‘Prices Have To Be Corrected, Dropped; Improved’
It’s desk clearing time for this blogger. From Florida, “The latest sign that the air is leaking out of the bubble: Condos are being marketed by guys standing at busy intersections holding sandwich boards touting properties for sale. Aren’t sandwich boards supposed to be for furniture liquidation sales, tax-return preparers and, uh, sandwich shops?”
“And remember when the mere whisper of condos for sale drew long lines of eager buyers with deposit checks in hand?”
“South Florida’s Broward County residential real estate sales continued to fall by double digits in May, as for-sale inventory soared from a year ago, according to statistics provided by the Realtor Association of Greater Fort Lauderdale.”
“The huge increase in inventory has been a major factor in the region’s sales slowdown, as 9,537 single-family homes were available in May, an increase of almost 300 percent from last year’s figure of 2,412 available homes. The condominium-townhouse inventory reached 12,297 units in May, up 383 percent compared to May 2005 when the market had 2,547 units available.”
The New York Sun. “It was inevitable, some housing industry watchers say: After a five-year period during which the value of many homes in the Hamptons ballooned anywhere from 30% to more than 120%, economic reality seems to be catching up with New York’s most prestigious summer playground.”
“‘I’ve never seen so many houses on the market since we’ve been here,’ says Marcia Wolf, who has owned a beach home in Westhampton since 1979. ‘We see a lot of homes for sale and never did they seem to sit so long,’ Norman Wolf says.”
“Edward Meagher says he received calls from the brokers representing two sellers, both of whom told him the owners were now willing to renegotiate. ‘I’m not going to do it,’ he says, ‘because the asking prices are way too excessive.’ He contends that is the case with most homes on the market in the Hamptons. Even the brokers will privately tell you so, he says.”
“Most sellers, he argues, have their heads in the clouds, ignoring such real-world realities as rising mortgage rates, the fact the stock market is no longer appreciating every single day, and that not every buyer works on Wall Street and gets a $10 million bonus each year.”
The Idaho Stateman. “Jayo Construction has begun demolition work on a $75 million development that will add up to 106 new condominium units to downtown Boise. Area development experts say the boom in downtown condominium construction is being fueled by aging baby boomers who are increasingly abandoning the suburbs for downtown living. ”
From Billings, Montana. “The HPI for Billings shows that houses appreciated a total of 47 percent in the last five years. Maybe I missed it, but I didn’t see wages up 50 percent in that time. These levels of appreciation cannot be sustained, plain and simple.”
“In Billings, total for-sale inventory is up big time, from 760 in January 2005 to 1,300 this month. Dust off some classic economic principles, and all signs point toward falling prices. In real terms (adjusted for inflation), we just had a price decline. Maybe it’s just a blip or, just maybe, we’re seeing the first signs of a downturn.”
“No amount of grant money can take care of this problem. I believe that the market will correct itself eventually and we’ll all realize, once again, that housing is cyclical and huge run-ups cannot be sustained.”
From Realty Times. “When it comes to pricing your house when you’re ready to sell it, keep in mind you must sell in the market you’re in today. It doesn’t matter what your former neighbor got six months ago.”
“In the DC area, there are stories from the field on how sellers are defending their prices as if their lives depended on it. Bringing it down the $20,000 or $40,000 to sell the property seems, well, just not fair.”
“What’s even scarier are the agents who are defending their prices in a correcting market. They’ll be the first to let you know, ‘It won’t sell for what the seller’s asking,’ but they’re too afraid to tell the seller the sobering news. They’ve just now entered a market where prices have to be corrected, dropped; improved, as it were.”
“Keep in mind, the market is the market. Work with the market you’re in, not in the market you wish it would be.”
A huge week for housing bubble consensus! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
Ben - I still can’t get my blogs to post. HELP
Pismobear,
Earlier this week I cleaned out my “cookies” file and when I returned to the blog I couldn’t post until I noticed I had to re-enter my name and e-mail info. Something to check.
San Diego inventory just went over 22,000! Nope, no bubble here.
There are three (recently listed) homes on my street in Rancho Bernardo; only one shows up in ziprealty. My guess is that 22K is the tip of the iceberg, as FSBOs and some Realtor (TM) listed homes are not there.
Boss,
Hey, Rancho Bernardo! If you see couple driving around RB doing the We Rent! dance with the windows rolled up, you’ll know who it is. I didn’t know you were also in the neighborhood!
Orange County CA inventory just went over 16,000 today.
Hey,
Sacramento is at 15,724, so we’re right behind you!!
http://sacramentohousingbubble.blogspot.com/
liar
that desk will never get cleaned
This week your right. I had a bunch more. Maybe this weekend.
Ben –
The bubble avalanche must be burying your desk about now! Have you hired a bodyguard yet? You and that other Ben (Bernanke) might need one if you are not careful (he has them, of course!).
GS
” not every buyer works on Wall Street and gets a $10 million bonus each year.”
I love this quote as I have felt for a few years now that the world has gone insane. Nice to hear some sanity back in the system.
Simmssays…Toys for Father’s Day
http://americaninventorspot.com/node/1264
With the current performance of the indexes this year, the number of $10 million bonuses should drop. I’m guessing that a couple of hedge funds got creamed in the last six weeks too.
