April 10, 2010

Were The Prices Right To Start With?

The Vail Daily reports from Colorado. “Home loans have been harder to get ever since the nation’s housing bubble burst a couple of years ago. But money’s still out there, for the right borrowers. Jeff Wilson of Wells Fargo Home Mortgage, was asked about the future of interest rates and whether the current wave of foreclosures has crested….(and) whether or not people can get money for home loans. Wilson said reports that home loans have dried up are just ’sensationalistic headlines,’ adding that Wells Fargo is writing mortgages for all kinds of property all over the nation.”

“The problem, though, is who can get loans. Wilson said that current lending standards reflect those that were in place between roughly 1986 and 2002. ‘It was 2003 through 2007 that was the aberration,’ he said.”

The Denver Post in Colorado. “What has become known as the ‘Roaring Aughts’ in Colorado’s resort communities was a time like no other. Retiring baby boomers drove up home prices, spending millions on 30-year-old condos with a view. The construction trade boomed with an appetite for newer, bigger homes. Working-class locals stepped up from apartments to condos to single-family homes in a matter of years, tapping escalating values. ‘We were drinking too much of the Kool-Aid. I had a couple more sips than I should have had, that’s for sure,’ said Aspen-area loan consultant Drew Sakson, who last year lost five of his investment and commercial properties and is fighting to stay in his longtime home. The fight has cost him 30 years of savings.”

“With his income nearly zero, Sakson qualifies for employee housing, but he can’t sell his condo in the depressed market. He’s late on his payments. ‘I had the ability to pay when this thing hit,’ Sakson said. ‘I thought I could ride it out. . . . I never knew it was going to get this bad.’”

“For years, mountain brokers touted endless appreciation that bested the stock market. When properties appreciated at rates of 10 percent or more a year, ‘all you needed for a loan was a pulse,’ Sakson said.”

“John, a former top-producing loan officer for Bank of America who owes $1.2 million on his 5,000-square-foot home in Edwards and is in foreclosure. ‘I’m the first, and there are probably another few hundred behind me,’ said John, who at 41 worked as a VP for two regional banks in the Vail Valley and as recently as two years ago earned $600,000 annually making loans. He asked that his last name not be used for fear of damaging his banking career.”

“‘Everyone was getting greedy, and everyone was living like kings, and everyone was making money thinking it was never going to end. Now everyone is getting scorched. Everyone,’ he said.”

“In 2007, his home was worth $1.8 million, $1 million more than he paid four years earlier. He tapped that equity and bought two investment homes. Those, too, he will lose to foreclosure, he said. Today, John is not making any money. He’s packing his stuff, joining a mass exodus of formerly flush locals fleeing the valley. ‘There’s no more work up here. It’s not about to end, and it’s never going to come back like it was,’ he said.”

The Aspen Times in Colorado. “The number of residential real estate sales and total sales volume have both plummeted since the boom years of 2005 to 2007, reported broker William Small, but the decline has slowed. ‘There are some indications that the market has bottomed out, but it’s still too early to say things are turning around,’ he said. ‘I think it’s safe to say the worst is behind us.’”

“Banker Kurt Adam, president of Community Banks of Colorado, was less optimistic. The lending market remains tight, interest rates will rise, and the national debt will continue to have a crippling effect on the economy, he predicted. ‘The good old days that we saw on many of the charts and graphs — I don’t think will ever happen again,’ he said.”

The Greeley Tribune in Colorado. “Looking back now almost a year after regulators shut down New Frontier Bank…the total cost is expected to reach well beyond the current estimate of $670 million. ‘My guess is the loss will be closer to $1 billion,’ said Carroll Miller, a bank investor and former board member of New Frontier.”

“For all the bad associated with the bank — the fortunes lost, the call for criminal proceedings, the failed businesses — the environment inside the bank left a permanent mark on employees. ‘It was a special place,’ said Joe Tennessen, a former VP at the bank, who lost his retirement but landed at the helm of Greeley’s Habitat for Humanity months after the closure. ‘During the good times, we all said to each other, ‘You better enjoy it, because this is a once-in-a-lifetime experience.’ It was indescribable. It was an absolutely spectacular place to go to work.’”

The Gazette in Colorado. “Classic Cos., which has constructed thousands of homes in the Pikes Peak region over 20 years as Colorado Springs’ largest local builder, is doing something it’s never done before — auctioning some of its inventory of homes. Classic has hired a national auction company, to sell 10 upscale homes that the builder has constructed at its Flying Horse development on Colorado Springs’ far north side.”

“Classic built 25 pricey homes as part of its Village of Sonoma, which is one of the neighborhoods at Flying Horse. About two-thirds of the 25 homes were sold in 2005 and 2006, said company Chairman Jeff Smith. But as the real estate market began to tank, he said, buyers who had contracted to purchase the remainder of the 25 Sonoma homes backed out of their deals because they couldn’t sell their existing homes. Classic has been renting eight homes for the past 18 months, Smith said.”

“Classic has been renting eight homes for the past 18 months, Smith said. Classic, both a builder and developer, wants to sell the homes because it needs to pay some bills, he said candidly. ‘We just need to pay off some bank debt,’ Smith said, declining to say how much.”

“One of the properties to be auctioned is a more than 10,000-square-foot custom home that sits on Flying Horse’s Tom Weiskopf-designed golf course. Minimum bids for the home will be $2.6 million — a 41 percent price cut from Classic’s original asking price of $4.4 million. Other homes will carry minimum bids that are substantial discounts from their original asking prices.”

