Taking Down The Neighborhood
WWLP reports from Massachusetts. “A new report finds that Massachusetts is listed as the second most expensive state in the nation when it comes to real estate. The Coldwell Banker Home Listing report finds that the average cost of a four bedroom, two bathroom home in the Bay State is just over $489,000. That’s $80,000 more than homes in Connecticut and $60,000 more than the average cost of homes in California. Hawaii is the only state with higher prices at nearly $750,000, on average.”
“Longmeadow resident, Ken White says the real estate market reflects what the state has to offer including jobs and good schools. ‘If you have jobs in the state that are going to give people incomes that are going to support the real estate market, that’s the key right there,’ said White.”
The Republican in Massachusetts. “The city’s unemployment rate rate fell slightly from 10.7 percent to 10.1 percent in October, according to figures released Tuesday, but rising home prices might be a sign of a better economy. Springfield’s unemployment rate was 10.7 percent a year ago in October 2011. ‘It’s a little bit disappointing,’ said Robert A. Nakosteen, a professor of economics and statistics at the University of Massachusetts Isenberg School of Management. ‘It is definitely a sign that the state’s economy is slowing down.’”
“The problem is that households overburdened by debt are still not spending enough money to make employers more willing to hire, Nakosteen said. Without employers hiring, the families don’t feel confident to spend and the cycle gets harder and harder to break. But rising home prices might be part of the cure, Nakosteen said. Nakosteen even started sounding like a real estate broker when said now is a good time to invest in housing. ‘People need to take advantage of these low mortgage rates,’ he said. ‘They are not going to last forever.’”
The Lowell Sun in Massachusetts. “The worst of the foreclosure spike — when Lowell averaged three foreclosures every two days in 2010 — is over, but Lowell and other local communities have either passed or are on pace to pass last year’s total. The cause could be a Massachusetts Supreme Judicial Court decision in June on whether a lender could foreclose on a property without having a promissory note, said Richard Howe, the register of deeds for Middlesex North, which covers the Lowell area. The court ruled that a lender could foreclose if it has a promissory note or is acting on behalf of the note-holder.”
“Another factor could be that foreclosure-modification regulations were clarified during the past year, giving banks a greater ability to know how to engage with homeowners who are underwater on their mortgages, said Christopher Pitt, president of the Real Estate Bar Association for Massachusetts. ‘There are so many factors that affect the whole foreclosure situation that it’s hard to say,’ Pitt said. ‘There still is a glut of mortgages out there that have been nonperforming, and the banks are just getting around to doing the foreclosures.’”
“Jim Wilde, executive director of the Merrimack Valley Housing Partnership in Lowell, said he found it more difficult to find meaning in the trends. A homeowner who hasn’t paid his or her mortgage in many years might still not have received a foreclosure notice yet, for example. ‘There’s not really a direct correlation with that’s going on with the market,’ Wilde said.”
The Connecticut Post. “Unemployment ticked up for Connecticut in October — but so did home sales — sending mixed messages on the economy. State officials announced that the unemployment rate in Connecticut has inched up to 9 percent. Realtor William Raveis said while sales have increased, the amount of money from sales is not increasing because the cost of houses has not increased.”
“Don Klepper-Smith, chief economist for New-Haven based DataCore Partners LLC, said the rise in the state’s unemployment rate to 9 percent from 8.9 percent was surprising. Even more surprising, he said, was the recalculation of the September numbers, which resulted in a net loss of jobs in 2012. Klepper-Smith said the real disposable income measure continues to lag, increasing by 0.4 percent in October. ‘It is really hard to make an argument for legitimate economic recovery when we don’t see any tangible proof that we’re seeing gains in the all-important measure of consumer spending power,’ he said.”
The Connecticut Mirror, “Once considered untouchable, the tax break available to homeowners for the interest they pay on their mortgages is now vulnerable to new limitations that are likely to have an bigger impact in Connecticut than in most of the rest of the nation. Any limitation of the mortgage interest deduction would affect Connecticut homeowners more than most others because the state has high-priced homes compared with the national average. The national median home price is about $182,000. The median home price in Connecticut is $282,000, and many homes in Fairfield County and other areas of the state cost much more than $500,000.”