“Sellers can’t imagine bringing it down the $20,000 or $40,000. It seems, well, just not fair.”
Now there’s a weekend topic for ya!
Flash forward: “Some sellers couldn’t have imagined bringing it down $200,000 to $400,000. But it seems, well, they just wouldn’t come down on their asking price back in the summer of 2006.”
There you go — a thread on the quotes du jour, two years from now.
Too true.
It is surreal the number of funny comments and predictions that were stated less than a year ago that have been coming true lately.
Ben’s blog has become a crystal ball.
We may have to start calling Ben “Swami” instead.
Sellers need to realize prices haven’t “fallen”, they are “falling”. The price they could get today will look pretty “fair” six months from now.
That’s a very good point, not embraced much at all by sellers yet and insufficiently embraced by agents.
Once prices start falling, it usually takes several years to reach the bottom. Give them a few years and they’ll be saying “I should have sold in 2006 when someone offered me XXXX.”
No question whatsoever. And particularly in the Hamptons Wannabee Wonderland.
Some remarks by some mortgage/real estate professionals on an earlier thread made me wonder what the benchmarks are for a “normal” market. For example, “months of inventory” seems like the most common metric, but, if I understand it correctly, this combines inventory with a sales rate variable, which makes this very difficult to calculate for a non-realtor without access to sales data.
People have also been mentioning the per capita number of houses for sale in a given area, which seems like a useful estimate of real “need” for housing in an area (although I imagine that it will likely differ for “working” communities vs. popular vacation/2nd home spots).
For San Luis Obispo County, there are about 3100 homes listed on a local MLS. This includes SFHs, condos, and mobile homes; it excludes out-of-county listings as well as any listings (e.g. FSBO) not on the MLS. Population of the county is about 250,000. Average number of persons per house is typically between 2.1 and 2.3 per US Census statistics. Thus, we have about one place for sale here for every 80 residents, or around one place for sale for every 30-35 households.
If these were rental vacancy rates, they would be on what I think of as a “normal” rental market (around 3 percent), a little lower than what I like to see as a renter (I have learned that there is a huge difference in renter choice and bargining power between trying to rent in a market with 1-2% vacancy vs. 4-5%). I have no idea, though, what type of “for sale” ratio to population suggests the proverbial “balanced” market. Or are these type of data at all useful in determining this? Any comments from any of the pros out there?
All else equal, I think that measure would make sense to compare the relative strength of markets, but all else isn’t equal. You need to also consider area population and job growth, not just current population, so there isn’t going to be a ratio that works across markets. Detroit is going to look different than Vegas simply because of these factors.
A better estimate than Realtors’ (TM) days-on-the-market is to simply divide the current inventory by the amount that sold last month. This gives you a measure of how long it would take to clear out the current inventory at the recent rate of sales. Realtors’ (TM) DOM is severely underestimated because it only counts days since the last time a home was listed (and many are frequently relisting these days…).
Is it just me, or does the concept of 1000s of aging baby boomers flocking to condo towers in “formerly” seedy areas seem like a recipe for diaster? Why am I envisioning hordes of seniours huddle together in the closets late at night — ten years from now?
Along with those thousands of ageing baby boomers come the private police companies and tremendous pressure on the local govt to beef up the public police. Old folks vote. And condo towers are easier to defend than SFHs unless the gang-bangers start crashing airplanes into them.
The only way you’re going see boomers huddled in closets is if we get the “Greater Depression” that Doug Casey talks about.
http://www.lewrockwell.com/casey/casey11.html
Here’s my favorite part of that piece:
“However, I feel the Fed will keep short-term rates – which are really the only ones they control – as low as possible for as long as possible…
The biggest single problem, however, is that there are trillions of U.S. dollars outside of the U.S. Unlike Americans, foreigners have no reason to hold them. And at some point very soon, perhaps when the Fed finally hits the wall on its ability to raise rates, these overseas dollars are going to start flooding back home, while the products and titles to real wealth flow out of America.”
This is the real key I believe. While I greatly respect Getstucco and his views on the macro picture, I’m very skeptical about Gentle Ben and believe he really isn’t much of an inflation fighter. Bernanke’s comments recently are nothing more than tough talk, designed to deflate gold and oil a bit and inflate the dollar a bit. That way, when the Fed announces that they will stop raising, which they desperately want to do right now, gold and oil will skyrocket from a lower position and the dollar will plummet from a higher one. The real bond market bust (and subsequent housing bust) will only really start when the Fed stops raising. Totally counter-intuitive. We won’t have long to wait, IMHO.
There are only a couple trillion dollars outside the US that could be repatriated, as opposed to about twelve trillion dollars in debt that needs to be paid. Initial signs point to deflation, but Bernanke could change that in an instant of course by just buying the debt out with phantom dollars.
Rent controlled retirement towers are not uncommon in Canada. However they are usually for those that can’t deal with a house anymore due to very old age or loss of a spouse and don’t want to be stuck in a true nursing “home”.
I don’t think the boomers are quite that stupid — to buy into seedy or formerly seedy areas. They wouldn’t be that age and still in a position to buy if they were that stupid. The few exceptions might belong there.