The Arizona Republic. “The Centerpoint condominium towers in downtown Tempe failed to sell at a foreclosure auction Tuesday, forcing the lender, ML Manager LLC, to take over the property. Peoria-based ML Manager, the successor to real-estate lender Mortgages Ltd., asked a minimum bid of $8 million to sell the property at the foreclosure auction. Because there were no bidders, ML Manager now owns the property.”

“‘Our plan is to market the towers to a buyer who will finish them,’ said Mark Winkleman, chief operating officer for ML Manager.”

“He said proceeds from the sale of the project will go toward paying back investors. Mortgages Ltd.’s loan to Tempe Land Co. LLC, the former developer of Centerpoint, was for approximately $135 million. Winkleman said several people attended the foreclosure auction, but no one made a bid. ‘There have been reports of problems with the towers and that they need more work than they actually do,’ he said. ‘The 22-story tower is 90 percent done.’”

“Centerpoint broke ground in Tempe in 2005. The development was to include an estimated 375 condos, an upscale retail plaza, fine dining and a winery. Tempe leaders hailed the coming of hundreds of affluent condo dwellers. Now, weathered plastic tarps and boards drape the vacant property. Downtown Tempe stakeholders have complained the towers, which are secured by a chain-link fence, are an eyesore. There have been reports of transients breaking into the condos, looking for shelter.”

“Shannon Randle is a manager for Churchill’s Fine Cigars, which is across the street from Centerpoint. ‘If I was the city, I would try to have (the owners) put a 10-foot wooden fence around it and put up advertising for all the downtown businesses on the sides (of the fence),’ he said. ‘They should have that for us as complimentary service for what we have to put up with.’”

“The setting was a lobby turned into a meeting room with rows of plastic chairs at the Carnegie Center next to the state Capitol. The occasion was a public meeting hosted Wednesday by the Arizona Housing Department to share and receive feedback on how it plans to spend $125 million in new federal funds to fight the foreclosure crisis. Amid the numbers and bureaucratic terminology, the meeting provided a visceral glimpse of the wrenching downward spiral everyone involved in the foreclosure crisis feels and how this latest financial package is more triage than bailout.”

“Housing Department Director Michael Trailor recapped the grim trajectory. That the new federal aid would only help less than 10 percent of the households sent a new ripple through the crowd. Some seemed surprised. Others nodded in agreement, studying a handout passed out by Trailor’s staff. ‘We are on track for 50,000 foreclosures in the Valley this year,’ he said. ‘We are hoping we can use this $125 million to help 4,000 homeowners.’”

“Standing at the front of the crowd with microphone in hand, Trailor said he wants to use the money to help homeowners who had ‘demonstrated personal responsibility’ in their purchase. Help would not be available for people facing foreclosure due to ’self-inflicted wounds,’ such as taking large sums of cash out through refinancing or home-equity lines of credit or risky loans. Only homeowners living in ‘modest’ primary residences would be eligible, not investors.”

“And anyone who applied for help would have to demonstrate their risk of foreclosure was due to reduced income from unemployment, a medical condition, divorce or death. ‘We can’t be all things to everyone,’ Trailor said. ‘This $125 million might seem like a lot of money. But when facing Arizona’s foreclosure problem, it’s not.’”

“As the questions went on, some sparked heated debates, others set off frustrated murmurs. Near the scheduled end of the meeting, one man seated at the back of the room, wringing his hands, asked, ‘Why is Arizona only getting $125 million of the $1.5 billion?’”

The East Valley Tribune in Arizona. “While homes sold briskly in March compared to previous months, it’s not necessarily good news, according to a new study. In March, the existing-home market saw more activity and foreclosures than it has since last July, according to a Realty Studies report from the W.P. Carey School of Business at Arizona State University.”

“Activity in March was driven more by increased foreclosure activity, bargain hunters, short sales and the federal income tax credit for new home buyers, said professor Jay Butler, who authored the report. Almost 6,500 single-family homes were resold in the Valley in March, up from more than 4,600 in February and about 5,900 in March of last year.”

“‘Foreclosures remained a major force in the market,’ the study said. ‘Foreclosures and the resales of foreclosed-on homes accounted for 64 percent of the existing-home market activity. Almost 4,400 new foreclosures happened in March. That’s way up from just over 3,300 in February and about 2,700 in March of last year.’”

From ABC 15 in Arizona. “Canadian investors are buying Arizona real estate, helping the housing market in the west Valley. ‘It is the buying opportunity of a lifetime,’ said Bill Chipman, an investor from British Columbia whose business group is buying real estate in Arizona, Texas and Nevada. ‘Our business plan is to buy 500 homes but I hope we can do 1,000,’ he said.”

“Real estate sales to Canadians are reportedly up 80 percent over last year. Real estate values have plunged in areas like Avondale, sometimes by more than half what they were a few years back. But there is hope according to realtor Greg Swann. ‘Phoenix has great opportunities. It’s like California without the beaches or California,’ he said.”

The Winnipeg Free Press. “These days, however, it’s not just the favourable climate that makes Arizona an attractive locale. It’s the ridiculously low real estate prices that have really caught Gerry’s attention. ‘There are houses along golf courses that were $500,000 three years ago and now they’re $120,000,’ he says.”

“Although real estate prices in desirable U.S. hot spots like Arizona, California and Florida will likely never be more affordable than they are today, certified financial planner Wynn Sweatman says it’s equally important to consider the other costs involved in owning and living in a home south of the border. Owning and maintaining two homes will increase their costs, putting pressure on their ability to maintain their current lifestyle in retirement, so their investments may have to provide even better returns, he says. ‘They could end up wishing they had more in cash reserves and less in real estate.’”

