‘What We Have Is A Lack Of Inventory Priced Right’
Some housing bubble reports from California. “Orange County’s skyward trend in new housing is getting another boost with the construction of two condominium towers in Santa Ana. Orange County condo tower development has so far been successful in part ‘because they have attracted some speculative investors,’ said economist G.U. Krueger Irvine. ‘It remains to be seen if these buildings will be occupied by real living people.’”
“Despite a national study that concluded Chico homes are ‘extremely overvalued,’ members of the real estate industry here see a buyers’ market. The high prices have plateaued, (realtor) Brewster Beattie said, and there is an increasing number of homes on the market. In May 2005, there were 163 homes up for sale in Chico. Now, there are 492.”
“‘I think right now the inventory is escalated because people are putting homes on the market too high,’ he said. ‘They’re not selling. It has turned into a buyers’ market.’”
“Carlee Shannon said the market in Orland is showing a similar trend. There are now more than 90 homes up for sale, whereas a year ago there were only 20 to 25. ‘I think it’s because our prices are too high. I believe it’s softening and becoming a buyers’ market,’ Shannon said. ‘There are so few buyers at this time and so many listings out there, so it influences the seller to be motivated. We’re seeing price reductions.’”
“The standoff between thousands of Sacramento-area homeowners and buyers sharpened in May, as 1,800 new listings added to a mounting inventory of homes for sale in El Dorado, Placer, Sacramento and Yolo counties. The newest influx of ‘for sale’ signs contributed to a near-record pileup of 13,146 homes on the market at month’s end.”
“‘What we have is a lack of inventory priced right,’ added (broker) Michael Lyon. ‘We have absolutely a ton of overpriced homes.’”
“As the ‘for sale’ signs pile up, buyers like John Daniels of Sacramento and Alison Munro of Vacaville are holding back, waiting for lower prices. They’re key players in what experts now call a ‘buyer’s market.’ ‘We’re probably going to wait longer than three months just to see,’ said Daniels.”
“Munro, a Fairfield teacher considering a move back to her Sacramento hometown, said, ‘We are looking actively, but I’m kind of watching the prices come down. We’re just waiting it out a little bit longer.’”
The Santo Cruz Sentinel. “Evidence of a cooling trend in the housing market is popping up at several street corners: large clusters of brightly colored ‘for sale’ signs. These real estate signs are staying up longer, and new ones are being planted next to them, creating what some people in the unincorporated parts of Mid-County call ‘visual pollution.’”
“‘It looks like all of Rio del Mar is for sale,’ said county Supervisor Ellen Pirie.”
“Some real estate agents say it’s not so easy to eliminate the clutter. While the abundance of signs doesn’t look good, they say the changing housing market demands aggressive tactics. ‘You have to market the property and you have to work,’ said (realtor) Gregorio Magana. ‘It’s the first time in 40 years that you have such a large inventory of product available.’”
Thanks to the readers who contributed to this post.
“Orange County’s skyward trend in new housing is getting another boost with the construction of two condominium towers in Santa Ana. Orange County condo tower development has so far been successful in part ‘because they have attracted some speculative investors,’ said economist G.U. Krueger Irvine. ‘It remains to be seen if these buildings will be occupied by real living people.’”
New horror flick coming to a theater near you:
“Dark Towers”
I always thought that the tallest building in Santa Ana was the ronald reagan federal building in SA civic center. It is a recently built gleaming glass and steel 20 story tower which stands out as a bastion of US-federal power in the burgeoning immigrant latino community in the north and west part of Santa Ana.
Orange County is gonna pop like a big fat over-inflated ballon. Inventory has more than doubled since the beginning of the year, and inventory is already up 840+ properties this month and we’re only half way through the month. Do I hear 900+ more properties by month end??
http://bubbletracking.blogspot.com/2006/06/tracking-orange-county.html
And this article is why the “they’re not making any more land” argument is crap.
true, they’re not making too much more land (that said some places like Mexico, and also Dubai actually ARE making more land)…
but we can always build skyward, which has the same effect. More supply.
Clouseau.
Good point, Dubai is MAKING more land, and this NEW LAND will become home to about 135,000 people.
I used to live in Dubai .. there’s plenty of desert land there .. that whole man-made island thing is for show ..
Really? I think it is far more likely to become home to a sea of empty condos.
