Buyers ‘Don’t Want To Pay Too Much’: NYT
The New York Times reports on the ‘chill’ in home buying. “Many Americans who planned on real estate as their path to wealth are beginning to find that there are limits to how high is up. As higher interest rates dampen demand, sellers are grudgingly lowering their prices to drum up interest.”
“A house at 57 Marina Boulevard in San Rafael, across the bay from San Francisco, was originally listed at $1.45 million. The owner recently dropped the price to $949,000 when a competing house on the same street lowered its price to $959,000, from $989,000.”
“In Marin County, the prices of about a quarter of all listings have been reduced. County records show that 57 Marina Boulevard was sold in February for $700,000, so the owner, Dan Marr, is unlikely to lose money even at the lower price. ‘I don’t want to talk about it,’ he said.”
“Nearly a year after the sales of homes peaked, buyers are wresting control from sellers in many areas as inventories of unsold homes have grown, in some markets doubling. The most widely used statistic to measure home values, the median home price, shows that once-hot markets like San Mateo, Calif., and Mercer County, N.J., are now registering year-over-year declines.”
“‘It’s going from a seller’s market to a buyer’s market,’ said David Lereah, the chief economist for the NAR. In March, ‘price appreciation went down to 7.4 percent, from over 10 percent,’ he added. ‘That most probably reflects that sellers are bringing their prices down.’”
“ZipRealty has found widespread price reductions in the MLS’s used by all agents to advertise homes. Prices have been trimmed on 35.7 percent of all homes currently listed for sale in the Boston area, for example. The same is true for homes in San Diego, Sacramento, Los Angeles and Miami. And prices have been snipped on a quarter of the homes in Chicago, Washington and Baltimore.”
“In Silicon Valley, (realtor) Richard Calhoun said that the number of homes sold was now 85 percent of the 25-year average. A year ago, it was 30 percent above that average. In Santa Cruz, inventories have tripled. A result is that the median price of homes in San Mateo County dropped 2.7 percent, to $875,000, in March, from $899,000 a year earlier.”
“Elsewhere you can smell the anxiety. The listing agent for a four-bedroom home on Scripps Trail in San Diego informed other agents in the MLS that a ‘very, very motivated seller will entertain all reasonable offers’ and ‘will help with closing costs.’ The house was listed in September at $810,000. After a previous price cut, the seller is now willing to entertain offers as low as $685,000.”
“The seller bought the house for $730,000 in 2005, according to county property records, for what the listing agent said were investment purposes.”
“Robin L. McCarthy, a real estate agent who works in Princeton, N.J., said homes were sitting on the market three to four months, when houses sold in as little as a few days a year ago. Houses that would have been the subject of intense bidding wars now sell for slightly less than asking price.”
“‘Buyers are afraid that real estate prices are going to go down, so they are very careful,’ Ms. McCarthy said. ‘They don’t want to pay too much.’”
‘originally listed at $1.45 million..recently dropped the price to $949,000..was sold in February for $700,000, so the owner is unlikely to lose money even at the lower price’
Hands up all those that want to hand this guy a couple hundred thousand for holding a house for a few months.
Furthermore, he does not want to talk about it! Classic comment but not quite gagging yet.
The guy who bought at 730K and is asking 685K would be down 6.2% plus closing costs– If it actually sold for that amount. When all is said and done, he’ll have lost about 100K on that flop. Love it.
I sincerely hope this isn’t the one Suzanne researched!
she only traffics in special homes, not this sort of place.
(Dan Marr) recently dropped the price to $949,000 when a competing house on the same street lowered its price to $959,000, from $989,000.”
It doesn’t say if the other house sold for $959, just lowered to that. So perhaps the new asking price will not be sufficient to sell it and will have to be lowered more. It’s hard for me to put into words how much I would like to see him have to go below the $700K he bought it for, just based on his greed and arrogance.
What makes him unlikely to lose money? The fact that he is still asking for more than he paid, or the fact that he still doesn’t have a buyer?
The fact that he doesn’t want to talk about it makes it likely that he lost money.
Most likely he bought a Hummer and add 100k in upgrades, So 700k, plus upgade cost, the Hummer, sent daughter to the finest’s school.
Maybe thats what he doesn’t want to talk about it????
This stuff just makes me day! We’ve all read and heard about the Bay Area’s incredible “intagibles” and how no matter what else happens in the rest of the country that the BA will be “immune” from any kind of downturn. Now the proof is in the pudding. While Dan Marr may feel like the biggest idiot west of the Mississippi right now his name (and problems) will be quickly forgotten as he is just the first of many. Ben, thanks for identifying this as the “lead article” as it should be!
It’s not just the bay area. Some people here (Northern Nevada) seem to believe it “wont happen here” Don’t you know? EVERYONE wants to live in Nevada! Our houses are a downright bargin. The area has been under valued for years and years. and my fav….They are not making any more desert!
You’re messin’ with us, right? Are they really saying that? Seriously? That’s pretty darn funny!
I wish I was.
Well, that’s a good one!
I almost became a flipper. My sister lives in Silver Springs,NV and has been buying distressed properties for years, fixing them up and either renting them or selling. BTW, She has told me there are NO bargains to had now. Anyway, I actually seriously considered in 2002 buying, fixing and flipping a couple of properties there in order to get more money for a down here in SD. I could have bought outright and used my own cash to rehab but I felt it would be too hard to manage long distance.