“Still, buying a home in Phoenix likely has a substantial upside as an investment. Assuming they purchase a home today for $120,000, and that it will increase in value by five per cent annually, the asset would be worth about $171,000 in 10 years and $278,500 after 20 years. Sweatman says the figures are conservative estimates, considering current real estate values are extremely depressed.”

“What does $1 million buy in an Ahwatukee Foothills neighborhood these days? A lot more than it did five years ago. Longtime Foothills real-estate saleswoman Pam Eagan, for instance, has clients who are scrutinizing three $1 million cash offers for a custom five-bedroom, 4,700-square-foot home. The house, priced at $1.2 million, has a remodeled kitchen, a lap and diving pool with a spa, and balcony views of lights from Phoenix and Tempe.”

“Five years ago, the house would have listed for $1.8 million - and perhaps sold for even more if buyers got into one of the notorious bidding wars of 2005, Eagan said. ‘The prices have just come tumbling down,’ longtime Ahwatukee real-estate broker Mike Mendoza.said. ‘It makes you ask the question ‘were the prices right to start with?’ I just saw one listing that I know the people bought for $1.65 million, and it is listed for $950,000. Another one sold a few years ago for $1.65 million and now is for sale a $1.35 (million).’”

“No matter where a potential million-dollar homeowner wants to live, the biggest stumbling block is financing, those who make a living in real estate say. ‘You used to be able to buy anything with fog in a mirror,’ said Tempe mortgage broker Scott Harward, who works with many Ahwatukee sales representatives to arrange financing for buyers. ‘But not anymore.’”

The Las Vegas Business Press in Nevada. “The country’s largest private development, MGM Mirage’s CityCenter, was sued by its general contractor for $490 million in unpaid construction bills. On March 25, Perini Building Co., a unit of Tutor Perini Corp., Sylmar, Calif., sued several entities controlled by property owners MGM Mirage Inc. and Infinity World Development Corp., a unit of Dubai World, the investment arm of the Persian Gulf state.”

“‘We are doing whatever we have to do to protect ourselves and our subcontractors,’ Tutor Perini Chairman and CEO Ronald Tutor said. ‘They simply stopped making payments and started offering excuses. Their position is absurd.’”

“On March 23, MGM/Infinity demanded ‘that Perini cease all construction activities at the Harmon,’ and directed security to escort the contractor off site and change the locks, the lawsuit alleges. The oval-shaped glass tower was scheduled to open later this year. A timely completion now seems unlikely since ‘MGM/CityCenter is delaying the ability of Perini to complete its work under construction agreement,’ the lawsuit alleges.”

“The Harmon was scaled back from 48 stories to 26 stories in January 2009. MGM Mirage eliminated 200 high-end condominium residences, of which only 44 percent had sold, but retained the 400-room hotel component. The move saves an estimated $600 million in construction costs, and defers another $200 million for interior finishes.”

“‘By canceling the Harmon condominium component, we will be able to avoid the need for substantial redesign of the Harmon resulting from contractor construction errors,’ CityCenter President and CEO Bobby Baldwin said in a previous statement. It also keeps the project focused on ‘maximizing’ sales at CityCenter’s other condo towers, he added.”




RSS feed | Trackback URI

73 Comments »

Comment by wmbz
2010-04-10 07:06:29

“said John, who at 41 worked as a VP for two regional banks in the Vail Valley and as recently as two years ago earned $600,000 annually making loans. He asked that his last name not be used for fear of damaging his banking career.”

“‘Everyone was getting greedy, and everyone was living like kings, and everyone was making money thinking it was never going to end. Now everyone is getting scorched. Everyone,’ he said.”

“Damage his banking career” ROTHFLMAO!!! This banking clown never was a “banker” he was a loan peddler/pimp with plenty of easy lays!

Comment by DebtinNation
2010-04-10 09:42:17

He also took his so-called gains and doubled-down on everything. How is it possible that d-bags like him who make plenty of money can’t save at least a little? What a pig.

Comment by mikey
2010-04-10 16:41:58

“In 2007, his home was worth $1.8 million, $1 million more than he paid four years earlier. He tapped that equity and bought two investment homes. Those, too, he will lose to foreclosure, he said. Today, John is not making any money. He’s packing his stuff, joining a mass exodus of formerly flush locals fleeing the valley. ‘There’s no more work up here. It’s not about to end, and it’s never going to come back like it was,’ he said.”

b..b..but the cute, pretty in pink, little Snow Bunnies John. What will happen to all the poor, young homeless Snow Bunnies John?

the Horror…the Horror

:)

 
 
Comment by fries with that?
2010-04-10 11:17:02

John, guess what? If you ever try to get a job with another bank, they’re going to run a credit check. They’re going to find out.

Comment by NYCityBoy
2010-04-10 11:40:07

If one has never watched a debt peddler in action they are missing out on one of mankind’s most disgusting endeavors. It is amazing to see people do anything they can to create debt. You don’t want to have a full stomach when you witness it.

Comment by Chris M
2010-04-10 22:20:00

It seems like I get a face full of debt peddling, every time I buy my wife a new used car with cash. The sales drones never seem very pleased to make a cash sale. It’s like they’d rather I borrow the money instead.

(Comments wont nest below this level)
 
 
Comment by snake charmer
2010-04-10 12:02:45

His foibles hardly make him unemployable in that industry. The inability to overcome greed-driven impulses is practically part of the job description.

Comment by aNYCdj
2010-04-10 13:00:39

Bingo what a great investigative story…..how does a bank VP with horrible credit get another 6 figure job when you or i get screwed….details at 11.

