Buyers Either Drastically Overpay, Or Wait
The Record.net reports from California. “Single-family home inventories in San Joaquin County have dwindled from about 2,600 in September 2010 to just over 1,000 in May, the lowest level since the peak of the housing boom in 2005. Area real estate brokers report strong activity, receiving multiple offers on homes within the first week of a new listing. ‘If people are looking for the bottom of the market, the place they have to look from now on … is in the rearview mirror,’ said Larry Underhill of Statesman Realty in Lodi.”
“But there are barriers to price gains, even as would-be buyers try to outbid each other for attractive properties. Brokers reported the primary snag is the home appraisal, which is largely based on recent sale prices on comparable homes. And there are a good number of all-cash sales as investors take advantage of low home prices, said Jerry Abbott, president of Grupe Real Estate in Stockton.”
“‘If you really look at the smart money, … the investors aren’t looking to (buy and resell homes quickly); they are buying to hold, because they’re looking at prices going up over the next five years,’ he said. ‘Investors are really ruling the market right now.’”
The Desert Sun. “There is a relatively low inventory of affordable homes in some valley communities, as well as a dearth of new construction, so buyers must respond quickly when a new listing pops up. One of Patrick Jordan’s home-buying clients recently offered $100,000 more than the asking price for a house in Rancho Mirage. ‘There were 10 offers — 10. We wound up being in the top four, but we lost; we didn’t get it,’ said Jordan, broker associate in Palm Springs.”
The Mercury News. “A surfeit of buyers has sparked bidding wars around the bay. ‘This particular summer is white hot. Sellers are more comfortable about getting their homes on the market, and buyers are just dying to get in,’ said Barbara Lymberis, president of the Santa Clara County Association of Realtors.”
“At current levels, there’s only a month or less supply of homes for sale in many Bay Area counties, according to Redfin. ‘There’s not enough homes to go around,’ said Miawand Bayan, an agent with Redfin in Fremont. ‘I have buyers getting to the point where they are so frustrated they will either drastically overpay, or wait another year and hope it gets better.’”
“Although Bay Area sales were the highest for a May since 2006, they are still about 8 percent below the average number of sales in May since 1998. Many people are stuck with negative equity — homes worth less than their mortgages — and ‘it could be years before they’re able to make a move,’ said John Walsh, DataQuick’s president.”
The Ventura County Star. “Ventura County’s luxury home market is still in flux, although hints of an uptick are emerging. Forty-year real estate veteran Larry Stern said homes in his market sell for $3 million to $6 million these days, while in 2008, the same homes sold for $6 million to $8 million. The average time on market now is two years, Stern said, indicating sharp price declines are still needed.”
“For the luxury homes that dot the hills and valley of the Moorpark area, Realtor Gwyn Goodman said she’s seen ‘only a downward spiral’ in upscale home values that in her area range from $2.5 million to $4 million. A builder’s home in Moorpark was on the market for 2½ years, with an original listing price of $3.85 million before the bank reclaimed it and it sold for $1.85 million, she said. ‘What they (buyers) want is value, and if they’ve got cash, they don’t mind sitting and waiting till that property goes to the bank,’ Goodman said.”
“In the beach colonies near the city of Ventura, Realtor Janet Caminite said, eight homes sold between $2 million and $6.9 million between 2008 and 2010. From March 2011 to the present, 28 homes sold between $1 million and about $3.4 million at 8 to 18 percent off the list price, she said. ‘We’re not even in that $4 million to $6 million range,’ Caminite said. ‘I think buyers are not paying close attention to fair market value. They just want the deal of the century.’”
The Glendale News Press. “The number of houses and condominiums for sale in Glendale and Burbank stayed in the basement last month, according to the latest real estate reports, a likely result of homeowners waiting for the market to rebound to get more out of their investments, Realtors say. The dwindling number of homes on the market is the result of people waiting in hopes of getting more money for them or more equity out of them, said Gerri Cragnotti, owner/broker of G & C Properties in Glendale.”
“There are basically only three types of sellers right now, she added: ‘It’s primarily a divorce, death or relocation for a job.’”
“The median price for homes sold in Glendale rose from $455,000 in May 2011 to $572,000 last month. The median price for condos was $278,000 last month, a slight increase from $255,000 in May of last year. In Burbank, the median price for single family homes sold dropped from $540,000 in May 2011 to $477,500 last month. The median price for condos was $253,000 last month, down from $335,000 in May of last year.”
