Speculators ‘Losing Interest’ In Idaho’s Treasure Valley
The Idaho Statesman reports on the fading housing bubble. “The Treasure Valley’s housing boom is starting to slow, some housing-industry leaders say. Area industry experts say the runup in prices may not be sustainable now that out-of-state investors are apparently losing interest in the Valley. Nampa real-estate agent George Tallabas said developers can no longer count on having half of the homes in a new subdivision sold before construction has been completed.”
“The industry is now having to depend more on local buyers because runaway housing costs and rising interest rates have combined to chase off the out-of-state investors who have been driving the housing boom, he added. ‘We’re starting to see a definite correction in the market,’ Tallabas said.”
“Developers are starting to reduce prices because the cost of home is now beyond the income earned by many Idahoans, he said.”
“(Mortgage broker) Marianne Wake in Boise, said the number of loans her company issues is falling as high prices keep some homebuyers out of the market. The increase in loan values has offset that decline, she said.”
“‘We only have to do half as much as we used to because the loans are so big now,’ she said. ‘It used to be that a $200,000 loan was a big loan. Now it’s just average.”
“Wake said her confidence in the local market remains high enough that she plans to add five new loan officers. ‘We’re going to have to make connection with the high-end home buyer, if we’re going to survive,’ she said.”
“Corey Barton, whose company is one of the busiest builders in the Pacific Northwest, said his recent rollback in some prices is attributable to overestimating this year’s increase in the cost of building materials.”
“‘Last year was way over the top,’ Barton said. ‘So 2005 is not a good year to set the bar. If prices were up 20 percent last year, and are down 10 percent now, you’re still ahead.’”
“Barton conceded, however, that his sales were off an estimated 10 percent in the first quarter, which he attributed to ’sticker shock’ experienced by consumers. ‘If I was going to buy a pair of sneakers that cost $20 last week, and they cost $30 this week, would I still be interested in a buying a pair of shoes?’ he asked.”
Thanks to the readers who sent in this link.
“The industry is now having to depend more on local buyers because runaway housing costs and rising interest rates have combined to chase off the out-of-state investors who have been driving the housing boom, he added. ‘We’re starting to see a definite correction in the market,’ Tallabas said.”
I wonder if they can hear the giant sucking sound of California speculator demand leaving their locally-frothy market?
Oh, do they mean the local buyers that the speculators priced out of the market?! Good luck!
The high-end market comment was funny. Those places are sitting here in Boise. There just isn’t the market for them and they are building like crazy hoping for CA retirees. I was talking with a small builder the other day and he was complaining that lot prices and material costs have skyrocketed. Cement went from 60/sq yrd to over 100/sq yrd. He said they are blaming oil/etc — but he thinks its mostly greed. He said they are causing inflation and that is going to hurt housing even more.
On antoher note… the FSBO listings (at least in my area) are more than the actual realtor listings. I don’t know if they are in MLS or not, but we are adding about 75-100 homes a week to MLS after the sales are taken into account.
Did these developers/investors consider the fact that the baby boomers would not all be retiring at the same time ? It’s as if the builders wanted to build the entire supply of possible demand for a 10/15 year period. So than the speculators jumped in wanting to buy than sell to the retiring baby boomers .its almost like the speculators wanted to add a retail price to the wholesale price of the builder and than sell to the BB’s.
Regarding concrete prices, blame Chinese demand and high US tariffs on Mexican cement for the rise in price. US Cement producers are still fighting allowing the cheaper Mexican cement in - they are more interested in their profit versus the costs to the rest of us.
Do not forget the tarrif on Canadian softwood. Building could be a lot cheaper but for the tarrifs.
I am waiting, saving, and will build on my land in 2-3 years when the inductry is very hungry.
And you thought the US had free trade with Canada and Mexico? Only when it suits certain people’s interests - and I’m not talking about consumers.
Sorry, correct my understanding. Concrete, from my background is always a local issue because transportation costs are the most substantial portion of the cost of production. This is why concrete can sell for 200/yd in Cali but 60/yd in upstate NY.