(Comments wont nest below this level)
 
 
 
 
Comment by Ben Jones
2010-04-10 07:07:43

‘Real estate sales to Canadians are reportedly up 80 percent over last year’

This is one reason I’ve tried to focus in on the ongoing bubbles in Canada, etc. This is very much like the ‘rolling bubbles’ of 2005-06. It is my contention that these people are using their false equity to speculate, and when their market crashes, they will try to sell.

‘They could end up wishing they had more in cash reserves and less in real estate’

Comment by wmbz
2010-04-10 07:16:10

‘They could end up wishing they had more in cash reserves and less in real estate’

100% guaranteed!
It’s going to blow up, it’s simply a matter of time.

Comment by Ben Jones
2010-04-10 07:23:14

This is what’s important, IMO. If it does, this thing could go off the rails. We’ve got the governments pushing in the absolute wrong direction. There could be millions of additional foreclosures.

I was listening to NPR on China this week. They said the income to price ratio in Beijing was 50! This isn’t an academic consideration. We are often told how interconnected the global economies are, so we could be headed into turbulent times.

Comment by Professor Bear
2010-04-10 07:44:18

“We’ve got the governments pushing in the absolute wrong direction. There could be millions of additional foreclosures.”

We have an unprecedented policy experiment underway with the financial version of the hair-of-the-dog hangover cure. I doubt that downing another bottle of whiskey works very well to cure a hangover, but maybe the financial analogue of this approach will prove more successful than the alcoholic version.

(Comments wont nest below this level)
Comment by Professor Bear
2010-04-10 07:45:31

Prediction:

When this hair-of-the-dog housing bubble reflation scheme blows up (which I believe it will), the Fed will find something else to blame besides their policy experiment.

 
Comment by cobaltblue
2010-04-10 07:56:34

“I doubt that downing another bottle of whiskey works very well to cure a hangover, but maybe the financial analogue of this approach will prove more successful than the alcoholic version.”

No, it won’t.

There are functional alcoholics and those who build up a tolerance to alcohol, as well as those who can appear to be sober while actually drunk. There are some who can “get away with it” for a long time.

However, numbers, especially numbers pertaining to cash flow and debt service,
can be manipulated or disguised for a while, but not for long. In the end, the numbers hit the system like a two -by-four across the bridge of the nose. Numbers add up to, and divide by, and multiply to, a mathematical reality, every time.

Mathematics and cash flow eventually trump man-made policy and all good intentions and fraud, every single time.

 
Comment by pressboardbox
2010-04-10 17:07:29

Numbers, manipulated?? You mean the recovery may not be real? Get out of town!

 
 
Comment by DebtinNation
2010-04-10 09:48:18

When the price to income ratio gets really high, make sure your ammo to zombie ratio is really low. ;-)

(Comments wont nest below this level)
Comment by Itsabouttime
2010-04-10 10:03:17

Wouldn’t you want the ammo to zombie ratio to always equal or exceed the price to income ratio?

If the ammo to zombie ratio is low, doesn’t that mean you have less ammo per zombie, meaning you could be overrun? Please clarify. I lost out in the last bubble. I don’t want to lose out in this last of all possible bubbles–the ammo versus zombie bubble.

A/Z 100 ammo / 1000 zombies = 0.10 = overrun
A/Z 1000 ammo / 100 zombies = 10.0 = survival

?

IAT

 
Comment by DebtinNation
2010-04-10 19:07:18

Actually, right after I posted that, I realized my error, but have been out all day. Thank you for that clarification. Yes, lotsa ammo per zombie, not the other way around.

 
Comment by pismoclam
2010-04-10 20:44:22

Do you have to shoot silver bullets into zombies or is that only werewolves ???

 
 
Comment by Itsabouttime
2010-04-10 10:08:04

Wouldn’t you want the ammo to zombie ratio to always equal or exceed the price to income ratio?

If the ammo to zombie ratio is low, doesn’t that mean you have less ammo per zombie, meaning you could be overrun? Please clarify. I lost out in the last bubble. I don’t want to lose out in this last of all possible bubbles–the ammo versus zombie bubble.

A/Z 100 ammo / 1000 zombies = 0.10 = overrun
A/Z 1000 ammo / 100 zombies = 10.0 = survival

IAT

(Comments wont nest below this level)
 
Comment by snake charmer
2010-04-10 11:14:28

I have seen some reports, and photos, suggesting that China is keeping its economy booming by constructing empty malls, empty apartment buildings, and even an entire empty city. Here is an example:

http://tinyurl.com/y3yf4kb

This is not going to end well. At all.

(Comments wont nest below this level)
Comment by palmetto
2010-04-10 11:37:44

I think Red China’s bubble burst will make the US’s look like a Cub Scout outing. It is my belief Red China is FAR worse off than it purports to be, and its propaganda is even more over the top than ours. I think it is one HUGE bluff at the moment. I don’t know why we are so worried about it.

 
Comment by goedeck
2010-04-10 11:50:26

I’ve seen China described as 100 X Dubai (sorry can’t recall who wrote that).

 
Comment by edgewaterjohn
2010-04-10 13:07:20

That’s 1,000 x Dubai, and IIRC it was Jim Chanos who said it. He’s betting heavily against them.

Time will tell about China, but regardless what happens it is laughable and pathetic to see all the “free marketers” over here hang on every economic word issued from a totalitarian/centrally planned country!

When they say they need 8% growth, brother they “get” it!

 
Comment by pressboardbox
2010-04-10 17:11:24

The Chinese baby-boomers are going to buy all of that stuff. I also heard they were not making any more land in China.

 
Comment by DebtinNation
2010-04-10 19:22:16

I heard all the rich Chinese were going to buy up our, um I mean, their, ahh, forget it.