“In addition, there are many second homes in Connecticut. If the mortgage on those homes are added to the mortgage on a primary residence, it’s likely the total could exceed $500,000. A report by John Burns Real Estate Consulting said only five metropolitan areas — all of them in California — would be impacted more than the Bridgeport-Stamford-Norwalk area by limiting interest deductions to mortgages that are $500,000 or less.”
“The report said the taxpayers in that area of Fairfield County would lose more than 11.1 percent, or about $82 million, each year in if the cap went into effect. Connecticut’s realtors are opposed to all of those proposals. ‘We’ve had this deduction for 100 years and no administration has had to do away with it to balance the budget,’ said Bob Kimball, who is president of the Connecticut Association of Realtors.”
WPRI in Rhode Island. “Rhode Island home prices declined 3.5% in September from a year earlier, the largest drop in any state, according to CoreLogic Inc. Housing prices doubled in Rhode Island between the summer of 2000 and the winter of 2006, according to the Federal Housing Finance Agency index. Prices have dropped 35% over the last six years and are now back to about the same level where they were in the summer of 2003.”
“There was a 9.9-month supply of distressed homes in the state. Rhode Island continues to have more homeowners in trouble than most other states. CoreLogic said 7.5% of all mortgages in Rhode Island were at least 90 days delinquent in September, tied with Connecticut and topped only by Florida, Nevada, New Jersey, Illinois, Maryland, and New York. Corelogic said 22.7% of Rhode Island homeowners had negative equity in September.”
The Portland Press Herald in Maine. “Residents of Mary Avenue have been watching a vacant house deteriorate for the past four years. Thieves have stolen a roof vent, causing water to leak into the house and create mold. Vandals have spray-painted graffiti on the windows, knocked over cans of paint, destroyed a back deck and removed the metal railing at the front entrance.”
“‘This is taking down the neighborhood,’ said Earl Jamieson, 74, who is trying to sell his house next door. He said the previous residents bought the house at the top of the real estate market and later abandoned it. The bank now owns the house, but has yet to put it on the market. And so it languishes.”
“In October alone, 131 properties in Maine had received a foreclosure filing and been repossessed by the bank, according to RealtyTrac. The number of new foreclosures, which was 479 last November, has been holding steady at an average of 114 a month for the past nine months. The statistics, however, don’t count ’shadow’ inventory, the number of bank-owned homes that are not yet on the market, as well as the homes with delinquent mortgages, but on which the foreclosure process has not been completed.”
“In Maine, it takes a bank an average of 570 days to complete the legal work to foreclose on a house, according to a study by the Federal National Mortgage Association. That’s why people see vacant homes in their neighborhoods with no ‘for sale’ signs on them, said Peter Judkins, chairman of the Maine Bankers Association.”
“When people owe more money to the bank than their house is worth, their behavior changes, said said William Fogel, a Portland attorney whose practice includes bankruptcy law. They no longer act like owners because they no longer view their property as an investment. ‘They have no money or savings,’ he said. ‘They live in the house until the house falls apart or they go bankrupt.’”
DNAInfo in New York. “The number of stalled construction projects in the city has increased by 17 percent since February, according to an analysis of Buildings Department records by the New York Building Congress. The report identified an average of 691 sites stalled in November, up from 592 in February, and 180 of those were added to the list in 2012, erasing the gains made by an influx of new development in the last 15 months, according to NYBC President Richard T. Anderson.”
“All together, the sites have a market value of $883 million, which is down from $1.3 billion one year ago, according to the NYBC. ‘It is interesting to note that while the raw number of stalled sites has increased, the estimated market value has dropped by nearly half a billion dollars,’ Anderson said. ‘This suggests that the luxury residential market was home to an outsized percentage of the projects that have resumed in 2012.’”
The New York Times. “Rising demand and a scarcity of new apartments are creating something of a rush on new luxury condominiums in choice New York neighborhoods, with buyers increasingly signing contracts for spaces even before they are built. Buying in early can have significant upside in a rising market. Prices at Chelsea Green, a nearly sold-out 51-unit condominium going up at 151 West 21st Street, were raised four times since sales began in May. Now the two remaining two-bedroom two-baths are $2.7 million and $2.8 million, up $200,000 from their initial asking prices. ”
“And with some sales offices opening to long lists of potential buyers, there is even more pressure to get in early. In Brooklyn, 20 Henry Street, a 38-unit condo, started selling in February to 800 prospective buyers who had put their names on a waiting list. More than 85 percent of the building has since sold.”
