A Call For Photos & A Wednsday Bits Bucket
A mid-week reminder to take some housing bubble photos and email to:
photos@thehousingbubbleblog.com
May as well make this post a Wednsday bits bucket for off topic items and Craigslist finds, as well!
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Don’t know how common they are, but my buyer-side realtor’s office just put a sign out front that says “AGENT ON DUTY — walk-ins welcome!”
I’ll get a photo if I can.
Seems painfully obvious that there would be RE agents in an RE office, right?
I realize there are difficulties, but if anyone ccould get a night photo of an under-occupied condo tower, that would be great.
I have posted pictures from DC on my blog
http://bubblemeter.blogspot.com/2006/06/more-dc-pictures.html
David
Here’s a fun one. What a nice guy, giving away 100k in equity just out of the goodness of his heart. He’s practiclaly a one-man non-profit.
And, he’s not really paying for your fees and closings costs if they are added to the price of the condo! Sheesh.
http://washingtondc.craigslist.org/rfs/168856666.html
Reston is NOT 15 minutes to DC unless your in a F-15! LOL. With a 6am start you can make the Pentagon in about 45 minutes. Start at 7am and it will atke you 1+15. Add anothe 15-30 minutes to get into DC and park.
As a newlywed 12 years ago, I lived in Reston and commuted to D.C. I HATED the one hour commute. I am sure it’s worse now. That condo is way overpriced compared to comps.
a future metro stop? yea, in 10 years!
“Overlooking the GULF course!” Is that a golf course that has been flooded? Do they get hurricanes in Reston?
I’m tired of the news media portraying increased oil and gas prices for decreasing consumer spending going forward. The consumer could easily absorb higher gas prices if they hadn’t run out and overspent on straw McMansions, higher property taxes and higher insurance premiums. Even with higher gas prices they just need to forgo their daily Starbuck java fix, fast food or movie rentals, but mortgage resets means that they need to sell, get a second or third job, or call the moving van and turn in the keys. I guess if the latter happens the shrinks will have to invent a new term to relieve and absolve them of any responsibility for their actions.
I agree. I have heard just about every excuse in the book as to why the housing market is “softening”:
-Rates are going up
-It’s Bernanke’s fault
-The market needs to “catch its breath”
-Energy Prices are straining budgets
-The Media is scaring us
-Buyers are being unrealistic
How about housing prices are too high?
the “catch its breath” excuse I find hysterical.
imagine the visual of the traders on the NYSE taking some time out to “catch their breath”.
it just doesn’t ever ever happen to financial markets. it is a meaningless phrase.
I think people have been in trouble for a long time. I know in my area those payday advance places are huge.
I agree people *SHOULD* be able to cut back on somethng small to cover the rise in gas. In mean if they hadn’t over paid for a house, then refie’d for the SUV. IMHO gas prices are the final straw, for an all ready streached too thin consumers.
I live in outside of a formerly affordable area. The problem in the midwest is that 1) there has been incredible wicked manufactuing declines (WMD’s) - pay of $20+/hr has been replaced by service at $8/hr; 2) RE taxes are marked annually to the market - in Wisconsin the current rate is ~2% in NE Illinois ~1.75%; 3) Credit card minimum payments have doubled (per law); 4) Many of the residents are now commuting 30 miles+ daily as a result of WMD’s and they are driving the same truck that they had 6 years ago with the same crappy gas mileage. I have been inside a Wal-Mart once in the last 10 years. A friend’s wife who is a Wal_Mart store Manager, says their sales have plummetted - IMHO this is a result of the rising inflation along with falling wages.
In summary - we may be immune to the price of gas and fuel, but the average American is hard pressed to meet bills.
It is affordability and in the midwest - the affordability appears to have vanished for the average working American.
One interesting connection is that WalMart’s reduced sales mean reduced imports. This improves the trade balance but gives China fewer dollars to ship back to us. Not sure how that will play out.
If Americans stop buying “cheap crap” from WalMart then that’s at least one of the dominos that begins slowing the global economy.
Lengthy write-up on the China banking situation on this thread on Ben’s Blog
http://thehousingbubbleblog.com/?p=817#comments
(near the bottom)
Way back when, I happily joined Sam’s Club when Mr. Walton hyped “Be American, Buy American.” Over the years that changed dramatically in both the Sam’s Club and Wal-Mart franchises.
I try to buty US-made goods whenever possible. Ironically, I can buy good products like mayonnaise and vitamins at the 99-cent store that are made in Orange County, CA! Voting with my meager dollars, but wondering if somehow we are still able to compete in certain sectors?
“buty” = “buy”
Salinas,
This has been bothering me as well for a long, long time. It’s like the talking heads think that as long as they don’t mention the housing bubble, it doesn’t exist. Easy to blame gas prices, but that is nothing compared to the debt (housing and other credit used since their housing prices were too high) people have amassed the past few years.
