Have Any Personal Stories Of Capitulation?
What are you seeing in your housing market? homebuilder incentives? Motivated sellers in the classifieds? Here are some from the topics thread. “More personal stories of capitulation? My brother (bought a 508k POS in bad area in ‘04) AND a work colleague (bought 3bdr in La Jolla in ‘04) just this week have confided in me that they are thinking of selling their homes.”
“The friend says if he can get out with less than 30k loss, he’ll do it. Bro still thinks he’ll escape with a 10k ‘profit.’ I guess he is overlooking the 60k in interest he has paid over two years.”
Another said, “As per CNY homes.com Syracuse market now up to 3700. The site showed a huge jump of listings in last 2 days. There’s some old stuff on there but I think we’ll break 4000 before June’s over. I wonder what will happen after August. It’s starting to feel real bubbly round here.”
“I do notice I could take some bubble photos in my little village area but they are in the ‘rental’ neighborhoods in the older, less desirable areas. That and the million dollar homes on the lake are plentiful.”
And another, “We waited 3 months on a list to get into this 780sf one bedroom in Rancho Bernardo in the summer of ‘04. Very nice area. Now, there is a ‘Now Renting’ sign at the entrance (first time since we’ve been here), and they just put a flyer on my doorknob yesterday stating that the company will pay a 300 dollar finder’s fee if we get someone to move in. Think my rent is going down this summer???”
From Oregon Live. “‘From a buyer’s point of view, they have a little bit more to pick and choose from,’ said Sherry Francis, an agent whose territory runs from Portland’s West Hills to Hillsboro. Francis says she’s seeing fewer out-of-state investors speculating in the Portland market this year and more owner-occupied sales.”
The Mail Tribune. “‘There seems to be clear evidence nationally that a slowdown is taking place,’ said Tim Duy, at the University of Oregon. ‘We’re starting to get softer readings from Oregon as well. The lower permit numbers in single-family housing is reflective of that change.’”
“Craig Horton of the Medford Better Housing Association said he wondered whether new rental buildings could pay their way. ‘Building costs are so high anymore that it’s hard to build something and have a positive cash flow unless it’s a large project,’ Horton said. ‘When I drive around seeing all those buildings going up, I ask myself ‘Where are they getting tenants?’ said Randy Unger, Southern Oregon Rental Owners Association president.”
From California. “Dale Griffin has been trying to sell her home in Merced for more than a year. She says seeing the most recent report that says Merced’s housing market is extremely overpriced is frustrating. ‘It’s hard to escape what the news says and I am sure everyone that is looking for houses is looking at that and saying well are they telling us the truth?’ said Griffin.”
“Griffin reduced the price of her home $85,000 over the last year and it still hasn’t sold. ‘It’s very frustrating; we have loved Merced, it has been good to us, but we just want to go to the coast and retire,’ she said.”
I saw the first free car offered with a house in northern Arizona this weekend, ‘A New Fully Loaded Honda Accord.This house is priced in the $500,000’s.’
A car salesman/flipper?
When someone does that type of offer it would tell me they still have a lot of profit baked into their asking price.
Most likely, it is a property developer and they don’t want to “screw” up their comps. By saying the car is “free”, they can perpetuate their mythical “500K” selling price for homes. When in fact, they’ll settle for $500K minus the price of the car.
I wonder how that kind of deal affects the seller tax situation.
If they buy a car for 30k and it has a used price of 10k. But instead of selling it they include in the price of the house.
I wonder if they can then itemize the car at 30k, within the contract. They could then reduce their taxable “profit” on the real estate by 30k.
Was that what your thinking was on why you thought there was alot of profit backed into the selling price?
No my thinking is that if he’s willing to throw in a car there is still alot of paper profits in his asking price. Someone who has gone upside down doesn’t have the dough to be handing out cars as bait.
Signs of stress in my neck of the woods include the first “owned by bank” sign and a 3.8 million tear down that is now an empty lot with the builders at least smart enough to not dig themselves any deeper in debt.
How much is a fully loaded Accord worth? $25K?
I am getting sick and tired of these “incentives”.
Who falls for these incentives? Are buyers really this dumb? Since when did buying a $500K house actually mean buying a $25K car and a $475K house.
Why not be upfront with it and admit, that the house is on sale for $475K. Or even better, admit that you’re a desperately scared flipper who wants to get out without putting hard money on the table.
And you get to pay property taxes on that car forever!
and interest on the car for 30 years.
Not only that, when you take the title in to get a tag, they want to see what you paid for it. No proof? Nooo problem! They’ll assign a retail value to it and charge you sales tax on that. Double-screwed.
