A Flood Of Vacant McMansions ‘Is One Possible Outcome’
The Fredrick News Post reports on the housing bubble in Maryland. “Thousands of Frederick County’s so-called ‘McMansions’ could be back on the market in coming years as deadlines on interest-only loans come due, mortgage payments skyrocket, and homeowners’ pocketbooks are stretched to the breaking point.”
“It’s a real concern for Mary Christine Jackman, director of the Frederick County Treasury. It should be a concern as well to the buyers of those high-end houses who pushed their financial limits five or 10 years ago to buy big. Principal payments will kick in for buyers who took out interest-only mortgages during the recent housing boom, Ms. Jackman said in a recent interview.”
“That $300,000-plus home, bought with the expectation of a return on the initial investment, could become a white elephant. ‘There could be thousands of homes on the market at the same time and nobody’s quite sure if there will be enough equity to take the houses off the market,’ Ms. Jackman said.”
“A flood of vacant houses ‘is one possible outcome,’ said Thomas Shaner, executive director of the Maryland Association of Mortgage Bankers. ‘I don’t want to say it couldn’t happen. It absolutely could happen, and that kind of stuff worries everyone.’”
“He was ’shocked’ to find out more than 50 percent of mortgages taken out in the past several years were interest only. Impractical expectations played a part, he said. Many homeowners used an interest-only loan to buy a larger house than they really needed, instead of seeing what they could realistically afford. ‘If you were stretched to the last dollar to make that work, you’ve got issues,’ Mr. Shaner said.”
“Filing for bankruptcy, or defaulting on taxes, are two of the choices homeowners could be left with. This year’s tax sale was Monday. On offer for auction were 306 properties whose owners had defaulted on their annual property taxes. Despite Ms. Jackman’s best efforts to reduce that number, it’s a sharp increase over 2004’s 235 properties and 232 properties sold in 2005. Twenty-five properties on the list were valued at more than $300,000.”
“‘People don’t have the money, whatever the reason, and that’s only going to get worse as the interest-only loans come due,’ Ms. Jackman said. Twenty-five properties on the list were valued at more than $300,000. The most expensive of those, worth $510,946, is from in the Villages of Urbana subdivision. The owner owes the county $11,739.”
“Thousands of empty high-end houses will have an unknown impact on Frederick’s property tax revenue. The effect on the treasury, Ms. Jackman said, ‘I’m very nervous about.’”
“Mr. Shaner said that from the standpoint of a county treasurer, as housing prices come down, assessments come down, and the county tax base declines. That affects the county’s bottom line. ‘The local governments have been riding on a wonderful windfall with everybody else as the housing market has risen,’ Mr. Shaner said. ‘They’ve had an increase in their revenues, and they haven’t done a darn thing to do it, and they’ve got more money’ without having to raise taxes.”
Phoenix
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sorry guys… but this is good exercise for that wheelmouse
phuck, i know that you went out and counted each and every one of those listings personally.
by far, my favorite post is your 3,500 page report. keep ‘m comin good buddy.
Wow! How many houses are there in Phoenix, anyway?
496,000
http://www.xanga.com/home.aspx?user=russwinter&nextdate=5%2f13%2f2006+23%3a59%3a59.999
495,793 http://www.city-data.com/housing/houses-Phoenix-Arizona.html
So almost a full 10% of the houses are for sale? How many more are on the sidelines waiting for the market to turn back even higher? How many more will be forced to sell when their ARMs adjust? lol, I think there may be a “desert storm” on the way.
10% is just amazing…
er, Phuck’s numbers are for the greater phx area which is really the best way to think about the valley– cause it’s pretty continuous. The city-data numbers are only for the city of phx proper, from what I can tell. It’s also about 6 years out of date. With annual permits in the greater phx metro area running at 45-50k /year, that’s pretty signficant.
Still, 45k for sale is a screaming huge portion of the available stock.
This is why graphs were invented.
Yeah, but don’t you like the “flipbook” aspect of the post? If only you could animate houses sprouting like mushrooms to the right of the numbers…
Does anyone here know Flash?
Something like this (superimposed on a map of Phoenix, instead of Iraq) might be a good way to show this data. More impressive than a simple graph.
sorry guys… but this is good exercise for that wheelmouse
So what you’re saying is… you’re not sorry at all. Glad I could clear that up for you.
This is boring and off-topic. Whny bother with all of these daily little increases ? It takes up a lot of space and not really relevant to the posted article. At least get out your handy calculator and do weekly summations on the increase in the houses being offered for sale in Phoenix. As thrilling as it all is, the article is about MARYLAND, and I for one don’t really care if there are 78 more listings in Phoenix today than yesterday. We get the trend, dude, we get the trend.