This such a “telling moment”. Not only is this particular incident the first time I’ve had documented evidence of a 50%+ price reduction, it occured in CA and in the BA no less! Look, I don’t know if Dan-Dan made a dime on his little venture or not, or if he bought the place “way back in 2003″ for 350K and made a 100% profit. Frankly I don’t care! This is THE FIRST 50% + price reduction, and here’s to many more!
$945,000 isn’t 50% of $1,450,000: it’s a $505,000 drop, so it still has a long way to go.
The article said it sold for $700,000, a 50% haircut
Re-read it. It sold if Feb for $700K. it’s on the market *again* for $945,000.
Sorry Karen, you posted before I did. My letter below isn’t in reference to yours (above), but to the one you are also addressing.
No, it ORIGINALLY sold for $700,000 (that is, the guy who is now trying to sell it for $945,000 bought it in February for $700,000). This is why the article says that even at $945,000, he isn’t likely to lose money. He’s reduced his outrageously inflated asking price, but he’s still asking for a quarter million dollars in profits for a property he’s owned for less than three months.
Nice work if you can get it.
Anton, I may (or may not) have jumped the gun here! If I created any confusion I apologize. I realize that Dan Marr didn’t buy the property for 1.45 mil. But he did try to sell it for that, and it ain’t happening. Zillow shows the property at 773K as of this morning. Now either the guy has never heard of Zillow or he’s banking on the notion that buyers haven’t heard of it either. This place is barely 1,000 sq. ft. btw. Now if he did buy it for 700K in FEB which seems to be the case he expected to more than double his money in 3 months? What could he have possibly done to this property to double it’s value in 3 mos? This makes me want to puke! If we were in court (swearing on a stack of bibles) he DID try to sell it for 1.45 mil, no? He was unable to do that. It is conjecture on the part of the author to say this guy is not in any kind of peril. How does he know? Evidently the author doesn’t know about Zillow either. In any event, I stand by my original statement. It’s a 50% + price reduction. Next case.
Anton, not to beat it to death but he’s come farther than he has to go. That’s almost a 35% drop in asking price! ASSUMING he gets what he’s asking! It was dumb play any way you slice it and when he drops it even another 10% it’s all over but the crying b/c he’ll have carrying costs and a commission to contend with. Sorry I didn’t read the article more carefully from inception but I stand by original position; this was a dumb play. Momentum players are like dogs that chase cars. They make a lot noise, they attract a lot of attention but sadly they don’t last to long!
He might have been asking too much to begin with. In any market. He paid $700K for the house only 3 months ago.
I only consider 50% reductions to be true when it’s half of the value someone actually paid for it. You want a 99.9% reduction? Okay, I just dropped my house listing to $500,000 from the $500,000,000 I was asking. People can ask whatever the F they want. I only care about actual sales.
Actually, the Times screwed up. The original list price was $1.045M and not $1.45M.
http://www.socketsite.com/archives/2006/05/nyt_not_proof_r.html
It was sold in “February” for 700K, and now it’s 959K or whatever?
Yeah, they’re really learning fast!
WCI Communities Inc. before the opening bell Tuesday said lowered its 2006 earnings forecast on slowing demand for the company’s active-adult communities, towers and expensive homes in its Mid-Atlantic markets.
The company said orders, a key measure of future profits, fell 55.7% on a unit basis.
Whoa — that’s a huge drop. So the boomers from Up North are bailing? No surprise, if they can’t unload their old place at the price they think they should get. I think it will be interesting to watch as their equity continues to shrink, well past the time they now think they’ll wait for. They might well be able to remain in palce, and comfortably, but what about the Southern market, especially Florida, that was putting on lipstick just before their expected arrival?
“you can smell the anxiety….”
….as homeowners rush to “liberate” their equity.
More pain at Dominion
Struggling home builder Dominion Homes Inc. (DHOM : Dominion Homes Inc
late Monday said it swung to a loss of $3.9 million in the first quarter. Revenue slipped to $61.8 million from $92.6 million as the company delivered fewer homes than in the year-ago period.
“Home sales generally remained slow in the company’s markets,” Dominion said in a statement, adding that it does not expect to be profitable in 2006.
Shares of the company are down more than 32% over the past year, making it one of the heaviest decliners in the Dow Jones U.S. Home Construction Index (DJ_HOM : DJ US Home Construction Index
Dominion has been hit by a softening market for first-time home buyers in the Midwest
Wow , the turn-a-round is happening everywhere ,in so many markets . This really was a National Housing Boom .
“Dominion…does not expect to be profitable in 2006.”
Wow…and this (’06) is just the beginning of the downward cycle. Forget about getting above water in ‘07, ‘08, etc.
“The house was listed in September at $810,000. After a previous price cut, the seller is now willing to entertain offers as low as $685,000.”
This house is already dropped around 15% and is still sitting. Now that’s the kind of action I like to see! It also becomes the new comp if it ever sells which makes every other seller trying to unload their $800k house waaaaaay over market. Sweeeet!
“willing to accept $685K” after buying in ‘05 for $730K
what? at a loss!? but RE only goes up!
ahhh, yes…locally, finally some solid signs/evidence. I like to call the wife over to the computer to read this kind of stuff, …especially since I suspect everyone around me thinks I’m full of hot air,…especially since that house is w/in a mile of here
Throw in the additonal buyer costs (financing, moving, buying/selling, etc.) and I bet someone’s having a real bad day.