The Journal News in New York. “White Plains developer Louis Cappelli has sold five units at the Ritz Carlton in downtown White Plains to the Royal Bank of Scotland for $22 million, according to state records. This would be Cappelli’s second sell out of his holding in downtown White Plains in the last couple of months. At the Ritz, the deed transfer log shows that the transaction was made in lieu of foreclosure with Cappelli’s LC MAIN LLC selling the deeds to the Bank of Scotland’s BOS PB LLC in October.”
“The deal — which sent five units of the luxury condo/hotel building to the Royal Bank of Scotland — followed a similar unwinding of Cappelli’s interest in the City Center, located just across Main Street. Technically, it stood to be the biggest residential real estate transaction of the year for the area, but it’s far from a typical deal where a buyer is selling his or her property to a new owner or occupant.”
http://cl.exct.net/?ju=fe5013777d6206747d14&ls=fe1b1d777d6c017e741275&m=fefc1172766306&l=fed1157376640678&s=fe35157277640d7d711074&jb=ffcf14&t=
That’s $80,000 more than homes in Connecticut and $60,000 more than the average cost of homes in California. Hawaii is the only state with higher prices at nearly $750,000, on average.”
And this explains why housing demand (sales) is at 16 year lows in MA, CA and HI.
Realtor William Raveis said while sales have increased, the amount of money from sales is not increasing because the cost of houses has not increased.”
What a weaseling way to say prices are falling.
Just say it you scumbag realtor. Say it.
‘Technically, it stood to be the biggest residential real estate transaction of the year for the area’
It went back to the bank. That may be a transaction, but it wasn’t a sale.
Does anyone know why there are condo-tels in ‘downtown White Plains’? Five units, $22 million. Must be pretty nice hotel rooms. I wonder what the nightly rent on one is/was?
Interesting comment from a poster on the article;
You’ve nailed it! Institutional asset managers have convinced institutional investors (pension plans) that they (the managers) can buy foreclosed single family homes in bulk purchases, rehabilitate them, then rent them or ‘flip’ them. It’s a very exciting story the managers are ’selling’, however many very experienced investment managers think it’s not a reasonable strategy. Managing large numbers of widely disbursed single family homes requires a lot of administration and it is a very labor intense and expensive activity. Many very smart investors say such bulk property management is not a ’scaleable’ activity (It doesn’t enjoy economies of scale. In fact, as scale (size) increases single family home property management becomes less economical). On YouTube search for, “Warren Buffett Gives His Opinion of the Single Family Home Market.
I call it ‘The Institutional Home Buying Bubble’, it will unravel.
Managing large numbers of widely disbursed single family homes requires a lot of administration and it is a very labor intense and expensive activity.
I used to rent from a lady who owned a total of five rental properties. One of them was the front half of her duplex, and that’s where I lived.
Three of the rest were SFRs in Tucson. The fifth was a house up in Scottsdale, AZ.
To say that she was in a labor-intensive business was an understatement. Her little real estate empire ran her ragged.
‘It’s a very exciting story the managers are ’selling’
The press and the REIC are selling it too. The funniest part is they bid up the price of the very ‘asset’ they are buying. A few months ago I posted a story where four Canadians were in a bidding war for a house in Scottsdale. You would think they would look around and say, what the heck are we doing? It’s the same concept that drives Apple or Groupon stock.
I am very familiar with how REO asset managers think and behave. They see these guys coming and rub their hands with glee. Here’s the big problem with hedge funds buying smelly, run down houses; they aren’t doing any of the work. They have to pay for every toilet cleaning, every grass cut, each AC repair.
I read about funds buying on the courthouse steps, like I saw in Phoenix a couple years ago. You know what that means? Sight unseen. Bulk sales; how can you inspect 100 houses at a time? Answer; you can’t. Basically sight unseen again. How could that go wrong?
