Record Vacancies ‘Now That The Music Has Stopped’
Danielle DiMartino has this on declining home ownership. “The evidence of a deflating housing bubble is spreading to places less visible to the naked eye. The evidence has segued to the subtle in three ways; mounting mortgage interest expenses, a declining homeownership rate and a rising owner-occupied vacancy rate.”
“According to Moody’s chief economist John Lonski, the yearly increase in mortgage interest paid by households rose to 15.8 percent in the first quarter, a 24-year high.”
“Interest rates aren’t soaring. How can households’ interest payments rise that much? Here’s how Mr. Lonski put it: ‘The steep advance by household interest costs amid relatively low fixed-rate borrowing costs is unusual and reflects an earlier atypical reliance on variable-rate mortgage debt for the purpose of affording costlier housing.’”
“In other words, the chickens are coming home to roost on the variable-rate mortgages.” “And then there is the homeownership rate. After more than a decade of rising to the highest levels on record, the homeownership rate declined to 68.5 percent in the first quarter of 2006 from 69.1 percent in the same quarter last year.”
“But that’s not the whole story, according to Goldman Sachs chief economist Jan Hatzius: ‘The decline in homeownership..has occurred in the face of strong rental-to-condo conversions of apartment buildings, which have expanded the supply of owner-occupied units. Thus, declining homeownership is very likely due to a decline in demand, not a decline in supply of owner-occupied units.’”
“And finally, the owner-occupied vacancy rate is rising sharply. At 2.1 percent, the current rate is the highest on record. This is, of course, an unintentional consequence of speculators realizing there’s no place to take a seat now that the music has stopped.”
The Lowell Sun has a related tale from Massachusetts. “Despite a booming housing market for several years, area landlords are now finding themselves in a bind, a shrinking tenant pool has made them unable to raise rents.”
“From the perspective of a landlord, ‘the rental market in Lowell is terrible. I would say the biggest problem is there just seems to be no tenants out there. You can advertise, but you don’t get very many calls,’ said Dick Macdonald, president of the Greater Lowell Landlords Association.”
“Vacancy rates in Lowell are around 20 percent, about double the rate nationwide. One Lowell landlord said a vacancy that lasts a month or so is ‘within their comfort zone,’ but in recent times apartments that have been vacant for four or six months at a time are not uncommon.’”
“Landlords also say that many properties, especially duplexes and three-family homes, have been converted to condominiums. Also, construction of rental properties has increased as well. ‘How they plan on filling them, I don’t know,’ said Macdonald.”
When they were announcing all the condos and conversions in Lowell, nobody even mentioned vacanies or over-capacity. All the focus was cashing in on the boom. One journalist reports how homeowners may be financing the surge in mortgage interest:
‘American consumers are now using their homes as piggybanks — literally. A new report from mortgage giant Freddie Mac reveals that nearly nine out of every ten homeowners who refinanced during the first three months of this year ‘cashed out’ — that is, they pulled out extra money rather than seeking a lower interest rate.’
T’he 88 percent cashout ratio is the highest Freddie Mac has seen since 1990, and close to the highest ever recorded. ‘
‘American consumers are now using their homes as piggybanks — literally. A new report from mortgage giant Freddie Mac reveals that nearly nine out of every ten homeowners who refinanced during the first three months of this year ‘cashed out’ — that is, they pulled out extra money rather than seeking a lower interest rate.’
DUH….what six-figure salaried FM dolt figured this one out….
Landlords have been taking it on the chin due to an enormously diminshed tenant base in both quality and quantity due to the easy finance terms offered by the loan industry over the last decade.
You have to be dead in order not qualify for home purchase financing.
The subsequent underlying societal and economic devastation wrought by these vultures will go on for 10-20 years.
Would that mean landlords would think twice prior to ridiculously raising rent? If so, I am a happy camper:)
I’m renting a place a half block from the beach for 20% less than the owner originally wanted. After 5 wasted months, and a lot of questionable looking would be tennants, the landlord realized I wasn’t such a bad deal after all.
Yes. Renters have had to worry about getting booted for a sale/remodel. That worry is rapidly disappearing. The worry of a rent increase is not in the picture.
The time of the renter has come!
Yup — it’s a renter’s market for sure!