SOLD! in Menifee, CA
I wrote on this blog a few months ago that I had an elderly relative’s house up for sale in southern Riverside County (CA). Given that I am a housing bubble believer, I was worried about being able to sell the house for a reasonable price. The house was purchased 15 years ago and had to be sold now because it is 2 stories and not appropriate for a very old person and has a reverse mortgage. Anyway, in 12/05 I put the house on the market at exactly the price of comps. During Jan and Feb I also put $20K into the house for new paint, replacement windows, maintenance that hadn’t been done, new carpets, etc. The house had to compete with literally thousands of NEW homes in the area (Menifee) along with lots of other homes in the same subdivision. It does have a great feature though an absolutely fabulous view of the golf course lake and the mountains behind.
After 3 months of little interest I lowered the price by $5K to get it under $390K, threw in $5K for seller’s closing costs and raised the buyer’s commission from 2.5% to 3% (kept the seller’s at 2.5%). Finally a serious buyer showed up who wanted to live in the house but didn’t want to put a nickel into it — so I threw in another $3K for closing costs and another $1K to fix the fence. Well, it just closed. It’s SOLD! I feel relieved although another relative says I “gave it away”. What do you all think? If I I could have sold it “as is” at the comp price I would have “saved” about $35K — about 9%. But maybe I never would have had a buyer…especially if things deteriorate in the Menifee area. The realtor says the market is fine — she had 7 closings in the last month.
You played it very well. Knowledge is power, and you used it to your advantage. You were able to sell it at a competitive price, and the buyer is happy not having to do any work. It is a win-win scenario. Congratulations.
“If I I could have sold it “as is” at the comp price I would have “saved” about $35K — about 9%. But maybe I never would have had a buyer…especially if things deteriorate in the Menifee area.”
There’s a sort-of false argument here. The truth is that you could not have sold “as is” at the comp price, otherwsie you would have, or at least would have had an offer or serious nibble. You cannot calculate any savings on a virtual impossibility. With the competition you described, who would pay a comp price for an “as=is?” Good for you on selling it — in today’s market, it sounds like you skated and that you were awfully close to the edge of the cliff. You did ask what we think.
I sold out last summer, by dutch auction, and thereafter never once conjured up a price that “might have been.” My willing buyer defined the price and I’m super grateful that it closed smoothly.
I agree — the quotes around “saved” are meant to indicate fake savings! But this is what my other relatives are telling me…that I left all that money on the table! I hope that in a few months when nothing is selling there anymore (Riverside County) they will pat me on the back and say “good job”!
I agree — the quotes around “saved” are meant to indicate fake savings! But this is what my other relatives are telling me…that I left all that money on the table!
Hey the second guesser’s and peanut gallery always have something to say, as long as the deal belongs to somebody else.
BE THANKFUL for your buyer. As the saying goes, your first offer is usually your best offer.
Market factors change like lightening today.
I see nothing good on any horizon.
Count your blessings and don’t second guess yourself. You done good.
Tell your relatives: Bulls eat, bears eat, pigs get slaughtered.
How can you sell one item (house) in a dutch auction?
Easy. You set a price, typically am little higher than you think you can get. Then, on a regular, disciplined schedule, you reduce that price by a significant amount until it sells. By significant, I’d say no less than 2.5-3.0% every two weeks. You don’t pause on the way down because it snowed last week.
Most people don’t have the stomach for this, but it works. Sure, there is the small chance that the “one” buyer for your home wasn’t riding around looking during the week they should have been, but that’s life. I used dutch auction at what turned out to be the top where we are — I’d have turned up the reduction percentage even more if I were selling today.
People were doing this in Davis (just outside of sacramento) and nothing was moving. Now people are reducing less frequently with much larger reductions (10%) and in a few cases those sold. Recently, homes started going to the courthouse because the reductions just aren’t enough and the foreclosures are starting. Frankly, the last court sale I saw looked overpriced at what the bank stated as it’s bottom offer. Good luck
Ahh. But that really isn’t a dutch auction. You’re just reducing your price until you get a buyer.
Ahh. But “reducing your price until you get a buyer” is pretty much the exact definition of a Dutch auction.
7 closings, huh? Bullsh*t! It would be fun to ask her to prove it……talk about uncomfortable moments.
You did the right thing, my friend. Riverside is one of those counties that was doomed from the beginning. I sucessfully talked my bro-in-law into selling his place in Nuevo. His reservations are the same as yours, but trust me, you’ll look like economic geniuses in 6 months or less.
I agree with everyone else , you were wise my friend .
Thanks for the positive feedback! The realtor did say that some of the 7 houses she was closing this month had been on the market awhile. Ours was on the market for 5 months. Others could have been longer…who knows.
Menifee, with all of the investor-owned homes, and the HUGE housing tracts built over the last 15 years and many still under construction, looks like a total housing and environmental disaster IMHO. It’s only claim to fame is being relatively close to the Pachanga Gaming Casino in Temecula. As a funny note, my elderly relative actually pulled equity out of the house for gambling money! Luckily I was able to step in after only $20K was gone…she said she was going to die anyway so she might as well enjoy herself. (That was 5 years ago.) Now she has Alzheimer’s and doesn’t even know how to push the buttons
Life never turns out the way you expect does it?