“The ratio of bank-owned homes sold in Burbank compared to total sales jumped to 50%, a 17% jump from a year ago. The ratio of distressed homes sold in Glendale declined by about 9% to 41.8%. Realtor Julian Munoz said banks are starting to put more of the homes they own on the market. ‘They’re doing it very strategically and slowly,’ he said.”
The Clovis Independent. “Mosquito control officials in the central San Joaquin Valley say there are more green pools than ever in backyards, serving as perfect breeding grounds for mosquitoes carrying West Nile virus. Algae-laden pools have been ground zero for mosquitoes since default notices and foreclosures skyrocketed during the recession, but mosquito fighters had hoped that the spate of unkempt pools would ease. Not so, they say.”
“‘It’s continuing and it seems like it just increases year after year,’ said Steve Mulligan, manager of the Consolidated Mosquito Abatement District, which covers most of Clovis. ‘It’s an ever-changing number, but the number is always increasing.’”
The Manteca Bulletin. “In the past, two-story homes were viewed as gravy trains since you were essentially adding less expensive space between the set expenses represented by foundation and basic house infrastructure and the roof. The profit per square foot is significantly higher for a two-story home than a one-story for that reason. The appetite for the old McMansions is not expected to return anytime soon - if at all.”
“One of the 4,400-square-foot homes in the Heritage Ranch neighborhood sold for over $400,000 less than the purchase price - for $225,000 back in 2009 when the McMansions crashed harder than any other housing in Manteca except the Cherry Lane condo conversions.”
The Lodi News Sentinel. “The housing market was the driver of the economy for a couple of decades and now is moribund. Economists and pundits all talk about the housing rebound and when the market will come back. As if the housing market was normal and will go back to what it was. It won’t.”
“First, there are plenty of homes already built. With population growing slowly (and only by immigration), there is only a small increase in natural demand for homes. Second, a lot of the built homes are in foreclosure. These are coming on the market at a fairly steady rate. The banks are bleeding them into the market to avoid knocking home prices further. Third, the nature of the housing that will be built will be dictated by what is needed, which is smaller homes and multi-unit buildings. McMansions were an aberration. Homes will be smaller, as they are cheaper. Fourth, housing should cease to be a Ponzi scheme where developers build homes before need exists and finance the next development through the payments on the current development.”
“In short, the housing market will be a reduced portion of the economy. Our politicos need to realize that housing will not drive a recovery and is not an easy source of tax revenue. The politicos must devise sensible policies so a sound economy can reassert itself. The politician who says Stockton will be all right as soon as the housing market returns so tax revenues will be up and the city won’t have to go bankrupt — that politician is blowing smoke.”
“The housing market is just one of the restructurings that are going on. But things will get better; indeed, are getting better.”
the investors aren’t looking to (buy and resell homes quickly); they are buying to hold, because they’re looking at prices going up over the next five years,’
These people are no more investors than I am a chinaman. Rather, they’re empty pocket, tire kicking speculators who did the Rip Van Winkle routine from 2006-2011.
Back in 2002-2005, we had a lot of investors like that in Tucson. When the hoped-for price increases didn’t materialize, they dumped their houses like hot rocks.
We’re still dealing with the aftermath.
I’m wondering if it’s time to buy. Really. I saved the cash from selling in 2005. Pre pay the loan at low interest.
‘The politician who says Stockton will be all right as soon as the housing market returns so tax revenues will be up and the city won’t have to go bankrupt — that politician is blowing smoke’
This goes along with something that’s been in the news:
‘CNNMoney - Last week, the Federal Reserve released its triennial study that showed median family net worth overall dropped nearly 40%, between 2007 and 2010. The Great Recession — including the housing and stock market collapses — wiped out nearly 30 years of net worth gains for the typical household.’
Are we just sitting around waiting for some depreciating asset to make us wealthy? What about this:
‘A typical American male who works full time and still has a job is earning almost exactly the same now as his counterpart was back in 1972…The figures, which appear in Table A-5 at the back of the Census Bureau’s report (pdf), are these. Median earnings for full-time, year-round male workers: 2010—$47,715; 1972—$47,550. That’s not a typo. In thirty-eight years, the annual earnings of the typical male worker, adjusted to 2010 dollars, have risen by $165, or $3.17 a week.’