Yeah, but Stressed Renter, Lowell is one of the less desirable places to live in MA. (Sorry if I offend anyone but a lot of people would pay more elsewhere before going there.) Places considered safer may not be in the 20% vacancy range. I think this only shows the less desirable areas will be feeling the pain first.
Landlords might be really glad that some of these dumb fools who purchased $500K 1BR/1BA condos with neg-am mortgages are not renting out their place. I certainly would not want anyone of that kind of fiscal responsibility to be renting my place out. So in fact, the kinds of tenants renting now might be of the highest quality tenants out there. All the dead beat tenants are now (temporarily) homeowners.
Unfortunately the number of people smart enough to avoid buying is significantly smaller than the number unable to get financing.
And the smart ones who avoided buying in the last couple years are generally looking for SFH, can pay higher rent, and have pretty tough standards.
Lower-end apartments are huuuuurting. Even with all the conversions… since half of them are bought and empty or trying to be re-rented!
“You have to be dead in order to not qualify for a mortgage…”
I’m sure there’ll be some dead mortgage holders turning up by the time this is all over. If six year olds and puppy dogs could get credit cards the last couple years, I bet there’s at least a couple dead mortgage holders.
Piggybanks? That’s a misnomer if I ever heard one. With a piggybank you withdraw money you have saved. What these people are doing is taking a loan using the house as collateral. Let’s call it what it is and stop obfuscating the issue.
If something cannot go on forever it will stop.
– Herbert Stein –
Lowell isn’t the most attractive place to live and there are many other surrounding communities that are relatively safer to live in. I imagine that U Mass Lowell generates a lot of renters though only for 9 months out of the year.
When I moved to New England a few years ago I looked at apartments in Lowell. The landlords were arrogant as hell and told me I was dreaming if I thought I could do better than their prices ($1100 / month, no utilities included, for a shoebox-sized 2 bedroom apartment in a crappy neighborhood). I don’t feel bad at all if they’re struggling.
I agree with Michael, Lowell is not that great!!Rents are still way out of line with incomes and so is housing of course.I get more and more sick of Mass. every day.Dirty and loads of White Trash losers.
Jayman-
I get more and more sick of Mass. every day
I had to come back to MA to watch over elderly parents.
It is “ACUTELY” depressing being here. For all the high-price real estate and big city media propoganda the quality of life sucks. Lines, rudeness, and f*ckin’ traffic everywhere.
Just got rear-ended at a stop sign Friday afternoon in my vintage Mustang by an idiot talking on her cellphone…1st road incident for me in 35 years.
Get me outta here!!!!!!!!!!!!!!!!!!!!!1
I almost got rear ended, and then sideswiped by two crazed motorcyclists!. Only in MA do they get pi.. off that they pass you on your right, on a single lane road, when you are stopping to let someone through the intersection!!!!!
And then get chewed out by their buddy in an expedition!
Try living in NYC for a few years. MA is eminently sane and livable by comparison. “Value” and “real estate” are completely oxymoronic here.
So where are the “good” places to live?
People in the good places are not going to tell you.
North OC, CA - Fullerton. Just n0t too many. Railroad Days yesterday was nice!
To be fair though, there’s a lot of rotaries in MA, which is why every MA driver is terrible. They cause dizziness and confusion that doesn’t seem to go away.
There’s a Super Target in Woburn that I’ve gone to a few times. Every god damned time I get back to my car it has new dents and scratches in it! Every freaking time!!!
oh, I’m sorry to hear that! I can’t even begin to imagine what effect cellphone blathering has on Mass drivers, ohmygod. They were rude and incompetent before the advent of the cellphone, and apt to get distracted by the other jerks physically in their vehicle,…now they can have long-distance heated exchanges with people in other cars as well!
The landscape is lovely if a bit claustrophobia-inducing, and cheap lobster (is it still?) is a huge boon, but the driving sucked so bad in MA I’m not sad I left before sprint moved in, and nobody would accuse the populace of creating loving community..
At least in NYC area the drivers are *competent* in their asshole moves at highspeeds; I found in MA they were obnoxious plus unskilled…
That’s what several readers said about Lowell when the Boston Globe ran the article about a year ago. If I recall correctly, it was about how the condo developers were marketing to yuppies in Boston area bars, with free drinks and hand-outs.