She was lucky enough in life to have a loving relative that cared enough to take care of her.
Congrats! I’d be very relieved to have cashed out of Riverside County too. With the jaw dropping pace of new construction and inventory piling up around there, I think you did well to price the house attractively to get it sold quickly against all the new supersize stucco McBoxes.
I’ve got to remember to take my camera the next time I drive up through Temecula/Murietta. It really deserves a spot in the HBB gallery.
The Temecula/Menifee/Murietta area is going to be devastated. You were very lucky to get out now. There are tons of places that are sitting on the market for well past the 5 months yours was. In addition, there are thousands and thousands of new homes coming online in the next 18 months. It’s going to get ugly very quickly in Southern Riverside.
Just 2 weeks ago, my fiancee and I did some scouting for RE up there. In Sun City (Romoland), we stopped in at Heritage Lake, a Master Planned Community and toured Model units. It was a ghost town. We never saw more than 2 or 3 people outside of the Agents in the several hours we were there. There are 2600 homes coming online at Heritage Lake though 2008. However, it was like this at all the model homes we toured in the Temecula area. Dead. For sales signs up everywhere, tons of new units, nobody is moving anything.
IMHO, this summer will see the start of massive bloodletting in Southern Riverside.
I’m giving you a gold star. Any sort of delay or inaction would have cost you real money. The market has begun its downward trajectory — you played an “A” game by doing what it took to unload it in the face of a coming storm and stiff competition from growing inventory. Going into “analysis-paralysis” mode, trying to hold out for the last dollar, or trying to maximize profits could have been disastrous — the best strategy right now is “DO WHAT IT TAKES TO SELL IT NOW”. Nicely played.
If that relative could do a better job he or she should have stepped up to do the selling job. I suspect that you put a lot of time and effort in addition to cash to get all of that done. Talking alone doesn’t get a house sold.
He helped me a LOT I am not complaining. He moved everything out of the house and hauled it across the country! But when the house didn’t sell after 3 months and I was responsible for the financials our opinions diverged and I had to go with what I felt was best.
Hurrah for you . Was in Menifee over the weekend. Drove across Bundy Canyon road. ABSOLUTELY polluted with for sale signs. 4 new developments graded and in process on Murrietta road (in a 1 1/2 mile stretch).
Stand clear–Something is impacting the rotary oscillating device!
I know it’s scary that area is going to implode. The HOA tried (and failed) to implement a “no more than 30% rentals” policy. I don’t know how they could even implement that. It would hurt people who are living in their homes too if they had to move but couldn’t sell. What a MESS.
WTF with this article relying on yoy for the idea that prices are still appreciating in most markets? If the S&P 500 was up 10% since last May, but down 12% since August, would you say that stock prices are up?
If I’m a broker, yes.
Fannie misses another deadline:
http://biz.yahoo.com/ap/060509/fannie_mae.html?.v=2
The most corrupt organization in our country(Government) investigating the second most corrupt(Government sponsored?) company.
Im sure everything will be fine!
WHY the upgrades? Anybody? Anybody? Bueller?
W’asnt it that Democratic wonder boy from the Clinton Administration that ran this thing. Lingus-even Democrats screw you. Why are these guys not being investigated. If
Raines signed off on the financials should he not be going to the slammer? Perhaps he is being protected by his Democratic buddies. The whole system stinks.
This is an excellent comment, but the investigations won’t start until the economy is in the pits and the Congress has to round up the scapegoats. There surely plenty of, not scapegoats, but perps. I can not imagine a bigger mess and fortunately most of those posting at this blog won’t be at the bottom of the pile of corpses.
And even when the investigations start, it will just be a big show. Do these guys ever take the rap? Few and far in between.
1 giant freaking problem with this.
Dems have been out of power for how long now, Rs control everything what are they doing about it—typical for the party of personal responsbility to accept none.
Well then, do the honorable thing. Stand up and say I made a mistake and take full responsibilty. It is not that difficult to do, and frankly, both parties need people to do that.
They’re up 3% today. Probably because the missed deadlines mean they’re officially above the law.
“‘It’s going from a seller’s market to a buyer’s market,’ said David Lereah, the chief economist for the NAR. In March, ‘price appreciation went down to 7.4 percent, from over 10 percent,’ he added. ‘That most probably reflects that sellers are bringing their prices down.’
I refuse to allow this hack to backpedal his way out of this.
Since when is a buyer’s market one with 7.4% appreciation? Asshole.
He paid 700K and was asking $1.45 M? What was he smoking? Must have gone to Trump’s seminar. BTW, while I enjoyed this article I’m a little more than pissed off because of the lies of the RE agents who have kept this whole scheme going longer.
Exactly. This is just marketing to GFs where a GF feels they are getting a steal since the property has been reduced 500K or almost 40%! Well, not such a great deal if you started out with 2 x a ridiculously high price from the start. Similar to an example I used earlier in another post: Buy a 500K house, list for 5 Million, then SLASH the price 80%, giving some GF 4 MILLION in INSTANT EQUITY!!!!
“After a previous price cut, the seller is now willing to entertain offers as low as $685,000.”
Soon the seller will be willing to entertain FOR offers.
LMAO! Nice one!