Sight unseen. Bulk sales ??
You would know Ben but I suppose they have guys frantically running around doing drive-by look-see’s then texting in what they found…
Yeah, this is what Gorilla Capital does, and what Norris was doing in California. The lenders on the other hand go in and assess the property, maybe even before the foreclosure, if it’s vacant. So do they disclose what they know? Heck no. They will paint over mold and never say a word. The lender contracts even say, ‘this house may have mold (and just about anything else you can think of) and you can’t hold us liable.’
Is there any other RE sale where the seller doesn’t have to disclose known health or safety issues? This is what’s nuts about buying REO’s sight unseen. So why not just buy in a regular REO process, thoroughly inspect the house and make a decision? Because ‘we’ve got to hurry! We’ve got a billion bucks burning a hole in our pockets and besides, someone else will beat us to it. Haven’t you seen the latest newspaper? Prices are up up up in Phoenix. We don’t have time to actually LOOK at what we are buying.’
They will paint over mold and never say a word. The lender contracts even say, ‘this house may have mold (and just about anything else you can think of) and you can’t hold us liable.’
Good point, Ben.
Here in Tucson, there was a cinder block apartment complex that was undergoing conversion to what looked to be condos. It was at the end of the housing bubble-mania, and guess what. The project went ker-flewey.
Place sat there for years with the OSB sheathing turning black. Then it was purchased by some affordable housing developer.
I don’t know for sure, but I think that black OSB wasn’t removed before the building project was completed. I think the studs behind it were warped as well.
Last year I looked at a bank owned abandoned auto repair in my search for a cheap place to put my studio/workshop. It was for sale cheap. No mention of the abandoned and known to have leaked fuel tanks on the property. I specifically asked the realtor if there were any known issues. All I got was a blank stare and a shrug. Luckily I inquired with the DEC. Whoever buys that property has the immediate responsibility to remediate. $100K minimum with no upper limit. The bank gets a free pass.
“Does anyone know why there are condo-tels in ‘downtown White Plains’?”
I don’t know B Dogg but they are impressive towers. One of our favorite restaurants is on the same avenue and I’m in awe every time we go there.
Must be all the beer. Heineken is head quartered in White Plains.
‘They no longer act like owners because they no longer view their property as an investment. ‘They have no money or savings,’ he said. ‘They live in the house until the house falls apart or they go bankrupt.’
These lenders aren’t any better. In the same paper there’s this article:
‘Benjamin Johnson III, 30, and his three young children died Saturday in a fire that was ignited by cardboard boxes placed too close to a wood stove. The mother, Christine Johnson, 31, was rescued from the roof by firefighters…The Johnson family planned to buy the two-story Cape and were waiting for the sale to close. They were heating the house with a wood stove because the pipes for the hot water heating system had been broken while the house was vacant last winter. They planned to replace the system once the sale was finalized, giving them access to the bank loan they were using for the house purchase, according to the real estate agent who worked on the deal.’
‘The house was being sold as a “short sale,” meaning it was being sold for a price that is lower than the principal owed on the loan.’
‘Short sales can take many months to complete. At the time, the Johnsons were living in a cramped mobile home in Brewer with a leaking roof. Cormier said he encouraged the Johnsons to consider moving in while the bank was processing the sale, and that Costello and Bemis agreed to let the family live in the house because a vacant house is an easy target for vandals and copper thieves looking to steal pipes.’
http://www.pressherald.com/news/family-in-fatal-fire-had-deal-to-live-in-vacant-house_2012-11-15.html?searchterm=foreclosure
They were heating the house with a wood stove because the pipes for the hot water heating system had been broken while the house was vacant last winter ??
So, to protect your property you entice a family with a short sale to move into a house with no functional heating system…Now we have a father and three innocent children dead…My goodness…
From the other PH story:
‘Residents of Mary Avenue have been watching a vacant house deteriorate for the past four years…He said the previous residents bought the house at the top of the real estate market and later abandoned it. The bank now owns the house, but has yet to put it on the market’
Four years, and still not on the market. But you have a family moving from ‘a cramped mobile home…with a leaking roof’ into a house with no heat. In Maine. Isn’t shadow inventory grand?