I should have framed that post relative to Maslow’s Hierarchy of Needs, which governs virtually all human behavior. After physical needs (air, water, food…), humans need safety. Once they are fed, dry and safe, they value family, friends and procreation. Once those needs are satisfied, they value status. Finally, the nirvana is self-realization — “I did what I was placed here to do,” or something like that (think: the grizzly bear guy in alaska who finally committed himself completely, so to speak, to the bear world).
As people age, their hierarchy begins to unwind in reverse order. So it will be useful and potentially profitable, if you are an investor, to remember that oldsters will seek safety above many many other aspects of their environment, when choosing their housing. That is a significant reason so many of them like condos, which are an illogical choice to equally many young folks. Seniors swarm to gated communities — not for the status, butr for the implied safety.
Yep Chip ,you nailed it .I have always felt Maslow”s approach was the most realistic . Aging boomers will value safety over status . That’s why Pulte has been a little better than some of the builders in that he caters to the over 55 group with the smaller homes and gard gated projects .
Sorry .. guard gated projects ….not gard
I think communities are also about social needs…loneliness and depression are epidemic among the elderly. When your friends and family are dying, a person who understands, just across the hall, doing the same activities on the same schedule as you, seems like a much better chance of a fulfilled “old age”.
Just got done diggin’ through the local MLS. Reduced, reduced, reduced, reduced, reduced, reduced………shall I continue?
Yes, please!
“Just got done diggin’ through the local MLS. Reduced, reduced, reduced, reduced, reduced, reduced………shall I continue?”
And someone here actually said it was too soon to lowball. You want prices down start lowballing. You’ll find out real quick who’s testing the market and who’s gotta sell. If you take the emotions and all the other crap out of the process. You will find a deal. I read earlier that there was this subdivision that had 15 properties for sale within a small radius. If I were looking for a home I would hit all 15 for an offer at what I felt was an appropiate price somebody is going to bite. Especially if they are 3-6 mo’s away from a reset and school starts in most places in August/September. I’d be lowballing my rear off.
OT but saw my first “owned by bank” sign on a property.
Get used to it, more are a coming. Saw some pretty nasty numbers for California on Ben’s blog today. Nasty but not quite up to the volume of the last downturn but rapidly getting there.
“Get used to it, more are a coming. Saw some pretty nasty numbers for California on Ben’s blog today. Nasty but not quite up to the volume of the last downturn but rapidly getting there.”
I think it’ll get “there.” I bought a new house in southern California in 1990 and sold it in 1996 for a 20% loss. That’s over 6 years. Some real estate prices have already dropped 10% this year in some of the hot areas (coastal). This crash is just starting. I think we’ll see 50% cuts in LA and San Diego, for example over the course of 6 years. That’s worse than the 1989 to 1995 downturn in the southern California coastal areas. In one year when I look back on my 1996 loss, I think I will be able to say that I was lucky.
I’ll take it a step further. Hit all 15 properties with lowball offers, identify who’s desperate, then once you’ve indentified the desperate lot, back out and wait another 6 months. After 6 months have elapsed, repeat the process. Keep doing this for the next 2 years and you should find the deal your looking for.
Nah, In 2 yrs the rates will be crazy. If history is any indicator.
im paying cash f%ck you crooked brokers
Hey a$$hat, Night Train and posting don’t mix put down the bottle and step away from the keyboard. Not everyone has 100k to 500k sitting in their bank account to drop down on a house.
They should by the time this all clears up.
With what wages?? The average college educated desk jockey is making between 40-65k a yr. I know of a guy who was making that kind of money and had a hard time scaping up 30k for a down payment and made living within his means an art form before he bought his home. With the layoffs in the past and the ones forthcoming most will have a problem scraping 2 nickels together let alone saving 100-500k.
dont need your no doc i/o only crap get a real job
sorry mr mtge broker i will wait.you see my lowball is 50% off of asking and the zip realty folks dont even respond to me yet.
LOL You seemed confused as to why they don’t. Here let me help by asking a few questions. How many of those agents have seen your financials to prove that you have the cash to stand by the offer your making?. How many of those agents know why your making those kinds of offers?. How many agents have you made those type of offers thru?, probably more than one so your probably being seen as an idiot troll at this point.
How about trying this strategy and see if your luck changes. Find an agent with about 10-15 yrs in the biz discount broker internet broker whatever, I’m thinking a full service broker would be better for this strategy, someone who can get behind your offer and verbalize it, but whatever floats your boat. Another agent discussing a lowball offer with another agent goes over far better than some wacko off the street. Unless you want to drive around and go to each agents office that has a listing. But with gas at 3.50 that might not be the brightest thing to do. When you find this agent make an appt bring rock solid proof of cash, explain your position bring some of the material from Ben’s Blog to back you up so you don’t look like you were just released from a mental institution, tell him all he has to do is fax offers and represent you upon success. See if your luck doesn’t change in 30-45 days. Especially if your hitting the stuff thats been on the market for more than 90 days. In a market as saturated as Phoenix/San Diego/Florida my starting bids would be at 1999 prices on everything sitting longer than 90. Whether I was paying cash or not. Why wait for 2 yrs when you can get it now at low rates. Get the price and the low rate to boot. Especially a condo. If I wanted or had to buy now.