GF= Gullible Fuk or what?
GF=greater fool
That “entertain offers” term really bugs me everytime.
The unRealtors got some complaints maybe. Some switched to “value range” instead. Me, I’m still awaiting the “devalued range”.
NYT + WP significant coverage means it’s officially “over.” BTW the graphic for the NYT story (front page of the business section) was also very good.
Next up: Stories like Menifee above — retirees who have been long-time owner-occupiers, who are having their equity slammed because of overbuilding, at the same time their property taxes reflect values from last year or the year before. They are the real innocent victims of this mess.
Nah. Prop 13 from keeps property taxes in California pretty much fixed from the sales price, so no worries there. In addition, all of the equity that is getting “slammed” was pushed to artificial highs in the first place (and was smartly leveraged to obtain a reverse mortgage). I’m sure there are real victims elsewhere as you describe, but probably not in this case.
A friend of my son is selling his house of 8 years because of the increase in taxes as a result of the bubble appreciation. His monthly escrow for taxes is now larger than his P& I payment. His salary has gone up less than $1.00/hr in the last 8 years. He has to drive 70 miles roundtrip to/from work and needs a truck. Gas increases/ property taxes have destroyed his American Dream. This is the disaster! His original purchase price $75,000.00 assessed value 225,000. current tax rate 2.34%
Exactly why the smart people of CA voted for Prop 13. All those who complain about it are about to find out why it exists.
Prop 13 perpetuates the cherry stemming of once rural areas, which begets the 70 mile commutes, which begets the larger problem of unsustainable lifestyles etc. If property were taxed on its best use (= zoning) this state might have preserved its open space, enriched its city centers and conserved resources. F@!% Prop 13!
Prop 13 may benefit homeowners in the immediate term, but only at the expence of the state, the new homeowners, and the quality of the properties. Did you ever notice how crappy the housing in CA in established communities is? In Bay Area, pretty much nothing is rebuilt, because of the reassessment penalties; most houses are quite crappy and are at the point of failure. And what about the chronic deficit of the state? There are many properties in Woodside and Atherton held by high-tech multimillionaires that still pay miser taxes, even though those are prime locations, while the state hasn’t built a road in five years.
Prop 13 is disasterous, and the source of much RE and fiscal distortions.
- CA seems to be more than 90% open space…and too much of it is in SF bay area where SENSIBLE development is needed. F@ck NIMBYism. Someone had the nerve to ask me to sign a petition the other day outside Albertson’s to limit development in BA…greedy Boomer protecting property value…she didn’t like my response.
- 2% of 5 million is bigger than 2% of 500K.
- Just because other states pay too much property tax doesn’t mean CA should.
- Property tax increases should reflect inflation, assessed every 2 years, for each MSA — no more, no less.
Prop 13 Government is disasterous, and the source of much RE and fiscal distortions.
Fixed that for ya.
Prop 13 benefits long-term residents, and helps to keep people rooted to a community that may have experienced rapid increases in property value. The ones that get hit with high property tax reassessments are the ones who keep flipping properties, or the “equity nomads” who keep moving and selling every two years so as to profit from the tax-free gain of their home. Plus, city residents can always vote to have special assessments to fund special needs - the City of Berkeley does this quite often. Any way, without Prop 13 the county would be assessing property taxes based on housing bubble derived comps (like many of the East Coast states). Would you really want your property taxes determined by GFs, speculators, flippers, etc?
Regarding other poster’s comments on Prop 13 - there are plenty of states that don’t have it, and they have urban sprawl equal to or worse than California’s (i.e. Texas). I don’t see Prop 13 as perpetuating “the cherry stemming of once rural areas.” This is something that is happening all over the nation. And with regard to the “poor communities” of Woodside and Atherton, they don’t seem to be hurting from the “miserly” property taxes paid by the high-tech multi-millionaires. And property tax has no effect on the state budget (and road building). As per the California Budget Project: “Property taxes don’t go to state governments, they go to support local schools, your city county, a park district or maybe a library district. None of those property tax dollars come to Sacramento.”
BillB,
Of course local taxes build roads (and many other things in case you didn’t know), and the lack of local taxes translates to more burden on the state, what’s so hard to understand? We pay for multi-million dollar estates that don’t pay their fair share. Inflation reassessment is laughable, show me registered inflation of 2%, I’ll believe you.
Proposition 13 has been a disaster for public schools too, and decimated self-governance of municipal bodies, because they became more dependent on the state to cover revenue shortfalls.
I never understood why states/municiaplities don’t move to a taxing system based on cubic footage and lot size. Easy to measure and discourages eyesore McMansions, overconsumption, overdevelopment, etc.
Max,
No offense, but CA is bankrupt because of the burden of overpopulation and illegal immigration. Most Prop 13 money goes to schools. Been in one lately? I used to work for LAUSD, and strongly believe the mismanagement of funds is what is causing our problems. Seriously, is it a school’s responsibility to feed, provide ALL school supplies, give medical care & social services, etc. to illegal immigrants (or anyone else, for that matter)?
If we ever had a real shortage of money, CA voters are able to pass bonds which increase prop taxes for everyone.
Nobody is “subsidizing” the older owners. If we didn’t have all the population increases (the original owners were all that existed), the demand on our resources wouldn’t be so bad.
Feepness,
Prop 13 does not cause pricing distortions in RE prices.