I wish someone would publish these #’s for Portland. As far as I know, this blog does not support graphs. This at least allows one to copy and paste the raw data into Excel if they would like. At that point they can summarize, pivot and chart to their liking.
I am pretty sure these numbers are for all of AZ, but pretty amazing none the less.
http://www.benengebreth.org/housingtracker/
I just keep hearing the Beach Boys, “Don’t worry baby” in my head as I read all the realtor spin.
I’m going to change my prediction from 55k to 60k by August 30,2006 ,(but I get to include new homes, FSBO’s and EXCLUSIVES)
I love that song! Don’t ruin it for me!
I just keep hearing the Beach Boys, “Don’t worry baby” in my head as I read all the realtor spin.
Funny, all I hear is Jan and Dean’s “dead mans curve.”
It makes me want to go listen to Pink Moon by Nick Drake just to cheer myself up.
I’m thinkin’ more like “Wreck of the Edmund Fitzgerald”.
When Doves Cry by Prince
News Ticker from MarketWatch…
U.S. home builders’ index falls to 45, lowest in 11 years
By Rex Nutting
Last Update: 1:00 PM ET May 15, 2006
WASHINGTON (MarketWatch) - U.S. home builders have turned negative on the housing market for the first time since just after 9/11, the National Association of Home Builders and Wells Fargo said Monday. The NAHB/Wells Fargo housing market index, a builders’ sentiment gauge, fell six points in May from a revised 51 to 45, the lowest level since June 1995, the industry group said. The index shows more builders say the market is “poor” than say it’s “good.” The index has fallen 23 points in the last seven months. In May, builders’ assessment of current single-family home sales fell to 50 from 55. The assessment of future sales dropped to 54 from 59. The assessment of the traffic of prospective buyers dropped to 32 from 39.
1:13PM 5/15/2006
You’re quick!
Say it isn’t so!!
52 week lows for HOV and TOl
As well as Ryland (RYL) and Pulte Homes (PHM)…
Time for dips to buy!
http://tinyurl.com/o7skt
I’m in for 50 shares.
short those homebuilders on the bounce … easy money.
or … if you are talkin’ w/some flippers, realtors, or 20-something RE “investor” (wink-wink) , you could say it’s a “no-brainer”!!!
Time to buy the dips on Toll Brothers! Come on, sheeple, when do you expect to be able to buy their stock this cheap again (down over 50% since last August)?
P.S. I like that short vertical drop in several of the HB stocks around 1pm today. Any theories on what news could explain it?
http://tinyurl.com/o7skt
Clearly the Plunge Enhancement Team (PET) was at work.
Or maybe the invisible hand is back at work after a spell of unemployment?
I’m not buying any Toll Brothers at all — I’m afraid they’re gonna go bankrupt….
“U.S. home builders have turned negative on the housing market for the first time since just after 9/11, the National Association of Home Builders and Wells Fargo said Monday.”
What does this mean — did the top management all sell their stock shares and buy put options, or something?
The industry group expects new home sales to fall 12% this year from the record 1.28 million in 2005. They expect housing starts to fall about 7% from 2005’s record 2.07 million.”
2.07m - 1.28m = 790,000 more homes built than bought at an annual rate. That does not sound sustainable to me, even after you factor in attrition due to homes which are lost or destroyed each year. Is it any wonder that the builders are starting to foresee a slowdown on the horizon?
I think housing is more inclusive than “homes” and includes condos and maybe even apartments. They aren’t building 700K more homes than sold every year.
Since when are condos and apartments not homes? Haven’t you ever heard of condo conversions?
Ah yes, Villages of Urbana, where a friend of mine lives and RENTS! He wanted to buy in that area, and said forget it: You can pay $2400 on a house (er, townhouse) payment, or rent it for $1600/month. He chose the latter. His landlord bought a few years back, and so is breaking even — unlike others nearby whose rentals stand empty becase they “can’t afford” to negotiate rent down to market rates. Ouch!
Meanwhile, this friend looks at some of the single family houses where the owners are either so proud to show off their spacious, half-empty houses that they don’t need drapes! Or maybe can’t afford them even after owning the place for 1-2 years? Let’s hope they aren’t strapped for monthly payments already.
And on visits through that general area, I see some of the same houses listed last fall, and winter, and through spring, are still listed. Some I note are “New Listings”, however that can be! Not a good time to be a new owner there! My friend is looking to buy eventually/perhaps, but he’s also worried what will happen if too many houses go empty and leave the neighborhood in a real social slump as well. When is a good deal not a good deal, at any price? Hmmm…
The missing drapes are just like in the report from Denver, don’t you know. From Yesterday:
“In a reality the working class may be unfamiliar with, those townhome owners are just waiting until the interior decorator finishes coordinating with contractors to put in custom fixtures. The hot-mod furniture, imported from Scandinavia, will come afterward.”