You are blowing the “your” vs. “you’re” thing again. How can I trust your numbers when I must spend so much time trying to decipher your words?
troll broker who will manage a del taco.i hope you dont short me on cheese i like cheese on y tacos ok.
Remember I’m a broker I’ll go out on a limb and say the vast majority on this blog don’t trust what I’m saying, not that I really give a rats a$$. Why should you be any different no matter what or how I write it. Just ignore it like every other broker hater does. Hopefully it helped someone who’s frustrated by hearing they have to wait another 2-5 yrs to buy a home. I’m sure it did, if they are paying attention. The strategy I just gave I implemented it with a client of mine and to my surprise he had great success with it during the last downturn. So do with it what you will.
Reading you guys bitching makes me wish I had a double shot of tequila.
Bottomfeeder, just start lowballing.
MrIncomewetdream, go buy another income property.
WeRent, the your vs your’e isnt as bad as those who mix up loose vs lose.
“troll broker who will manage a del taco”
bottomfeeder1-
LMFAO Dude, I probably spend more money sending my kid to pre-school then you make in a year. If all hell breaks loose as predicted you’ll be on your 10th yr of selling blood and sperm to eat before I even consider breaking principal. I’m a long long way from managing a Del Taco aSShat.
do i detect anger or is it denial get a life cause re is going down
I work in the admin side of broker business and see several of our loan brokers sitting on there ass with their thumb up their butt, because no calls are coming in. The best job they can get out of all this is selling cars. Its a matter of time before the desk they sit out will look better if it were empty.
I’m going to try a reverse silent auction. I’m going to take a list around with the prices of other houses in the area and have sellers make me an offer. Comps have two edges.
In recent months I’ve thhought about variations on that. I expect that some bright person will come up with a Website and/or company to make that process easier.
MrIncomeStream — good observations and forecasts, all of them. I’m trying to think of the Elvis quote about business — seems approriate here.
im all shook up oh yeah
2nd Chips comments.
TCB - Takin’ Care of Business
It’s just killing me–no one pays any attention to price.
All else equal, yes, as we age, we like to take care of less property, and many would like to be near urban centers, etc. BUT, only a select few can do so if the price point is $700k-$1.0m. PRICE MATTERS. Especially with folks whose major earnings years are behind them.
San Diego is learning that baby boomers won’t pay $1m for a condo. Yet, there are developers that think baby boomers will pay $700k for a condo in downtown Boise?!?!?!
Once houses go back to being a place to live and not a place to invest, prices will have to come down to earth.
hang on here, rental
i thought i was the only guy having a calculator malfunction.
$75,000,000 / 106 units = $707,547.17 builders cost per unit??
what’s wrong with this picture?
When builders call a project a “$75 million project”, it is very commonly value (ie sell-out price), not their cost. However, if they did report cost, that means the condos would need to be 20% more, or $900k per. Good luck with that.
You are likely omitting commercial space on the ground floors which will subtract from the unit cost of the condos.
The condo boom has arrived in downtown Boise:
“The development will consist of 19 three-story buildings. Each unit in a building will be allocated two spaces in an underground parking area. The units will range in size from 1,800 to to 2,600 square feet, and will be priced between $700,000 and $1.2 million.”
Yes folks- San Diego condo prices right here in Boise!
We need more housing in downtown Boise, but 700k plus?
In Bozeman, MT we have a flush of new downtown condos coming onto the market - the “mill district” which used to be known as the bad part of town.
Small 1-2 bedroom condos 800-1100 sq ft are listed for $350k +
All the way up to $660k for a 3/2 1650 sq ft luxury condo or $1 million for a penthouse loft.
Consider that Bozeman is a town of 30-35 k with a handful of restraunts and bars downtown. And the “mill district” is bounded by the railroad tracks, interstate 90, main street traffic and a poor neighborhood with a bunch of very junky bungalows.
In a word: unbelievable.
The thought of a “bubble” in Bozeman is ridiculous. However, there is simply nothing else with even the slightest urban character for hundreds of miles. But if somebody can get a sucker to buy the stuff, then more power to them.
More like the inland reach of the California flipper tsunami tide…
All right, Bozeman has caught the condo fever! Your home prices are truly outrageous compared to wages, and now some nice condos. In Billings, the rage lately has been for struggling downtown buildings to announce top-floor condo conversions. I can recall four different projects (including one new medium-rise building) announced lately.
I know our prices sound outrageously low to you, but in 2000 $120k would buy a nice 3-4BR in a good part of town. Now it buys a 1BR condo in an ugly metal shed in the bad part of town. Yay.
All right, Bozeman has caught the condo fever! Your home prices are truly outrageous compared to wages, and now some nice condos. In Billings, the rage lately has been for struggling downtown buildings to announce top-floor condo conversions. I can recall four different projects (including one new medium-rise building) announced lately.
I know our prices sound outrageously low to you, but in 2000 $120k would buy a nice 3-4BR in a good part of town. Now it buys a 1BR condo in an ugly metal shed in the bad part of town. Yay.