Remember, what causes the old-timers to stay (high taxes if they move) would cause newcomers to leave in a normal market (it’s actually happening anyway). RE taxes are part of the price which should be determined at the time of purchase. You determine affordability when you buy, based on your income. Here we are on this blog, chiding people for getting ARMs because the monthly payments are erratic, yet the (anti-Prop 13) types think wildly-swinging prop taxes are a good thing????
CA prop values are VERY volatile. Prop 13 is what enables sane, long-term people to stay in their homes and communities. BTW, they might think THEY ARE SUBSIDIZING YOU if you have children and theirs are grown and out of school. Ever thought of that?
I’m a native, and a renter. I have no more to gain than any other hopeful buyers here. I’ve just been around long enough to see the stupidity of RE bubbles, and how long-time residents need protection from idiots chasing prices into the sky with Monopoly money.
And it’s not NIMBY-ism that causes people to want protection from overbuilding. It’s quality of life and ability the region to handle all the newcomers. Stick around her for a while to see how overbuilding/overpopulation has ruined this state. They’ve seen the effects, you obviously haven’t.
Prop 13 is the worst NIMBYISM. Tax those who moved to improve their economic standing (not necessarily immigrants to CA ya know) by moving at a higher rate than investors and commercial property holders! Keep property taxes low so speculators can hold property in city centers without developing-despite costs to the community. Case in point-Napa CA where a single developer has a lock on the downtown property market. This downtown would be ripping but he gambles with the downtows future by overpricing rents-forcing tenants to the outskirts where e builds more strip malls. Can I get a witness? Anyone else from Napa. This is all made possible by prop 13-no distinction between “elderly owners on ixed incomes” and unscrupulous commercial speculators.
Agree Prop 13 should not apply to commercial/industrial nor necessarily to second/additional homes.
As well, it should not pass, in whole, from one generation to the next.
Max,
So consider an established community where the prices paid for a few homes doubled in the last three years - which happened in many places in California. The tax burden for long-time homes owners would have doubled - and for what? Did the salaries of police officers, teachers, etc. double? Did city costs and maintenance double?
And those who buy the multi-million $ estates are paying taxes based on those prices. And the guy who bought twenty years ago for $200K is paying based on his purchase price. Seems reasonable to me. If the new guy doesn’t like paying so much more in property taxes than his neighbor, he can wait for the bubble to burst and apply for a reassessment
I don’t know much about downtown Napa, but if a developer managed to lockdown the property there recently, then he is paying close to the market value for property taxes. If the developer accumulated these downtown properties a long time ago and is paying taxes at a below market assessment, then he’s not really a speculator is he? Wouldn’t he be a long-term investor? It’s funny how some people always seem to have a lot of good ideas for someone else’s property. The Supreme Court appears to support this based on their eminent domain ruling. The city of Napa could always use eminent domain and take back the downtown area, and build a nice big condo tower. That should maximize property taxes
Hmmm, that leads me to an interesting thought - do local governments encourage the over-development of condos to boost property tax revenue?
Oh, you betcha!!
57 Marina Blvd. the listing: 2bd 2ba 1,580sqft .17 ac
http://www.realtor.com/FindHome/HomeListing.asp?snum=10&locallnk=yes&frm=bymap&mnbed=0&mnbath=0&mnprice=900000&mxprice=1000000&js=off&pgnum=1&fid=so&stype=&mnsqft=&mls=xmls&areaid=20118&poe=realtor&ct=San+Rafael&st=CA&sbint=&vtsort=&sorttype=&typ=1&typ=2&typ=4&x=51&y=9&sid=0697ED91001DC&snumxlid=1056643336&lnksrc=00002
For that price I expected something that at least looked stately, that thing is just plain fugly.
The place was built in 1950 and it looks like it might needs alot of repairs to .
If you look at the photos, you’ll see all of the beautiful granite! He can’t lose.
Believe it or not, that’s not an atypical price for a house like that. I’m shocked he got it has cheap as $700K a few months ago.
“In Silicon Valley, (realtor) Richard Calhoun said that the number of homes sold was now 85 percent of the 25-year average. ”
and next week it will be 65% of 50 year average
The 700k he paid is probably 50% over fair value to start with.
anyone think the launch of zillow.com and other sites that show detailed history on what homes sold for has had a hand in taking some air out of the bubble?
The internet decimated the monopolistic choke-hold realtors had on information from the MLS. I think the free flow of information drives price adjustments more quickly in both directions.
too bad BUSH didn’t get reforms through- the MLS is ready for pasture
No…
Why? [:confused:]
I always thought that means which improve symmetry of information, increase overall market efficiency and reduce market failures like adverse selection and mispricing.
For example, with Internet, information travels faster and cheaper. Therefore, the masses know more about the market, and are presented with a choice of making decisions based on the more complete set of information, than say in the 80’s.
….or even in 2000 when many real estate sites were in their infancy or not even born yet.
Exactly. Internet already reformed car-buying experience for many people. It is much harder now to rip off a person walking into the dealership.
Not really you will never know what a dealer truly paid for a vehicle from the factory. It amazes me how many people fall for this ruse. You are still being overcharged and what the dealer doesn’t make in the showroom he makes up in financing and servicing.