Also agree that wages are DOWN for the average working guy/gal, especially when one takes cost inflation into account. Our standard of living has been intentionally lowered by the PTB in order to make us more competitive on the global market. IMO, we still have a ways to go before it levels out. Not good.
From:http://rismedia.com/index.php/article/articleview/14725/1/1/
RISMEDIA, June 1, 2006—(Baltimore Business Journal)—Erin and Oliver Somers were chasing the modern American dream back in 1999 when they moved into a new house in an Eldersburg subdivision.
Their new home was quite typical — 2,500 square feet and all of the associated amenities of the “McMansion.”
“But it’s just the two of us, and it was just too big,” said Erin Somers, vice president of communications at Magellan Health Services in Columbia.
So the couple decided to downsize, moving to a 1,700-square-foot home in Baltimore’s Homeland neighborhood earlier this year.
“It’s cozy, and it has a lot more character than the suburbs, where every house tends to look the same,” Somers said.
Real estate agents and builders in the Baltimore area and throughout the nation are expecting increases in house sizes to level off in the not-so-distant future as increasing numbers of the huge Baby Boomer generation become empty-nesters.
And, at least anecdotally, more younger people like the Somers are questioning the need for large living spaces, particularly as energy prices rise.
“For the first time, I’m starting to hear some younger couples talk about space and conserving electricity,” said Vicki Sindler, a Timonium-based Long & Foster real estate agent.
But, overall, statistics show that Americans’ appetite for the largest possible home is still strong.
“In the high price ranges — $1.5 million to $2 million — buyers still want everything,” Sindler said. “Nothing is dampening their spirits. They want more.”
The changes in the average, newly built home over the past five decades is staggering, according to U.S. Census Bureau statistics. In 1950, the average new house had about 1,000 square feet of living space, two bedrooms and one bathroom. Nearly 60 percent had a one-car garage or carport. Forty percent had no garage at all. Two-car garages existed only in an architect’s imagination in 1950.
Twenty years later, the average new home was 1,500 square feet with three bedrooms. About half the new houses still had one full bath in 1970; the other half had two or more. Forty percent of new homes had a two-car garage.
By 1990, the average new house was 2,100 square feet. By then, the vast majority — 85 percent — had three or more bedrooms. Eighty-seven percent had at least two full bathrooms, and 72 percent had at least a two-car garage.
Each year since 1990, house sizes have crept up. By 2004, the average size of a new home was about 2,350 square feet. The biggest change since 1990 was garage size. Sixteen years ago, three-car garages were a custom flourish for the rich and famous. Now, 20 percent of all new homes have them.
Will house size ever level off? Or will houses continue to grow?
The jury is still out. Experts say energy costs may play an even bigger role in keeping the average house size in the 2,000- to 2,500-square-foot range. In addition to heating and air condition costs, gasoline prices may have an effect.
So-called McMansions are usually built on large lots of a couple acres or more. In Maryland, in particular, virgin land is at a premium, forcing development farther away from the city centers. The high price of gas is making some people reconsider long commutes.
And the Baltimore area isn’t likely to loosen its nationally known development restrictions anytime soon.
“Maryland is a leader in smart growth and Baltimore County is recognized as a leader in planning,” noted Timothy N. Mead, a Phoenix, Md., architect who designs custom homes in Maryland and California.
So what does he tell clients who want a huge home? He advises against it and often lends out his copies of a now-famous series of books by architect Sarah Susanka, called the “Not So Big House.”
“Attitudes are changing,” Susanka said. “Several years ago, everyone wanted a formal dining room and a formal living room — even if those spaces were never used. Now, we’re seeing less of that.”
Susanka has a simple credo: “If you don’t use a room more than a half-dozen times a year, you don’t need it.”
Ummm…since when is 2500 sq/ft a McMansion?
Here’s your 2500 sq/ft McMansion (i.e. a working class house in many parts of the country):
http://tinyurl.com/ofgdq
…or maybe this generic middle-class colonial:
http://tinyurl.com/rdrha
which is at least 4000 sq/ft if you include the basement.
http://boise.craigslist.org/rfs/168892179.html
Somehow, the seller claims you will receive 25K cash as soon as you buy this house. The seller also claims “If you missed out on Vegas or Phoenix 2 years ago to make easy money on pre-construction - don’t let this one pass you buy!”
I posted something about this a few days ago. Chino Hills, CA realtors offering $50K cash “decorating allowances” to the buyer during escrow. Housing Wizard thinks this practice is illegal.
I am trying to think of a way to non-fraudulently put that on the HUD.
Maybe if it is not a FNMAE loan, or if it is a purley commercial non-RESPA transaction you could do it. But you are playing with fire there… not for the faint of heart.
if/when there is a series of defaults, the bank officers will be looking for someone to shift the blame to. If you violated the law, you will have a big target on your back.
I know people who ended up in Federal prison for getting cute on a mortgage app.