 
Comment by goedeck
2010-04-10 20:16:38

Yes Edge you are right it was Chanos.

 
 
Comment by joeyinCalif
2010-04-10 11:39:01

I was browsing Chinese demographics a while back and recall the average per capita income for urban dwellers was roughly $2,900, and for rural $850 or so.
Beijing (the PRC Capital) is a little better off, being one of the wealthiest cities. They are pushing $6,000.

Considering income being so low, the total dollars lost when the 50-X income property returns to norms is going to be significantly less than somewhere people are averaging, say, $25,000 a year.

How many Chinese citizens own property? It depends on the definition of “own”. There are “fully transferable property rights” and “Usage rights” which require the “owner” pay a premium to sell the property. Either one is considered home ownership.

To take it further, how is private property as we understand the concept even possible under communism?

Maybe I should be, but I’m not too concerned with a Chinese RE bubble collapsing and bringing down the global economy… Not until i understand china better anyway.

(Comments wont nest below this level)
Comment by Ben Jones
2010-04-10 11:58:17

‘bringing down the global economy’

This isn’t how I’ve come to see things. When manias are unwound, it is a return to sanity. Ultimately, this is a positive thing. But there are bound to be dislocations, and that is what I think the central bankers, etc, are being complacent about.

‘How many Chinese citizens own property?’

From a few days ago:

‘Just how far behind I am in the race to get into the Chinese property market was made starkly clear to me recently. My cleaning lady – who earns about $90 a month for each of the handful of households she cleans (considered a high rate for Beijing) – recently beamed proudly to me about becoming a homeowner.’

‘Granted, it was a small apartment in a somewhat remote area way out by the outermost highway circling the Chinese capital, but there was no getting away from the fact she owned her own home while I’m still doling out monthly rent that some people here liken to ‘money down the drain.’

‘Vicky Tang, an English-language teacher from Hebei had stood on the property sidelines for years, said that the interest rates were so low it seemed silly not to dip her toes into the property market. ‘It was time to buy,’ she said.’

‘At least seven cities saw land prices triple in 2009′

 
Comment by joeyinCalif
2010-04-10 12:21:54

I recall reading that one..

As for comments like rent being “money down the drain” and “It was time to buy”, I have to wonder what she really means.

We are talking about life on a foreign planet compared to capitalist societies.

The “fully transferable property rights” are inheritable. As far as I know, there is no true ownership, but certain rights can be passed to the kids. Perhaps that is such a huge benefit that they consider it the next best thing to ownership.

But the State actually owns everything. If and when prices crumble it will be the entire country that is responsible for the losses. China has lots of resources it can use to bail itself out of trouble.

 
 
 
Comment by skb
2010-04-10 13:06:12

Sadly my nephew just bought his first home in Winnipeg. He paid 187,000 for a 100 year old 1,000 sq foot home that has been nicely re done.
I fear his joy will turn to anguish when he realizes just how much he over paid.
His home should never have sold for more than 70K.

Oh well, you try to get family members to listen and they still only think with their equity. My sister loves the thought that her home has doubled in the five years she has owned it.

I live in Florida and my family is very well aware of what has happened here. I have gone on and on about this enough over the last five years. I would have hoped they learned something.
Oh well.

Comment by Lionel
2010-04-10 16:31:45

And insult to injury, the poor bastard’s stuck in Winnipeg. The best thing my parents ever did was book of there for LA before I was born and buy a beautiful property near the beach for near nothing. My dad was goofy about a lot of things in life, but he deserves a Nobel Prize for that. I went back to Winnipeg a few years back for my dear granny’s funeral. It was April and the snow was still shoulder high. It’s like Phoenix in the prairie - land available in every direction. Why the heck should property be worth anything out there? I apologize to any natives to Winnipeg, but even as a child I recognized that it was uninhabitable. A few summers ago, I went to visit family and visited the Lake of the Woods, which is actually a very attractive region near Winnipeg. Even there it was clear bubble prices were growing. I met a strange giant of a man who told me his shack-like cottage was worth over 400K. I didn’t argue with him - he could’ve squashed me like a mosquito.

(Comments wont nest below this level)
Comment by mikey
2010-04-10 17:45:38

” Lake of the Woods, which is actually a very attractive region near Winnipeg.”

Yeah…if you’re a bug or a timber wolf.

;)

 
Comment by Lionel
2010-04-10 21:56:46

Or a black bear.

 
 
 
 
Comment by Bob
2010-04-10 07:43:18

I am visiting Toronto this weekend for my nephews’s first communion. The prices are absolutley incredible with tons of new luxury condos - with lots of bidding wars (which they realtors are now calling ‘auctions’?). Prices in my parent’s neighbourhood went up 18% since late summer. Lots of it from newer immigrants from Asia - some of whom have $$s

Parents of kids in their late ’20s and early ‘30 are helping with the downpayments (i really dont mind that since it is not CMHC, the equivalent of Freddie/FHA etc), but they are pulling equity out of their mostly paid off houses.

It will not end well - and i think the govt will be force to cushion the downfall. Canada fortunes will be tied to resources, esp oil price. Housing will be buffered until resource price really fall.

Comment by CA renter
2010-04-10 17:11:18

Comment by Bob
2010-04-10 07:43:18
I am visiting Toronto this weekend for my nephews’s first communion. The prices are absolutley incredible with tons of new luxury condos - with lots of bidding wars (which they realtors are now calling ‘auctions’?). Prices in my parent’s neighbourhood went up 18% since late summer. Lots of it from newer immigrants from Asia - some of whom have $$s

——————-

As some of us have mentioned, a lot of the current (apparently wealthy) buyers in San Diego are Asian.