South Side metal box
why wait till they’re built in Boise?? there are 81 available at the marquee park place highrise in irvine, calif. right now that flippers can’t sell. most are smaller tha 1,800sf, but hey, you have a great view of the 405 freeway 1/4 mile away, you get to pay an $1,100 per month association fee and you can’t have any pets.
what more is there in life??
Do you get to share coin operated laundry facilities,too.
What about parking? There is just enough for one space per condo owner right? Cause, I’d like to discourage friends from ever visiting.
700k + in downtown Boise?
What a deal!!! I better camp outside the sale office the night before, and I hope I can get 5 of those condos. In a year they will be worth 900k each, and I will be a milionaire!!! Then I can quit my McDonalds job and hang out with the high rollers!! Money money money!!!
This has to be the complete breaking point for me.
Not that I can afford it, but I could by the SFH I rent for app. 520k here in Vienna, VA which I rent for 1700 per month. It needs new windows and sometime in the next five years, a new heating system.
Compare that to a 750k condo in Boise…..
Am I the only one who thinks things are beyond really insane? More than this blog has even reported? That what isn’t reported on the ground that we will hear about three months from now (when it is finally reported) is even more awful than we could imagine?
Let’s face it folks, if the average jane, like myself, who doesn’t make six figures and has a one income household can’t afford 520k in the NoVa area. Who, in reality, can afford to plop down 3/4 a mil in Boise?
I’m often stunned by how hard I think the sh!t is going to hit the fan in the housing market, but then I’m even more floored by what I read here.
This is going to be very bad.
Per this website Phoenix is at 50,626
http://www.jimmessenger.com/mls.php
Ahhhh… executives, are they?
Am I doing my math wrong, or are the % increases in the inventories in the Florida article wrong? It looks to me like they are up almost 400% and 483%, respectively, not the 300% and 383% reported. While either number is great, I would prefer the higher percentages, as it puts that much more downward pressure on prices.
Yes, you are doing the math wrong.
If something goes up 4 times, it’s a 300% increase, not 400%.
Hey Ben, I will repeat my tracking metric suggestion for the “Homes&Land Index.” Here in California, Homes&Land is the standard for home advertising, available in any real estate office and in front of any supermarket. My proposed index is simple: how many pages are there in your local Homes&Land edition? The “Malibu to Beverly Hills” June addition is….. 300 pages! THAT is huge.
300 pages? That’s going to be a collector’s item one day… I’m going to have to grab one every month for the rest of the year.
Neil
I hear lining your clothing with newpaper helps to keep you a bit warmer.
LMAO - my dad lined his shoes with them to make ‘em last in the Great Depression (sad but true, still had to laugh)
Thank God that if (when?) another depression comes around, we have Duct Tape!
My mom and her siblings used to wear “flour sack drawers” — home-made underwear fashioned out of burlap sacks — seventy years before the present when the symbiosis provides ready access to Chinese sweat shop labor.
I’m chafing just thinking about burlap undies. Ow!
“Area development experts say the boom in downtown condominium construction is being fueled by aging baby boomers who are increasingly abandoning the suburbs for downtown living.”
Boise has suburbs?
Boise has a downtown?
Boise 2003 population estimate: 190,117
Suburbs of suburbs of LA have more people…
What’s a Boise? Is it in Joisey?
$700,000 in Boise? How many cows and potatoes am I going to need to sell?
You know this thing is hitting the last hour with prices in Boise Idaho like those discussed here.
Not that Boise is a horrible place (I’ve been there many times), but it is what it is: a dusty, very desolate chunk of town in the northern Great Basin.
Sorry to be picky, but Boise is not in the Great Basin, but the Columibia River watershed. I think only parts of far southern Idaho are in the Great Basin.
I think it is technically the Great Basin. At least, that is how the federal government classifies it.
anyone paying $1M or so in Boise is either from California or a big time lunatic. Or both.
Phoenix over 50,000? Wow. I think someone on this site had predicted 50,000 by June and its really come to life.
It’s simply stunning, the number of houses on the market. You see signs everywhere, but still not much movement in prices. But in the current makret, buyers will not be the ones blinking first.
Simmssays…Kid’s Toys Perfect for Dad’s
http://americaninventorspot.com/node/1264
OT but I just spent 3 days in Kansas City, MO. I couldn’t believe the number of condo conversions, mostly lofts, under construction. Some of them really did look spectacular, at least from the outside, but who would be buying these condos? Kansas City is completely surrounded by farm/ranch LAND and lots of it.
Also, if anyone reading this is living (or from) KC I have a question. The city appears truly wonderful — sparkling clean, no traffic, beautiful architecture, wonderful museums…but there is something not quite “right” about it. A bit too much like Disneyland???
Kansas City is a nice place indeed, I wish I still lived there. The big problem is that the J word - jobs. A lot of them tend to be attached to Sprint, and they are in ok shape, but not so great as they used to be.
It’s easy to put on a LOT of weight there, so much good food.
Have never been there, but an amateur Sherlock Holmes might focus on the “no traffic” part.
Kansas City is an overgrown cow town, complete with a horrible crime problem and a bunch of snobby Johnson county residents. I’d look elsewhere.
http://tinyurl.com/qkspu
NYTimes article on model homes complete with actors - pretty funny.