You have to read this article from Buinessweek. He predicts further increases! There is no bubble…Bakersfield should see a 43% increase ?????
Seems he may have a few spec houses he needs to unload…
http://www.businessweek.com/magazine/content/06_20/b3984102.htm
LMAO. There is now way we will be #1.
In fact I went to several open houses this weekend. One inparticular was priced at $1.4 million. My youngest daughter (seven) and budding economist asked the realtor “I have two questions first - how long has this house been on the market and second - are they willing to negotiate.”
The realtors response “They are very very desperate. This home is way overpriced and it has been on the market for 6 months.” She then looked at us and said “Just make an offer, any offer, LOW BALL these people. They need to sell ASAP.”
ROFL!
The look on the realtor’s face… Priceless
Everybody put your hands up, say wheeeeeee, and enjoy the ride.
And someone is paying this person to do this to them….
Reminds me of a story from a few months ago, we saw an open house while we were out and decided to stop by-overpriced, in mediocre shape, etc, but the showing was rather well attended.. The kids who lived next door to the place were running a lemonade stand that day, so we stopped by to get some. “Hey, looks like you guys picked the right day to do this, what with all the people at this open house.” The kid who was about 10 said “That place has been for sale forever. For like a year!” I wish the owners could of overheard that.
I remember posting a couple of months ago that “the realtors will now turn on the sellers .” I’m sorry ,but unless the seller approves of it ,any revealing of seller weakness to a potential buyer is a no no with most real estate codes of ethics . When I was in the business years ago I would hear agents reveal information about the seller that they should not of . Imagine the seller ends up paying some turncoat salesperson that betrayed them .I know I have very neg. posts about the realtors ,( and I’m not saying that all the realtors are like this ), but a high % are . When I was in the loan business years ago the realtors were so dumb they would call me up because they couldn’t even write up a contract that would fly and I would have to tell them how to do it ,( That was back in the days when contracts were more blank ). Its find to tell the seller the truth about what price he should list the property at ,but to turn on the seller behind his back makes me want to vomit . Both buyer and seller need to be protected so the property goes out at a fair price .Appraisal dept. use to protect buyers from overpaying ,but that apparently went out the window a number of years ago in this crazy market . Anyway ,sorry about the rant .
This realtor, like all commissioned sales people, works of transactions. The volume is down 35% and they gotta eat. BTW - she had a nice Jaguar in front of the open house.
I don’t see a problem with a realtor telling the potential buyer to lowball (except, of course, if the realtor is advising the seller to seek a low price because the realtor’s sister wants to buy the place).
The realtor has a strong incentive to advise the seller to list at a high price, because this will increase the realtor’s commission. But at the same time, the realtor has a big incentive to make a sale, because the commission is zero unless there is a sale.
If the seller is living in a fantasy land, and asking (hoping) for too much, then the realtor has to do what she can to convince the seller to get their head out of the clouds.
Would it be preferable for the realtor to continue to encourage the seller to reach for the sky?
In Florida, at least, there is a “middle” category that I think is called transaction broker. In that, the agent represents neither party and is there solely to put the the deal together. But in a traditional listing, the listing agent’s fiduciary responsibility is to the customer, the seller. Without the seller’s permission, to encourage a lowball offer is a breach of that fiduciary relationship and not only is a violation of the profession’s stated ethics, I suspect in gross cases it could subject the offending agent to a suit for damages.
Congrats C&C,
sounds like you have 7-year old with the mental age higher than most Americans (at least FBed Americans). Whatever you’re doing to raise her, keep it up! - and provide tips as I will soon need as much good advice as possible in this area. =)
I wonder if they are willing to make a million dollar price cut.
Sounds like you’re doing an excellent job bringing up your daughter.
He’s got to do the CYA (as well as protect his financial interests):
Leading Mortgage Sector Underwriter Expands ABS Research
ARLINGTON, Va., Aug 26, 2004 /PRNewswire-FirstCall via COMTEX/ — Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today announced that Michael D. Youngblood, Ph.D. has joined the firm to direct asset-backed securities (ABS) research. Dr. Youngblood joins FBR’s broker-dealer subsidiary, Friedman, Billings, Ramsey & Co., Inc. from GMAC-Residential Funding Corporation, where he was head of mortgage research.