Heh :))
How swift!
Yeah-I forgot to ask, what’s “hot-mod furniture, imported from Scandinavia”? It sounds like Ikea to me.
interesting observation. I’d noticed many in phx that didn’t have drapes either (usually 2nd floor). Kinda wondered about that myself.
In one of his commentaries, David Rosenberg of Merrill Lynch said “As for housing, yes we see deflation coming. It has already arrived, actually, in the new housing market.” He goes on to say “in our view, RE is the most overowned, overleveraged and overvalued segment of the economy”. This is a somewhat different view than David L’s.
“Mr. Shaner said that from the standpoint of a county treasurer, as housing prices come down, assessments come down, and the county tax base declines.
Hmm…Maybe they should cut spending?
Of course not. LIke real estate prices, taxes only go up! County budgets only go up! They have plans for that money……
Remember in government budgeting, a decline in the rate of growth is a severe cutback. Actual shrinkage is simply not discussed
Now government spending…..that’s something that always goes up.
Hey, that is what Arnie the Republican is proposing with the 7.5 B surplus this year.
It should ALL go into a rainy year fund.
Cut spending? It was only by fighting tooth and nail that a bare majority of that county’s commisioners even managed to keep spending where it is now, commendably adjusting the rising property tax rates so that an equal amount of revenue from (pre)existing properties comes in as last year. (I think it was approx. 7% reduction to offset the phasing-in windfall that would have occured from the skyrocketing assessments.)
But they won’t manage that trick every year, and if property assessments do decline, they’d probably never agree to spend LESS! But then again… when have you ever seen assessments decline? Prices yes, but assessments? Or maybe I haven’t been on this earth long enough to see that.
Why should they? I work for a local government who has been on a hiring and spending frenzy for about ten years. Right now they’re intoxicated by ever increasing property taxes, sales taxes and free state and federal government grant money. The young ‘uns in the organization have never seen a declining tax base or massive unemployment. They think this crap will go on forever.
I sure hope most cities got all caught up on their “to-do” list with all their windfall taxes during the housing boom. Once homes start devaluating they may need to increase taxes or pass more bonds. Oh yes, I hope they also kept some in reserve for rainy days too.
I have lots of high hopes don’t I?
“When the principal payments come due, combined with other economic burdens … it may be more than some families can bear.”
MAY be? C’mon, lady — just one milligram of honesty has that verb as “WILL be.”
“… Thomas Shaner, executive director of the Maryland Association of Mortgage Bankers. … was “shocked” to find out more than 50 percent of mortgages taken out in the past several years were interest only.”
So the head muckety-muck of the mortgage bankers is supposedly is blindsided by this news. What is his day job? Or has he been on one of those three-year round-the-world cruises with no Internet, TV or phone service?
But housing values are up 30-40% over the past 2 years most likely. So most of those people could actually take cash OUT, if they haven’t already. Or they could do another IO loan, since their loan balance is less than “value”.
“That $300,000-plus home, bought with the expectation of a return on the initial investment, could become a white elephant. ‘There could be thousands of homes on the market at the same time and nobody’s quite sure if there will be enough equity to take the houses off the market,’ Ms. Jackman said.”
“A flood of vacant houses ‘is one possible outcome,’ said Thomas Shaner, executive director of the Maryland Association of Mortgage Bankers. ‘I don’t want to say it couldn’t happen. It absolutely could happen, and that kind of stuff worries everyone.’”
This part I don’t understand: If a flood of inventory hits the market and sits there, then why would prices remain sticky for the indefinite future? Or, to put this another way, why would we not eventually see prices fall by 50% or so (like they did in many parts of California in the early 1990s) in order for the market to clear?
Sorry, I forgot, this time is different
OT, but the Plunge Protection levee is broken; time to issue flood warnings and mandatory evacuation orders:
http://tinyurl.com/fvju7
Quiz: Which of the red numbers on this page is good news for an investor who is long the asset whose price it reflects?
http://tinyurl.com/cb79u
Guess I need to eat my words again — looks like the PPT was just on lunch break extra long today
Woohoo! Maryland McMansions for everyone!
Bubblefucius say:
Interest Only loan without foresight much like leaky boat without bucket.
At first both nothing much to worry about, then suddenly time come to bail.
Bubblefucius say:
Person with interest-only loan like person in sinking boat. Both looking for something to inflate.
