Springs and Stead are DUMPS. Houses there should be selling for well under $100k. The fact that they were selling into the $300k’s is so incredibly absurd that it defies description.
Right, now we’re seeing nearly new homes in Fernley, Fallon etc. drift right back to those levels. I actually happen to like Yerington, Shurz etc.
Yes, Yerington is a great ranch town with good
water. We almost bought a ranch there about
10 years ago, glad we didn’t though because we
ended up here in southern Oregon with an even
better place without the high desert winter cold.
“New home prices can’t fall any lower because they are below their replacement cost, Sullivan say.”
I can show you beautiful mansions built 100 years ago in Philadelphia and Trenton that probably cost at least $1,000,000 in today’s money to build (all REAL stone, leaded windows, slate roofs, massive stone pillars, intricate wood working, 5 stone fireplaces, 12 ft ceilings, etc.). Today you can get them for $100,000 or less.
Replacement cost and sales price are two different things.
Would you build that fancy mansion at a cost to you of $1,000,000 in labor/materials/etc and then offer it to me for the price of $100,000? Hopefully not..
What is your absolute lowest price? Why can’t you ask less than that?
I can show you beautiful mansions built 100 years ago… Hard to know what to make of your comparison. Many towns have old mansions given to them, that need a substantial endowment just to keep in decent repair and heated. Old fireplaces brought more cold air into the building than heat. Back in the days when servants could be hired and coal-powered heating was a few cents a ton, old castles made some economic sense, but not any more.
those builders are both lying and stupid. plenty of stuff is built or made that turns out to be unwanted and then has to be given away. including whole subdivisions!
it probably wasn’t till 1933 or so that the sheeple of the era had to say, “Yes, we are in a depression.” 1931, 1932, they were still saying, “this is just a rough patch… we have to ride it out.”
there will be some dead-cat bounces in the stock market in the next few months, but so what? the secular trend will be of a 40 or 50% drop in stock values in a single year.
the day that a weeping builder has to pawn his tools and truck — an experience to be repeated thousands of times nationwide — is that individual’s reckoning with reality.
already, self-styled “Realtors” (pretentious cap letter there) and brokers have reverted to their more proper station in life: bartending, burger flipping, manning 7-11 cash registers, pole dancing.
It seems to me that the depression in the mid US is spreading, instead of the opposite. Soon, we’ll all have houses worth nothing or less than before.