At FBR, Dr. Youngblood’s group will provide clients with evaluations of the fundamental and relative value of residential mortgage-backed securities (RMBS) in the context of America’s 331 metropolitan housing markets.
“Michael Youngblood brings a phenomenal track record to FBR,” said Martin S. Friedman, Director of Research. “He is widely respected for developing the first mortgage-backed securities (MBS) conduit, the first option-adjusted spread analytics and the first total rate of return index for commercial MBS. Our clients should benefit greatly from his leadership, creativity and superior analytic capabilities.”
Dr. Youngblood has over 20 years of experience in investment, mortgage and commercial banking. He served as director of residential mortgage research at Salomon Brothers, where he worked with Henry Kaufman and Lewis S. Ranieri, was a vice-president of mortgage finance at Goldman Sachs and Company, and developed MBS research units at Banc of America Securities LLC, Chase Securities Inc., and Smith Barney Inc.
Sounds like they are after the Ads money from Real Estate Related. Everyone just drop businessweek a comment! Don’t let those BSes run.
Well, the new NoVA sales and inventory reports are out and it ain’t pretty. Loudoun County single family home inventory up nearly 300% YOY and sales down 46%. Median price down marginally.
The townhouse/condo market is where the inventory picture really gets bad, and it’s not surprising, since these have been overrun with flippers. Inventory up 517% YOY, and sales down 33%. Median price up marginally.
Beautiful, simply beautiful. You lucky dog, I have to wait for the MRIS site to post on Wed (I think), as the MAR (MD) wait’s ’til mid-month to post on their site.
Loudoun County now has 8.6 months worth of inventory in SFH.
You beat me to it!!
I declare the Spring selling season in Northern VA officially over.
I noticed NVAR made a huge error in the “settlements” column again in all the counties. They fixed it last time. If they don’t fix it in a few days I’ll have to write to them again like I did last time. I have a hard time trusting their data when they make glaring errors.
I agree - I noticed the error as well and decided to double-check their numbers generally by adding up numbers from January through April and then comparing to the YTD number in April. Neither the settlements nor the contracts columns for Fairfax County SFHs worked out. Very confidence inspiring…
I was scratching my head about that, too. How in the world could the YTD numbers be way up? Good catch!
thanks John for posting the link
“According to Moody’s chief economist John Lonski, the yearly increase in mortgage interest paid by households rose to 15.8 percent in the first quarter, a 24-year high.”
This is quite alarming considering that we are barely on the leading edge of ARM resets. If you think the consumer is crying over $3.00 oil, just wait until they get their new rate/payment notices. Short BBY and CC as well as HD and HB’s. No more custom kitchens and big TV’s.
$3.00 Gas - Would love to have $3.00 bbl oil,
but ethanol is cleaner.
How much oil does it take to to produce the ethanol equivalent of a gallon of petrol?
The answer: Quite a bit. You have to fill the gas tank on the farm equipment you use to plant and harvest the corn. Fossil fuel is consumed in transporting the irrigation water needed to grow the corn. It is a component of both the fertilizer used to stimulate the corn’s growth and the pesticide used to protect it from pests. It provides the fuel for transporting the corn to the place where it is converted to ethanol. And some kind of fossil fuel is likely involved in running the process which converts the corn into fuel. Ethanol production sounds like a great way to help keep oil prices high (good if your friends and family are in the energy business like W and Cheney), but otherwise not quite so Green as advertised.
P.S. A UC Berkeley engineering professor estimates that six times the fossil fuel is consumed per unit of ethanol production versus just using the fuel to power vehicles directly.
http://www.coe.berkeley.edu/labnotes/0305/patzek.html
Seems unreal that the stock market is treading water at all time highs.
Interest rates going up, housing tanking, homebuilders cranking out homes at a rate which is probably 25% greater than the natural absorption rate.