They’ll say you paid $475K for it.
“They’ll say you paid $475K for it.”
Haaaaa! I love it!
because this way you don’t cause sales prices to go down and risk scaring off future homebuyers or starting a selling panic
I swear I saw this happening last year in Escondido (northern San Diego inland area). Maybe we ARE ground zero!?
Was that new Honda a lease or an outright “gift”?
i want the free house when i buy the car.
Amen brother! What the heck, a Honda when I buy a $500,000.00 house? Not knocking the car but damn, not enough incentive for me.
You can live in your car, but you can’t drive your house.
“You can live in your car, but you can’t drive your house.”
I think that if I had way too much to drink, that could seem profound.
EXCELLENT!
The “Van Dwellers yahoogroup community would love that one!
EXCELLENT!
The “Van Dwellers yahoogroup community would love that one!
BTW, the second post has the corrected Link for the Van Dwellers yahoogroups. I still haven’t figured out how to delete a post that I made in error, yet.
While on the topic of living in vehicles.
I read some articles on the phenomena of “New Nomadics”. I particularily liked the article by Wendy Priesnitz, the editor of “Natural Life, titled “Beyond the VW Van - The New Nomadics“. And to find more articles on the subject do a google search for “Modern Nomad”
Los Angeles Friends In Deed
These guys are close cousins of the “Bridge and Tunnel Dwellers” a.k.a. bums and winos. There will be a lot of FBs and “institutional investors” joining their ranks in the not-to-distant future — perhaps we could pair bagholders with bag ladies to show them the ropes in their new, more mobile phase of life.
Hey, I resemble that remark! Starting year 3 traveling the country with my family in our motor home. No property taxes, bad neighbors (that you have to put up with), state income tax and there is always someplace to go where the weather is nice! I am aspiring to become a wino though!
BTW, I noticed the Van Dwellers yahoogroups has grown about 2 or 300 new subscribers in the last 8 months or so, to over 1100 subscribers today.
While on the topic of living in vehicles.
I read some articles on the phenomena of “New Nomadics”. I particularily liked the article by Wendy Priesnitz, the editor of “Natural Life, titled “Beyond the VW Van - The New Nomadics“. And to find more articles on the subject do a google search for “Modern Nomad”
Los Angeles Friends In Deed
In Deed,
Ever heard of Steven K. Roberts? I met this guy at a conference about 10 years ago. The original TechNomad. If you’re into tech like a number of other folks on this blog, you might enjoy reading some of his articles:
http://microship.com/resources/index.html
Also check out the Microship:
http://microship.com/microship/index.html
And the Winnebiko and Behemoth:
http://microship.com/resources/winnebiko-behemoth.html
The quote from Merced is priceless and just a preview of what is to come. Great job Ben look for 9 e-mails chock full of Huntington Beach bubble lunacy pictures!
SBG,
When did you send them? If it was after this morning, they will be posted next Saturday. Thanks!
photos@thehousingbubbleblog.com,
between 1:15 and 2:15 this afternoon
There were quite a few pictures.
I got some strange looks from people but I hope it was worth it.
SBG, I will be interested to see your HB pix as well; a friend bought a 3 or 4 br townhouse in HB last July, I think for about 650, with an IO and ARM. He’s convinced it will always appreciate.
And another, “We waited 3 months on a list to get into this 780sf one bedroom in Rancho Bernardo in the summer of ‘04. Very nice area. Now, there is a ‘Now Renting’ sign at the entrance (first time since we’ve been here), and they just put a flyer on my doorknob yesterday stating that the company will pay a 300 dollar finder’s fee if we get someone to move in. Think my rent is going down this summer???”
Hah! So much for the myth that you better buy now, or else face high rent inflation forever…
Not my ‘hood, but Santa Cruz has a problem with a newly-identified form of “visual pollution”
(Thx, Patrick!)
http://www.santacruzsentinel.com/archive/2006/June/15/local/stories/06local.htm
‘Take Clubhouse Drive and Sumner Avenue in Rio del Mar: the intersection has seven directional signs staked in the ground, with large red arrows pointing to the available properties. Or Rio del Mar Boulevard, where 13 signs are posted within three blocks of each other, representing four properties for sale.
“It looks like all of Rio del Mar is for sale,” said county Supervisor Ellen Pirie, whose district includes much of Mid-County.’
My neighborhood (in Rancho Bernardo) has more of a problem with the visual pollution of “human directionals”, whose twirling signs point in the direction of recent condo conversions…
How funny… I just went to that link to read the article… what do I see? A java advertisement on the Santa Cruz Sentinel web site with a ReMax air ballon floating over homes for sale! I guess that didn’t have any pictures availble so they created their own graphic to illustrate the point???