It sounds very similar to the first time buyer “nonprofit” scam, which has since been declraed by the IRS as fradulent.
Why, 1. Would it have to be put on the HUD? and 2. If it has to be put on the HUD why would it have to be done fraudently?. I’m not familliar with the post that’s being referred too. But I don’t see any reason to violate a law to get a deal like that accomplished. I see no RESPA Violations there if done properly maybe you can enlighten me.
It would be a stretch to call “decorating allowances” illegal if they are disclosed upfront to the lender. What would probably happen if the deal was done on the up and up is that the lender would make the buyer escrow the funds and have the vendors paid thru the escrow account and any overages would be paid to the principal of the loan. Nothing wrong with that works sort of like a construction loan.
This is also a stupid deal, at least in my state. why would you want to show a purchase price $50K higher, so that your property taxes are higher by the same proportion? Also, it looks to me that the deal would distort comps for the neghborhood.
Where did I say anything about showing a higher price. Distorting Comps how??
Income - it distorts comps because the recorded sales price did not include the $50K kicked back to the seller during escrow. So if an appraiser used this as a comp for another sale, he would see a number $50K higher than the net transaction amount.
Floor/decorating/roofing, etc credit are common practice here and I saw them on the Cape too. I always thought it was done to maintain the base price on which the realtor’s commission is fixed.
What’s 6% of 5,000.00 for an average roof. 300 bucks. I really dont think that’s the reason.
My understanding of the deal was this realtor was sitting it up so many buyers into that neighborhood got a 50K to 60K kickback of cash at close of escrow ,(calling it a decorating allowance . )I think the escrow officer was in on the fraud and cut the check without the Lender knowing about it .
My take on it was unless the appraiser/lender knew about it and approved it ,( cant imagine the lender allowing 50K cash back to the buyer ) ,it was fraud . Not only would it raise the comps in the neighborhood by 50K over what they should be , it would be giving the buyer a over 100% loan .
Sure the stupid buyers would be paying taxes on the higher amount ,but the 50K kickback was apparently worth it to these buyers .
Can you imagine this Realtor talking to buyers saying ‘Hey I can get you a house for a low down payment and than get you 50K back at the close of escrow to do what you want .
When things turn sour those same stupid buyers run to the bank finking on the realtors etc. who gave them this kickback . I’ve seen it happen a number of times .
Oh ok, I get it now. Yea I agree that’s a big no no. I was thinking something else. Disclosure Disclosure Disclosure.
Checked some internet stuff. Now, having several desperate mortgage brokers calling my voice. They appear to be very desperate for business. Calling over and over, begging me to call them back. Good thing that they only got a voice mail, so it is kind of funny to hear their desperation. And then it is a little 3 (button on phone) to erase their message, and they will never get me live. Recommend to folks to have a voice mail for screening callers if you are afraid to give a real home/cell number out.
same thing here but it’s realtors calling whose open houses I dropped in on months ago.
FOr the Boise ID house, I just placed a bid of $520.01 to purchase that house. If I am the high bidder, I will then insist that he give me $25,000 in cash, and title to the house. GO have fun at his auction. LOL
Dude, no. Thats NOT bidding for the house, thats the bidding for the “assignment fee”, basically a fee he will charge to turn the contract over to you so you can buy the house when its done.
Just go and retract the bid.
Realtors to travel agents hunh? Yea if what happened here is any indication of the masses I don’t think so. Looks like this guy would benefit from 2 agents.
FOr the Boise ID house, I just placed a bid of $520.01 to purchase that house. If I am the high bidder, I will then insist that he give me $25,000 in cash, and title to the house. GO have fun at his auction. LOL
The ebay auction is not for the house, it is for a “finders fee.” You will still have to pay $265k for the house….but then you will somehow get $25k back.
Read carefully, you might find yourself in an ebay mess.
He can give you $25k back as its only worth $200k tops. This is a butt ugly townhome. You can get similar sized nice looking SF home in v. nice area of Meridian for $210-$220k
One more. This guy can’t sell at 305k but he’s threatening to list with a realtor for 324k?
http://washingtondc.craigslist.org/rfs/167442814.html
You should call him and tell him “why pay 305K when I can buy similar units 3 months from now for 275K”.
That’s just an ugly apartment!
I see this a lot in DC. Sellers threatening to take it off the market or raise the price. Or saying get in now at pre-renovation price because price will go way up after renovation.
hey, that approach worked on them, they figure it will work on another greater fool
Buy mine now, or I’ll renovate and remove the future equity from you!
I hate flipper / speculators as much as anyone, but I don’t think the guy is “threatening” to list higher. He is just trying to do a FSBO and is willing to pass the savings to the buyer before he lists with the realtor. If the comps in his ad are accurate, then both make out and cuts the realtor commision out of the picture (yeah on that). When I sold my house in 04 I was willing to sell to a an interested lady for 30K less than I listed it for with the realtor the next week. She didn’t buy from me, the price went up 30K when I listed with the realtor, and it sold…but that was during the height of the bubble, YE HAW!