Please, advise us how this is not a local issue?
‘If I was going to buy a pair of sneakers that cost $20 last week, and they cost $30 this week, would I still be interested in a buying a pair of shoes?’ he asked.”
Now there’s a lame-ass analogy.
You beat me to it. That statement has to be the worst analogy I’ve seen regarding the housing bubble. I take that back.. probably one of the worst I’ve seen period.
Actually, I thought it was a perfect analogy. I wouldn’t buy overpriced sneakers either.
ok, I’ll bite, although I’ll probably regret it since I have no idea what amount of sarcasm was in your comment. Though overpriced -anything- is not good, comparing a 50% increase in housing to a 50% increase in cheap shoes is at best, pretty idiotic IMO. It is essentially comparing years and years of future earnings, financial hardship, inflexibility, sacrifice, and potential bankruptcy on one hand, to sacrificing a supersized lunch combo on the other.
I’ve used a different analogy (laugh if you want) but it’s like going to McDonalds and the price of a big mac is suddenly $40. Any analogy should draw a comparison to the level of extremity of the housing bubble.
“Developers are starting to reduce prices because the cost of home is now beyond the income earned by many Idahoans, he said.”
I can hardly wait until we can literally substitute “San Diegans” for “Idahoans” in the above sentence.
GetStucco said:
I can hardly wait until we can literally substitute “San Diegans” for “Idahoans” in the above sentence.
Stucco, Read the sentence again:
“the cost of home is now beyond the income earned by many Idahoans, he said.”
Unfortunately, the opposite replacement occured… we replaced “san diegans” with “Idahoans” in his sentence. That’s the true shame of this equity bubble. AS the rolling horde travels across the land, more and more communities find themselves unable to afford to live in their own cities.
Began with really only NYC and SF. Then Boston, DC, San Diego, LA. Then Miami, much of OC, much of the East coast. Then LV, Phoenix. Now places like Salt Lake city and Boise. and so on (I’ve missed many areas I know)
Each area looks at their oncoming conqueror with glee, oblivious to the harm.
After the fact, when the area is ruined and nobody can afford to live there, the people remain saddled with a lifetime of debt on a depreciating asset.
Sad.
Clouseau.
one of the best explanations I’ve read. Nice job. The fact is, this “boom” was never about strong underlying fundamentals (with the possible exception of 2002 or early 2003 as we were coming out of recession). It stemmed from a huge surge in speculation fueled by the complete abandonment of lending standards, a ridiculously incompetent Federal Reserve and a bunch of greedy idiots. And one look at the stock charts of the major home builders — which look like Cisco circa 2001 — or, say La-Z-Boy, which is imploding today, tell you this soft landing claptrap is just that — bull. I hope everyone finally realizes that Alan Greenspan was one of the worst central bankers of all time, only good at blowing up bubbles, then bursting them, then blowing up even bigger ones elsewhere to clean up the mess.
And thank GOD we have Ben Bernanke who apparently is not afraid to put an end to this nonesense. I don’t know if the general public will like him when all this is said and done, but I sure will.
Doesn’t anyone find it ironic that BB is getting accused of over tightening with the Fed rate at only 5% ? I mean if the economy is really as good and robust as people say it is, 5% should be peanuts.
Heh heh, my favorite is the way people thing the Fed has actually been fighting inflation. If it really cared about inflation we would have had 5% fed funds last year and we’d be up to 7-8% now (ceteris paribus).
As far as I’m concerned, the jury is still out on Bernanke and his resolve.
When the Fed funds rate is 10%, the PPI (aka commodity prices) still shows no sign of abatement, and Bernanke is still willing to hike rates in the face of deflating real estate and a pervasive depression, then we’ll see. That’s what Volcker had to deal with.
Summary of the Boise boom:
“Equity locusts” begin cash out in California and pay cash for homes in SW Idaho and have enough leftover cash to live on for a few years ago.
Friends and family of the CA transplants hear about how cheap the homes are, so they start buying homes as “investments.”