‘If you do the comparison with 1973 it is even worse. The figure for median earnings of full-time male workers in that year was $49,065. Between now and then, Archie Bunker and Willie Loman have suffered a pay cut of more than twenty-five dollars a week.’
http://www.newyorker.com/online/blogs/johncassidy/2011/09/poverty-figures.html#ixzz1yFZTNrgr
I wonder why the ‘politicos’ don’t address this, instead of trying to keep us believing that we’ll all be wealthy because the trees will grow to the sky? That the politicians can borrow/spend infinite amounts of money because we’ll ‘grow’ our way out of the debt.
Are we just sitting around waiting for some depreciating asset to make us wealthy?
….. GASP!…… How dare you be truthful about houses depreciating!
‘about houses depreciating’
I work on houses. Of course they depreciate. As a matter of fact, if you don’t constantly pour money into maintaining them, they really fall apart.
I guess I can see why people in California want to believe in these myths. But the fact is the only sustainable way for a population to gain wealth is earnings, defer spending and hopefully earn even more on those savings. But what does our govt do? Enter trade agreements that lower typical wages. They do everything to encourage consumption. And then, through the central bank, punish savings with artificially low interest rates.
And when the ponzi nature of this economy falls apart, they stand around screaming, ‘we gotta get house prices up!’
Is the issue really low wages or?????
Are prices of everything grossly inflated by the overconsumption fueled by cheap credit which is necessary to offset low wages, which merely drives prices up anyways?
Thanks, Ben, for reminding once again why I can’t quit this place. Oh, no. I keep coming back to this blog like the swallows to Capistrano.
This place is an oasis of common sense. Thanks to Ben for creating it!
A zone can be cloned from one zpool to another one
Why is it that our government does this, while other nations jealously protect and grow their job markets?
Silly me! I know the answer!
Having industrial and trade policies that would grow jobs means having the government “pick the winners”, right?
Of course, with our current policie the government is picking a winner: the banksters.
Ben said: “I work on houses. Of course they depreciate.”
Not if you buy new and then flip, buying new again. You won’t spend anything on maintenance, hence the very idea of depreciation in your personal housing stock has been erased, like Big Brother did it. House buying today involves Newspeak; some concepts have been totally eradicated.
Part of the solution is to copy what Germany does- educate their students in technical/vocational efforts, We have to learn to compete.
“For the luxury homes that dot the hills and valley of the Moorpark area, Realtor Gwyn Goodman said she’s seen ‘only a downward spiral’ in upscale home values that in her area range from $2.5 million to $4 million. A builder’s home in Moorpark was on the market for 2½ years, with an original listing price of $3.85 million before the bank reclaimed it and it sold for $1.85 million, she said. ‘What they (buyers) want is value, and if they’ve got cash, they don’t mind sitting and waiting till that property goes to the bank,’ Goodman said.”
They will buy in Thousand Oaks for that price until TO gets out of reach then back to Moorpark
Shortage of homes in the area makes for very high prices. The Movie industry is big in this area.
Roger on the movie industry’s heavy influence in the TO/Moorpark area.
What a lot of us don’t realize is how precarious a business it is. For every perennial star, there are a lot of has-beens.
And even if you do make it big, there’s no guarantee that you’ll be able to hold on to the money. Recall that Ronald Reagan was able to do that. He had very good financial advisers and he was well-guided on his investments. Reagan also had quite the ability to schmooze people, and we know where that took him.
Reagan was also quite devoted to his craft as an actor. He took rehearsal so seriously that he was known as “One-Take Reagan.”
Reagan managed to avoid the emotional and substance abuse problems that fell a lot of performers. That, in and of itself, is no easy feat.
A good friend of mine is a cameraman. Things aren’t so great right now.
“so buyers must respond quickly when a new listing pops up. One of Patrick Jordan’s home-buying clients recently offered $100,000 more than the asking price for a house in Rancho Mirage. ‘There were 10 offers — 10. We wound up being in the top four, but we lost; we didn’t get it,’ said Jordan, broker associate in Palm Springs.”
Just amazing what short memories people have!!! There is no end to stupidity and greed.