How rare to find a 2bd/2 ba condo around the DC area? Isn’t that one of the condo bubble central places? He looks to be looking to hook a GFF? Maybe a realtwhore will help, at $20K. And that was sure really ugly furniture. Must have come from Rent To Own, or some other cardboard box furniture store. LOL I’ll offer him $305.
VERY RARE 2BED/2BATH CONDO IN WILLOUGHBY’S RIDGE! CALL 703-966-5203
BONUS WITH A FAST CONTRACT >>> CONDO FEES PAID UN
Interesting info on this blog. As a newbie I have several questions regarding what seems to be a serious reduction in residential pricing in the very near future. Assuming that interest will be 7.5% by EOY - what percentage will housing have to drop before potential buyers can realize savings on the monthly nut.
Also, with the attendant disruption to asset markets caused by the burst housing bubble will cash be king or simply another devaluating asset? It seems that that all the exits may be booby trapped. Tough being opostomistic after reading this blog for a month. Perhaps the truth will set us free. Thanks.
Zeke, I do not know VA Beach. You will have read on this blog about the “falling Knife” syndrome - there are individuals who believe a 20% drop is sufficient and that this will happen by 2008, there are others (myself included) that believe we could face 10+ years of declining prices aka Japan 1990 - 2006. The biggest difference between America and Japan is that in 1990 Japan had a 10%+ personal savings rate, the US has negative personal savings. How this plays out is going to determine the extent of the collapse and the years to recover. IMHO this will be a depression that will last years.
For a good starting read see
Housing Bubble Correction Fifteeen Years to Revert to the Mean
January 20, 2005
http://tinyurl.com/q75r9
Good Luck
here are individuals who believe a 20% drop is sufficient and that this will happen by 2008, there are others (myself included) that believe we could face 10+ years of declining prices aka Japan 1990 - 2006.
Hoz, I read that article too - a lot to chew on, but what wasn’t factored into the analysis very well is what struck me. I am considerably more optimistic than “10 year decline” and “protracted depression”, in part because of that difference between US homeowners and those in Japan that you cite. There are lots of prudent homeowners with a cushion, stable job and ability to wait out the home market cycles, but I think enough of the “leveraged out and praying” are congregated at the far end of the boat now that race to the bottom of the housing market will be swifter than anyone can imagine.
I’m in one of those areas that never got “hot”, where rent is pretty much in line with home prices (damn!)…and where defaults/foreclosures are still among the highest in the nation. But gee, I’m seeing just as many “FIRE YOUR LANDLORD” and “RENT TO OWN” spam on Craigslist here as in California! - and the signs line every parkway, boulevard, or half-busy street to the point that you can’t see the “Furniture-store-going-out-of-business!!!” signs anymore. While the asking rents in chicly gentrifying (sorta, still better keep that carry permit and your window bars) midtown Memphis are about 1.5 Xs mortgage for recent comps - well, I guess that’s proof that things are looking up!
There’s one picture of what it’s like where the bubble isn’t. I just can’t envision how it could take 15 or even 10 years for the market to unwind, when we do love to go to irrational extremes in this country.
Cash will be king in my opinion. If prices on assets are falling, then your saved dollars will buy more when you are ready to buy.
But the Fed is not your friend on this gamble. They fear deflation (which is what makes cash the king) worse than they fear inflation, and hence strive to steadily inflate the currency (but not too quickly!).
We see many posts on here about the Fed and the stock market so I thought I would share some information. I work in the retail brokerage world, hoping to move into more analytical/quantitative stuff after grad school. Anyway, we had a conference call this morning with our equity strategy group and economist. Here is what was said:
Economist: Moved the forecast to a 5.5% FF rate with 2 more 25 point moves (June and August), but wouldn’t be surprised with a move to 6%. He feels the Fed should pause due to the lag time of said rate hikes. Doesn’t see cutting rates until mid-2007. Most on the street have similar forecasts, except they see no rate cuts in the future. Also, looking for a slowdown in the economy as 2006 progresses.
Equity: Looking for 1394 on the S&P 500 year end, which is about 10%-11% from where we are right now. Doable, but there needs to be some catalysts. The catalysts are a soft-landing economy, an end to rate hikes, and the fact earnings improve in years when the Fed stops raising rates. These forecasts are bit conservative compared to many on the street. They had been calling for the current correction since early April and it could extend another 3% to the downside. Historically, corretions last about 4 months as long as they don’t turn into true bear markets. They have trimmed the emerging market sector a bit and have added some more defensive plays (utilities/health care/staples/telecom).
We are certainly at some dicey points at this stage in the economic cycle. Personally, I am still optimistic about this year in the stock market and agree with our equity strategy group up to this point. However, there are many events that could change my/their tune quite quickly. I think we’ll know more at the August FOMC meeting as all June data will be available before the vote. Going to be a topsy-turvy summer.