Wow, my letter (about Billings, MT) is on Ben’s front page! I’m honored. E-mailed it to the editor on a whim Monday night and there it is. Interestingly, the cover story in the Outpost (the local weekly free/independent newspaper, still pretty well read in town) was about the poor wages in town. I’ve already talked with a number of friends and co-workers who read my letter, and most are pretty much in agreement that the high prices can’t keep going like this. But I think the realtors and builders are mostly still in denial. Most say, “Yeah, maybe in California, but never here.” We won’t have a crisis like the coastal areas or Phoenix, but houses are still overvalued here. The tide of psychology seems to be turning, inventory is up 50% in six months, QOQ appreciation is below inflation now… things should get interesting later this year, as it will elsewhere.
Anecdote, I had lunch with a friend who already owns but wanted to buy in a new community-oriented subdivision later this year. He’s kind of put things on hold because of things he’s heard about prices, and my letter helped confirm that for him. Look for prices to drop as my generation revolts and postpones the first-time homebuying, especially when we see that 12% a year is an anomaly and not a guarantee.
Can you post your letter here ? I think the newspaper’s server is overwhelmed by all the lurkers here hitting it at once.
Wow, you’re right. Maybe they’re having a server meltdown about now. Here it is. I had to cut out a bunch I wanted to say just to keep the length down.
- - - -
Dear Editor:
Steve Devitt had an interesting article about housing in the June 1 Outpost. He noted that, even with assistance, first-time homebuyers are having a hard time finding anything affordable. And he’s definitely right. Currently in Billings, just 52 of 800 single family homes have a list price of under $100,000
How did we get here? House prices roughly followed the rate of inflation through the late 1990’s. According to the 2000 Census, the median home value in Billings was $99,900. But since then, prices have skyrocketed.
The Office of Federal Housing Enterprise Oversight (www.ofheo.gov) has a Housing Price Index (HPI) that tracks historic home prices. The HPI for Billings shows that houses appreciated a total of 47% in the last five years. Maybe I missed it, but I didn’t see wages up 50% in that time. No wonder housing has become unaffordable.
These levels of appreciation cannot be sustained, plain and simple.
Potential first-time buyers would do well to look at the history of home prices. Real estate does not always go up. Here’s an example using HPI figures. If you bought a house in Billings in 1989, just before prices declined, you would have had to wait five years just to break even. Factor in inflation, and that number extends to 10 years.
Maybe there was a reason why a 20% down payment used to be standard. Being upside-down on a car loan is not fun, but owing more on your house than it’s worth is even worse if you need to sell.
In Billings, total for-sale inventory is up big time, from 760 in January 2005 to 1300 this month. And demand must start waning as prices get out of reach for many and interest rates go up. Supply is up, demand will drop. Dust off some classic economic principles, and all signs point toward falling prices.
The latest Housing Price Index for 1Q 2006 shows that prices have increase just 0.66% since the last quarter, or at an annualized rate of 2.8%. This is the lowest quarterly increase since 2001, and below the rate of inflation. In real terms (adjusted for inflation), that means we just had a price decline. Maybe it’s just a blip or, just maybe, we’re seeing the first signs of a downturn.
It’s true, even starter houses have become hard to afford in Billings. But no amount of grant money can take care of this problem. I believe that the market will correct itself eventually and we’ll all realize, once again, that housing is cyclical and huge run-ups cannot be sustained.
Doug A. — congrats on your letter. Solid data and well-written. Sic ‘em.
Speaking of sellers with heads in the clouds, this is from today’s Washington Post chat:
________________
Virginia: I recently had an offer made on my condo for sale where I would have had to pay money to sell it (about $20,000). The agent representing the potential buyers had not even bothered to look at what I paid for the unit. How common is this phenomenon? And is the market really this bad? I was shocked.
Maryann Haggerty: When demand was soft in the early ’90s, people did indeed have to bring money to the closing table in order to sell. Obviously, you don’t have to take that offer. You can counteroffer. Or you can turn it down and wait for your reservation price.
But I’m guessing–just guessing, mind you–that you haven’t owned the unit very long. Maybe you just want to stay.
____________________
link:http://www.washingtonpost.com/wp-dyn/content/discussion/2006/06/02/DI2006060200931.html?sub=AR
That answer had to feel like a swift kick in the a$$ to Virginia. LMAO talk about ego crush
“The agent representing the potential buyers had not even bothered to look at what I paid for the unit”.
I didn’t bother looking at your FICO scores, Tax returns, or phone records for the same reason. They are irrelevant to what I’m going to offer you.
Yes, she should definitely wait. Next year she can bring 50k to closing. What were the potential buyers supposed to do, look at what she paid and add 12% per year? What a joke the advice she got was too. Yes Virginia, there is a Santa Claus, you just haven’t waited long enough for the appreciation to kick in. Buhuhu!
It really is unbelieveable how this “I cannot EVER lose money on a real estate purchase” mentality has ingrained itself into to the psyche of the current crop of “homeowners”. If you asked them is it guaranteed they will make money in any other investment, they would agree it is not. Why is it they think they can overpay for real estate in an insane market six standard deviations away from the mean and still make a profit. You’re not even in the first inning of this downturn. They’re still taking batting practice.
