Free-Flowing Financing, Greed And Unrealistic Demand
The Advertiser reports from Louisiana. “Two real estate agents, Terrica Smith and Stacey Arceneaux believe that today’s market in Louisiana benefits neither party. ‘It’s not a buyers or sellers market, it is a stabilized market,’ Smith said. ‘Buyers market doesn’t mean you can go out and buy a $200,000 house for $150,000 and sellers aren’t selling homes in 24 hours. The low interest rates make it a good time to buy, but overall the market is stable.’”
“Stable, however, is a relative term. Two homeowners, Melissa Clements and Zonghuaun “Bradley” Wu, haven’t had such luck in selling their homes and as a result have seen their property remain unsold for more than 10 months. Clements, whose home is located in Youngsville, is asking for $159,000. She and her husband were so excited about the potential buyer they went out and purchased land to prepare to start building their new home.”
“‘We thought we had it sold and two weeks before the closing they backed out,’ Clements said. ‘We had started packing everything, purchased the land and they backed out. So now not only are we paying a mortgage, but now we are paying a note for the land. Right now we are having to live month-to-month.’”
“Wu, who followed his career to California, is in a similar situation with his five bedroom, three bath home located on Broadmoor Boulevard. He’s asking for $220,000. ‘Of course I’m frustrated,’ Wu said. ‘Definitely. We want to sell so that we don’t have to worry about it financially and we haven’t been able to achieve that so far.’”
“Arceneaux and Smith said there are other reasons besides the economy as to why homeowners are finding it difficult. ‘The number one reason why someone’s home is on the market for a long time is because of the price,’ Arceneaux said. “If a house is on the market for six to eight months the first thought of a buyer is ‘What is wrong with it?’ In most cases nothing is wrong with the house, it is just priced too high.’”
The Express News in Texas. “In recent years, San Antonio real estate agent Richard Zepeda has seen prospective homebuyers do something they didn’t used to do. In the morning, they’ll go to a home they’re considering purchasing, and from there, they’ll drive to work and time how long it takes. Then, during afternoon rush hour, they’ll time their drive back to the home. Buyers aren’t just worried about traffic anymore, Zepeda says, they’re worried about gasoline costs.”
“Builder David Anderson of David Anderson Homes said some areas that used to be mainstays of his business have dried up, and gas prices are partly to blame. Agents said gas was especially a consideration for first-time homebuyers. Some of them, Anderson said, ‘can’t get loans qualified because they’re spending $200 a month on fuel costs.’”
“Anderson said that although many buyers are feeling the pressure of higher prices, he acknowledged it was just one facet of a range of considerations that can sway buyer decisions. ‘I think there are several factors playing,’ he said, ‘and the biggest is fear.’”
The Houston Chronicle in Texas. “Demand for apartments and single-family rental homes has been on the rise as tough lending standards mean fewer Houstonians can qualify for mortgages. Some would-be buyers aren’t purchasing homes because they’re trying to sell their existing properties here or in other markets. The number of proposed apartment projects is rising.”
“When it comes to the condo market, Houston is no South Florida. But lately we’ve been getting our share of distressed sales of waterfront properties. The latest is at Endeavour, the luxury high-rise built on the Clear Lake shore before the housing slump. The developer filed for bankruptcy protection in 2009.”
“An auction will be held next month to unload 21 of the two- and three-bedroom condos that range from 1,650 to 5,533 square feet. Starting bids will begin at $165,000 on units previously priced from $640,000 to $2 million , according to Kennedy Wilson, which is conducting the July 17 auction. Bidding on a five-bedroom, 5½ -bath penthouse will start at $490,000.”
The Kingswood Observer in Texas. “It didn’t take the latest real estate numbers for Liz Frazier, of Spring, to realize selling a house was no longer the simple proposition it was a few years ago. ‘We had several showings by Realtors and some drive-by interest from the sign out front,’ the former Realtor said. ‘As far as sticking points on the sale went, we hadn’t gotten far enough along to see what the problem was.’”
“Just days before new Houston Association of Realtors data showed area home sales had taken another tumble in month-over-month comparisons for May — falling 11.9 percent this time — Frazier awaited the closing on her four-bedroom house, which sold for $189,900. She considered herself fortunate that the right buyer came along at the right time. After ‘only months’ on the market, she said, a deal was struck with well-to-do parents who wanted to give the house to their newlywed child as a gift. ‘Cash buyers have always been very welcome,’ she said.”
“Meanwhile, in the Heights, Deborah Jeans, who has been trying to sell her $332,000 home for more than a year, hopes she starts hearing from some of those who will be filling some of the area’s new jobs but also want to live closer to the city of Houston itself. ‘I’ve been hearing from people who like my house but are not really in the market,’ she said. ‘Most people are looking to move into town, then go, ‘Gosh, for that much, I could get a really big house out where I live.’”