You can agree/disagree, just thought I share some information. Hope some of you find it helpful and usefull. For what it is worth, I am more bearish then my associates. I see hard-landings in the bubble areas for housing, I see big corrections in the stock market starting in 2007,and I think we will be in a recession in mid to late 2007. Just my opinion.
Thanks for info Notorious.
We ARE in a bear market that began in 2000; it’s just that people mistake the almost 4 year rally for an actual bull market. Notice that most of the indexes have not been unable to pull off a new high, a huge 6 year non-confirmation. The corner has now turned and the worst part of the bear market has begun. True bear markets ALWAYS bring the PE level down very near or even under the dividend level, so this bear should bring the market down at least 75% before it is finished, because dividends and earnings will both drop as the market drops. I believe that we will see articles hitting the news media about the bear market within 4 months or so, so I do not believe that it will be an up year for the S % P at all but more likely down 20 to 30% by the end of the year.
“not been able to pull of a new high” is what I was trying to say.
Kim - The stock market is in an asset bubble that was not allowed to fully collapse in March ‘02. I’ll buy when it gets 10 % below mean ~4300 on the DOW. BTW - you posted last year that caused me to think and made my best investment in the last 12 months. Sold half yesterday/sell the rest tomorrow - then take off ’til Nov. So belated thanks. EZCORP
Wow, you and Kim are big bears. I get called a pessimist at my office, but I look like quite the optimist compared to you 2.
I was looking for corrections on the DJIA back to 9320 and 1060 on the S&P 500, which are roughly 20% corrections from the 2006 highs. I agree that the bubble of 2000 did not fully deflate and I know some of the free money that Big Al dished out found its way into stocks.
Only time will tell but we are at cruch time.
I don’t think that was me last year, it must have been another Kim. I think 4300 might turn out to be too high for a final bottom of the bear market. Take a look at every major bear market of the last century and see the relationship between the dividend yield and the PE. This time won’t be different. When we get to 4300 check to see if the PE is less than 2 above the dividend and if it isn’t, the bear market isn’t over. In 1932 or 33 the dividend actually went OVER the PE so that could happen again, too.
Notorious DAP, I think you should let your Economist know he’s smoking crack.
Earnings and margins will not increase because they can’t increase. We are at that part of the business cycle where earnings decelerate and volatility increases markedly. Since they are at multi-decade record levels, the decleration could be quite sharp. While fundamentally I find it difficult to make a case for a bear market right now, 1394 is just way too optimistic. Most likely scenario is a downward trading range through 2007. This assumes there are no skeletons in our nation’s financial closet that come out.
Should the market sell-off be orderly, it’s a great time for hedge funds who can capitalize on volatility and good “alpha” driven managers.
Hussmann has some good work on his site that your Economist should read.
I am wondering if anyone has noticed this. The realtors around here seem to have come up with a new status for a property listing. It used to be that a property is either “active” or “pending” if it hasn’t closed. Occasionally, there would be a “accepting backup offers” status in which case the property is technically off the market. My understanding is this is done in case the buyer is unable to close. I don’t seem to be seeing this status anymore. Instead I am seeing a lot of “accepting additional offers” on properties.
I dug a little deeper and found that houses having this status are still on the market.
I am thinking I wouldn’t be too happy if I were the buyer. Here I am planning to move into this house and a few weeks before I do, someone came in an offer higher than mine.
Are sellers this greedy? Holding out to the very end for a higher price.
Local realtor friend (a real professional vs realtWhore) said negotiations have been very tough this year. (Not about price which I’ve posted previously has been close to asking) Examples are Buyers asking for move in dates that may be difficult, repairs that seem to make negotiations sticky…not much other detail….I just got the idea that many buyers were only 1/2 committed when they made their offer with one foot extended back out the door until the ink on the contract was dry.
I’ve seen this in DC, too. House is under contract but remains “active” on the listing service. Sellers are indeed fishing for better offers.
Can they do that? Aren’t sellers obligated to see an offer they’ve accepted through to closing? How can they accept a better offer after accepting one that is already in process?
72-hour clause, most likely. If a better price comes along, the current buyer has 72 hours to close, or they are dumped.
Buyer’s a fool for accepting language like that.
The inspection can provide lots of opportunities to back out.
Also, we had a well situation that hadn’t been dealt with correctly (lawyers ok’d a deal between themselves without consulting us. We were not at all happy with it) On the day of my closing with the moving truck sitting on the street I was arguing with our lawyer that he had no right…so negotiations continued while the owner who wasn’t ready for us had called in the boyscouts to get her stuff out of the house. Needless to say the house was left filthy…and half her stuff was still in the basement and garage. The walkthrough hardly found the house acceptable. If I didn’t want to move into the house I could have made that situation work in my favor.
