Sellers Should Be Prepared For Cuts In Asking Price
KLAS TV reports from Nevada. “One of the biggest complaints homebuyers have had about the real estate market is they can’t compete with investors who are buying up property with cash. But now, ordinary buyers have a chance to finally close the deal without the fear of investors beating them out. It’s a special program by Fannie Mae only being offered in 27 states, including Nevada. A homebuyer can get 3.5 percent off toward the closing costs and no investors are allowed to bid on the home. ‘This is a great bonus for a buyer who’s looking for a property because they’re basically giving away free money,’ said Nick Nolf, a broker/salesman with the Nolf Group.”
“‘What happens a lot of times, we’ve seen in the past, we have investors that come in and overpay. Let’s say the property is listed at $150,000. They’ll pay $10,000 or $20,000 more for the property, and they’ll pay cash,’ said Noah Herrera, president-elect of the Greater Las Vegas Association of Realtors.”
The Arizona Daily Sun. “A state Senate bill aimed at disallowing city and county energy efficiency standards for new buildings is drawing the ire of astronomers and dark sky advocates. State Sen. Chester Crandell, R-Heber, says he proposed the bill because he thinks that city and county energy requirements are pushing up the cost of new homes. Flagstaff City Councilmember Coral Evans rejected Crandell’s argument that cities are driving up the cost of homes. She said that city, county and the state have waived fees, offered incentives and still watched the price of houses climb. Ultimately, she said, the market sets the cost of a new home. ”
“As long as people are able and willing to pay Aspen, Colo., prices in Flagstaff, there will be an affordable housing crisis, Evans added. ‘To place the blame of the cost of housing here in the city of Flagstaff solely on the shoulders of the city government is truly misleading,’ she said. ‘I think that we need to look at the issue of affordable housing in a historical context to understand why the cost of housing is as it is.’”
KTAR in Arizona. “The Valley’s housing market is changing and so far, it’s not for the better. A new report from the W.P. Carey School of Business at Arizona State University revealed that sales of single family homes dropped 17 percent from December 2012 to the same month in 2013. The news was worse for homes priced under $150,000. Sales of homes in that price range dropped nearly 50 percent during the same time period.”
“‘Buyers are starting to lose enthusiasm,’ said Michael Orr, director of the ASU Center for Real Estate Theory. ‘There are not so many bargains out there for investors. Generally speaking, most areas are seeing more sellers than buyers right now.’”
ABC 15 in Arizona. “According to the ASU report, the percentage of residential properties purchased by investors decreased to 19.3 percent in December, down from a peak 39.7 percent in the summer of 2012. ‘Overall, buyers are enjoying less competition in bids for homes, but sellers should be prepared for possible cuts in asking price,’ said the report’s author, Mike Orr.”
“‘We’re seeing growing evidence the housing slowdown is also being experienced in other parts of the country, including Southern California, Orr said. ‘If current conditions persist in the Phoenix area for several months, downward pressure on pricing will become hard to resist.’”
AZ Family in Arizona. “Investors seem to be losing interest in the Phoenix market, according to Orr’s report, opting instead for better deals to be had in other parts of the country. That waning interest from investors is not new. ‘Demand has been weakening since July, especially demand from investors,’ the report reads. ‘Although December recovered from the very weak level in November, we are still seeing a big drop in demand compared with the last two years.’”
“Looking at all the factors, Orr says the Phoenix housing market has officially hit a slowdown. While prices might not indicate a slowdown right now, the report points out that pricing is a trailing indicator, which means it might take prices several months to reflect what’s happening in the market. According to Orr, the biggest indicator is the ’steep fall in demand’ not just by investors, but by traditional owner-occupiers, as well, particularly at the lower end of the market.”
“‘We are seeing a big drop in demand compared with the last two years, and there are ominous indications of a softening market when we dig deep into the numbers,’ says Orr.”
The Phoenix Business Journal in Arizona. “If the current cooling trend that started in July continues for much longer, 2014 could easily see average and median home prices move a little lower than they were at the end of 2013,’ Michael Orr, the report’s author and housing expert, said in the report.”
“Household formation is also working against the market. Orr pointed out the nation had negative household formation last year for 205,000 homes, according to the U.S. Census Bureau. ‘A larger portion of the population is simply choosing to rent, instead of buy,’ Orr said. ‘That includes much of the millennial generation and those who lost their homes to foreclosure or short sale. They either prefer the rental lifestyle, don’t feel that secure in their jobs, or don’t have the credit history or down payment needed for a purchase.’”