‘If you’re young and just starting out, or have a large family but small paycheck, good luck finding affordable housing in Connecticut. And the old adage also hits home in the Nutmeg State: The rich are getting richer, while the poor keep getting poorer. These are among the troubling findings of an annual survey released this week that underscores fundamental flaws in our economic and housing systems.’
‘The report, HousingInCT2012, published by the Hartford affordable-housing advocacy group Partnership for Strong Communities, found that the bottom 40 percent of earners in Connecticut earned slightly less money over the past five years, at the same time top earners enjoyed significant gains. In addition, the report found that even though rents in Connecticut are the sixth-highest in the nation, the state last year recorded the lowest level of housing built per capita in the nation.’
‘A family now needs to earn $49,000 a year to afford a typical two-bedroom apartment in Connecticut, $20,000 more than it did less than 10 years ago, the report found.’
‘A rule of thumb used to be that you should spend about a quarter of your paycheck on rent, but the report found that 52 percent of renters spend more than 30 percent of their incomes on housing.’
http://www.theday.com/article/20121116/OP01/311169995
Isn’t shadow inventory grand ??
And you would hope the bank and the person that moved them in there would get their a$$ handed to them but as we have seen over the past 5 years nobody is ever held culpable for things like this…
I’m pretty sure everyone involved is gonna get sued on this one. It’s unusual circumstance for sure, but in general, what about squatters? What about the neighbors kids? Or drug dealing that goes on in these houses?
I’ve done occupancy checks on many houses with a tenant inside who didn’t know the landlord wasn’t making payments. So who’s responsible for the safety of the property?
It’s a screwed up mess. That we’re going on four or five years of this is an outrage.
“That we’re going on four or five years of this is an outrage.”
All in an effort to keep housing UNaffordable. Nice huh? Our bought and paid for government hard a work making life difficult for the citizens.
On another note, I know of 3 houses that have been empty since 2009 that I would buy in a second if they were for sale. It seems BofA doesn’t know they own them (or at least acknowledge it) yet BofA field services are there every month cutting the grass and checking the heat.
On another note, I know of 3 houses that have been empty since 2009 that I would buy in a second if they were for sale. It seems BofA doesn’t know they own them (or at least acknowledge it) yet BofA field services are there every month cutting the grass and checking the heat.
Methinks that situations like this call for the resurrection of the HBB Photo Gallery. (How ’bout it, Ben?)
‘the resurrection of the HBB Photo Gallery’
I’ll think about it. It would have to be cloud based. The way I did it before didn’t work out after a while.
“It would have to be cloud based.”
Does Google support photo galleries?
If there’s one thing Facebook does well, it’s photos. You could always put them on the Friends of the HBB page at:
https://www.facebook.com/groups/108043917435/
If permissions were set to public I think even people not logged into FB could see them.
nobody is ever held culpable for things like this…
The one I find culpable in this case is the guy dumb enough to heat a house with a wood-stove while a cardboard-box is sitting next to it. That’s ridiculously stupid.
Some kinds of stupid can’t be fixed.
This is also an indication of why the shadow inventory isn’t all that HBB thinks it’s cracked up to be. Supposedly, releasing all this shadow inventory is going to bring down house prices. Well, it may bring down the average, but the condition curve is going bi-model, into livable houses and major fixer-uppers.
When I was househunting, I told the realtor, “I need a place that I can move into. Even if I need to fix some things, it needs to be livable now, because I don’t have the time, energy, or money to pay rent and a mortgage and make major repairs all at the same time.” I imagine that this would describe most end consumers.
Given this, I suspect that releasing the shadow inventory will increase the price of housing for end consumers, or at least keep it level. People like me will either pay high for a livable house, or they will pay for re-priced rehab.
Dont’ sweat it. Prices are falling irrespective of the 20+ MILLION excess empty houses.
How far underwater are you so far Oxide?
A flood of released foreclosures will lift all boats…..
Radical stuff Oxy, a rare peak into the thoughts of the mortgaged crowd.
Not sure if you’re being sarcastic here.