Same here. As swimming noted, ‘Under Contract’ will show up in the listings… all that does for me is gets me ready to see what the final sale price was.
One local listing said “DELAYED CLOSING, BRING BACKUP!” This for a house which has been on the block for a LONG time (listed and relisted). Seller is an expatriate Indian who went home, and I’m seeing a lot of that in my area too. They’re taking the cash back to where a few bucks means a lot more to them.
Good point (foreigners cashing out and moving home). I know a Filipino (Philipino) guy who owned a house in Carlsbad. Bought back around 92 when the market was tanking. He sold last summer and I’m sure he cleared at least $500K and moved back to Manila. To top it off, he was able to get a job transfer that paid for his move and will retire in the Philipines with a hefty pension next year. He will be living like a KING!
“Are sellers this greedy? Holding out to the very end for a higher price.”
No that’s not the purpose. It’s usually a sign that the current contract is flawed in some way where the agent doesn’t believe it’s going to close. IE: Buyer claims to have the ability to close all cash in 2 weeks yet can’t quite come up with the 3% deposit. Stuff like that.
I agree. If both parties signed the contract and there is an earnest money deposit in escrow, the seller can accept “back-up” contracts but they have no validity until the contract backed up falls through. Which begs the question: in what markets today are there enough buyers out and about to put in backup offers?
All markets if the price is right a few have alluded to that here. To me it’s a waste of time on the buyers part too put in a back-up offer unless they just really really have to have the house. It really just puts you at a disadvantage as far as negotiations especially if your a weak negotiator. In the past I have advised clients to pass on that type of nonsense. You want nothing that bad especially at 500k.
But wait! I thought Dallas was a great market for investors!
http://dallas.craigslist.org/rfs/168823114.html
or how about this one. What happened to all the Californians with tons of money to spend in hell?
http://dallas.craigslist.org/rfs/168924807.html
Why so hard on Dallas? Summers do get hot, but everyone has air conditioners. I’ve never been as miserable in Dallas as I was the summer I spent in Scottsdale. Even taking a dip in the pool didn’t help.
Last year in Dallas the weather was in the 60s/70s almost all fall and much of the winter. We had a beautiful spring, too. The Dallas RE market has been stable while the West and NE have gone bubbly. Ironically, that’s brought new business into the area and the economy is picking up. The North Dallas area has especially benefitted.
It sounds like some dumb investor finally figured out that Dallas isn’t ever going to experience Phoenix/Vegas/Miami type appreciations. There’s just too much available land and too many highways.
What I like best about Dallas is that the PITI on my 1800 s.f. farmhouse on 3 acres (built by the original owner) is $800. We’re a hub, so I can get cheap tickets to anywhere. With all of the money I save on housing, I have ample opportunity to take advantage of that. I think Americans have become obsessed with their homes because leisure travel and vacationing is a lost art. CA is beautiful, but there are a lot of beautiful places in the US and in the world. When you don’t have to kill youreslf to make monthly payments for mountain views, cool summer climate or beach proximity, you can actually afford to get out there and see some of them while you’re still young.
Saw an “investment” property in my neighborhood this weekend (Queens, NYC) Four family apartment building listed at $1.15 mil.
The rents equal $4500mo. I figure a 30 yr mrtge would be about $7500mo. Why would someone buy an investment that loses money every month?
Easy to explain…simple Specuvestor / Flipper math.
1) Loss on mortgage each month = -3000
2) Prop tax cost each month (est.) = -1,500
3) Prop insurance (est.) montly = -300
4) Repairs / maintenance montly (est.) = -300
TOTAL Cost out of pocket montly = -$5,100, Annual -$61,200
—-
Specuvestor estimated annual appreciation for the rest of the century = 15% annually (real estate always goes up). So .15(1.15M ) = over $150K annual. $150K annual appreciation - $61K annual carrying cost = $89K annual net profit. WOW! How can you pass this up. Please send me a check for $50 for the lesson on Specuvesting.
(& remember, the egotistical high of being a Specuvestor and knowing you are smarter than everyone else, especially those schmucks that actually work for a living, is PRICELESS…please send my $50 bucks. I’m temporarily underwater on a few great specuvestments that I’m sure will come back strong after the market takes a breather. My RE Broker that I work for won’t give me a salary and no one is buying properties right now…)
I ran across this interesting solar powered house in AZ for sale. I like the idea because it’s completely off the grid but just don’t like the location. The interesting part is that the price has been REDUCED. Like we’ve said, ALL housing will be affected. http://www.solarhaven.org/solarhavenforsale.htm
I saw that too on that Green Homes for Sale site. I’ll tell you, if that main house were 2000 square feet instead of 1000, I’d be writing the guy a check, bear or not.
SERIOUSLY overpriced however. I’ve got a friend who’s off grid in New Mexico, its a damn cheap way to live.