“Orr noted that the Phoenix luxury market — homes priced above $500,000 — is the only sector that hasn’t seen this slowdown. Patrick Jones, past chairman of the Scottsdale Area Association of Realtors, said Orr’s analysis of the luxury market is the only aspect of the report he disagrees with, at least in the North Scottsdale/Cave Creek/Carefree area in which he mostly works and where many individuals own second homes.”
“‘I think the luxury market’s struggling too,’ he said. ‘You can talk to any Realtor in that area. The luxury market is not as hot as that report says.’”
“Jones described his area of the market right now as a direct contradiction to Economics 101: prices continue climbing as demand is falling. He thinks part of the reason is because sellers operate on what they read in the news, which is always based on data that’s one or two months old. Buyers, on the other hand, know what’s going on in real time because they’re out there every day, he said.”
AZ Housing Demand Collapses 18% YoY; Falls Through 2008 Floor
http://www.zillow.com/local-info/AZ-home-value/r_8/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D14%26r%3D8%26el%3D0
Even with millions excess empty and defaulted houses, there is just no demand.
AZ and NV are underwater still…. and sinking.
http://www.zillow.com/visuals/negative-equity/#4/39.98/-107.01
good link
“…based on Zillow’s third quarter 2013 data.”
Lots of QE piššed away, but little improvement.
“Underwater mortgages Are a Bigger Problem Than The National Average Suggests”
http://finance.yahoo.com/blogs/breakout/underwater-mortgages-are-a-bigger-problem-than-the-national-average-suggests-132242644.html
This is stating the obvious but let’s revist….
As of today, if you bought a house anytime since 2004, you’re underwater. As housing demand at 1997 levels continues to sink and sales truly grind to a halt, the the underwater cohort will grow to anyone who bought a house 1999-current.
Good luck.
I think also the underwater mortgage statistics are based on first mortgages only, not including HELOC’s/second mortgages.
When you think of all the piggy-back financing (80%/20%) that was done during the bubble years, plus HELOC activity….yikes. Who knows what the real number is, but it’s bigger.
Taxes, interest, depreciation, all losses.
Remember…. houses are depreciating assets, ALWAYS. They never pay you back.
In some states like Illinois property taxes are a death sentence. And the state is still struggling to make ends meet.
Very true. Its crushing and forever. Only New Jersey is higher, would not have guessed these two states were highest if coming in cold.
http://tinyurl.com/l9q539b
“‘What happens a lot of times, we’ve seen in the past, we have investors that come in and overpay. Let’s say the property is listed at $150,000. They’ll pay $10,000 or $20,000 more for the property, and they’ll pay cash,’ said Noah Herrera, president-elect of the Greater Las Vegas Association of Realtors.”
Noah,
This is so great revelation. Anyone buying a house in the last 14 years over paid by large margins.
Noah? Noah Nothin’.
“Sales of homes in that price range dropped nearly 50 percent during the same time period.”
A ‘collapse’ in demand even by the tightest definition.
Want to starve the beast? Just raise the price.
“A larger portion of the population is simply choosing to rent, instead of buy,’ Orr said.”
Everyone knows housing is radioactive and extremely harmful to ones’ self-interest at current massively inflated asking prices.
Imagine Dragons rocked Phoenix last night big time! New theme song for PHX housing market
I’m waking up, I feel it in my bones
Enough to make my systems blow
Welcome to the new age, to the new age
Welcome to the new age, to the new age
Whoa, oh, oh, oh, oh, whoa, oh, oh, oh, I’m radioactive, radioactive Whoa, oh, oh, oh, oh, whoa, oh, oh, oh, I’m radioactive, radioactive
“Jones described his area of the market right now as a direct contradiction to Economics 101: prices continue climbing as demand is falling. He thinks part of the reason is because sellers operate on what they read in the news, which is always based on data that’s one or two months old. Buyers, on the other hand, know what’s going on in real time because they’re out there every day, he said.”
This is a profound statement; even not considering the source.
Analysis of timestamps indicates your posting speed dramatically accelerates over time. Coffee consumption?
From personal anecdotal experience with elderly relatives and also just reasoning it out, I think sellers are much further out of date than one or two months old. I’m not sure she’s even fully aware yet that the multigenerational peak in price was way back in ‘07 much less the situation a month ago. Also that type of decision takes months… I’d estimate sales decisions now are being made based on 2012 data.
Yeah it’s a 6 month lag between sellers and real time, not two.
peak was june 05 in DC area and surrounding oblasts
‘She said that city, county and the state have waived fees, offered incentives and still watched the price of houses climb. Ultimately, she said, the market sets the cost of a new home.’