I think traders are hanging on to the slightest hope that BB and co will be done after Wed. I hope he raises by 50 bp and throws everyone back on their asses. That will teach them to speculate about his dovish nature…
the damage is already done. whatever bb does from here on out is practically moot.
housing has run its course and people have moved on to other things. the titanic has already hit the iceberg. all that’s left of housing is those screams you’re starting to hear from the ship…
You are so very right! But BB is NO business person and has zero experience in the real world. I am sure he thinks that one or two more increases will stop the bubble & then he can lower as necessary to stop any decline. Wrong.
Except for the slim chance of hyperinflation, nothing is going to prevent the end result of the huge bubble. “Hyper” may come, but not until after the break.
cereal–I agree, but it’s amazing how many people haven’t figured that out yet and are still jumping at his every word…actually, I think it gives everyone false hope, which I think in turn extends the bubble even longer. The only way that doesn’t happen is if long term rates continue to go up even when they stop raising the FF rate.
Also, as of 5:30PM EDT, the headline is still “Buffett: Real Estate Slowdown” on Cnn Money, and is now linked at the top right ocrner of major headlines. It was not there earlier today.
The dow isn’t really a good measure of all time highs due to it’s poor weighting system and general lack of diversification. The S&P is still sitting a good 10% lower than it’s 2000 peaks, and earnings have risen sharply since then. When you look at a big enough chart, it’s more or less back on its’ 50 year trend for better or worse.
check out the increasing divergence between S&P 500 and the MACD….this ain’t gonna end well. On any front.
One thing I think stock market bulls are ignoring is this old truism… buy on the rumor, sell on the news. IOW, once BB does skip an increase in the FFR, the expectation will already be built into the market and there’ll be nowhere to go but down.
From SDCIA this morning:
I’m just starting in this biz and am curious on what strategies you use for buying over 10 homes. I understand that most lenders have a cap at 10 homes.
For this purpose let’s say each home throws off $100 cash flow each month.
Sure you could get a blanket mortgage but lets say you buy 10 homes in your first two years and you pay 90% of FMV so you only have about 15% equity in them. Blanket mortgages generally want around 65% of FMV.
The other option I suppose would be to find a lender that isn’t so concerned about how many homes you own. Is it easy to find such lenders?
So basically what I’m looking for is strategies you have used or even heard of people using, or read about that would help a single individual buy a lot of homes.
Thanks for your time and advice
not the time to buy 10 homes
10 homes = Guaranteed FB Status in this market. Transaction cost alone will be 4 to 8%.
I have a friend who runs a large rental property investment firm, and he tells me that their decisions to buy new rental units has little to do with the underlying rental demand. Instead, their expansion plans are determined almost entirely on the availability of easy credit for expansion. Whenever banks are willing to lend his company lots of money, they build like crazy (regardless of demand). This ballances out the lengthy periods of time where his company can’t get any financing, and just has to get by with the existing inventory they have.
So, according to my friend, the supply of rental units is more a function of easy credit availability for developers rather than underlying market fundamentals. They assume that demand will always come back eventually, so just build whatever you can when someone is willing to give you the cash to do it.
So what does your friend do when the units don’t rent? According to what someone on the blog said, there is the natural deterioration (and, of course, vandalism) that occurs with empty places. So they’d rather buy up property and build, to hell with what happens after? I guess it doesn’t matter since it seems to be all about the money.
BayQT~
My friend never has a problem with long-term vacancies. His firm is very aggressive in doing what it takes to rent the units out. His company is NOT sentimental about keeping rates above market, and has aggressively used incentives, and rate cuts to fill vacancies. The good news (for my friend) is that many of their rental units were acquired a decade or more ago, and can easily make money on the current rents. It is only on their newest properties (maybe 30% of their total) that they barely break-even, or go in the hole.
Rents simply don’t justify new construction costs of multi-family rental properties. New supply? No. One entity acquiring more rental properties because they can borrow cheaply? Yes. Most of the apartment projects that I’ve seen are begin sold for BELOW replacement cost, and even that is a pretty high number.
Thank god the bubble wont burst, I was getting worried there for a minute…
http://tinyurl.com/okmea
Housing market still strong for now
Economist sees little risk of bubble bursting in United States, locally
More houses across the country are for sale than ever before.
Mortgage interest rates are rising.
Inflation is inching up, meaning everything — including housing is getting more expensive.
Still, “a housing market bubble bursting nationwide is highly unlikely,” said Lawrence Yun, senior forecast economist for the National Association of Realtors.