Could it be that ALL of our RE bubbles are being driven by the Chinese RE bubble?

Whether it’s direct Chinese speculation in our (SD) market, or indirect Chinese speculation in the AZ market (Chinese driving up Canandian prices, which enable the Canadians to buy in the U.S.), it sounds like the whole RE world is sitting on top of the Chinese pin.

I think we need to keep very close eye on the Chinese markets.

Comment by bink
2010-04-10 18:02:34

The Chinese population in British Columbia has always been pretty large, from my understanding. I don’t see Canada allowing a huge additional influx of Chinese lately. At least, not enough to dramatically affect housing prices.

Most of my friends in that area have similar stories to ours from 2004-2006. They have friends who make $50k and who are buying condos for $500k or more. They don’t understand how it happens and I don’t understand who would loan them the money.

Tracking the money through Canadian banks to China would be simple enough. I know Chinese banks aren’t exactly independent, but they are publicly traded and I’d think their finances would be at least as opaque as our own investment banks.

China holds a lot of dollars, but do they really have anywhere near what it would take to float the housing market of an entire country? The US bubble was spread across every investment bank in the country and most of the large banks in Europe. Plus, China has its own property bubble to worry about supporting.

According to the Treasury, China held $889 billion in treasuries in January. Up from the $739 billion they held a year previous. Wouldn’t you expect that to go down if they were loaning huge sums of money out to the Canadians?

(Comments wont nest below this level)
Comment by bink
2010-04-10 18:18:26

I guess that was a very long winded way of saying that I’ve very worried that the same investment banks who leveraged themselves, and us, into oblivion and were bailed out are now using their Fed lifelines to double down on Canada. Can they be that stupid?

Are any of the watchdogs who caught on to our bubble still on the lookout? Or did they all either get scared off or fed up by what happened here? Or did they take the money and run?

Our leaders have made it clear that they do not want to see any bubbles. No one will hold them accountable if they don’t, but God forbid they hint that one might exist and cost some important people some money.

 
Comment by CA renter
2010-04-10 18:29:59

Yes, but do we honestly know what the “real” numbers are anymore?

The more I see, the more skeptical I become. There is little reason to believe anything we are being told to believe, IMHO. It feels like we are being duped.

 
 
 
 
Comment by bink
2010-04-10 11:30:12

I’m still looking for someone, anyone, who can tell me where this money is coming from.

Comment by NYCityBoy
2010-04-10 11:36:37

Bernanke has a kick-a$$ bubble-jet printer in his basement. I think the Chinese have reverse engineered their own version.

Comment by VegasBob
2010-04-10 20:07:28

Actually, Bernokio has a fire truck with magic fire hoses. The fire hoses spew out an unlimited amount of counterfeit US dollar$ which are totally indistinguishable from genuine US dollar$.

So any time, any where, Bernokio will put on his fire hat and he’ll be there…

(Comments wont nest below this level)
 
 
Comment by Ben Jones
2010-04-10 12:05:56

‘The country’s largest private development, MGM Mirage’s CityCenter, sued several entities controlled by property owners MGM Mirage Inc. and…a unit of Dubai World, the investment arm of the Persian Gulf state.’

The largest US development and Dubai, hmmm.

 
Comment by skb
2010-04-10 13:10:39

Low Canadian interest rates. My daughter’s boyfriend just locked in at 3.5% for five years on his home. At least he only paid 50K thank God not all of Canada is a bubble. He bought a proper “starter” home very cute and nicely fixed up.

He bought in NB where the prices have not changed.

My nephew on the other hand…….. ouch paid 187,000 for his “starter” home in Winnipeg, I guess everyone wants to live in Winnipeg….ROFLMAO.

Comment by bink
2010-04-10 13:37:05

But low interest rates either mean there are a large number of people offering to loan money (who are they?) or a government entity of some sort using someone else’s money to loan at below-market rates. I know Canada has its own Fannie Mae, but my understanding was that they didn’t have a significant share of the housing market. If it’s private companies, I’m wonder who they are and what rock they’ve been hiding under.

(Comments wont nest below this level)
Comment by CA renter
2010-04-10 17:12:56

Bink,

See my post above about the possibility that the Chinese are propping up all of our RE bubbles.

What if they are “laundering” some of their Treasury money?

 
 
Comment by pressboardbox
2010-04-10 17:13:08

What is a $50k starter home constructed from? Paiper Mache?

(Comments wont nest below this level)
 
 
 
Comment by TorontoStan
2010-04-10 14:49:00

I live in Toronto and I can only assume that this is the case. The hubris and denial reminds me of the people in various cities in the US I ready about on your blog before their collapse (I have been following your blog since early 2006). To bolster their belief that the market will never crash (as you predict), they have the fact that prices have only skyrocketed further here where they are falling or have fallen significantly almost everywhere else. Hardly anyone is calling it a bubble anymore, they are just giving up and buying in before it is too late!

The strategy of the government here in Canada to keep the ponzi scheme going mainly seems to be centered around importing as many people as fast as possible and get them to believe in the substitute American Dream - which most of them arriving already do. The thing here is that as the speculation gets more and more rampant and bizarre, people deny it more and more.

An anecdote:

My parents (mostly) own a house downtown which they purchased in 1995 for $170k which was roughly the bottom of the market after the early 90s recession - the last real recession here. It still the old wiring and plumbing and had a poorly finished basement.

A very similar house directly across the street sold about 5 years ago for $380k. While there the owners did a lot of work on the house (new kitchen, hardwood floors etc). They just sold the house a short while ago. The asking price was 525k. There were a lot of lookers.