‘As long as people are able and willing to pay Aspen, Colo., prices in Flagstaff, there will be an affordable housing crisis, Evans added’
It wasn’t that long ago that the city issued bonds to buy land from the BLM so it wouldn’t be developed. There is forest and scrub as far as you can see in every direction, owned by the governments.
“There is forest and scrub as far as you can see in every direction, owned by the governments.”
Ironically you can find the very same thing in new england… except it’s in private hands. Deciduous forest in all four directions at a latitude south of the MA state line, coniferous north of said line.
Land is worthless for the most part for this very reason.
It would be better for the people living here if they would stop hoarding land. But I would say it’s more a mania that describes this:
‘people are able and willing to pay Aspen, Colo., prices in Flagstaff’
For the most part they can’t. Why is the government cap for house loans so much higher in Flagstaff than Phoenix, when we earn less?
Trillions of free dollars from the obama administration vs some small town fees waived…
Who do you think will win that battle?
You want affordable housing?
Get government completely OUT of the financing the housing market.
Get government completely out of bailing out banks and buying their near worthless assets.
As long as the the government guarantees housing loans with 0-3% down that no bank in their right mind would make on their own - there will be little affordable housing.
‘As long as the the government guarantees housing loans with 0-3% down that no bank in their right mind would make on their own - there will be little affordable housing’
Unless it collapses under its own weight and distressed sales pull prices down. Of course, that would involved millions of families going through financial hell, but hey, the government’s trying to stimulate the economy!
http://www.bloomberg.com/news/2014-02-17/miles-says-big-stick-of-rate-hike-too-blunt-for-housing-market.html?cmpid=yhoo
‘The EY Item Club said this month that London’s housing market is beginning to show “bubble-like conditions.” The Institute for Fiscal Studies says the government’s Help to Buy program to aid first-time purchasers get on the property ladder risks driving prices higher.’
‘Bank of England official David Miles said policy makers will only use interest rates as a last resort to cool Britain’s housing market if it begins to overheat.’
“We do have, as the last line of defense, the blunt instrument, the big stick of interest rates,” Miles said today in a Bloomberg Television interview with Guy Johnson in London. “If you did get into a situation where the tools that the Financial Policy Committee have seem not up to the job of stopping overheating in the housing market, we would then turn to the blunter instrument of using bank rate. We’re a long way from that.”
‘Miles said he would become more concerned if expectations for house-price gains became entrenched and fueled rapid growth in mortgage lending.’
It’s “important that there is a clear recognition by borrowers and lenders that interest rates will not remain at this level for many years to come,” Miles said. “They need to think very carefully what’s going to happen when the cost of that mortgage moves up.”
Have some more kool-aid, but remember, you can get burned!
I think we should have a post on the government led distortions. I’ve come to the conclusion that on the financial side of things, the biggest one is the Fed. My rationale:
1. MID–distortion that only impacts a small percentage of borrowers, mainly in high tax and states with expensive housing markets.
2. GSE (government subsidized interest rates, low down payments)–if this were a big part of the blowing of bubbles, we wouldn’t have seen a global housing bubble…most (all?) other places do NOT have this subsidy–but still saw massive housing bubbles.
3. The Fed–pushes rates where ever it wants, lowering rates around the world as people flee US Dollars to seek yield elsewhere. The Fed is the one US Government institution that has the ability to blow bubbles worldwide by virtue of interest rate manipulation.
#3 seems like the biggest manipulation…by far.
‘As long as people are able and willing to pay Aspen, Colo., prices in Flagstaff, there will be an affordable housing crisis, Evans added’
I’ve been to Flagstaff. Paying Aspen prices in Aspen is already insane, but paying them in Flagstaff?
‘We’re seeing growing evidence the housing slowdown is also being experienced in other parts of the country, including Southern California’
I guess he’s been reading the HBB.
‘While prices might not indicate a slowdown right now, the report points out that pricing is a trailing indicator, which means it might take prices several months to reflect what’s happening in the market.’
Well, yeah, if low priced house sales drop 50%, and high priced sales rise, the median could be going up as prices per square foot are collapsing. Come to think of it, this is exactly what’s happening in California. It looks like Movoto was right all along.
“Well, yeah, if low priced house sales drop 50%, and high priced sales rise, the median could be going up as prices per square foot are collapsing. Come to think of it, this is exactly what’s happening in California. It looks like Movoto was right all along.”
A collapse in demand coupled with a surge in supply can be masked by hyperstability in the median sale price, which actually represent larger homes purchased at lower price per square foot for roughly the same median dollar amount as before.