People have been conditioned into believing that housing is supposed to be unaffordable.
And they’re thinking “wow, that was a tough 4 years there…at last we’re finally getting back to normal”.
To paraphrase Billy Joel:
Give us this day our daily discount outlet merchandise
Raise up a housing tract, and we will make a sacrifice
STOP Fannie and FREDDIE. If they couldn’t get 3% loans, this crap would end, immediately. It’s all another finance fraud.
But all the mouthpieces (folks like Krugman, chief propagandist for the leftist “economic” views) want to Push up prices to get the ponzi game of finance and money printing to spiral to new heights.
Sustainable growth is only a concern when you want limits on environmental issues. When it comes to money being printed and transferred to the select few in the Wallstreet skimming machine, there are no limits. None.
We can never print enough money to allow the insiders more asset confiscation from the working class throughout the world.
A Swiss Chalet for summer, a Caribbean home for winter, a place in the Hamptons, near the office, and a yacht or two for cruising, after arriving in just a few hours on your private jet.
That’s real “capitalism”. All done by shuffling papers, writing contracts and having a non-governmental agency given free rein to PRINT MONEY and give it to you to disperse around the globe. Without your consent or the consent of the Congress. Only RON Paul understood this game and the rest don’t care because the get a little skim from their masters.
It’s GREAT if you’re a member of the club. If not, expect to keep on the “job” to support the “system”. They need the rest of us working or their caviar may not arrive.
I wouldn’t just tie it to Krugman and the “leftists”.
There are very few politicians that would say to scrap Fannie/Freddie. They are simply too popular (ie. they lose votes if they scrap them). You might have more on the right looking for reform, but from where I sit, there is not enough political will on either side to simply wind them up and shut them down.
I’ll put forth my idea again. Increase the down payment requirements by 1% (1 point) every 6 months until Fannie/Freddie are out of business entirely. This gives the financial industry long enough to get their act together and be a viable replacement, and each 6 months, the loans Fannie/Freddie make during the wind down become safer and safer.
Diogenes said: “Sustainable growth is only a concern when you want limits on environmental issues. When it comes to money being printed and transferred to the select few in the Wallstreet skimming machine, there are no limits. None.”
Our system runs on cheap energy. That ended in the mid 2000s, when world petroleum production peaked. That’s put a hard stop on growth.
Period. The housing bubble was at best a coincidence, but could have been a last gasp of a high-energy economy.
I’d love to see Fannie and Freddie obliterated, BTW, but they are just another rung on our journey towards nationalized housing. When more and more people become stranded due to ‘high’ (i.e. historically normal) energy costs, the government will be well positioned to step in and take more control of where people live and what they do.
“Buyers Either Drastically Overpay, Or Wait” with 10 bidders for every property the decision for 90% of the buyers is already made. They have to wait…
Another sign of the apocalypse…
“”I’m working with people who had to endure the pain of a foreclosure or short sale three years ago who are now eligible to buy,” he said.
“Now, they’re coming back.”"
Yeah, I saw that in more than one article while putting this together. We’ll have to see if it is or isn’t just a boosterism point.
I’ve also seen this referred to…however, no numbers, just anecdotes (the Smith family is back in the market, etc.). My sense is that this is just a smattering of buyers so far.
My understanding is that a short sale blight lasts less time on your official credit score than a foreclosure. I don’t know the details, but I thought I heard as short as 3 years…this may be the type of people they are talking about.
I still think foreclosures last 7 years on your credit report.
In any event, the Fed isn’t doing us any favors. By keeping rates so low, they are encouraging people to seek yield elsewhere. The potential pool of buyers who have been foreclosed within the past 4 years is so great, that I wouldn’t be surprised if financial types are putting together a pool of capital to lend to them (subprime 2.0a).
I can see the pitch now to investors:
“…why invest in 4% fixed rate mortgage debt when you can invest in 6% fixed rate mortgage debt?”
“Sure the borrowers were recently foreclosed, but the market has bottomed, and we are requiring _____% down payments.”
“You have massive walk-away risk with the 4% debt if prices do fall from here, the same risk that you have with the 6% debt…you might as well get paid for the risk…”
That’s pretty much what Brent White said in his book, Underwater Home.
In it, he talked about the stigma of foreclosure. It’s often made out to be one of those things where you’d all but wear the scarlet “F” for the rest of your life.