If Zillow and Trulia are to be believed, I’m not underwater at all because I put money down. My house is zestimated at about what I paid for it.
but the condition curve is going bi-model, into livable houses and major fixer-uppers.
I agree w/that sentiment, oxide. We realized about 1-2 years ago that this shadow inventory in our area was not being cared for. Things were just sitting, deteriorating. We realized that in a place where so many of the more recent housing stock was huge, 3500 or more square feet, that finding a home in good shape that was smaller but livable and correctly priced was leaving a lot of us buyers chasing the limited numbers.
I would never again consider a fixer unless I inherited it and it was fully paid off. For what you have to put into some of the houses we’d look at around here the improvements alone could potentially top the price of what I feel median housing will eventually correct to around here. Besides the shadow stuff, there was also the sad fact that in so many homes we looked at, the boomer generation basically bought these homes and did nothing more than pay the extravagant taxes. Systems, siding, roofs, all uncared for. Appliances often broken or hanging on by a thread. It’s the saddest thing. If you come across a home in very clean condition w/a reasonable price, there is incredible pressure to snag it because you know you won’t see another like it for months.
I’m not underwater at all because I put money down.
And there it is folks. You don’t get any better exhibition of Housing Delusion than this one.
Downpayments have nothing to do with going underwater. So you’re underwater. What are your losses so far?
Time for your meds, honeypot.
Running from reality with an insult won’t limit your losses.
Once again….. how far underwater are you.
Isn’t looking to Zillow for a price estimate on a place you just bought kind of like asking what you paid for it? I would imagine for a while it is its own best comp as far as they are concerned.
There are two ways of looking at underwater, one from the person who operates on debt and another from a person who actually pays for something and considers what current losses might be.
Don’t move the frickin’ goalposts. “Underwater” means to owe more on the mortgage than the house is worth, and it has meant that for years. Since I put money down, the house is still worth more than the mortgage I borrowed.
That’s not underwater. It’s even arguable whether I “operate on debt.” I am SOLVENT. If I had to, I could sell the house tomorrow and pay off the mortgage and be no worse off* than if I had rented the entire time. I would hardly call that debt slavery.
As for comps, I bought the place some moons ago, and there has been enough activity since then to at least adjust comps. During bubble times, the Zestimate would have gone up what, 10%? During a “crater,” the Zestimate surely would have gone down 5-6%. Neither has happened. We are bouncing along the bottom.
———
*admittedly, it would get close with the taxes and fees etc.
‘Systems, siding, roofs, all uncared for. Appliances often broken or hanging on by a thread…If you come across a home in very clean condition w/a reasonable price, there is incredible pressure to snag it’
A house in good condition has been maintained. Otherwise it will look like you described. In most climates a structure will wear out. The only way around this is to buy new and pay for maintenance.
There’s ways to make things durable, but pretty much all of them require more cash. Steel roofs are great. Tile floors instead of carpet. Keeping the snow/rain water away from where it shouldn’t be. But making houses to last isn’t common. I did some work on a newer, very expensive house recently. Lots of nice touches. I noticed the shingles were really worn. They probably cheaped out on materials and now there will be a huge roofing bill before too long on this mcmansion.
I remember when concrete slabs became common in Texas. Lots of people warned the soil wasn’t right for them, but now you hardly see anything else there. So what’s the point in building everything to last for 70-100 years if the foundation isn’t going to last that long?
Then there’s comfort; efficiency. That costs too, upfront at least.
I can show you a bunch of houses for sale in AZ that were built in the 40s, 50’s, 60’s. Most of them are on their last legs. What’s that worth? Ten years of rents, maybe? They sometimes sell for 5 times that. My point is we’ve gotten used to thinking houses always go up, and it’s exactly the opposite; they are becoming worth less every day. An then there’s this:
‘pay the extravagant taxes.’
Do property taxes go down as the house depreciates? Not around here.
These are reasons why I think these hedge fund guys are fools. I read them say, ‘this house used to be worth $250,000.’ Who cares? It doesn’t even matter how much it cost to build. The only thing that matters is its functional value, the stream of funds necessary to keep it functioning, and how much longer it will last.
My point is we gotten used to thinking houses always go up, and it’s exactly the opposite; they are becoming worth less every day.