LOL to you both…. Hey Rainman 18 does anyone feel a song coming on . Never mind ,guess I just have to wait .
I miss Bubbles the Clown. The kids seem to like him.
Good one Feeps
It should be a concern as well to the buyers of those high-end houses who pushed their financial limits five or 10 years ago to buy big.
Bubblefucius say:
Rabbit who spurns humble carrots near his burrow to gorge on huge carrot across field make easy prey for Fox on return trip.
Wiz, Huggy,…Bubbles has checked into the Betty Ford Clinic…not sure when he’s getting out…
Well heck, he ain’t gonna be much value to us sober! Send that clown some Jack Black!
How Much Is That Windmill?
By Damon Darlin on Developers
“Even if I didn’t tell you that the Boycott Housing Web site was the product of a San Franciscan, somehow I know you would have figured it out.
“This site proposes that the way to bring down housing prices is to boycott housing. Don’t buy any, which the site notes will happen anyway as prices go too high.
“Here’s what these folks suggest:
“1. By all agreeing to boycott buying a house for a period of time, and telling our friends to boycott buying a house, we CAN make a difference. We can show that once people stop paying insane prices, the insanity goes away. It’s going to happen anyway – let’s just speed it up so more people don’t get hurt, and so we can get our house sooner!
“2. We can also report overpriced houses, or houses with hidden flaws, to protect each other.
“Anyway, there are two windmills out near at the end of Golden Gate Park, near the ocean, that are perfect for tilting at. – DAMON DARLIN”
How sad that a little paper like the Frederick News Post has a more in-depth look at the MD RE market than the freaking Sun. When I fly into BWI from the west coast, I can always tell as we fly over Frederick, because it goes from green, rolling hills to block after block of cookie-cutter McMansions with no landscaping and hardly any grass.
But it’s not just Frederick where they overbuilt McMansions and can’t unload them to anyne except stupid flippers–check out this example that I found and posted on my blog.
http://baltimorehousing.blogspot.com/2006/05/flips-of-day.html
The family that bought those two homes are screwed beyond their wildest dreams…and these types of homes are STILL being built righ this minute. Hey, MD may be close to DC, but there isn’t enough money in the world to make all these $700K McMansions affordable.
I’ll really quickly summarize the link–a family bought two McMansions on the same street with one house in between them for $670K and $679K in December 2005, and have just listed them for $779K and $799K. The home in between is still for sale by the builder for $635K.
Haha, are all you bubble loggers flooding the SDAT server? Little MD never saw it coming…
If everything went according to our hopes, the idiots who bid up these houses get screwed, and foreclosures are available for everyone, I still wouldn’t want one in Frederick.
Even if I could buy one for, say, 175K, that would give me about a commute around 1.5-2 hours to DC each way. Won’t do that.
I’m quite content being trailer trash. Lot rent is 500, mortgage is zero, and commute is only 1/2 an hour. If I won the lotto I’d own a house instead of a trailer, but I’ll take the tin can over living my free hours stuck on a train or in traffic any day.
default news in San Diego today:
http://www.signonsandiego.com/news/metro/20060515-9999-1n15default.html
All those vacant McMansions will be needed to house the expected 100 million legal and illegal immigrants expected over the next 20 years. Let’s see…. at 30 persons per house, that’s over 3 million McMansions needed.
It’s amazing how stupud people are. We all must have a house at any cost..cant give up on the dream. The dream of a hunk of land that will be there when you die and was there before you were born(now thats ownership).
You can’t take it with you. Yesterday I was talking with someone who said that reverse mortgages were a bad thing, because old people will lose their home when they die.
Well, they lose a lot more than that!
If McMansions are vacant lenders own white elephants. Big trouble coming for owners of MBS, including banks who own tons of them.
One of the things that bothers me the most about the housing going sky high in almost all the states is it does take away the “American Dream “.
I’m a baby boomer so I have seen it when real estate was affordable for almost everyone that put a little effort in .
I now feel sorry for the young people that face this overpriced market and do not benefit or enjoy what made American great in the past . Yes , cheap real estate ,was a good thing .
I now feel sorry for the young people that face this overpriced market
My own opinion on this is that it’s the Baby Boomers once again cannibalizing the country’s future for their own gain today.
Yes Jaz , Im on your side . I don’t like what happened . It should not of happened . In my view housing , health care and food is something that should remain affordable . I’m not sure what age group has been feeding the bubble the most , or in total how it happened , but time will tell .
“Yes , cheap real estate ,was a good thing .”
And it will be a good thing again in the future. Wife and I plan to pay cash. After “throwing away” $1100 a month for the past two years on our apartment, we have been able to save quite a bit. Jack up the interest rates all you want - I don’t do interest.