I’ll paraphrase an comment made by someone here the other day: prices are not merely high, they are as high as they can possibly be. There is no “stand-off”. Many people would buy if they could, but they are not buying because they can’t buy.
My realtor friend said that they’re seeing a lot of traffic at the condo conversions in San Diego but nobody is qualifying for loans anymore. There are plenty of greater fools, they just don’t have enough money/credit to become debt slaves. Maybe that’s a good thing.
‘What we have (hyar) is a lack of inventory priced right’
With apologies to Cool Hand Luke…
MjM
I hear ya and I am sure Luke would agree too..All this talk about a buyer’s market seems loony when those buyers would need to pay the highest prices in history for their homes, only to end up upside down in a year or less.
Realt-whore’s definition of “Buyer’s Market”:
Market where inventory is skyrocketing but not selling, while would-be sellers refuse to negotiate on price.
Excellent point. Until sellers drop their expectations–and asking prices, we have not yet entered a buyers market.
Until then, we are still stuck in a very slow market, with prices that are not in the buyers favor.
‘It remains to be seen if these buildings will be occupied by real living people.’”
In related news… LA County coroners office is looking into alternative locations to store and indentify “Lifeless Americans”, and is considering various multiplex locations thoughout the southland.
Lifeless American’s advocate group LAFFING (Lifeless Americans For Fair Interm Negotiated Garaging) attorney Gloria Allred stated… “Lifeless Americans have been held down by the “live-man” and they will no longer take this abuse lying down.”
As opposed to “genuine immitation living people”
That’s pretty funny.
Years ago, National Lampoon did a parody of retirement communities - a community for the dead. Attendants would take your corpse around for golfing, swimming, dancing, etc.
“Why let death interfere with your active lifestyle?”
MjM
Sounds like ‘A weekend with Bernie?’
This is going to be like spring of 2001 when the dotcom bubble began to burst. I, like many others, thought tech stocks were a great bargain as they dropped in price. Everyone though we were at the bottom- and bought those “great deals”. I had a great time riding a stock from $7 a share to $2 a share. I was pretty stupid at the time.
Most have alluded to a “dead cat bounce” as prices retreat a bit and dumbvestors snap up some “screamin’ buys” just to see prices retreat even more.
Who knows how low it will go? I’m not familiar with the long term history of the Florida market, but I remember moving to Orlando and seeing little condos for sale as low as 30k and a lot of condos for sale around FLL and MIA on the beach for well below 100k. Were these low prices the result of a prior crash? Will we see it again?
We’ve seen it before, I don’t see anything on the horizon to prevent us from seeing it again
“You are pulling a cart. Each day more weight is added to it. There is nothing on the horizon.”
T. Ficher
I remember lake-front homes selling in the low 100’s in Melbourne, FL. Now the asking prices are 250-300 .. down from 350-400 from Jan 06.
I’ll wait till prices start going up, watch the market for a few months, then maybe, maybe .. I’ll make a move
The term standoff is misleading.
Potential buyers are SAVING money this year because the cost of renting is much less than the cost of owning. Potential sellers are LOSING money because they are paying the high monthly payments.
Potential buyers are watching potential sellers burn money.
I thought about this today. At first I was merely thinking of the difference in the “monthly” payment - for us it’s saving about $1500 a month over buying (just simple rent vs. mortgage). But our total yearly outlay is $27,000. That’s steep, but I see that much and more whacked off of prices every day here in Northern VA bubble-land.
How much more are people in the outer burbs paying in gas? time? tolls? car repairs? new air conditioners?
Who cares?
Some sounds a little bitter
I could’t agree more, arlingtonva. “Standoff” implies that the selfish and greedy BUYERS are refusing to get with the program. It makes me see red every time I read something like this. Long-time lurker, first-time poster; it’s a hot button for me — what can I say?
I agree! It’s all the Buyer’s faults. Quit reading the housing bubble blogs and f’d borrowers blogs and buy something. Your country needs you.
“Some real estate agents say it’s not so easy to eliminate the clutter. While the abundance of signs doesn’t look good, they say the changing housing market demands aggressive tactics.
Like, um, lowering the price?
To newbie RE agents, I think ‘agressive tactics’ really does mean more advertisting.
There is a condo conversion near me which has, almost every weekend since February, had out the sign twirlers on 4+ corners. Not to mention the little short signs on at least the 16 nearest intersections.
So much harder to find a greater fool….