That’s right. Why? Because houses depreciate. ALWAYS.
“Underwater” means to owe more on the mortgage than the house is worth, and it has meant that for years.
That’s YOUR understanding of it. Even if you pay cash, you can still be underwater.
Regardless, I doubt you could find a buyer for even 80% of what you paid.
It’s true that houses deteriorate. But rentals are not exempt from the laws of nature — they deteriorate too. Sure, LL’s save money when they have an in-house handyman to do routine stuff like replacing water heaters and windowpanes the like, but eventually some big system goes into the crapper and the LL pays a big bill, which is passed along as raised rent. Or, if the place falls apart entirely, then that cuts down inventory which increases demand and raises rent anyway. Or, somebody buys that land and builds something shiny new, meant for yuppies, and charges high rent yet again. You can’t really escape it.
Houses have been built, have been maintained, have deteriorated, and have fallen apart for thousands of years. And yet, except during some well-defined bubbles and plagues, the price has appreciated, if only due to inflation. And the price of new construction just starts even higher compared to old construction. Deterioration hasn’t stopped the slow rise in prices yet, what is going to stop it now?
Disclaimer — this probably only applies where the jobs are, where people want to live. Sure thing RAL, there are towns where houses will deteriorate and the price will depreciate to near 0. But that is due more to lack of jobs and industry than to the housing itself.
That’s YOUR understanding of it. Even if you pay cash, you can still be underwater.
My understanding of the term “underwater”, and the usage I’ve seen of it, is that the house is worth less than the mortgage owed on it. And that can happen even if your house appreciated, especially if you “liberated” some of that equity.
If you paid cash and the house depreciates, that sounds more like an unrealized loss. Also sucks, but not as bad as being underwater.
but eventually some big system goes into the crapper and the LL pays a big bill, which is passed along as raised rent.
You can repeat this falsehood like a savant but it doesn’t make it any less false. Expense are never automatic passthrough costs. EVER.
then that cuts down inventory which increases demand and raises rent anyway.
We don’t have to worry about that for a few decades or more.
Or, somebody buys that land and builds something shiny new, meant for yuppies, and charges high rent yet again. You can’t really escape it.
Yet rental rates continue to fall. Even in DC. Another case of creating your own reality once again? I believe it is.
And the price of new construction just starts even higher compared to old construction.
You’ll have to explain why we continue to build for double digit percentages less than resale. Proceed promptly with your explanation.
Deterioration hasn’t stopped the slow rise in prices yet, what is going to stop it now?
It’s called depreciation. Why are you denying it? Worse yet, prices are falling. Why are you deny it? I think we all know why. It is you that needs the answer. Proceed.
the price has appreciated, if only due to inflation.
That’s not “appreciation”.
there are towns where houses will deteriorate and the price will depreciate to near 0. But that is due more to lack of jobs and industry than to the housing itself.
Once again with redefining reality? Houses depreciate irrespective of location like ALL manmade/manufactured items.
‘but eventually…the LL pays a big bill, which is passed along as raised rent’
We’ve had this discussion before. What you’re saying is a LL can’t lose money.
I guess renters just tell their boss they need a raise.
underwater [ˈʌndəˈwɔːtə]
adj
1. (Earth Sciences / Physical Geography) being, occurring, or going under the surface of the water, esp the sea underwater exploration
2. (Transport / Nautical Terms) Nautical below the water line of a vessel
3. (Economics, Accounting & Finance / Stock Exchange) (of a stock option or other asset) having a market value below its purchase value.
So we call a mortgage that is for more than the house is worth an “underwater mortgage”. That does not limit the meaning of the word to only this context.
This is a well-known phenomenon that the media doesn’t talk about anymore. It’s called a “Money Pit”. In fact, there’s a Tom Hanks movie of that same name from 1986:
http://www.imdb.com/title/tt0091541/
“Well, it may bring down the average, but the condition curve is going bi-model, into livable houses and major fixer-uppers.”
Fixer-uppers and livable houses are substitutes in consumption, as with enough money and attention, a fixer-upper becomes a livable house. So an increase in the supply of either quality category of house puts downward pressure on the price of the other category.