The chance of one in the Richmond area is even more remote, he said during a recent visit to Richmond. Yun spoke at a Real Estate Research Forum sponsored by the Virginia Association of Realtors.
“Housing prices are still relatively affordable in the Richmond area,” he said.
The economist said he is “very comfortable” forecasting a 10 percent rise in prices here this year. “I would not be surprised if home prices in Richmond grow by 15 percent.”
Wes Atiyeh, president of the Richmond Association of Realtors, said that might be optimistic. “My guess is we are just under 10 percent price appreciation.” He agrees that no bursting bubble is in sight for this area.
Northern Virginia’s over-heated market could benefit other areas. Yun called it the “rolling boom.” When one market takes off, demand moves into neighboring regions, he said.
The U.S. economy is creating jobs. Job growth in Virginia is outperforming the nation — and new jobs keep housing bubbles away, Yun said.
Historically, mortgage interest rates are still favorable, he said.
Plus, the 3.19 million houses on the market nationwide can be absorbed by demand, he said. “It’s definitely not a buyers’ market.”
It would take longer to sell all those houses than a year ago — an average 5½ months instead of four. But it’s manageable, and it does not imply an oversupply, Yun said.
Yun predicted mortgage interest rates will rise, but only modestly. Home sales will decline 6 percent nationally and price growth will slow to 6 percent, down from 13 percent a year ago.
Virginia sales are likely to drop by a larger amount — about 10 percent — due to slower growth in high-priced Northern Virginia, Yun said.
That said, the overall picture for housing is positive.
Thank God the bubble is going to burst, I was getting worried there for a minute…
http://www.allheadlinenews.com/articles/7003468319
Buffett Predicts A Housing Bubble Burst At Annual Meeting
May 7, 2006 9:46 a.m. EST
Omaha, NE (AHN) - Financial giant, Warren Buffett has given the world his economic predictions at the annual meeting of his company, Berkshire Hathaway.
Buffett and Berkshire Hathaway Vice Chairman Charles Munger held their traditional question and answer session with shareholders in Omaha, Nebraska.
According to Buffett, the U.S. housing market is coming upon a correction, saying, “What we see in our residential brokerage business [HomeServices of America, the nation's second-largest realtor] is a slowdown everyplace, most dramatically in the formerly hottest markets.”
Munger adds, “There is a lot of ridiculous credit being extended in the U.S. housing sector.”
Buffett says that Miami-Dade and Broward counties are seeing “a rise in unsold inventory and stagnation in price.”
Buffett believes, “Dumb lending always has its consequences. It’s like a disease that doesn’t manifest itself for a few weeks, like an epidemic that doesn’t show up until it’s too late to stop it.”
interesting contradicting articles. hmmm … whom does one believe, a NAR-paid shill, or one of the greatest investors of all time?!?!?
I saw that a few days ago and was APPALLED at the lack of intelligent reporting. It was written by a local reporter with no brain cells. Inventory is up almost 500% in Northern VA and there’s not an oversupply? And as for Richmond, the scariest city in Virginia with its high crime rate? A nice family (Mom, Dad, two little kids) just had all their throats slashed a few months ago in their own home. I know it could happen anywhere, but it didn’t surprise me that it was in Richmond.
Lawrence Yun is the genius who predicted Seattle would appreciate 30-40% inthe next couple years.
At the time he said that, 3/4 of the homes sold were selling under asking price in the zips I was checking.
Can you say MAJOR incompetent? Maybe the NAR just pushes him around the country in last final vain attempts to shore up the bubble here and there. Looks like a futile effort.
Will the NAR have to hire new economists, once it becomes clear how far off the mark Yun and Lereah’s rosy predictions turned out?
(The S&P is still sitting a good 10% lower than it’s 2000 peaks, and earnings have risen sharply since then. When you look at a big enough chart, it’s more or less back on its’ 50 year trend for better or worse.)
It’s better than it was, perhaps the least over-valued asset. But 18 times trailing earnings is a 5.5% return, not so good when stock options will dillute your share of those earnings and cash is getting 5.0%.
Moreover, we are in a debt-driven consumer boom, with profits at an all-time high share of national income. So I think we are at 18 times peak or near peak earnings, not 18 times low earnings. This I don’t believe in multiples based on forecasts of next year’s earnings.
