When Are We Going To Get Back To Normal?
The Greeley Tribune reports from Colorado. “For months, Mitzi Williams has been searching for a house in Greeley. She doesn’t want anything extravagant — just a rental with two or three bedrooms and a yard for her dogs. But she and several other potential renters these days are caught in the middle of the tightest rental market the area has seen since 2002. Just Friday, hours before she had hoped to walk through a potential home, she got the call. ‘They called back and told me they rented it already,’ said Williams. ‘I’m online every day looking.’”
“Real estate officials believe it’s a product of not only the high foreclosure rate in Greeley in the past few years that has kicked former owners back into the rental market, but the lack of people qualifying for home loans, and new employees. Vacant single-family homes aren’t even included in the state surveys on vacancy rates. But the number of vacant homes on the market for sale is unheard of, said Lori Jarrett, owner of Take Me Home Real Estate, which deals in real estate throughout northern Colorado.”
“‘There’s so much property on the market for sale right now, and 32 percent of property on market is vacant,’ Jarrett said. ‘To me that’s unheard of. If there’s that many properties vacant and so many people needing housing, it would make sense for so many properties to rent until the market turns around for the sale.’”
The Salt Lake Tribune in Utah. “The high-end home market has taken a beating during the past four years, even more so than the market for more affordable properties. You either need to have a lot of cash to buy a property in this price range — about a third of such homes along the Wasatch Front are purchased with cash — or a fairly high six-figure income. And in these challenging economic times, there just aren’t enough of those types of folks around.”
“In Draper, Lisa Armstrong is trying to sell another former Parade of Homes property, this one built in 2002. She and her former husband bought it in 2003; outdoor features such as a pool were added in 2004. It has no shortage of luxury items throughout its 7,600 square feet.”
“In 2008, Armstrong had the home on the market for its appraised priced of $2.1 million, but took it off when there were no takers. ‘Now, prices are back to where they were in 2002,’ she said. Now remarried, Armstrong says she’d like to sell the home for about $1.1 million — an amount, she says, is what she has invested in the property.”
“Ginger Williams of Draper has her home, with 8,332 square feet of space, listed for $995,000. She and her husband purchased the lot with the stunning views at the height of the market in 2006, designing and building their home in 2007. Williams said they have about $1.4 million invested in the property. ‘We bought the lot at the very worst time you could have possibly bought,’ she said.”
“Although the couple want to sell and design and build another home nearby, Williams says she’s not going to give her house away to do it. ‘If it doesn’t sell for this price, we’ll just take it off the market. This is as low as we’re going to go.’”
From Vegas Inc. in Nevada. “The demand for existing homes in Las Vegas strengthened in May but that hasn’t stopped prices from falling, according to SalesTraq. The 4,942 sales in May is 17 percent higher than May 2010 and one of the strongest months since existing home sales started rebounding in 2009. The median price dipped to $106,200 in May, $700 less than April and nearly 14 percent below the $123,000 price in May 2010. At that rate, the year-end median price would be the lowest it’s been since 1990.”
“Foreclosures and investors remain a big factor in the housing market’s dynamics with 2,233 homes repossessed in May, the highest number for this year and 2010, according to SalesTraq. It was 31 percent higher than May 2010. Foreclosures amounted to 2,005 of the 4,942 existing home sales in May with their median price at $102,000.”
“Some 51 percent of homes sold in May were bought with cash and 79 percent were vacant, SalesTraq reported.”
From KTNV in Nevada. “Armed with bug spray, Benedeane Blake-White is fighting a losing battle. ‘Just recently, the last couple weeks, we’ve been inundated with mosquitoes.’ And after searching her backyard near Durango and Blue Diamond, she decided to peer over her next door neighbor’s wall. That’s when she saw it… ‘A nasty green pool and tiny baby little mosquitoes,’ says Blake-White. ‘They were just everywhere.’”
“Blake-White hasn’t seen anyone living at the home for quite some time. County records show it went into default back in 2009 and a new foreclosure notice was just posted on the front gate this week. The notice shows more than $431,951.71 owed on the home. It’s now worth half that.”