The data is tainted, especially in a metro area and lagged at best. The number’s really don’t make any sense. If you truly follow their value system with everything they have for adds and apply it to a house your going to come out one FB.
EX: House I was born and raised I zillowed. Current zillow value 950K add for updated kitchen 30k, and for bathroom they missed which is permitted and has been on file since the 70’s they added another 25k. Other odds and ends I included totaled another 18k Total zillow estimate: $1,013,000.00.
Last sold comp for similliar house $895,000.
Why would you base your buying decisions on one something no matter how they try they will never be able to give you accurate information. Two they have to wait for the data to filter thru at least 3 different sources which may or may not be accurate. Three once sellers really figure out whats going on they will just mask the information it’s really easy to do. Four they only survive by scraping and bowing to the real estate industry and their vendor’s for there survival.
It’s kind of a no-brainer
Yup, my wife found a duplex that was almost in our price range and was researching it further. Then she found out it is listed at 300% of it’s 2002 sale price on zillow. And she said she’d NEVER pay that to these sleazy, greedy sellers.
Even as this news breaks, sellers will suffer from the “I’m different” syndrome. This is human nature-you hear about a crime in your city, you try to find something different in the victim from yourself so you can convince yourself it won’t happen to you. Drunk driving crashes are always in the news, but people still drink and drive, thinking “Well, that guy was an idiot” or some other distancing mechanism. Same with real estate-as this news all breaks, people will say “well, yeah out in some crappy suburb” “well, yeah in the urban core” “well on the coast” “well in the landlocked states” “well in high priced homes” etc, etc, it may be happening, but my house is different.
My folks own a condo in Phoenix-bought 7 years ago so maybe there is hope. Anyway, they went to the quarterly condo owners meeting, and said a bunch of people there (new buyers especially I am sure) were pretty freaked and were asking the association agent about what they had heard about the price plummet in Phoenix. They were told not to worry-though this decline was affecting high-priced homes in some areas, condos like this (more “moderately” priced ones were safe.) God. Talk about telling people what they want to hear-so larger, newer homes are declining in value, but the value of a smaller, older condo is staying constant? I mean is the obvious question not why someone will buy one of these condos for what they can pay for this better house as it drops?
T-Bone, I think the thing that will shatter the ‘I am different’ thinking is the 7 other for-sale signs on their street colleting dust. All it takes is one, just one desperate seller to shave off 25% (or less even) for everyone on the street to go “Oh FAWK, it’s happening to ME too!”.
Yep, just the reverse of all the smiling neighbors who were grinning ear to ear each time a neighborhood home sold for a higher and higher price in 2004.
Im shocked at how much short turn flipping drove up many markets for a while . A wise investor never buys at the top , and a flipper should always have the ability to hold long term if necessary .I still think some of those T.V. shows made it look easy. I like to look at Zillow.com to see how long a seller has held the property , what the history of the property is and what the comps went out at . I just wish that Zillow would update more often .
Slightly OT: Maybe we should be happy that there are so many incompetent and starving realtors that have accumulated over the last 5 years. They’ll be rushing their listings down to the bottom, trying to beat the guy across the street to the lower price. Not only will the Internet speed things along (compared to our last bubble) but the absolute glut of greedy, incompetent and larcenous realtors will sink this pig.
In dc some sellers are renting out their units rather than dropping the prices too much. this is a trend thats hard to quantify though.
http://www.dcbubble.blogspot.com
O/T:
Since I know many here are short HBs, lenders, etc., just wanted to throw out a warning. Like the GDW buyout by Wachovia yesterday, some of the HBs and lenders might soon be acquisition/merger targets. I lost more that I’d like on the GDW deal and would caution all short sellers to be very, very careful right now.
Let’s all keep our eyes/ears open for any possible news — even if it’s a quiet rumor — for M&A activity of the obvious short targets. Suspicious activity of GDW was ever-higher stock price even though their business model (99% ARMs, mostly in CA) should be losing value right now.
That’s also why I got out of all my FNM positions…something’s not right when they can’t produce financials, have a (minimum) $11 BILLION loss and all the executives have been thrown out…and after a decent drop, the stock price mysteriously starts heading up and up, for no apparent reason (still no financials & should be delisted).
correction: more that I’d like = more than I’d like
??????????????????????
Good post. HOV is mostly sinking slowly into the sea with the occasional (far too often, %$#!) 3% rise on Fed days, and similar rises that have no explanation whatsoever — last Friday for example, that disappear within two days but are hell in the meantime. A recent cbs.marketwatch.com article had a guy drawing lines on a chart that suggests its ultimate destination is somewhere between $7 and $12 vs ~$36 today.
Indeed, I remind myself every day that long before they reach “fair value” there is a chance that I’ll wake up one fine day to a takeover offer of 25% above whatever the previous day’s closing price was.
Anybody who was short WLS when the guy made his first take-under offer and thought they could grit their teeth and tough it out was screwed completely and permanently. He just kept raising his offer from $93 to $100 to $108.
GF = Getting Fucked?
That house at $1.45M was a complete joke. Even for a ridiculous place like Marin. He was smoking some of the local grown weed there when pulling that price out of his A$$. Here’s hoping he winds up selling for a loss, and that the house falls down the hill in a mudslide. Ciao - those are the folks driving many good folks out of California.
