‘Appraisals Tell Us The Market Is Dropping’: S. Oregon
The Mail Trubune reports a turn in one Oregon housing market. “Rising inventories of homes on the market are beginning to stack up against historic norms in Jackson County. A total of 1,177 single-family residential units were listed for sale countywide as of Friday, 90 percent more than a year go.”
“‘I think we’re getting to a point of equilibrium,’ said Medford appraiser Roy Wright. ‘I think we’re getting back to the norm.’”
“While the inventory is climbing, the number of sales plunged 38.5 percent to 139 sales in January. There were only two months with fewer than 200 sales in 2005 and only one with fewer than 200 in 2004.”
“‘There’s a lot more competition in the market,’ said agent Ron Galbreath. But with sellers holding out for top dollar, it’s going to take something besides the ongoing low interest rates to kick-start the market. That might have to wait until the spring and summer buying season kicks in.”
“Galbreath said lending restrictions have made it tougher for first-time buyers with questionable credit to obtain mortgages. ‘A year ago this time, kids could come in with zero down, and even with B- or C-grade credit, could still close on a conventional loan in 20 to 30 days,’ Galbreath said. ‘What’s missing are easy-to get-into, no-down-payment loans where there are high credit risks.’”
“‘Appraisals are coming in high and that tells us the market is dropping,’ Wright said. ‘Prices may not be below where they were last year, but in some cases they might be below where they were three, four or five months ago.’”
“Bargains were still hard to find in east Medford where activity fell 21.3 percent. West Medford deals dwindled by 50 percent. Eagle Point transactions fell off 31.2 percent. Ashland sales tumbled 37 percent. Phoenix-Talent activity was at a near standstill with only three reported sales at a median price of $300,000.”
“Median sales for both rural ($395,000) and new homes ($319,900) grew 9.7 percent. Activity slowed in the unincorporated local areas by 8.1 percent, while new home transactions declined 22 percent.”
Thanks to the reader who sent this in.
Good thing they’re getting back to the norm - equilibrium out there in S. Oregon.
“What’s missing are easy-to get-into, no-down-payment loans where there are high credit risks.”
Yeah, that’s why the market is tanking. It’s because the 20 somethings with bad credit can’t get 0 Down loans.
I can still do 540 FICO middle scores 100% financing - so can most LO’s. Credit has tightened up only on the better loans.
What are the terms on those loans? ie significant pre-pay penalties, interest rate, upfront costs, debt-income requirements, etc..
In Illinois and Wisconsin - NO PREPAY, Interest rate on Friday (Feb 10) for an OO 1st 7.75% ; 2nd 11.75%; 1pt, costs to close (incl appraisal) ~1,500. Add .5 point to above for loans over 1mm and another $250 for 2nd appraisal.
Read this article.
Senior Economist says there is no housing bubble
Vitner expects interest rates to remain low, a factor that will affect the number of people taking out mortgages on homes. Someone in the audience asked Vitner whether he was concerned that so many of the home buyers were financing their purchase through the use of interest-only or other nontraditional mortgage methods. Some experts have predicted that an increase in interest rates could lead to scores of loan defaults by buyers who have purchased more house than they can afford.
Vitner thinks that is an overblown doomsday prediction.
“It takes a lot to foreclose on your home,” he said. “If you just pick up the phone, the bank can work up a plan with enough payment holidays to get you through just about anything.”
Hi…Countrywide? Yes, say…I enjoy working at Starbucks since a college degree is too costly and stressful to work for, but my girlfriend and I still want to live in this $850k home. The tip jar isn’t filling up like it did last summer; do you think I could refinance my NegAM loan?
The problem I have with opinions such as this “nationally known economist” is that they do not verify their facts. How do we know that interest rates will stay low? He offers no proof.
His scenario is great assuming his facts are correct. If interest rates remain low and businesses are to expand and invest in technology the RE market will be ok. While I agree that businesses will invest more because they have not been spending in recent years and loans remain very accessible to them, interest rates are another story.
As the national debt grows the dollar becomes riskier. Interest rates must rise to compensate for the increased risk. This scenario may allow for continued business capitalization, but the housing market would be affected negatively.
Also to think that banks would give sufficient “payment holidays” to keep over-leveraged borrowers afloat is an extraordinary claim that requires extraordinary evidence. Would a bank be willing to give sufficient payment holidays to sustain an over-leveraged borrower through several years of a housing decline? Please name a single bank that has committed to doing so.
Couple rising interest rates with excess inventory, RE speculators moving to greener pastures, a scarcity of buyers, tighter lending practices and a flood of foreclosures and the claim that the RE market will be ok is just not believable.
While the overall economy may be saved by the job creation that comes from business expansion, the housing sector should suffer a correction.
I agree.
Can’t we put this situation in simple terms that we can all agree upon? We all know that our economy is dependent upon the consumer. Currently over 70% of GDP is from consumption.
We know that incomes have not been rising nearly as fast as many other things including house prices. In fact, in real terms wages are about where they were in the late 70’s.