There are two condo conversions in Sacramento off Howe Avenue that have had sign guys dancing for TWO YEARS. LOSING POTENTIAL RENTING WHILE SIGN GUY BURNS CALORIES.
REALTORS NEED MORE SIGN GUYS THAT SHOULD SOLVE THEIR PROBLEM
Was in downtown Long Beach Last weekend(june 11th) and saw at least two sigh twirlers advertising the Dwtn LB condo projects, Also a gigantic canvas sign hanging from one of the uncompleted projects with the phone no of the project developers.
This is bad news. More bad news was that DWTN LB almost deserted of traffic and tourists. As LB did a lot of development of Condo’s, harborwalk and rainbow pier oceanfront mixed-use shopping, tourist, and residential developments over past two years, this could be a harbinger for an impending slowdown in the overall economy.
long beach has become south compton
BECOME South Compton? Long Beach always was.
IMHO, if you live in a town that has ever been touted in a rap song (i.e. the LBC), you definitely live in the ‘hood!
Ok then… we keep the signs, but throw away the agents…
Saw a very interesting report in my inbox today, forwarded to me by a lawyer friend titled, “House Prices in America” done by a joint venture of Global Insight and National City Bank. In it, among other things, it says markets like Los Angeles are overvalued by over 61% and based on historic data, is due for a 30% correction over an median period of 14 qtrs. Parts of Florida are even worse off, with 100% overvaluations and 50% corrections. Ben, I’d be happy to forward it to you for publication if you’re interested.
Yep, that’s a quarterly survey these guys have been putting out using the OFHEO government price numbers for metropolitan areas around the country. They then analyze local wages, job growth, and other factors to determine how expensive homes are in relation to the local economies. There are some truly, truly scary stats to be sure. The Marketwatch story (I don’t have the link anymore) said 71 markets representing 39% of all US housing were “extremely overvalued” — up from 1% back in 2004. Talk about a meteoric rise, surely one to be followed by a nice “soft landing” just like the NAR says.
I’d love to know who exactly is buying a house these days. Are they first time buyers ? Are they renters ? Are they moving/trading up ? I’d love to know if the bank makes them sell their existing house before they buy the next one. When that happens things will really get interesting.
I know a handful of people buying. They are trying to cash in on what they made in equity from one house, and upgrade to another.
I put in itallics trying because many are holding open houses, in an attempt to sell their existing house, and no one is showing up.
Yep , you got upgraders and first time buyers . The upgraders can’t sell their current house and the first time buyers can’t qualify at the higher prices and rate . Interest rates go up 1/2 % and more first time buyers can’t make it .
Who is buying? I’ve got a friend who is wanting to buy, and why? He feels like (1) he is missing the boat on the housing boom, and (2) he is wasting his money on rent. I’ve tried to convince him otherwise.
Let’s put it this way: He’s wasting only half as much money in rent as he would be on a mortgage for the same house — and that’s ignoring maintenance costs. But what about equity? Yeah, what about it!? Bring your cash to the table if you get a better job next year and have to sell you starter home! Ouch!! Equity can go negative, as some of my other friends have found in previous housing busts.
He and his wife are young, no kids, just starting careers — and quite likely to move for a good job! These are, in fact, the perfect type of people who should NOT buy a house right now!!
This poor guy is going to lose a lot. Hopefully the stress won’t hurt the marriage.
In my office here in Boise, a few people looking at homes are first time buyers. They are fallen victim to the “buy now, inventory is down, get in before it’s too late” mantra spewn by the local RE crowd. I feel bad because its like watching a train wreck. One girl talked about a loan officer “changing a few numbers” so she could qualify. Another girl is qualifying based on the assumption she will rent out her extra rooms to suplement her income.
Other buyers I know have “traded up” to bigger homes, nicer neighborhoods, etc.
I’d like to buy my first home, but I would be really streching my finances to afford the $220K home, along with the high FL insurance and taxes.
I’ll wait till the price drops to 150-160k.
From the Sac Bee article:
‘Altogether, there were 4,621 more homes for sale at the end of May than there were on New Year’s Day, according to figures from TrendGraphix. The record number of “for sale” signs in the region was 13,507 in April 1992. That happened amid local military base closings, a statewide recession and unemployment numbers almost double the region’s most recent jobless rate of 4.6 percent in April.’