The reality is that the ding to your credit only lasts a few years. And then you can be a borrowin’ fool all over again.
One thing to watch for is public homebuilders becoming more active in providing debt for homebuyers…if appraisers won’t provide the values they want, they’ll simply take a different path to a sale.
If this happens, I will be curious to see how confident builders are in the then-current demand being real and sustainable…what down payments will they require?
I think they just handle the paper, not take the loans onto their books. So it would basically be securitized in that scenario. But how about the market at large? With T-bonds rates so low, why doesn’t the private market stick their toe in the water?
It does make sense that builders have typically only been conduits. I’m wondering whether anything changes.
Builders have a greater incentive to make the sale. Sale=profit today. A lender today only makes their profit when either a) they sell the note to someone who is scrutinizing the loans much more, or b) they collect the interest over long periods of time.
I think private lenders are starting to put their toe in the water, but they can’t point to enough price increase cover to override the third-party appraisers (without getting fired if the loan goes bad).
I’m refinancing my home (dropping the rate by 15%, ~80bps seems logical). I finally have loan documents after about a month following the appraisal. When I asked what the hold-up was, the loan officer said that new home sales go to the head of the line. They seem to be either understaffed, or very busy with new loans. That bank seems to have been putting their toe in the water. Of course, this is in the SF Bay Area, so it may be different in other markets.
OMG I just heard the most amazing FB story, from a fellow passenger en route from SD to SF. She struck up a conversation from across the aisle. When she told me she lived in SF, I asked whether she rented or owned. Turns out she recently went through foreclosure on two homes, one a $1M+ home she bought in SF and a second which she bought in a lease-to-own deal in Sacramento where she was the investor/owner/landlord.
The folks who leased the home in Sacramento started a home renovation project w/o filing any permits; after the home was half-trashed and uninhabitable, the renters moved out, leaving her unable to cover the rent or to rent to another tenant. She was foreclosed on the Sacramento home and ended up $100K+ short on the auction price versus what she owed on the mortgage, leaving her with a serious black mark on her credit record. The former renters somehow managed to buy the home for a song at auction, finished the rehab, and resold for a huge profit.
She fell behind on the SF home and it went to short sale for more than $300K less than she paid for it.
After taking in this tale of woe, I spent the rest of the flight encouraging her to put these real estate woes behind her, keep her dreams alive and find a way forward in life.
After talking to my new FB acquaintance, I crossed paths with an attorney I know for whom I summarized the Sacramento scam. He opined that the incident involved serious fraud and would provide the foundation of a successful criminal prosecution.
BTW, the young lady who told me her story was clearly working through the anger phase of the housing bubble stages of grief. She was generally very congenial, like most San Fransiscans, but a visceral hatred welled up in her eyes when she described the experience of walking past the million dollar home she used to inhabit, knowing that it was now reoccupied by new owners.
My hasty response was an assurance that I would never buy a foreclosure home, for fear of the terrible karma which might await one who becomes the hated squatter in somebody else’s homestead.
The banks’ home hoarding activities coupled with the availability of easy-money, low-down, low-interest loans are producing a new generation of f-d first-time buyers.
Housing isn’t a buyer’s market for many first-timers
By Julie Schmit, USA TODAY
Updated 6h 12m ago
CITRUS HEIGHTS, Calif. – Alex Dorado thought that buying his first home was going to be easy.
“I said, ‘This is a recession. No one is looking at houses,’ ” the cellphone salesman says.
Dorado, 25, found his first love in February, a 1,200-square-footer in this Sacramento-area suburb. Before he put his offer in, he took his parents to see “where I was going to live,” only to discover the house was already sold.
He lost more than a dozen other bids on homes, often to cash-packing investors, before he landed a $134,000 fixer-upper in May with a low-down-payment Federal Housing Administration (FHA) loan. Now, he’s upgrading the home, which sits on a blue-collar street with dented cars parked in two nearby driveways.
As the nation’s housing market shows signs of bottoming after years of declining prices, many first-time buyers such as Dorado are getting a rude awakening. Instead of having their pick of homes to buy in some markets, they’re losing houses to cash buyers and bidders with bigger down payments, or they’re facing bidding wars spurred by shrinking numbers of homes for sale.
…