The selling price was $609k. This is a ~1500 sq. ft semi-detached 80 year old house which still has some knob-and-tube wiring in it.

It truly is an insane thing to behold.

 
 
Comment by cereal
2010-04-10 08:13:16

“Still, buying a home in Phoenix likely has a substantial upside as an investment. Assuming they purchase a home today for $120,000, and that it will increase in value by five per cent annually, the asset would be worth about $171,000 in 10 years and $278,500 after 20 years. Sweatman says the figures are conservative estimates, considering current real estate values are extremely depressed.”

Looks like perpetual appreciation is making a comeback.

Comment by VinnieTheFish
2010-04-10 09:48:07

$120,000 on a golf course? Hmm they must be referring to homes in Goodyear, Mesa, Gilbert or other out lying areas. The only flaw in this logic is the location of these homes compared to the entertainment, employment, city centers and airport. Location, Location Location really is the most important factor with Real Estate especially in AZ.

Unfortunately we happen to have family who live way out in Goodyear & we constantly hear them refer to studies about how Goodyear is going to be this and that, they’re building this & that… but when you ask these same people if they have guests visit and want to take them someplace nice to eat, go shopping or any entertainment it’s easily an hour drive just to get to those places. From my perspective as someone who sat out the housing bubble, was talked into moving from CA to AZ just as the bubble burst by family and has been happily renting the entire time — if you’re not within 20 min of a major area for dining, entertainment or a nice shopping area (i.e. away from the ghetto malls) you won’t see $.01 of appreciation in the next 5 years unless you find a bigger fool from outside the area to buy your overpriced home. So far the only people we see doing this are from Ohio/Wisconsin, California or Canada Baby Boomers who were lucky enough to sell during the boom or planning to retire within the next 5 years & invested their next egg.

Oddly enough my gf’s mom just sold her house living on a golf course in Goodyear in the Estrella and was glad to have moved. There’s nothing worse than waking up on a nice Sat morning, going out in your back yard to read the paper and drink your coffee while listening to locker room talk from the golfers passing buy every 5 min or digging around the brush near your fence as they look for the golf ball they just sliced near your fence. From the brochure it sounds nice living on a golf course until you actually LIVE on a golf course. No thank you.

Comment by NYCityBoy
2010-04-10 10:49:02

And what happens if the golf course goes belly up and has to close? Somebody has to keep those clubs financed. It seems like that would be harder and harder as the Arizona economy continues to stink. I can’t imagine it is cheap to keep a golf course up and running in the middle of a desert.

 
 
Comment by snake charmer
2010-04-10 11:07:45

Yeah, it’s like California without the beaches and California. But it still has the speculators, only they’re not from California, they’re from Canada.

Come on Canada, you’re better than this.

Comment by NYCityBoy
2010-04-10 11:37:48

I guess those hosers didn’t learn anything from the Californians. What is that all aboot?

Comment by bink
2010-04-10 13:38:17

It’s different up der.

(Comments wont nest below this level)
 
 
 
Comment by VegasBob
2010-04-10 20:11:10

Yes, and in a hundred years, at 5% compound appreciation, today’s 120K crapshack will be going for $15,780,151.

Somehow I don’t believe that’s ever going to happen…

Comment by CA renter
2010-04-11 00:57:27

O ye of little faith…

;)

 
 
 
Comment by Don't Know Nothin About Buyin No House
2010-04-10 11:44:17

An insight into the mentality of people who lose everything.

“I had a couple more sips than I should have had, that’s for sure,’ said Aspen-area loan consultant Drew Sakson, who last year lost five of his investment and commercial properties and is fighting to stay in his longtime home. The fight has cost him 30 years of savings.”

If I lost my home, my life savings, I don’t believe I would be standing around getting quoted and using light-hearted euphemisms such as ” too many sips”. It’s like “whoops, I peed in my pants” “whoops I forgot to buy cigs”. These people just have a missing string of DNA I suppose and I will never relate or understand.

 
Comment by exeter
2010-04-10 13:05:59

“and it’s never going to come back like it was,’ he said.”

So a grossly overpaid loan pimp gets it. why is it the dumbest of dumb believers on Main Street think the roaring 2000’s are just around the corner?

Comment by edgewaterjohn
2010-04-10 13:22:44

Oh, they’re getting it - painfully slowly - they’re getting it one household at a time. Just read about another local implosion this morning: condo sold for $770k in 2007, bank is trying to unload it for ~$190k.

Comment by AbsoluteBeginner
2010-04-11 07:03:32

‘Oh, they’re getting it - painfully slowly - they’re getting it one household at a time.’

And that is a how a housing bubble is supposed to unwind, isn’t it? Not a Wall Street sell-off and V-shaped trench. A deflating bubble with phases of denial and carny barking. I am still receiving information via widespread main-street media that real estate is the way to go for the long run. People still get worked up about owning a house or property developing. We have a ways to go before bottom.

 
 
Comment by bink
2010-04-10 13:41:00

He gets it because he knows firsthand that the money isn’t available anymore. He’s not being pushed to offer loans to people with no income. I’m still waiting for most people around here to understand that.

Comment by bink
2010-04-10 13:44:14

Here being DC, not the blog, of course.

 
 
 
Comment by silverback1011
2010-04-10 15:22:15

The amazing stories above of the crazies who were paying millions for houses, taking out their equity, and buying more and more “investments”, only to lose the whole shooting match reminds me of a quote from The Outlaw Josie Wales”, which we happily watched last night…

Lone Watie to Granny as they are both tied to the back of a Comancheros’, seeing Josey ride up with a flag of truce tied to the barrel of his rifle ( that should have been the first clue to the Comancheros):

” Get ready, little lady. Hell is coming to breakfast. … ”

A little later on, right before the action commences,

Lone Watie says to himself, ” Now, SPIT…”, a sure sign that Josie Wales will be dishing out some hell forthwith.