‘The Folsom-based Gregory Group, which tracks the new-housing market, estimates that 20 percent of new homes are finished but have no buyers moving in.’
Some housing bubble reports from California. “Orange County’s skyward trend in new housing is getting another boost with the construction of two condominium towers in Santa Ana.
I say cheer them on… Build more! That’s what I’m doing in our area, I gave up long ago thinking common sence would kick in. I encourage anyone I hear talking about “now is the time to invest in RE” I say, you know you’re right, get out there and buy more. Call me a SOB I really no longer care. This thing has to crash and cause a lot of pain, and so it should be!
What we have here is….failure to communicate.
if the developers of the condo towers exclude flippers, there won’t be many buyers.
The OCs only existing high rise condo towers, the 18 story 230+ unit Marquee Park Place in Irvine, has 81 of the approx. 230 units available for resale and 39 available for rent in the MLS. there have been only 8 reported resales in the MLS over the last 4 months or so. looks like it might take awhile to sell all 81.
I just don’t understand the allure of these luxury high rise condo towers.
I haven’t been inside of one, but it seems to me that it would be like living in a hotel your whole life. Always in an elevator; no privacy at all–neighbors *all* around you; little storage (unless you count the balcony); I can picture the smaller units being downright clausterphobic.
Is it the view?
Is it the “lifestyle”?
Are these cheaper than normal condos?
Are there people who really want to live in such dense proximity?
Are there really that many people really interested in living the “lifestyle”?
Whatever it is, I’m sure the “lifestyle” must get old and boring soon enough, and the turnover on these traps must be very high.
And HUGE HOA fees.
“And HUGE HOA fees.” And that is so true. Two sisters (friends of a friend in Marina Del Rey) each bought 2000 square foot suites in a luxury MDR high rise years ago at a good price, they say $400,000. Last summer they said their units are now each $850,000. However, they each pay $900 per month HOA. It’s a luxury high rise. First class. One of the ladies also has a house in Westchester. I toured an open house there a couple houses down the street, same square footage, builder, design, going for $1.4 million last summer. They did well in R.E. But they will see their prices fall back to where they bought them at. They are stuck in a stuck market.
Right now it is neither a buyer or sellers market.
I call myself a “waiter” - I’ll get into the market when it’s acting something close to sane. Sadly the last place I lived was about one year from sanity, now that I’m in CA, I give it two to five years.
Five years is a good timeline. We will be seeing lots of 3/1 and 5/1 ARMs adjusting over the few years, and owners will not be able to refinance with negative equity. People will try to flee the market for years. There should be some good opportunities in 2011.
Correct.. it is neither a buyer or sellers market… it is a renters market!
And, for those of us on this blog, a “ranter’s market.”
Here’s some more about those OC towers…
Work begins on towers in South Coast Metro
Construction has begun on what will be – at least temporarily – Orange County’s tallest residential towers. A hole in the ground in Santa Ana’s South Coast Metro area will sprout two 25-story, luxury condominium buildings, dubbed Skyline at MacArthur Place. A third 25-story building is planned for nearby.
The 349 residences in the first two Skyline towers are expected to sell from the high $500,000s to $1.5 million, said Corey Alder, president of developer Nexus Cos. The towers should be ready for move-ins in 2008.
It’s unclear how long Skyline at MacArthur Place will hold the distinction of being the tallest residential towers in the county. Lennar Corp. has proposed taller towers for the Platinum Triangle area of Anaheim.
Meanwhile, One Broadway Plaza, a 37-story office tower that will be Orange County’s tallest building, is planned for downtown Santa Ana.
Save that article so we can all laugh when they come on the market in ‘08 at $350K starting or so… and the developers make up some lame excuse like “changing market conditions” to describe it.
I hope this blog starts documenting some of this historical insanity. By 2008 we will all be chuckling at the thought of someone buying a $1.5M CONDO.
Jesus, I know. I’ve mentioned here before that when I started looking at condos a few years back, the only mid-rise complex in Irvine at the time was the Metropolitan, near the airport. I remember the prices were much lower than a more traditional condo and lots of units were for sale. Now they seem to be all the rage. LOL.
they haven’t even started digging the hole yet for the foundations on that plot. right now it is just a level piece of dirt surrounded by a fence. Looks like another mult-unit project getting started at Jamboree and Alton parkway.