RE agents whip everyone into a frenzy and encourage all to “buy, buy, buy!” as the market moves up.
As RE prices begin to rise, locals start upgrading there 120k homes when they find out they can sell them for 160k+ - they sell their homes to “investors” from CA.
Renters get into the buying game so they can own a house before its “too late”.
Today, the cycle is nearing an end. Homes are too expensive for first time buyers, the investors are going away, investment homes sit empty waiting for renters…
Can’t wait for the next phase.
Amen Mike.
What’s the matter Humpty Dumpty housing bubble, running out of steam? Real smart, speculators run up prices in Idaho and then expect the locals to buy their jacked-up real estate. I’m sure there are a lot of local people who make $8.00/hr and would love to make you wealthy by borrowing 200k to buy your over-priced chitbox. I know I’m preaching at the choir here but I still think it is funny. These people think they are so clever gambling with borrowed money. I wonder how many of them ever had plans to live in Idaho?
“‘Last year was way over the top,’ Barton said. ‘So 2005 is not a good year to set the bar. If prices were up 20 percent last year, and are down 10 percent now, you’re still ahead.’”
Wow. Genius.
Actually, the last 2 millenia were also way over the top, and thus not good millenia to set the bar either. I think the original purchase of the land under my home was for 3 shiny beads and a feather in a Native American transaction (this was of course before money). I think 3 beads and a feather might be worth 1 penny now.
So even if my house value drops more than 99.999999% this year, and remains worth more than a penny, then in the end I’m really ahead.
Right?
clouseau
My favorite quote: “Wake said rising prices hit first-time home buyers especially hard. “You can’t find a home that’s decent for less than $180,000, and the first-time home buyer can’t afford that,” she said. “I’m afraid that a lot of these kids are going to end up having to go back to living in trailers.”
I may not be moving to a trailer, I’m i’ll rent until the market becomes rational.
Look on the bright side…soon the kids might be able to rent those new $180K homes for the same cost as renting a trailer. See, not all housing news is bad news if you look at it the right way. THATS my new paradigm!
And of course the possiblity that prices might just have to come down to meet incomes is just crazy talk……
“I’m afraid that a lot of these kids are going to end up having to go back to living in trailers.”
Hey lady, this isn’t New York City where people live in studio apartments all their lives. It is freaking Idaho! When all the funny money evaporates from the area, I am afraid a lot of these RE agents are going to have to go back to living in trailers.
“Cement went from 60/sq yrd to over 100/sq yrd. He said they are blaming oil/etc — but he thinks its mostly greed.”
I’ve read there is a world-wide shortage of cement, brought on partly by China ramping up construction, plus I’m sure complicated by all the houses being built.
And that highlights another problem cause dby easy money. With all this fake demand I bet a gazillions of dollars that could be better used elswhere have been sunk into cement producing infrastructure that will be sitting idle in a few years.
OT, but the guy in San Diego who always gives the big sales report there at Realty Times just posted. Says sales in May were up pretty big from April (mid-20%) but down big from year ago (around the same amount). Full read is here:
http://realtytimes.com/rtmcrcond/California~San_Diego~bobcasagrand
Quite funny to read casagrand’s sobering assessment of the declining SD market, and then read the other realtor’s upbeat, never better, strong market, great-time to buy comments. LOL
but I thought everybody wants to live in Idaho….
but I thought everybody wants to live in Idaho….
Yes…Pocatello, the Paris of the Rockies.
…..until they find out what the pay is
Boise. For god’s sake, who would have thought we’d have housing bubble in Boise. It’s a pleasant town, but it’s surrounded by hundreds of miles of wide-open land and there are very few high-paying jobs there. Besides that, one of the largest (if not the largest) employers in town, Albertsons, was acquired and you know that can’t bode well for high-income management types. Micron has been struggling for years, and then there’s J.R. Simplot - a french fry manufacturer. The only good thing that can come from a Boise housing bubble is a bunch of bankrupt CA speculators learning that it’s not so easy to corner a housing market.
Almost ditto for Phoenix and Vegas, so much empty desert there’s really no logical reason for housing to ever go up much, just the sheer stupidity and greed of CA speculators.