Nothing looks good relative to cash IMHO.
I don’t like the risk that cash gets substantially devalued due to global inflation, post a big decline in housing values.
Worry about deflation instead, I’m guessing gold is going to tank in the not too distant future because the runup is being caused by speculation instead of inflation IMO.
That previously referred to article about anticipation that Bakersfield would experience a 43% price appreciation almost made me angry! This Youngblood fellow from BusinessWeek obviously has a vested interest in these markets as he’s watching them falter now.
I think Bakersfield, Visalia, Fresno, and Merced will be among California’s biggest casualities in the coming housing crash. Most realtors in that area finally have enough sense to realize this: check out :
http://www.valleyvoicenewspaper.com/vv/stories/homeinventory3.htm
In May of last year the Visalia market was torrid with roughly five buyers for every listing, says broker Brad Maaske. “Now there has been a complete turnaround with five listings for every buyer.”
Finally!
The person who wrote the Businessweek bit is only staring at some numbers:
…”What makes you more optimistic than other housing experts?
I look at two economic indicators that I think drive the housing market: the growth in employment and the growth in personal income. Getting a job or a salary increase is what motivates people to buy their own home.”
43% increase in Bakersfield this year?
The writer of that article should be dragged out of his office, dumped in Bako and forced to see what is brutally obvious to everyone but him! The jobs that have been created there are mostly low paying retail or construction. The LA/SF equity overflow has stopped and the good times are drying up along with the grass on the foothills and the tumbleweeds.
I agree wholeheartedly, Anthony. Those areas are going to be hurting badly. People are trying to get out, but the ARMs and HELOCs are coming home to roost.
Again, CNN has as its business page headline “Buffet: real Estate slowdown Ahead” as of 1 PM EDT. I’m talking in like 42-point font! I think a CNN Money editor must be having a hard time selling their house!
More likely they just sold there place a few months ago.
owner-occupied vacancy rate
Check out this ludicrous newspeak. Black is white! Up is down! Occupied is vacant!!
Big brother is watching you …
For what seems like well over a day, the following has been the headline at cnnfn.com: Buffett: Real estate slowdown ahead
It’s not like thete haven’t been other stories. It seems that CNNfn is now pushing the bubble.
They took it out from the headline early Monday, then put it back. It seems like many people are worried about RE and it sells to have such a headline.
I’ve been saying for the past several months that once the media thinks they can make a good long lasting story out this, they will begin to tear into like pitbull. Wait until the local news outlets begin to repeat the stories from the major media and begin finding local examples of FB’s. This will happen when the ARMs and I/Os start resetting in mass. I’m in San Diego and I’m just waiting to see the first stories pop up on the evening news.
Good luck with that JWM. I’m here in San Diego too and the Union-Tribune is printing nothing but puff pieces on RE here in ‘Diego. If you look at yesterdays ‘Home’ section, burried deep on page I-6 is a very weak article about rising inventory not being a concern for builders. However, half of the article talks about buyers tastes in North vs South County. Then a ‘oh, by-the-way’ record levels of inventory will be offset by strong job demand (hahaha!), more people moving here (net loss of 40,000 in ‘05) blah blah blah.
They are going to keep talking about how high-demand is and how great a market San Diego is until people are being thrown out of their homes.
Personal question. I am renting since being divorced 2 years ago. (2 kids with me part-time.) Want to buy. Found nice condo in Fairfield, CT. Price seems okay. Of course, price is pretty high, but in a nice complex and at least fairly priced for where things are today. I’m antsy to move….
But should I wait it out another 6-9 months to see where things are.
Then start looking…
I hope this okay to post on this site. If not, I apologize. Just looking for some insights from people like yourselves with an eye on what is happening.
Oh boy…did you come to the right place…I mean there are some incredibly insightful posters here and you would do well to read as much as possible.
And I’ll keep this brief, so you can start reading all the others.
No, don’t buy now. Wait at LEAST 9 months. Buy when everyone says “real estate sucks”.