So it is easy for us to understand that the government’s reports about growth in our economy are not based upon increased income. Where does the growth come from? We know the answer to that from the many postings on this blog. Consumers are tapping their ATM homes for the money to buy more things that cause the growth of the economy. Since consumers drive the economy, business investment will conform. If the prospects of greater consumption are there, then businesses will invest. If not, they won’t. The media is just now beginning to report the harsh reality of the housing boom so that businesses will increasingly see that consumption is going to decrease. When a 70% piece of the economy is on the skids, why would a business expand?
Interest rates are a factor but remember that with the housing bubble (and before that the stock bubble which is only partially deflated) Americans are extremely vulnerable. We know that many have stretched mightly to buy houses. We know that the good jobs are leaving the country and that burger flipping jobs have replaced many of them. We know that the savings rate has gone negative. Any one old enough to remember when most people kept savings accounts for a rainy day? Not many of those anymore.
We know that credit card payments are doubled now. We know that ARMs payments are soon going to rise. We know that energy costs have risen sharply. Gasoline is considerably more expensive as is health care and education expenses. We can see the rapid depreciation of the dollar as the FED keeps cranking on the printing presses. The national debt is now over 8.2 trillion and there is no way that we can repay it.
Don’t pay any attention to learned economists on the question of what lies ahead for this economy. We know they are abysmal failures at predicting recessions. They report on them after they occur, they never seem to be able to warn us beforehand.
So we know that the economy is sinking and it will be due in large part to the housing bust we are all observing in its early stages on this blog
“Hi…Countrywide? Yes, say…I enjoy working at Starbucks since a college degree is too costly and stressful to work for, but my girlfriend and I still want to live in this $850k home. The tip jar isn’t filling up like it did last summer; do you think I could refinance my NegAM loan?”
Actually, it’s much worse than that. $850K is what you’d pay for a half-decent Bay Area home. With a Ph.D. in a hot field, you’d pull in low six figures. That’s still a price/income ratio of close to 8 instead of the usual 3.
Test
I have noticed that while there have been small price reductions for exhisting homes here near gilbert az, some new home builders are still hiking prices. One bull sh**er agent told me to buy before next 5000 increase. This seems to be happening around homes
I have noticed that while there have been small price reductions for exhisting homes here near gilbert az, some new home builders are still hiking prices. One bull sh**er agent told me to buy before next 5000 increase. This seems to be happening around homes less tham 250k. Just a pattern I would like to share. Looking forward to nascar race tonight if rain in daytona clears up!!!!!
but. buuuttt,, buttttttt wwwhaaat about all those baby boomer retiree’s and Californian’s pouring into this area???
This is/was rated as one of the best regions for retirement. Prices are a “bargain” compared to most cities in CA, so why is inventory up 90% and sales down by nearly 40%???
IT”S BECAUSE the 30% buyer/investor profile has vanished. All those speculators that (did) and those that are now trying to ride an easy gravy train are now realizing that it is “game over”.
“‘There’s a lot more competition in the market,’ said agent Ron Galbreath. But with sellers holding out for top dollar, it’s going to take something besides the ongoing low interest rates to kick-start the market. That might have to wait until the spring and summer buying season kicks in.”
IF I WERE THIS REALTOR… I would start telling my clients it is time to slash 15 - 20% off the price “they COULD HAVE got” last year… and be happy with still an incredible gain. They will THANK this guy as they watch this regional market TANK by year’s end.
Appraisals are coming in high and that tells us the market is dropping
WTF?
HI fisher,
That one caught my eye too. Sort of counter intuitive to what we would guess, but with more thought, it makes sense.
Fisher and Don’t,
I’m not sure, but my read on that strange comment was that appraisals are coming in higher than selling price. Hot markets sometimes have the problem that appraisals come in lower than the sale price. This forces borrowers to fumble around for another appraisal or a loan in excess of 100% financing.
test
Yes, smart ones would slash price now and take a good profit. But, if this downturn mimicks all others things will pick up in Spring/Summer and will indeed likely sell for more than Winter. All past downturns did not have a straight line down. They all went a little Flat (which is where we are now), then up, then down and down, then flat, then down and down and down.
““Galbreath said lending restrictions have made it tougher for first-time buyers with questionable credit to obtain mortgages. ‘A year ago this time, kids could come in with zero down, and even with B- or C-grade credit, could still close on a conventional loan in 20 to 30 days,’ Galbreath said. ‘What’s missing are easy-to get-into, no-down-payment loans where there are high credit risks.’”
***
Comment by HOZ
I can still do 540 FICO middle scores 100% financing - so can most LO’s. Credit has tightened up only on the better loans
****************************************************************************************************************
Among the reasons that prices haven’t fallen more than they have is the lingering availability of sub-prime loans as Hoz reports. But the process is shutting down. There are fewer buyers of subprime loan paper as the hedge funds, REITs and other traditional buyers are retrenching and kicking sub-prime MBS’ out of their portfolios. Lenders are laying off more people and reporting weaker financial results.
It is happening. Wait until summer when one could reasonably expect that subprime lending will be limited to non-existent.
And on the other front, sellers are holding firm on their prices now but by summer the cold reality of having to reduce prices to sell a house will be clear to all. Centex is setting a good example with their $100,000 - 150,000 discounts.
Hold tight, folks. We are going over the top of the big run on this roller coaster!