The Las Vegas Sun in Nevada. “Although burglaries happen all over — gated communities, apartments, unattended homes — police said the greatest concentration tends to be in the southern end of the Northwest Area Command, an area dubbed the ‘Rainbow Corridor’ because of Rainbow Boulevard running north-south down the middle.”
“Part of the success of the new initiative lies with residents communicating with officers and safeguarding their homes, police said. The changing nature of neighborhoods since the economy’s collapse, however, makes that more challenging because people don’t know their neighbors and, as a result, might not notice irregularities as easily, Lt. Daniel Zehnder said.”
“‘There is no such thing as a bad part of town anymore,’ he said. ‘That crime has migrated because the people have migrated because the housing has diversified.’”
Inside Tucson Business in Arizona. “Although active residential listings in the Tucson area have decreased for four consecutive months, as many as 2,100 bank-owned houses are not on the market. As of June 1, Bryan Hill, owner of Tucson Foreclosure Source, said there are 2,127 ‘pre-market REO’ units. REO is real estate owned by banks.”
“Most shadow inventory is concentrated in the central and southern parts of the city. In these areas, Hill reports there are about 1,160 pre-market REOs, or 55 percent of the total. Throughout the city of Tucson, there were about 5,800 homes listed for sale. Of that total, 1,700 units are classified as distressed. The data shows ‘most areas of the city have larger shadow inventories than active listings,’ said Hill.”
The Arizona Republic. “An apparent breakdown in the basic economic law of supply and demand has shaken Phoenix-area real-estate agents’ confidence in the local housing market, according to a report. Despite several consecutive months of increasing buyer demand for housing, the median price of homes hasn’t budged, said Bob Bemis, CEO of the Arizona Regional Multiple Listing Service.”
“Another reason for the drop in confidence, Bemis said, could be that agents were coming to the realization that home prices are not going to change significantly from what they are today. ‘The Number 1 question is, ‘When are we going to get back to normal?’ he said. ‘I think it’s very possible that this is it - we’re not going to have boom days returning like we did in 2005 and 2006.’”
The News Herald in Arizona. “Arizona State University’s President Michael Crow visited Lake Havasu City in May and announced that one of the nation’s largest universities would open its first campus outside of the Phoenix area in this small city by the lake. From commercial to residential — no one really seems to know exactly how the coming of ASU will affect real estate in the immediate area.”
“Bob McClory bought nine vacant lots surrounding the former Daytona Middle School in 2004. First he was going to build a strip mall, then it was announced that The Shops at Lake Havasu was being built. So he scrapped that idea, he said. Then he was going to build a gate-guarded community, but then the housing bubble burst.”
“Then he thought about an assisted living center, but then that market started degrading as well, he said. ‘Now it’s just empty land,’ he said.”
“All along Swanson Avenue, there are signs for properties for sale. Including three vacant lots that Havasu Management Services, Inc.’s owner Bob Bennett has had for sale for more than a decade.’
“‘I don’t see any way that the prices are affected by the college at this point,’ he said. ‘I don’t see sales increasing or anything because of it. I’m in favor of them having the campus. I wouldn’t mind if they came over and bought this cotton-picking property, but I don’t anticipate it ever happening.’”
You either need to have a lot of cash to buy a property in this price range — about a third of such homes along the Wasatch Front are purchased with cash — or a fairly high six-figure income. And in these challenging economic times, there just aren’t enough of those types of folks around.
There were never enough of those types of folks around…and the people with buckets of credit and boxes of stupid have already used or lost their bucket of credit. I’m glad to see at least a few people recognizing this is normal, 2005 was not normal.
So…we’ve got tons of empty houses and sky-high rents according to the Greeley story. Seems like a simple problem…except even sky-high rents can’t cover a 2005 mortgage and taxes and HOA and maintenance. The bubble debt has to disappear one way or another to fix this stuff.
From the original post:
“Most shadow inventory is concentrated in the central and southern parts of the city. In these areas, Hill reports there are about 1,160 pre-market REOs, or 55 percent of the total. Throughout the city of Tucson, there were about 5,800 homes listed for sale. Of that total, 1,700 units are classified as distressed. The data shows ‘most areas of the city have larger shadow inventories than active listings,’ said Hill.”