Couldn’t anyone see this coming ? I’m kind of cowardly about these things, I guess, but I could have seen the trainwreck coming. In fact, I did, and we sold some properties at their high. Thank goodness.

 
Comment by rms
2010-04-10 16:49:37

Are the tower cranes still up at the Center Point Towers in Tempe, AZ?

 
Comment by pressboardbox
Comment by mikey
2010-04-10 18:11:01

“The couple bought their Diamond Bar house for $550,000 in 2006, hoping to finance the purchase by selling their town home in Brea, Calif. - a sale that never materialized, they say, because of the housing crash. The year before, they’d also bought a $340,000 home in Las Vegas as a retirement property, which they rented to a tenant until last year. At the time of the purchases, their only sources of income were workers’ compensation insurance payments and Social Security, but that wasn’t a problem for the lender.”

You might want to stand on the highway and try to rob truckers doing 80 because morning chanting just might not cut it Benda.

 
Comment by DebtinNation
2010-04-11 00:18:31

Love the headline: “For unlucky homeowners, foreclosure can strike twice”

Unlucky my arse. Greedy and stupid is more like it.

 
Comment by Nudge
2010-04-11 03:46:33

“There is no recovery.”

Omfg. Someone almost owed me a new keyboard over this one.

“Every morning at 6 a.m., Brenda Duchemin kneels down on two plush throw pillows in front of a carved teak shrine in her Diamond Bar, Calif., home and chants.”

“ .. and their ongoing battle to stay in their spacious and airy home, which is furnished with soft blankets, leather couches and Elvis commemorative plates on the walls.”

“The couple bought their Diamond Bar house for $550,000 in 2006, hoping to finance the purchase by selling their town home in Brea, Calif. - a sale that never materialized, they say, because of the housing crash. The year before, they’d also bought a $340,000 home in Las Vegas as a retirement property, which they rented to a tenant until last year. At the time of the purchases, their only sources of income were workers’ compensation insurance payments and Social Security, but that wasn’t a problem for the lender.”

“ .. stroking their white Maltipoo, Sugar, one of four dogs the couple keep segregated in various areas of their house because the pets fight.”

“They’re entrenched for now: Board games are stacked up on tables, crystal figurines shine on display in a case, and the four bedrooms are packed full of stuff, including Duchemin’s artwork and teddy bears bigger than a toddler.

“But every day finds them on edge, waiting to see what happens next. They spend their days trying to appreciate the home they love, with its hand-laid brick walkway, fig and lemon trees in the yard and “Wizard of Oz” paintings on the walls, wondering what went wrong.”

/end quotes

I’m speechless. These people seem to have got some kind of gross neurological disconnection between their past excessive-beyond-all-reasonable-means spending and their present lack of money.

What are they, a couple of reincarnated Dutch Tulip Bubble flippers?

Comment by Reuven
2010-04-11 11:01:28

I think our population’s fascination with collecting junk as fueled the mega-house phenomenon. To me, every personal “durable” possession is like a ball-and-chain. You want to be able to get up and go! without having to worry about what to do with your crap.

 
 
 
Comment by az_lender
2010-04-10 18:24:12

From Ben’s post up top:

(1) “The problem though is who can get loans.” — Yup, az_lender is the beneficiary of tighter policies. Instead of turning down wacko propositions, I get to lend now on actual houses with actual 20% down payments, and can still charge 7.5% to 9% for such loans. The reason is, I’m STILL a “no doc” lender. Because I found over 17 years that the quality of the borrower is irrelevant, what counts is the value of the collateral.

(2) “Why is Arizona only getting $125 million of the $1.5 billion?” — ha ha, a state with about 2% of the nation’s population feels cheated because it’s getting “only” 8.3% of the bailout?

(3) “hot spots like Arizona, Florida, and California will likely never be more affordable than they are today” — All of us here can think of a lot of reasons to disagree. The reason I’m focused on right at this moment is the likely (??) expiration of the $8000 tax credit.

(4) “No matter where a potential million-dollar homeowner wants to live, the biggest stumbling-block is financing” — Whaddaya know, pretty soon the only “potential million-dollar homeowners” will be people who actually HAVE a million dollars. What a concept.

and from NYCityBoy’s post mid-thread:
(5) “I can’t imagine that it’s cheap to keep a golf course up and running in the middle of a desert.” — Right, especially when the die-hard golfers in the East Valley (of PHX) can always go to the Snake Hole Golf Course at the corner of Idaho Road and Southern Avenue just north of Rte 60. It’s a vacant lot. I don’t know if the holes are REALLY snake holes, but there’s no grass, and often plenty of participants. Why pay money!!

 
Comment by Cojo
2010-04-10 19:42:26

I have not been on here in a little while. So is now a good time to buy or should we still be wait this one out and renting ? I am in the Mid Atlantic area - central MD.

Comment by bink
2010-04-10 21:34:06

What’s the price/rent ratio in your hood? What about price/income? Where I live near DC it isn’t even close to normal yet.

 
Comment by DebtinNation
2010-04-11 00:29:04

That’s a pretty general question, but if you have cash for a down payment, I’d definitely wait. OTOH, if the price is low enough and the tax credit helps, now may be as good a time as any if you have the staying power. Every situation is different of course, but if I were forced to choose between now and next year, I’d definitely wait.

 
 
Name (required)
E-mail (required - never shown publicly)
URI
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post