BINGO
And this is where we get into evaluating the worth of the dirt, the structure(s) and inputting the depreciation.
‘Chihuahuas are apparently overrunning Maryvale, a Phoenix neighborhood, where animal control officers report stray dogs. Officials said foreclosures and undocumented workers being forced away led to a large number of small dogs running wild. Animal control workers said they’ve had thousands of calls about stray Chihuahuas.’
http://abclocal.go.com/wls/story?section=news/national_world&id=9434793
Oh my, an infestation of wild yappers.
The attack of the canine rodents…
Hee hee!
‘there are ominous indications of a softening market when we dig deep into the numbers’
Oh dear Mr Orr, what ever will happen to all these buyers of the past couple years?
What I’ve seen in my neck of the woods is a lot of properties being removed from the MLS in the last 10 days or so. I’m expecting many of these houses to be re-listed in May for peak RE season (spring/summer).
IIRC, if you de-list a house and remove it from MLS for 90 days, you can list it again on MLS as a new listing. These people are delusional, a lot of them were doing the “dutch auction”** thing but only dropping the price by a few thousand bucks, not nearly enough to generate real interest. In other words, instead of being 50k overpriced, they came down to “only” being 40 or 45k overpriced.
** Dutch auction is a good tactic for price discovery, so I’m not criticizing that, just that these sellers didn’t take away the right message… that maybe their price was ridic to begin with. And when your initial price is far too high, you basically ensure that people look at each subsequent price drop as a sign of weakness.
in other words, Realtors are Liars.
Let’s play a little jeopardy here shall we..?
“A home speculator who claims they bought on a dip in the years 2010 - 2012″
What is a “Sucker”.
“A Person unknowingly laboring under the weight of heavy burden but cluelessly continues shouldering said burden”
That too : )
Who is Jingle Male?
Yes I see the prices of North Scottsdale houses are too dam high for their level of quality and in a year or two those prices will dive below 2011 levels.
Our new runway foam….. and first cascade of defaults
“US Consumer Debt Rises in Q4 by most since 2007″
http://www.cnbc.com/id/101352848
Mortgage balances, which form the bulk of household debt, swelled $16 billion in the fourth quarter of 2013 from a year earlier.
Heh….. suckers….
Omen.
Rut roh
Sorry the doom and gloom isn’t flying with sellers anymore in the high end homes, they are discounting very little if any. They are not going to wholesale drop prices to suit the investors and real estate agents, they want everybody in every price range to give their house away so they can all make a quick buck.
Sellers at homeowners meetings have said for some time now, the weather back east is frightful, the taxes and cost of living beyond belief, they want to live in the sun belt, golf everyday, swim in my negative edge pool no way, we live in a great part of the country where there is climate not weather, you are going to make those folks East of the Rockies enjoy your life cheap why?
After all, because there is a slow down in car buying in winter this year I don’t see BMW or MBZ saying they are giving anything away.
Either you buy the climate and good life or go back to a chain link fence, brown lawns, and a tree, with blacktop pot hole living and maybe 3 months of decent weather?
Doom and gloom?
Pick yourself up off the floor and cheer up. Falling housing prices to dramatically lower and more affordable levels is bullish optimism.
And remember…. Housing Demand in CA as fallen through the 2008 floor established during the financial crisis and heading lower.
See for yourself.
http://www.zillow.com/local-info/CA-home-value/r_9/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D14%26r%3D9%26el%3D0
They don’t start giving things away until NOBODY is buying. This is exactly what happened in the car market late ‘08 into ‘09. I bought a 3 year old used Toyota FAR below (3K) wholesale in late fall ‘08.
I remember that. Nissan was advertising their little car for $5900… brand new. Apparently they had no business and a whole lot of excess inventory. It may have been late 2008 or thereabouts.
Sounds familiar.
Where is it that there are only 3 months of decent weather? And where are you located?
N Bethesda, MD Housing Prices Dive 27% Y-o-Y
http://www.movoto.com/north-bethesda-md/market-trends/
house around the corner sold in 4 days in 22151 dc area funded by tax slaves doing brisk biz
so vegas is kaput again , already? what was this boom duration 18 months?
Keep droppin’ that price through the floor homeboy. That’s why they call ‘em cellar’s.
I have contacts in the southwest, inventory went off a cliff last year, may have something to do with the sales volume decrease over the winter months. From what I gather, inventory is still low in quality neighborhoods, especially in the 1000 to 2500 sf range. Not sure what if any effect this will have on prices.
Remember….. the excess empty inventory is manipulated and managed to an extreme but you can’t hide 25 million excess empty houses.