“I’m not underwater at all because I put money down”
You can still lose money on a home purchase without being underwater.
households overburdened by debt are still not spending enough money to make employers more willing to hire,
Wait, I thought it was tax breaks that made employers more willing to hire. And this is from a newspaper named the “Republican?”
Now there’s talk of taxing health insurance bennies, while leaving tax rates for the rich untouched.
That’ll stimulate spending!
Tax rates for the rich are NOT going to be untouched.
From NBC News dot com:
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Poll: Public would blame GOP more for fiscal cliff failure
“[Pew/Washingonton Post poll] What’s more — in a trend surely being eyed by the Obama administration — the public still appears ready to place blame for the impasse on congressional Republicans over the White House by a nearly 2-1 margin.
With a divide similar to public perceptions earlier in November, 53 percent of those surveyed said they would point the finger at the GOP for the failure of the negotiations, while just 27 percent say the president would be at fault.”
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Blame the librul media if you want, but that’s a mandate to run out the clock on tax rates for the rich, if I ever saw one. No, it’s not enough to close the gap, but the moral victory will set the tone for further negotiations.
Now NBC says the R’s are pressuring Bohner not to “cave.” Are they this dumb? If Boehner caves, tax rates on the rich go up. If Boehner doesn’t cave, tax rates on the rich go up anyway.
LOL! The next election is not for two years.
People don’t know it yet, but the blame game is actually a moot point. Even if people DID blame Obama and not the R’s, Obama will just wait until January, when everybody’s taxes are up. Then, when The People get good and mad at Obama, he can offer to re-cut the middle class taxes, again and again, until the R’s say yes.
And by then it will be too late for the rich.
Hope so, Oxy.
My understanding of the proposals to tax health insurance benefits had nothing to do with normal health insurance plans. Instead, it was about taxing the benefits for the extremely wealthy, where health insurance plans cover things that aren’t normally considered medical expenses.
“but rising home prices might be part of the cure.”
Hunh?
yeah, that’s what i don’t understand - how can anybody consider exorbitant house prices, when the average family cannot very comfortably afford an average house “good”????? Simply mind boggling! And i agree with earlier comments, the vast majority of houses out there are quite old and junky. A good half of all houses for sale in Bergen County were built between 1900 - 1930’s!!! Just walking into the basement freaks me out every time. And anything built after 1980 that’s not a mcmansion is most likely a condo or townhouse. Weird. Somewhere this country went really wrong and the problem isn’t going to just go away magically. Over the long run, if things stay this way, the only directions prices can go is down. Any other way makes absolutely no logical sense.
Massachusetts is very frustrating right now. Home sales are up, but only because cheaper housing in places like Worcester accounts for much of that volume.
So we continue to happily rent, even though we’d like to buy… and the only towns with a SFH we could afford would be way out to the west, where my wife would be cursed with a two hour commute into downtown Boston. Forget it… we’ll keep renting…
Bob,
What’s the employment (unemployment) picture in Mass. these days?
Depends on your position. Skilled workers are hanging in, Lucky Duckies…not so much.
With an unemployment rate of 6.6 percent, Massachusetts was among 23 states with a jobless rate below the national average.
The unemployment rate among young adults in the state has more than doubled over the past decade, leaving nearly one in seven young people out of work, according to the Massachusetts Budget and Policy Center.
Note the stalled projects in Brooklyn and Queens. Many of them are in transitional, gentrifying, working class mixed-race immigrant neighborhoods.
Places very much like the Rockaways, where many housing units were damaged or destroyed.
I wish the FEMA money would go to buy up those stalled projects by eminent domain, finish them, and offer them to folks from the Rockaways (as buyers or tenants) in lieu of spending money in such a vulnerable area.
“To me, it calls for a concerted program on the part of the city.”
That’s a representative of owners of construction companies. Somehow “get big government out of the way of the private sector” only applies to assistance for the 99 percent.
FYI the city is broke. The state is broker. The federal government is brokest.
“Hawaii is the only state with higher prices at nearly $750,000, on average.”
How many HI households have sufficient employment income to afford a $750,000 house? I’m thinking one needs to inherit the wealth, like George Clooney’s character in The Descendants, or else bring it in from elsewhere.