Agreed…McMansions are nothing more than demographic dinosaurs serving as targets for the taxman; energy guzzlers for fuel oil; and money pits for maintenance.
At a continuing ed national housing seminar I took about 5 years ago-the speaker said, the prudent form of future housing ownership for aging boomers would be a pair of single-floor(!!!) 1400SFD houses-one in the north and one in the south.
Guess nobody else took the course…
They are the housing equivalent of Hummers. Grossly obscene and wasteful.
“He was ’shocked’ to find out more than 50 percent of mortgages taken out in the past several years were interest only. Impractical expectations played a part, he said. Many homeowners used an interest-only loan to buy a larger house than they really needed, instead of seeing what they could realistically afford. ‘If you were stretched to the last dollar to make that work, you’ve got issues,’ Mr. Shaner said.”
Every IO hawking LO I’ve ever read or heard said that borrowers don’t get IO loans to stretch the payment, but to earn more money from their investments. After all, why give your bank the principal at 6% when you can “invest” that money at 8%. One thing I hope that happens after this debacle is that people realistically take out loans with the expectation they will pay these loans off themselves, not with appreciation they have no control over.
Agreed…McMansions are nothing more than demographic dinosaurs serving as targets for the taxman; energy guzzlers for fuel oil; and money pits for maintenance.
Perhaps, but put 3-4 extended Vietnamese families in one, like I have in my neighborhood, and they become quite affordable.
Perhaps, but put 3-4 extended Vietnamese families in one, like I have in my neighborhood, and they become quite affordable.
Immigrant flophouses for everyone!
Bulldoze those horrible things. I hate McMansions. Worse than being ostentatious, they are usually built like $hit
Why waste the gas in a bulldozer? Let em fall down on their own.
These things are built with a little wood framing, vinyl on the outside, drywall on the inside, and a little insulation in between. Give me brick or stone anyday.
I can’t see any way these heaps of crap last longer than the 30 year mortgages taken out on them.
LOL. No joke - if they actually have wood exteriors, I notice they need re-painting w/in 2-3 years. Does not bode well as to the other places on the home that they cut big corners.
CRAP, they are CRAP, I tell you!!!! :-/
I am appaled at the shoddy construction I’ve seen recently. When touring homes, I found copper pipes used for gas lines (instead of iron, as usual), the cheapest possible appliances, little insulation, tiny bathrooms, brick veneer that looks cheap. The worst part - the owners think it’s heaven on earth and command premiums for homes that will be section 8 housing in 20 years.
By the time the trees are able to provide shade, someone will put a trailer in there. Mark my word.
Here is the general mentality of many idiots (or sheeple) that bought in the mania. This women is unemployed, broke, months behind on mortgage, in a now quickly declining housing area that is 84 miles from San Diego (up and over a trecherous mountain pass). And she STILL doesn’t want to give up on the housing ownership dream and is waiting for the magical money fairy to appear and drop a $HITload of money in her lap to pay for the overpriced POS. Sorry to be a little cruel, but if I were in this boat, I wouldn’t be letting someone take my picture, etc. See San Diego thread above for entire article.
For Estella Denise Overstreet, the crisis has arrived.
Overstreet, a longtime San Diego renter, bought a home in Hemet in Riverside County in mid-2004 to take part in the real estate boom. Her 1,760-square-foot home cost $272,500, a bargain by San Diego County standards. To make it affordable, her lender recommended a simultaneous second, or “piggyback,” loan, one of the adjustable-interest lending products introduced to help consumers keep pace with soaring prices.
Starting with a low teaser rate, such loans allow borrowers to achieve 100 percent financing by taking out two loans. Simultaneous seconds work best when the borrower expects a rise in income before higher payments kick in, usually within two to five years.
Overstreet, 47, a health care worker, lost her job in December and began having trouble making her mortgage payments. She said she thought she would be able to make a living as a real estate agent, but she hasn’t sold a home. Her monthly payment of $1,564 will adjust upward in September. Her lender already has asked her to boost it to $2,300 per month to make up for missed payments.
Overstreet has resisted asking relatives for financial help. Instead, she has begun dipping into her retirement savings.
“My mom lives in Clairemont,” she said. “She is elderly. I should be helping her.”
The home was briefly for sale. Despite mounting debt, she says she isn’t ready to sell and give up her dream of homeownership. Although a for-sale sign remains on display, she recently pulled the house off the market. Her plans to make up for missed mortgage payments remain vague. The home went into foreclosure in December.
“I am going to try to stay here,” she said. “I am playing it by ear. Hopefully something will come through.”