Txchick: Seems like every generation ends up asking the same question. To see how this question was handled in the past, take a look at the uber-classic book “Extraordinary popular delusions and the madness of crowds” by Charles McKay. It was written in 1841, but it is just as relevant today as it was then. Like reading a housing bubble blog, only in flower 19th century prose… It’s creepy how much in common maniacs of the present have in common with the maniacs of the past.
The book is still in print, so you can find it on the usual book websites. But it has been in the public domain for a long time, and you can find the text of it here:
http://www.litrix.com/madraven/madne001.htm
Be sure to read the short chapter “The Tulipomania”.
The book is in the public domain now.
Jeez. I should never edit my posts on the fly.
Ben, when are we going to get the preview and delete comment features we’ve been waiting for?
Is the book in the public domain now, or something?
My favorite so far is the landlady (not by choice - failed to sell for her price) of our new rental house. She said “Prices won’t go down . . . because of the county assessments”. (My jaw still hurts from dropping so long).
“Sellers can’t imagine bringing it down the $20,000 or $40,000. It seems, well, just not fair.”
To help such people confront their denile in the wake of this trajedy,make sure you only offer half of their asking price. This will help them to adjust to a small offer.
I know people who would simply present the seller with a cashiers check for the full amount they wanted to pay. Take it or wait for next offer. Now that’s hardball.
Mo Money, that’s a GREAT idea! Talk about flashing cash to a desperate seller. That’s the best idea yet.
Yep, also when the bank’s inventory gets out of their comfort zone you can play let’s make a deal with them. They won’t get all emotional about it and hate you for it either. Matter of fact, they’ll probably kiss your pinky ring for a lowball offer when it really gets bad.
Exactly, when the feds come calling all bets are off
“…a cashiers check for the full amount they wanted to pay…” That work extremely well when buying cars and I suspect we are close to a long period in which your idea will work well for housing, too. Takes some cojones on the buyer’s part, to be sure, because you typically are offering “as is.”
That’s exactly what I did when I bought my current car. Made the salesman an offer on the car that I wanted (which was below the listed price), and I didn’t back down until I got the car…at my stated price. No shuckin’ and jivin’ around. Of course, they wanted to do the let-me-check-with-my-boss dance but I just picked up my purse and proceeded to leave. “Oh, wait, wait, Ms. sfbayqt! Don’t leave! Let’s wrap this up at your cost. You know we are not making any money at this price.” HA! Did I care?? Nope. Just take my check and give me the keys…I’m late for my dinner.
Gonna do it again in another 5 years for the next car.
BayQT~
If they don’t like it they can eat crow when someone offers them 100k below what they paid. This an investment people where there are winners and losers and all the dumb asses who bought at the top are going to lose.
Actors to help sell homes. Forgot the Cleavers and Andy Griffith. They should be using the Bundys. Show it like it really is.
If the agent did look at the seller’s original purchase price, then they would have offered $50K below. Let’s get real people.
i’ve axed before and got no answer. What is proper lowball etiquette? Is 50% rude or what? I have tried to sell Previously Owned automobiles and felt insulted…. a house must be x100. Should one pack firearms?
A house must languish, the owners must be properly motivated, and they must have equity, otherwise you might as well be talking to a brick wall. I know some people, did well on one house, bought another in a rural area. Needed to sell because of a divorce. The first offer they got was 40k below what they paid for it. This was likely to be their only offer in the foreseeable future. They didn’t care, they wanted out. Bear in mind this was almost a 50% loss in the space of a few years. Other than sellers like this you must wait it out. The first wave of foreclosures, then the sharks and vultures, the second wave of foreclosures and the auctions. It will get ugly but it will take time. Buy when you are comfortable with the price, not because you think the market has bottomed.
I agree. Most posters to date have agreed that we are at least 1-2 years away from prime time on this. Once the media latches onto the revenue it is generating from housing-crash and foreclosure articles, the panic will worsen and then you will find a reasonable variety of properties on which you can lowball without any fear whatsoever of violence or humiliation.
Forget “rude” in the context you meant. Intimidation of buyers is as long gone as those San Francisco squirrels I cooked with a nice Merlot sauce. All offers should be polite and it’s in your interest to appear sympathetic to the sellers’ plight. But there is no shame in stating, “This is what the property is worth to me,” because that will be the truth, or close enough to it if you prefer to leave wiggle room (I don’t, having been stung by the reverse from sellers).
It’s not necessarily the easiest thing to take advantage of psychologically, but last August my agent told me about a house that went for $580K when the other comps were at least $100K more. The seller was an elderly man whose wife had just passed away, and her slippers were still by the bed. He needed out immediately as it was an emotional thing for him. There was really no need to lowball (at the time it was a relative good price) and he got the price immediately. I believe the price was a genuine “comp” and those in the neighborhood asking more may wish to take note.
some one mentioned on this blog some time ago — “If you are not ashamed while putting in the offer, you are paying too much?”
yes bitch it is time to bring money to closeing. Ur screwed. I mean try a counter *cough*
“Aren’t sandwich boards supposed to be for furniture liquidation sales, tax-return preparers and, uh, sandwich shops?”