The Oklahoman. “Sales didn’t reflect the spring boom Realtors were hoping for, and the jump in average price had to do with the mix of properties that sold, not property values in general, Realtors said. So, what explains the hike in average sales prices here in May? After months of lingering on the market, upscale houses are starting to sell again, said Ryan Hukill, a Realtor with Paradigm AdvantEdge Real Estate.”
“Hukill said the homes he sells average between $225,000 and $240,000, which means he sells quite a few at $350,000 and above, which has been sluggish. ‘Fall and winter were dismal. The past two months have started to pop,’ he said.”
“Hukill also noted that the wave of first-time buyers drawn to purchasing by last year’s unprecedented federal tax credits left something of a void of first-timers that is showing up in the statistics — which also is pushing the average sales price up. ‘We’ve taken the little buyer out of the market,’ with increased credit and down-payment requirements, said Steve Mann, president of the Oklahoma City Metro Association of Realtors.”
“But ‘perfect’ credit isn’t required to buy a house, said Scott Senner, a mortgage banker with First Commercial Bank in Edmond. ‘There is a perception among the general public, and real estate community, that a buyer or homeowner needs to have ‘perfect’ credit and a down payment to purchase or refinance a home. That is absolutely not the case,’ Senner said.”
KFOR in Oklahoma. “Over the past couple of years the housing market has been inundated with foreclosures. While it seems to have leveled off in some areas, there are many people still struggling to pay for their homes. Now, the federal government is stepping in to help some of those in trouble.”
“Janice Cantrell is one of thousands of Americans facing foreclosure. She lost her job in January of 2009 and has been struggling since then. She now works two jobs, but it’s still not enough to cover her mortgage and back payments. She says, ‘It’s just been a trial I don’t ever want to go through again.’”
“Roland Chupik, with Oklahoma City’s Neighborhood Housing Services, says, ‘We know folks who are in this situation; they can’t sleep at night, particularly if they’re unemployed.’ Chupik says helping Janice and others is why he’s excited about a brand new, forgivable loan being offered through the U.S. Department of Housing and Urban Development.”
“More than 300 qualified Oklahoma families will be randomly selected to receive the assistance. Chupik says, ‘This is an incredible opportunity for them to correct a huge problem, to keep a roof over their head.’”
The Kansas City Star. “Homeowners have to brace for yesteryear values on their property. The fat times are gone and aren’t likely to return, Jackson County officials said, when we talked after homeowners got reassessment notices. ‘We went through 10 years where property values were going up like crazy,’ Jackson County Director of Assessment Curtis L. Koons said. ‘It’s done a complete 180 on what they were.’”
“Before 2006, foreclosure sales weren’t considered when the county staff reassessed the value of thousands of parcels of property. They were excluded in market value calculations of property because they weren’t considered transactions between willing and able buyers and sellers. But in the real estate bust period, foreclosures couldn’t be ignored. ‘It got to the point where those sales do affect the market,’ Koons said.”
“Foreclosures and ’short sales,’ in which the seller settles on getting a lot less for a property, now make up the majority of real estate transactions. ‘About anyone buying a house today is in a short sale,’ Koons said.”
“Jackson County isn’t alone. Hard hit areas include Florida, Nevada, California and Arizona. Easy credit unhinged the real estate market from traditional loan practices based on the actual value of homes. Mountains of free-flowing financing, greed and unrealistic demand helped create the bubble that burst, resulting in foreclosures, stalled sales and plunging real estate prices.”
“The equity growth of 10 percent to 15 percent that homeowners experienced in the mid-1990s to 2006 is gone. Today owners can expect 1960s, 1970s and 1980s increases of about 1.5 percent. It is a saner approach compared to the wild ride we’ve been on.”
‘The equity growth of 10 percent to 15 percent that homeowners experienced in the mid-1990s to 2006 is gone’
Well, well, the mid-90’s time-line pops up again. How often do we see that dropped into an article? Again, the first question that should be asked when considering a housing bubble is, when did it start? Because that will say a lot about where things are headed.
Again, the first question that should be asked when considering a housing bubble is, when did it start?
I recently saw a graph — perhaps it was linked from this blog — that showed U.S. house prices starting to shoot up in the late 1990s.
And I use the term “shoot up” deliberately. The upward trajectory of those prices looked like a heroin high.
The mid 90s start line is clearly illustrated in the Case-Shiller chart. I think this misses several elements of the bubble. One is house size. In the 50s the typical house was (at least my home) something a little over 1000 ft2 on a tiny city lot. Rooms were small and Grandma lived upstairs. I shared a bedroom with my sib. In the 60s we moved to a 1300 ft2 house and that was without Grandma. In the 70s I bought my starter home of 1200 ft2 and had the first kid. In the 80s 1500 ft2. In the 90s 3000 ft2. I am guessing, but I’ll bet the average house built in the last decade was 2500 ft or up. Most of the new ones I’ve seen go up were larger.