I wish this guy would post a pic
http://albuquerque.craigslist.org/rfs/168338332.html
Guess things ain’t so hot in Big Dump after all, other than the 99 degree weather. Where are all the Californians with the big money who are supposed to be “snapping up” houses?
http://dallas.craigslist.org/rfs/168924807.html
Someone brought this tidbit before but have you noticed how the main-stream-media is beginning to use alot of the terms used on this blog? For example, I’m listening to CNBC right now and they’re saying “McMansion”. I don’t recall some of the terms being tossed around even a few months ago.
Also, on CNBC, they’re talking about how Bernanke understands how the loss of the housing ATM will slow consumer spending.
Seems like more influential people are reading this or other bubble blogs to inform themselves.
We called them McMansions when we lived in MA. It had to be around when we got married in 1995/6. At the time my h was going back to school while still on a construction crew. It was all he built. The wood cabinets on a home he built in Dover on the Needham line came in at $148,000. At the time some people were still paying that for homes in the area.
Huggybear…The main news media has been using blog terms IMHO.
http://indianapolis.craigslist.org/rfs/168442856.html
This is great. The key word here is “Near.” Downtown Indy and Broadripple (little village are 6 miles north of Indy) are prime spots. However, 34th and College is more like 34th and Ghetto.
Hope the walls are filled with Kevlar.
I can top that one… a hood for a hood…
http://columbus.craigslist.org/rfs/168890311.html
“5 beds, plenty of room for the family! … Needs approx. 15K in rehab. After Repair Value is $90,000! (this means you will have $25,000 in equity after repairs are complete).”
$49k, people… a bargain. Hehe.
Of course, ghetto has various connotations; this one is in the county’s poorest school district, and so some people there are selling out for cheap:
http://columbus.craigslist.org/rfs/168144181.html
$66 a sq ft. Nice new house. Decent back yard, which you can see if you goog-map it.
And there ARE jobs here, too. Go figure.
FWIW, that $66/sq.ft. is based on a total square footage that includes the 800+ sq.ft. basement.
Such things are not uncommon here; if the basement or ‘lower level’ is finished, they may add it on to the number. The final arbiter is the county auditor, and HE says it’s 2522 sq ft: http://tinyurl.com/z6rgr
JMHO, I would say that this listing in not atypical of the type of houses and edge-of-town location where a lot of the high-foreclosure-rate developments are in the Columbus area.
I purchased my older home last year. “Instant Equity” is what my realtor told me..yea, whatever. The price was affordable, but may still have been too high: $128K. Anyways, I did an 80% 30 year fixed, 5% down, and 15% on an adjustable HELOC to avoid mortage insurance. I could have put 15% down, but waited about three months or so. Over the last year, I have blasted away at that HELOC, now as 10%. First Horizon continues to send me checks. They also have started calling, asking me why I wasn’t using the line!! I couldn’t believe it. I told the guy “Ugh, because I don’t want to go into debt.” The recent mailing two days ago were more checks, quickly destroyed. They are not even advocating smart uses of HELOCs: Consolidate CC debt and destroy credit cards. Instead, the mailing said I should use the checks to redo my home and even suggested taking a vacation.
LMAO
Fed’s Olson says US mortgage portfolio very strong
…”Olson said that rapid change in the home mortgage and home equity lending industry raises fundamental issues about fairness and levels of risk.”
http://tinyurl.com/pspgx
‘The central banker said the rise of the secondary mortgage market has created a “voracious appetite” for loan products and that “it is not clear we have the same checks and balances, and that underwriting is done as carefully.”
“The question is, is risk being appropriately priced?” he asked rhetorically. “We’re at the front end of understanding that product.”‘
The answer is we clearly do not have the same checks and balances as we did only a few years ago, and that underwriting is not done as carefully. Moreover, risk is absurdly mispriced; behold the conundrum.
Nice Op-ed piece by Brian Wesbury in today’s WSJ, entitled “Economic Rehab.”
I have no electronic access, but here is an excerpt:
——————————————————————————
The stock, bond, currency and commodity markets are bouncing around wildly. While there are many crosscurrents, monetary policy and economic data are front and center in day-to-day market volatility. As a result, some market observers are trash-talking the new Federal Reserve Board chairman, Ben Bernanke, and blaming him for all sorts of perceived missteps.
This is unfair. Mr. Bernanke is doing a fine job. The inflationary pressures he is fighting today were baked in the cake before he arrived. Monetary policy was overly accomodative for too long, and even after 16 rate hikes the Fed has not yet reached neutral. Weaning investors, home builders, hedge funds and proprietary trading desks from 60-year low interest rates is like forcing them to quit smoking: It’s good for the health of the economy, but it hurts and they are complaining loudly.
There are two forces that cause the economy to grow. One is real, the other is an illusion. The real force — entrepreneurial innovation and creativity — comes naturally as long as government policies do not drive it away. The articficial force is easy money. An increased supply of money, by creating an illusion of wealth, can increase spending in the short run, but this eventually turns into inflation. Printing money cannot possibly create wealth; if it could, counterfeiting would be legal.