In this case, I would say “liquidation, yes — furniture, no.”
“One leading real estate broker in the Hamptons, Diana Saatchi, a Corcoran Group senior vice president, takes note of the growing number of available residences. She estimates listings, including both existing houses and new homes built on speculation, are up about 10% to 20% from a year ago,with the most sluggishness in the $1.5 million to $5 million range. “We haven’t seen any price weakness yet, but it might well happen,” she says”.
She says she hasn’t seen any price weakness, but everyone out on the east end knows the bloodbath has started. See http://www.suffolkresearch.com/report.pdf for a reprts that came out in April witnessing 5% drops at that time. And since then it has gotten worse, as the inventory just builds and builds and the hordes of wannabee losers run for the exits. I love it - they are finally getting their butts handed to them.
The smart money started leaving a year or two ago for other places such as Nantucket, Stowe and coastal Maine. The Hamptons are very quickly becoming passe — fashion, by definition goes out of fashion. Additionally the traffic is at an all time high, with commutes of six hours from Manhattan not uncommon on weekend. No wonder people are opting out for the one hour flight to Stowe or Portland.
Additionally, prices have gotten more stupid in the Hamptons than almost anywhere in the U.S. Take a place like Shinnecock Hills in the Southhampton PO. It was recently very blue collar. These are the tiny ranches people’s plumbers and handymen lived in. The nearby Shinnecock Indian Reservation, despit its name is one of the tougher black ghettos on the island and crime including murder is not uncommon. Yet these run down ranches are up to about $700,000, when in fact it’s a $150,000 neighborhood - at least that’s what it was about 4-5 years ago.
People are renting because they know prices are coming down - hard, fast and long.
http://smhbn.blogspot.com/2006/06/agents-of-fortune.html
No offers.
Repeat: No offers.
Way too early.
Wait a year and then read this post again.
————————-
No offers, etc.
Amerika is just beginning a RE bust of epic proportions…LMAO
OT:
The juvenile attacks vs SCDave, MrIncomeStream, SoCalMtgGuy, and yes even Va_InVestor (and others) get old.
IMO, it is nice to have at least a modicum of diversity of opinion on this board, and not only RE Bears jockeying to see who can be “more” bearish on RE.
I’ve found I take home a lot of good tidbits/info from all the above sources, even if they aren’t as bearish as I may be (and some of them may even be more bearish than me).
If you disagree with their posts, could you all please try to respond intelligently? Perhaps something like: “I see your point, but I disagree as to the methodology that led to your conclusion, and here’s why…”. As opposed to “You’re gonna be an ass licker at Walmart!”
Each time the mud slinging starts, it turns this otherwise awesome intellectual resource into my worst preschool nightmare.
Let’s puff down the chests y’all… this ain’t no mating dance, none of you are gonna get laid by being the coolest or the brightest on this blog. (I have a headache, and don’t feel so sexy, so you’re not getting any from ME that’s for sure)
ALL of the above people that I listed are RE bears. Read their posts. Read what they say. The only difference is
1) their occupations
2) their level of bearishness
3) the way that they come to their conclusions.
Keep that in mind when you start your attacks
Hell, I even thought LV_landlord and Homowner_MA brought something to the table. Was their “research” severely fundamentally flawed? yes, of course. But let me tell you, when I wasn’t ready to be a RE bear yet it was the THOUGHTFUL discourse between them and the RE bears that convinced me in full to the bear side. Not the “You’re gonna be eating dogfood while you prostitute yourself on Santa Monica Blvd”.
Rant off.
clouseau
well said with the exception of the skewering of the full on bulls (LV & MA).
I concur. Say Inspector, any news on RE up in MSP? Would love to hear what is going on!
By our newspaper, we’re now at all-time highs in inventory. The market has CLEARLY stalled. Talking with my neighbors, the psychology of the “desirable” SW Mpls RE market has also clearly changed (see below)
interestingly, on my block 2 houses were for sale, and both have sold in just a few weeks. Wife and I walked to breakfast today, and I counted 17 “for sale” signs while walking through 7 blocks. But 7 or 8 had “sold” signs (including the 2 on my block)
Thus, I’m very confused about just what the heck is going on. I am seeing a LOT of “sold” signs, something I didn’t see all winter.
Of note, one of the houses that sold on my block was by a woman going through a divorce. She dropped her price $10k/week or so until she sold it. It ended up selling for FAR less than even I thought, but I had never been inside. Other people on my block said that it was a disaster inside.
Anyway, it’s a flipper who bought it. He’s totally fixing it up now.
To show how much the market has changed, last night I was talking to my neighbors about the flipper. Everyone was happy that he was putting in so much work. But only 1 out of 5 neighbors thought he would be able to profit.
If we made that poll in my neighborhood LAST June, 5/5 would have guessed he’d pull in $100k minimum.
Times are a changing…
FWIW:
I live in the East Harriet neighborhood, near Lakes Calhoun and Harriet, zip 55409 and 55410.
clouseau
Thanks, I know that neighborhood. I used to live at the Calhoun Beach Club back in 99′, I enjoyed the lakes. Thanks for the update!