Why would anyone build a 37 story office tower within the SA Civic center? The entire area around the Old Civic center especially to the east and south is becoming a deteriorating Latino immigrant Suburban slum. There are some impressive new buidings within the old civic center such as the Ronald Reagan Federal building and the city Jail. The towering new office tower will no doubt have as its tenants a bunch of Federal and state agencies such as Medicaid, health anf human services, welfare offices, Immgration aid lawyers, Urban assistance to the poor, immigration housing assistance, low-cost medical clinics, ad nauseum.
OT, but Chevy Chase Bank has an office in our building (in OC). I spoke to someone who works there (but he is leaving at the end of the month). He said things are REALLY slow - they should be getting 60 loans per day, but they’re only getting 20. Also, a lot of the deals are falling through. He said that that mostly do ARMs, with a lot of I/Os, and that they have to disclose the worst case scenario. Due to the rising interest rates, he said that they have to disclose that a loan that is supposed to be I/O for 5 years may re-set in as little as 24-30 months. This is spooking borrowers since their brokers told them their loan would not re-set for 5 years, and they are not going through with the loans. (I’m not sure why the loans are re-setting early if interest rates rise - I’d be interested in hearing from anyone with info on that). And, since most of their loans have a pre-payment penalty, that early re-set can cause a lot of pain. I know that this office does loans throughout the country (not just local), so it looks like the banks are definitely starting to hurt for mortgages, and we should see some more cutbacks by banks in the not-to-distant future. Just one more thing to add downward pressure to the prices. It seems like we’re so close to having the market really start to panic and drop. I’m looking forward to it.
I would guess from my knowledgeable friends that there is a cap on the LTV that terminates the option/IO period if the cap is reached.
The loans my friend was selling me were 110%.
“The standoff between thousands of Sacramento-area homeowners and buyers sharpened in May”
I’m sorry but tell me how is it a standoff when the buyers aren’t even there? Oh that’s right, the sellers and their unreasonable prices are the ones STANDing around for months on end while the potential buyers are laughing their arses OFF!!
That’s about as close as you’ll get to this so-called stand off. Please…
“Shakin the Bush, Boss!!” “Shakin the Bush!!” (Apologies to Cool Hand Luke).
“I can eat fifty eggs”…sorry had to get that one in there
http://www.latimes.com/business/la-fi-highOrange County Getting Twin High-Rise Condo Towers
The twin 25-story structures in Santa Ana with 349 units will be the tallest residential buildings in the area.
By Roger Vincent, Times Staff Writer
June 15, 2006
rise15jun15,1,7965564.story?coll=la-headlines-business
So Orange county is adding twin condo towers. Area of construction is close to Costa mesa/Irvine so should see demand. Have seen condo projects go up in OC in various locations. There is a ton of projects going up in what is known as the Platinum Triangle area around the 5,57 and 22 frwys near Anahein stadium. Loks like OC is shedding its former image as a level sea of SFh,s.
I’m an architectural draftsman working in the Chico area mentioned in this article. Yesterday a contractor came in to get a bid on a 3,500 square foot “spec house” that he wants to build. He “heard” that new homes were selling for $200 per square foot and was looking to build a house that would sell for $700,000, (in an area where the median price is about $340,000 and median income is about $51,000). The architect and I, long time fans of this blog, tried to talk him down, (long time client, wife and young kids), but he wasn’t going for it. He bought his lot for $160,000 and can’t sell it because the developer recently lowered prices in the subdivision to $150,000, so he is going to go through with it. Today we managed to talk him down to 1,800 sq.’, (the minimum allowed by the CC&Rs), and encouraged him to price it at the median. We figure if he can walk away, even, he’ll do okay, (just working for wages). Even at that scenario, we both agree that he is screwed. This is going to hurt a lot of people.
You did your part with warning him. I warned many, and saved a few.
Man, I’ve seen a lot of good contractors deconstruct themselves by trying to become the money man. A whole different set of skills and economic awareness needed.
I also live in Chico. We are waiting to buy a home but we are wondering how low prices will (or can) go, and, how long will it take. We have our eye on a $488,000 Sorrento McMansion on First Ave. Is it possible that the price will go down 60%? How much does it cost to build one of these McMansion? How low can the developers go before they are upside down?
I’m seeing hard costs of about $125/sq.’ to build for average quality. With the new Title 24 requirements, (energy efficiency), costs will definitely go up. I wonder how many contractors are factoring that into their bids?