Undsoweiter…
Good article.
marketwatch.com headline:
“Rally brings relief
After two days of selling on hawkish remarks from the Fed chief, bargain hunters dig, trigger a rally.”
But the headline indexes are barely up today. Does anyone else sense a disconnect between the Wall Street cheerleading corps and the harsh side of post-Greenspan market reality?
http://www.marketwatch.com/news/default.asp?siteid=mktw&dist=lnctab
Bernanke Fed to Street: “When push comes to shove, we care more for maintaining price stability than encouraging speculators. Condo flippers and irrationally exuberant real estate developers be damned.”
—————————————————————————–
Slowdown here
Guynn said that the Fed is beginning to see the expected moderation in the growth, and some easing in the housing market. But Guynn didn’t seem too worried about the slowdown. He said he expects “good growth” to continue despite the moderation in activity.
Guynn also said he did not expect a sharp correction in the residential real estate market. “I believe the housing adjustment most likely will be orderly and with a limited impact on the overall economy,” Guynn said. There are some risks, he said. Some borrowers will have a hard time handling payments in the higher interest rate environment.
And some speculators may get caught with condos that they cannot sell. Overall, there is the “unanswered question of how developers, builders, and lenders will respond to an adjustment in housing activity,” he said. Guynn said the housing industry is one big group of independent thinkers, who might all believe that “only their projects” will be able to get through the tough times unscathed.
http://tinyurl.com/rt4fj
A little plunge protection, please?
http://www.marketwatch.com/tools/marketsummary/default.asp?siteid=mktw
The PPT took a late lunch, but they got back just in time to restore the DJIA’s 11K floor before the closing bell…
Red alert — marketwatch.com stock price screen is blood-red after 3pm (except for those rising long-term bond yields). Eventually fundamentals have to matter for these stock prices…
Ouch!! Getstucco, can you enlighten me as to why the prices are plunging after Asia opens? (after 3pmEDT) Is it just about Japan?
In short, the symbiosis (between American spendthrifts and their Asian creditors) is unraveling along with the conundrum. Japan has pulled the plug on the liquidity pond, and the draining of liquidity out of speculative investments is resulting in a return of risk premiums on overvalued assets in every corner of the globe which was inundated by the flood of easy money. Unfortunately for those who own said investments, higher risk premiums translate into investment losses.
More on plunging Asian markets…
http://www.washingtonpost.com/wp-dyn/content/article/2006/06/06/AR2006060600428.html
Check out all the cool waterfalls in the bubble zone –
http://tinyurl.com/o7skt
Plunge Protection only seems to be working for Fannie Mae. It seems patently unfair that they get better plunge protection than other bubble stocks…
Japan is taking a dump as we speak:
http://www.nni.nikkei.co.jp/
Check out this link on marketwatch.com’s front page –
(Jonah) Keri: Big funds dumping stocks
Take home messages –
1) Big institutional investors are throwing in the towel.
2) The market is in a “downtrend.”
3) Maybe you sheep ought to pull in your horns a bit…
Off topic:
Ben’s Money and Metals Blog has been very active lately (82 comments on one post). Congratulations on another great Blog Ben!! Now how am I going to find time to read both??
Doug French doesn’t see a housing market crash in Las Vegas.
http://www.lewrockwell.com/french/french40.html
Seems reasonable. What’s the crowd here make of it?
MjM
“Billions of dollars are being invested in Las Vegas to provide aging Baby Boomers and Gen-Xer’s a place to go and gamble away their retirement money. Gaming executives know that Americans love to drink, gamble and party when times are good, and especially when times are bad. Wagering on a housing crash in Las Vegas is likely a bad bet.”
Wagering on readily available cash to blow on Las Vegas gambling binges when times are bad is likely a bad bet.
In that article, which was three months ago, he said he didn’t see a 40% crash. In my mind, even 30% is a crash. Also, he is a Nevada banker; while I personally admire his generally Rothbardian outlook, I sure would not place any bets on a temperate fall in Vegas prices.
Bankrate has a good list of CD yields, but most of the banks seem to be Internet-based ones. And, for example, even though Bank of America in Charlotte shows a decent rate, our local B of A offers only around 2%. Does anyone know of a Website that posts yields for, or at least links to, brick and mortar banks by state or smaller area?
Ben,
I truly believe we see history playing out right before our eyes in this housing bubble……….and some of the quips I’ve read here are absolutely priceless.
Can we have an achive called “housing bubble” Classic Quips?
I’d like to start it off with one by “Get Stucco”……….
2006-06-06 16:01:09
Chinese banks have a problem with nonperforming loans, and Uncle Sam has a problem with his credit card spending. This sounds like a match made in Heaven…
I’m sure there are 1000’s more