To which I say:
I can corroborate Mr. Hill’s statement via what I see on my bicycle rides around Tucson. There are a lot of properties that not for rent or for sale. Instead, they’re just sitting there, awaiting something.
Here’s the new normal:
The Wall Street Journal
ECONOMY
JUNE 27, 2011
Debt Hamstrings Recovery
Inability of Nations, Consumers to Get Out of Hock Weighs on Global Economy
By TOM LAURICELLA
WSJ’s Francesco Guerrera reports U.S. consumer debt has skyrocketed by 37% over the past 10 years and is in part responsible for the economy’s slow recovery. Photo: Joe Raedle/Getty Images
The Federal Reserve is just days away from ending one of the major steps to aid the U.S. economy—but the effort has done little to solve the original problem: The government and individuals alike are still heavily in debt.
Around the globe, the inability of governments and households to reduce their debt continues to cast a shadow over Western economies and the financial health of individuals. Today, U.S. consumers have more mortgage and credit-card debt than they did five years ago, and the U.S. budget deficit is worsening. At the same time, European governments are having to throw billions more euros at Greece to keep it afloat.
The repercussions are likely to play out for years to come in the form of patchy economic growth, further government market intervention—such as last week’s decision by oil-consuming nations to release more oil onto the markets—and frequent financial-market swings.
The fundamental problem is that reversing the trend of piling on the debt requires some combination of cutting spending, growing income or the economy, and inflation. But wage growth is stagnant and home prices, which underpin much of the debt problem, are still falling.
Meanwhile, in a vicious circle, businesses aren’t hiring or investing because they know consumers are tapped out. Banks, for their part, are hoarding cash, being stingy with new loans.
Unlike the aftermath of typical recessions, simply lowering interest rates hasn’t been enough to get growth back on track, economists say. Central-bank efforts have boosted financial markets in the short term—raising stock prices and significantly lowering interest rates—but they have been unable to push people and governments to whittle down debt.
Quite the opposite has been the case. The lowered cost of borrowing has enabled individuals and governments to delay taking measures to change the way they spend and save.
Given the difficulties of paying down debt, “you have to get comfortable with the idea that it’s going to take a long time for the markets to adjust and the economy to get back on solid footing,” says Tom Luster, director of investment-grade-bond research at Eaton Vance Investment Managers.
Carmen Reinhart, a senior fellow at the Peterson Institute for International Economics, has said that the experience of past financial crises suggests the unwinding of debt on average takes seven years, with debt ratios not coming down significantly until three years after a crisis.
“The issue with debt is you can’t get rid of it quickly and you can’t get rid of it nicely,” Ms. Reinhart says.
…
“WSJ’s Francesco Guerrera reports U.S. consumer debt has skyrocketed by 37% over the past 10 years and is in part responsible for the economy’s slow recovery.”
The problem with debt is that it has to be serviced. The money paid back to service debt comes from disposable income, income that would normally purchase goods and therefore keep jobs and the economy flowing.
And to whom are those interest payments being made?
“The issue with debt is you can’t get rid of it quickly and you can’t get rid of it nicely,” Ms. Reinhart says.
“Consumers” (or as I prefer to call them: individuals) should just file for BK if they are that deep in the hole. Their credit rating will come back quicker than they think. I know a guy who filed last year and he told me that he just checked his score: 690. I was surpised, as I figure it would be in the 400-500 range.
“…..it would make sense……”
Well there you go.
“It makes no sense……..”
“Sense ain’t got nothin’ to do with it”
so said William Munny (Real Estate investor, Hodgeman County, Kansas).
‘They called back and told me they rented it already,’ said Williams. ‘I’m online every day looking.’
Me too, Mitzy. Me too. In fact, I wouldn’t need to be online looking all day if frickin’ FedResGov would’ve allowed sales prices to reflect mark to market. I would’ve bought a place by now.
Instead, I’m finding FBs renting out their places at absurd asking prices and a list of renters ahead of me no matter how fast I call after I see a post on Craigslist.
One woman I called said she had 4 people that wanted to apply for her rental site unseen. Thanks BushBerBama!