If you can, look at the previous purchase price for the condo, and make your own conclusion. If the current owner bought in the last 2 years, it is most likely either a FB, or a flipper. Neither of them a good thing. ITOH, if they bought 6-7 years ago, and they want 3X what they paid, you will feel really annoyed at seeing the ripoff. Offer what they paid plus 3% a year if you are feeling generous.
Seriously, follow the advice of the previous poster. Go to Zillow.com, and look up how much that unit was sold for. If possible, look at the prices it sold for from 1998-2001. Now give it a nice trendline of about 3% upwards and that is what it is *really* worth. Seriously. Offer that price if you still want it. Otherwise, wait. Because some day, that’s what you’ll be forced to sell it at.
Renter007. I live in your neck of the tri-state area (Westchester to be more precise). Thankfully, the wife has agreed that we will revisit the housing market only after one year at the EARLIEST, but are aiming more for two years before we start looking. In the meantime, we’re renting and we were out with the agent just last week and she said there were a LOT of homes coming onto the market. She was a nice lady and I didn’t want to rub things in, so I just took it at that.
Fellow Bostonians (and outlying 495 residents [incl Lowell] ), our homeland is toast.
As stated in an earlier blog, if you guys want to know where Boston prices will land, just look at its sister city in NY State, Buffalo, once the darling of the industrial age, now a rust belt town.
And here are the similarities… in 1970, both Boston and Buffalo had 2 million metro region population. Boston’s hi-tech industry, led by DEC and Wang, was taking off and the city was experiencing a renaissance like no other place in America. In contrast, the industrial age was ending, factories were leaving metro Buffalo for abroad, and young people were leaving town for greener pastures all over the country. Lowell residents, whose families have been there since the 1900s might identify here with the loss of the textile plants in MA. Now, fast forward to today, Boston’s got 3 million persons, Buffalo 1 million. Buffalo’s market had fully reached it bear market bottom and is now slowly picking up, thanks to the lower costs of living. Boston’s experiencing a silicon “rust” belt effects of hi-tech companies leaving the region for greener pastures. Buffalo’s average home range is $100-200K, Boston’s $300-500K. So, it Buffalo’s a leading indicator then I think we know where housing prices will land in MA. This is not going to be pretty.
Randy, couldn’t agree more. Buffalo needs a lot of cleanup. But I expect that folks seeking a low cost place may head there. They do have Niagara Falls, and proximately to Toronto. But the winters are bitterly cold.
“According to Moody’s chief economist John Lonski, the yearly increase in mortgage interest paid by households rose to 15.8 percent in the first quarter, a 24-year high.”
Good thing we are in a low-interest environment, or else homeownership would be downright unaffordable!
BwaHaHaHaHaHAHA!
From what I’ve heard, Buffalo’s main issue is the snow belt as oppose to the cold since temperatures are similar to Boston for the winter.
Also, like Boston, govt employment is the big thing once the private sector stops creating jobs. In this regard, the two cities really are sister towns and will probably go downhill in a similar manner. I expect when Fidelity Investments and Gilette leave town, the business climate of a once great city will start to look like the rust belt after the 60s/70s. I guess the really sad thing here is that Boston really was one of America’s most innovative regions at par with Silicon Valley for much of its modern history since the 60s.
“And finally, the owner-occupied vacancy rate is rising sharply. At 2.1 percent, the current rate is the highest on record. This is, of course, an unintentional consequence of speculators realizing there’s no place to take a seat now that the music has stopped.”
A rule-of-thumb I once heard is that 5% of the housing stock turns over in a given year. 2.1% / 5% is in excess of 40% of the annual turnover (at normal rates), and the steadily rising inventories and steady drumbeat of statistics indicating a falling rate of home sales suggest this is an abnormally slow year, I would guess a housing-led recession is already underway. The media just have not caught on yet, and the Fed is playing mum.
where’s beaconst? can’t he counter this record vacancy heresy with some of his (? sorry…i’m a newbie) observations?
Sorry, no one can counter the truth any longer. It’s taken a while but the whole notion of RE, as an asset class, vs a depreciating structure on top of a possible inflation hedge (the land itself) has come home to roost. This will be the toughest lesson for the current generation which is in its prime earning years. I just hope that the end result is simply another Buffalo NY, but for much of the bubble cities (Boston, SF, LA, NYC, etc) than a full blown third worldization of America.