Those same people 20 years ago remember Ontario, riverside, San Bernardino and seeing all the wide open desert and saying to themselves “who would ever live here and how could houses ever go up when there’s so much land available?” That’s the 20 year horizon. Then they see what’s happened to SoCal for the last 10. then they see what looks to them like an exact repeat in Las Vegas and Phoenix. They may get screwed but they don’t think of themselves as anything but investors. Where they are wrong is that they aren’t buying things with money, they are buying with debt on margin in a hedge bet that the price goes up enough to justify the expense. I keep reminding everyone there’s nothing wrong with the houses there’s something wrong with the purchase/funding mechanisms.
Alberstons just annouced it is closing underperfoming stores in CA, I’m sure any state with Alberstons stores will be affected. These jobs don’t pay a lot by the way either but it’s where many of the young/old and undereducated work as well as illegal alien with fake SS numbers.
They must keep the illegals in back. Albertson’s usually costs more and has better product. I go there to avoid illegals.
GOOD!!!
This blow-hard no it all I know, was going on and on about Idaho being the new promised land for investors. He was investing there at the beginning of this year. I hope he get his a$$ handed to him!
“his recent rollback in some prices is attributable to overestimating this year’s increase in the cost of building materials.”
Does he really think we’re going to believe that he lowered prices because of lower costs? Business lower prices only to compete for customers, not because of lower costs.
Yes, but lower costs also increase competition, as more firms can produce profitably when costs decrease, and existing firms can increase production to a higher level where (higher) marginal costs of other factors of production are offset by lower cost of building materials. On the demand side, the increase in supply offers buyers more choice, and equilibrium price is restored at a lower level than before.
This is interesting, posted by the Mortgage Daily News, none the less. I wonder what agents/speculators think when they read it ? Denial can only last so long.
http://www.mortgagenewsdaily.com/662006_Housing_Bubble_Economy.asp
Boise. For god’s sake, who would have thought we’d have housing bubble in Boise. It’s a pleasant town, but it’s surrounded by hundreds of miles of wide-open land and there are very few high-paying jobs there.
Perhaps it has coastal amenities.
Now THAT’s funny!
Must be something to have paid $300,000 or so for your McMansion, and to wake up one morning and realize that you moved to freakin’ Boise, Idaho. I mean, I’ve been there and it’s a perfectly good town–but it doesn’t exactly bring to mind the term “Retirement Mecca.”
Boise. It’s the new, petite San Francisco. LOL…
I once said (it seemed) 50% of people w/ houses on the market (Boise) are going FSBO route. That was an exaggeration. But, folks, I’m telling you … it’s a lot (because of the independent culture here). When people begin to give-up on FSBO, MLS inventories will sky-rocket. Just watch.
My neighborhood in Eagle is 50% FSBO. One house down the street which was listed at over 700K (way overpriced) with a realtor, but today went FSBO. My guess is that the realtor didn’t want to take them again because they refused to lower the price. House has been on the market for something like 6 months now.
What magical genie does this woman in RIchmond want to pull out of her A$$? I guess she is expecting the PPT to come and rescue her, or Bushie and his buddies? Maybe Jesse Jackson, the biggest idiot around, might come to her rescue? Or Useless Ted Kennedy?
Laura Burns said she and her husband were grateful they had been able to weather their financial storm without losing their house. But she said the experience had left her somewhat bitter.
“I have no faith in the American dream anymore,” she said. “You bust your hump year after year, going to work and paying your taxes. Then you get in a hole, and there’s no one there to help you out of it. The government doesn’t help you, the bank doesn’t care.
“If someone legitimately can’t pay their bills — not won’t, but can’t — there should be some type of help for you. We found out there wasn’t.”
What a lot of those California speculators don’t understand is that Idaho has no homestead laws. In California you can walk away from a property and let an original mortgage go into forclosure. The lender can’t go after you for the balance owed. In Idaho the borrower not only loses the property but is also liable for the balance owed, penalties, fees, etc…