Here in Tucson, the word-of-mouth rental market seems to be thriving. I’m on a listserv for neighborhood activist types and it’s abuzz with people looking to rent properties and potential renters of said properties. It’s like watching Yenta the Matchmaker in action.
“A yard for her dogs” — if I were a landlord this would be ringing big alarm bells right from the start. I’m hardly surprised they tell her that the property is already rented. Who wants to sign up for dog pee, poo and damage?
Perhaps the writer could have come up with some better example cases…
I’m of two minds on this story. One mind says “Beware of renting to people with pets.” Reason: Pets can do a lot of damage to a property.
OTOH, there are a lot of people moving out of houses and into apartments. Including the people who just gave up the dog to the SPCA that my parents just adopted.
I haven’t met this dog yet, but he sounds like a good one. I’ve been encouraging my mother to train him as a service dog so that he can help with my dad’s hearing and forgetfulness problems.
This is one lucky dog. However, there are other dogs facing the same problem who won’t be so lucky.
When our daughter decided to adopt a family dog, she had a hard time deciding between and adult dog and a puppy because she thought it would work better in our situation. But she was feeling sorry for the adultr until she saw someone else taking it home.
When I moved to Dallas I wound up renting because even though I got a job within 3 weeks I wasn’t sure about the purchasing a house. I have two large dogs and wouldn’t dream of giving them up. I moved into an apartment because I couldn’t find a house that I liked. I take care to pick up after my dogs and make sure they don’t cause any damage, I owned for too long to have a dog that causes damage to either the yard or house and have spent many hours training them not to do any.
I’m glad I decided to rent, I found that I hate the summers here and will be move out of state when my lease is up, I don’t care that the job market in Texas is wonderful if I can’t go outside for 6 months out of the year. I may move back to California, not sure yet, I miss my family and friends but I also don’t want to wind up living under a bridge if I can’t find a job.
I cannot understand how people can live in such a sweltering hellhole.
I just rescued a Silkie that was an owner turn in at the Los Angeles shelter.
“‘There’s so much property on the market for sale right now, and 32 percent of property on market is vacant,’ Jarrett said. ‘To me that’s unheard of. If there’s that many properties vacant and so many people needing housing, it would make sense for so many properties to rent until the market turns around for the sale.’”
The fact that this ISN’T happening is evidence that current prices are still unsupportable. There’s a price that will bring landlords into the market. It seems that we haven’t hit that price yet in Greely.
And after searching her backyard near Durango and Blue Diamond, she decided to peer over her next door neighbor’s wall. That’s when she saw it… ‘A nasty green pool and tiny baby little mosquitoes,’ says Blake-White. ‘They were just everywhere.’
I’d climb over the fence and dump a quart of cheap cooking oil into the pool. Won’t that kill the mosquito larvae?
And I’d be serving as the lookout as you climbed over the fence, DennisN. Because you never know when an irate bankster will show up.
As for the oil, I think that will do the job, but I’m not positive.
The cooking oil will kill the larvae and not harm other animals that drink the water. You can also add dish detergent but that might cause problems with animals drinking out of the pool.
The cooking oil will biodegrade in days and sink out of sight, What you need is non volatile petroleum unfortunately. What they used in the famous Mosquito abatement program in Panama while building the canal was kerosene…
The rental market is a joke with all the accidental landlords trying to cover their bloated mortgages. It’s not really collusive price fixing, but so many people are up against the wall with costs, that the commonality of interests produces the appearance of collusive price fixing. The rental market has to collapse too and both rents and sale prices are still inflated. People think that just because prices have receded to 2002-2003 levels that the bottom is near. It’s not and won’t be until prices go back to Summer 1997 levels; the run-up really began in 98. Either notional prices come down or inflation masks price declines, but one way or another 1997 is the benchmark and the market will stay locked up until we get there.
I was a realtor during that time period and bailed out in 2002 because I couldn’t take it any more and felt guilty for screwing all the willing victims who couldn’t see the hand writing “mene mene tekel upharsin”.
on the real estate market’s party wall.
“If there’s that many properties vacant and so many people needing housing, it would make sense for so many properties to rent until the market turns around for the sale.”
No kidding. Don’t these wannabe sellers realize they are inadvertently depressing home purchase prices and inflating rents?