Case-Shiller intentionally avoids this by using same house sales, yet it was part of the bubble. We more than doubled the size of the average house during the period that Shiller shows relative flat market prices. Another factor is shrinking family size. Consider that and in the period leading up to the mid 90s we trippled or quadrupled the average house size/person since WWII, and doubled again since then to the peak.
I think the bubble started at least back in the 70s. That’s also when I got my first credit card. By the 80s, the term McMansion was well used.
But were labor costs back then more or less expensive? Cost to build? Etc.
first question that should be asked when considering a housing bubble is, when did it start ??
Late 70’s with some disruption in 1980-82 & 1990-93…With that said, this market that we are in now is the mother of them all…1980-82 home financing was roughly 13%….90-93 it was around 8% +….Today its 4.5% and the prospect of rates going higher…Add to that the changes in policy for tax advantage deductions for homeowners and the trend for housing prices is pretty clear IMO,,,
The San Antonio article mentions gas prices. But having lived near there in the mid-90s, it is my opinion that the bubble was in place even then. The amount of over-building in central Texas is nuts. Now they’re thinking, wow, it takes a lot of gas to get to my job. But it was just a drive til you qualify type thing.
Around NYC, it was a drive til you survive, then drive til you qualify. My drive for those few years was 90 mi one way. Crazy early 80s.
I believe emergence of grossly inflated housing prices was regional broadly speaking. In new england, prices collapsed 1992-1997 after experiencing a series of mini bubbles from 1984-1991.
~Realtors Are Liars
The low interest rates make it a good time to buy, but overall the market is stable.
I guess frozen is a form of stable. Giant snowpacks on steep slopes are stable, too. Right up until they’re not.
There are a number of questionable conclusions in that article. Check out this gem from the not-too-sharp UHS:
“People usually rent instead of buying for a couple of reasons,” Laviolette said. “One they don’t really know who to call or how to start the process of looking to purchase a home and they fear the unknown. People fear what may come up on their credit report and they don’t have the money for a down payment or closing cost. So, they rent instead because they don’t have to worry about those things.”
They “don’t know who to call”? Seriously???
Here’s a hint: they also rent because they know they are not immune from job losses, and relocation may, in fact, be the fastest route to a new paycheck. They rent because renting puts them in a better bargaining position for when property taxes skyrocket, as local and state governments can’t seem to figure a way out of their debt hole. They rent because they’ve seen how the REIC turned their friends and family into FB debt slaves. They rent because they cannot buy on their own terms (yet). They rent because its cheaper than buying.
Landlords check credit reports and they have more reason to make a decision based on that report. A mortgage lender will care too, but it, at least, as a security interest in the asset if the borrower doesn’t pay.
they don’t have the money for a down payment
As if it were an afterthought.
At least banks WANT down payments now. This is a good sign.
Dead is a form of stable.
Really, that the funniest thing I’ve seen in a while.
“Hukill said the homes he sells average between $225,000 and $240,000, which means he sells quite a few at $350,000 and above, which has been sluggish.”
Huh, they lost me…sells quite a few > 350k, “which has been sluggish.”
Deborah Jeans. How could she be doing poorly? She has the same name as pants!
And she has the brains of pants too:
House is on the market for a year, people are telling her straight up that, gosh for that much the could buy something nice, and she can’t figure out her price is too high? Instead, she’s going to wait to sucker in some new pretty young thing to move into town.
Once these freeloaders understand that 80/20 hamburger now takes the place of that prime steak (they never really could afford) and they take their medicine and like it we will not see a conclusion to this nonsense for some time.
“Two real estate agents, Terrica Smith and Stacey Arceneaux believe that today’s market in Louisiana benefits neither party. ‘It’s not a buyers or sellers market, it is a stabilized market,’ Smith said.
So these brain surgeons redefine a seized up market as stable….. Realtors aren’t liars….. they’re not stupid. They’re stupid beyond all measure.
These morons are your legacy NAR. You own it. You own them. Rot in hell you corrupt bastards.
“….can’t get loans qualified, because they are spending $200 a month on fuel costs”.
Huh?
Are banks really looking that deeply into borrowers’s expenses?
It would be pretty easy to do if the person puts everything on credit cards. Tedious, but easy.
‘Stable, however, is a relative term. Two homeowners, Melissa Clements and Zonghuaun “Bradley” Wu, haven’t had such luck in selling their homes and as a result have seen their property remain unsold for more than 10 months.’
A dead market is stable.