I can tell you have never visited the Marin POS blog. At least for 949k asking price one could actually live in that house. Trust me there are worse places (much worse) in Marin for the money.
http://marinpos.blogspot.com/
Dan Marr doesn’t want to talk about it cause even if it does sell for 949k he’s still not going to come out that great. He got nearly 60 thou commission going to the realtor, the property taxes and mortgage payments, capital gains and his rehab costs. Then there is his time he put into it.
“‘Buyers are afraid that real estate prices are going to go down, so they are very careful,’ Ms. McCarthy said. ‘They don’t want to pay too much.’”
Not true for this potential buyer.
I’ll say it again, until the media gets it:
I DON’T WANT TO USE A SUICIDE LOAN TO BUY A HOME.
I WANT A FIXED RATE LOAN.
THE RATIO OF HOME TO INCOME IS ONE THIRD.
WE AREN’T LOOKING TO BANKRUPT AMERICA, YOU DORKS.
We just want to buy a house we can afford, so we don’t go bankrupt, get foreclosed on, and get divorced.
BRING THE PRICES DOWN TO A PLACE WHERE NORMAL HUMANS CAN BUY AND YOU WON’T BE LOOKING AT MASSIVE UNEMPLOYMENT.
My head hurts.
I’m gonna go lay down.
Argh.
Can ANYONE in the mass media HEAR ME?
This is exactly my stand as well. Sure I could stretch into a home using a NAAVLP but why in the world would I when renting so incredibly cheaper?
The fundamentals don’t support our correct housing market. Maybe now that Buffet’s quote made it into the papers, commonsense will come back.
correct = current
For what’s it’s worth, don’t through out the baby with the bath water. If you only plan to live in a house for 7-9 years, then a 5/1 ARM might have a better overall economic value than a fixed rate loan depending on the spread. Currently, the spread is very tight so the point at where a PV of a 5/1 equals the PV of a fixed rate mortgage is probably around 6 years.
Please understand that I’m not saying to buy at this time. I rent in the Bay Area and will be looking to buy in the next 1-2 years after a lot of depreciation. I also work in the secondary market arena so I completely understand the risks associated with this market.
All I’m saying is that not all Hybrid loans are of the High Risk / Limited Return kind. In the right situation, a 5/1 ARM may be a better overall deal depending on the situation. That’s all.
What happens if, after seven years, the price fell by 30% and the mortgage rates are pretty much permanently above their current lifetime low levels. How would your 5/1 ARM be doing at that point?
Because that is where we are headed at the moment.
Home : Income = 3 : 1 days are never going to happen again (on the average).
Yesterday income was supplemented with a pension plan. Today income includes the portion of the money you need to set aside for retirement. Presumably incomes have gone up to partly offset this difference.
Yesterday we enjoyed higher living standards. Today we do not.
Yesterday we had one breadwinner. Today we need two.
Get used to 4:1 long term, across the country. Even 5:1 is not unreasonable in the metros.
I’d say the lack of a pension is exactly what will cause housing prices to get even **lower** relative to income. If we have less to spend on housing (since we need to save more for retirement & healthcare), prices should come down to meet the buyers’ ability to pay.
Also, if the second earner (man or woman) would slowly pull out of the workforce, wages would likely rise. We need two incomes becaue **we put ourselves in that positon** with too many workers (more wives entered workforce) chasing too few jobs. Also, we caused cost inflation because the “extra” income resulted in more money chasing the same resources. We made the mess ourselves, we can fix it ourselves, if people would wake up.
Patience, we don’t know where this may end. I do agree, however, that our standard of living will go down. That’s just going to be the result of globalization, IMHO.
Your argument does not quite sense. Home price to income ratios are high for two main reasons:
1) Lenders have been underwriting subprime risk at an unprecedented rate.
2) Buyers have been stretching themselves beyond their long-term ability to pay because they assumed that high housing inflation would continue forever.
Now that home prices are falling, lenders will no longer be willing to extend credit that lets buyers stretch themselves to the breaking point, as it is no longer safe to assume that price appreciation will make up for the lack of income. Buyers will also be less excited about paying a 4:1 or 5:1 ratio for homes which are falling in value.
So enjoy your fantasy about 4:1 long term for the short time period that it lasts
Why don’t you write a “My Turn” to Newsweek?
Buyers don’t want to pay too much…..hmmm
Well, do they ever?
After thinking about this I’ve concluded the answer is *yes*, sometimes buyers DO want to pay too much! If they think someone will come along shortly and pay even MORE, they will pay almost ANY price.
I’ve seen this twice now in the last 6 years. The dot bomb stocks in 1999 and 2000 and houses in 2004-5.
Greed makes people do very stupid things. Now they get to pay the price of their stupidy and greed.
“ZipRealty has found widespread price reductions in the MLS’s used by all agents to advertise homes. Prices have been trimmed on 35.7 percent of all homes currently listed for sale in the Boston area, for example. The same is true for homes in San Diego, Sacramento, Los Angeles and Miami. And prices have been snipped on a quarter of the homes in Chicago, Washington and Baltimore.”
Prices have been “snipped?!” NOT.
Prices are FALLING, pretty much all over the place.
Here is what Zillow has on that Marine house:
Sale History
02/27/2006: $700,000
05/14/2004: $735,000
2005 Property Tax $1,052
Total assessed value: = $86,699
Assessed value bldgs: $40,162
Assessed value land: + $46,537