Maybe there will be a market for “not for sale” signs.
In January I checked the residential listings for Jackson County (slight overlap into Jo county due to how the segments are listed) and recorded 1412 listings. Today, 2379. Medford has slipped from the “top 10 most overpriced cities” per National City Bank to around 14…. which ranks us as 66% overpriced. With the slowdown in the California markets, we’re getting a dramatically reduced demand from the equity refugees……hence a big drop in sales, as those of us who live and work here cannot even contemplate housing priced as this market is….. Building new apartments? Whatever….. Can’t wait to see what September brings
I like Syracuse prices still. Been there few times 1.5 years ago looking for 1031 exchange property. Didn’t pull the trigger though.
We have jobs in NJ we would like to keep, and managing the property 280 miles away seemed scary.
But I keep tracking this area.
Maybe with Destiny USA project finally getting started and with new Lokheed Martin plant opening there 1 year ago things will pick up.
Any input from the locals would be valuable.
know the area very well and would agree housing is pretty affordable but property taxes are very high. Destiny is a joke IMO, will not create good jobs if it’s ever built and there really aren’t enough well-paying jobs otherwise to keep people in the area.
NJ Bear-
What is a 1031? I’ve got some realtor contacts I could ask info from.
NYTimes had an article earlier in the week about the Upstate “Bright Flight”.
http://www.nytimes.com/2006/06/13/nyregion/13census.html
That information could help you with any decision to move and /or invest. Personally I was stunned at the numbers.
Like LI Renter, I don’t have much faith in DestinyUSA. I believe it’ll make us like New Orleans with a few taking in all the benefits but the majority suffering with minimum wage or low income lifestyles. To boot, the tax incentives given to Bob Congel are going to be weighing heavily on Onandaga County for the next 30 years.
No capitulation in PHX yet. Still waiting for one big event to start the panic. My guess is it will be the upcoming “redeployment” at Intel, or one of the big builders quits playing the incentives game and actually starts cutting prices.
Or maybe something more national, like a stock market crash?
My sister is a contractor at Intel here. She will lose her contract job in July. She says she hears ten thousand worldwide job cuts at Intel are coming up. This will be a miniature replication of the Motorola haircut in 2001 in Phoenix. But I think it will certainly have some effect. All sorts of restaurants in the area will lose some business and lay off workers. Even the rich kids in Ahwatukee who “pretend” they are working at some restaurants will get laid off. I think Intel layoffs will be a 10% price cut on Chandler, Gibert, Tempe, Ahwatukee, and Queen Creek homes over the course of a year. Higher Federal Funds rates from here to 2008 will cut another 30%. I think we’ll see 7.5% federal funds rates in 24 months.
“I think we’ll see 7.5% federal funds rates in 24 months.”
Gutsy call.
WIth commodity inflation at 60% since October alone, not to mention out of control budget and trade deficits and a swelling M3 money supply, a 7.5% fed funds rate in 24 months seems extremely modest. I bet we’ll see double-digits within the next 18 months.
I’m in Chandler, AZ and the houses for sale in my neighborhood are just sitting. It’ been 6 months for some of them, yet not a single one has lowered their price. Some of the people who owned the home for 4 years could cut the price in half and still make a nice profit. I’m just waitng for the first desparate seller to slash their asking price and bring down all the comps.
Went through an intersection this morning where the houses on all four corners were for sale. No free cars, though.
Did you ask? Probably could get a free used one.
Is anybody from Syracuse to comment on the local market ?
NJ Bear-
What information are you looking for? Are you looking specifically for Syracuse or burbs? Very different situation.
I can say if you’re thinking of picking up cheap $60,000 rental properties, google syracuse police report. Also go onto a state sex offender registry site,
http://www.mapsexoffenders.com/
There are very high concentrations of Level 3 offenders in the city, none in our town, low numbers in others. I think you’ll start to see why things are so cheap.
If you want to ask about specific towns I’ll try to help you out.
I want to see the Wal-Mart of incentives: price rollbacks.
We’ve rolled back prices to 1999.
In reality, developers are going to hold top-line prices as high as possible for as long as possible. They created this mess for themselves in the past few years. They have gotten people used to dramatic price gains as each phase of construction was completed. Buyers in the first phase could look forward to each phase of completion and mammoth gains in new sales prices and equity for their own homes.
Now the builders have to face the consequences of lowering prices and instantly wiping equity for existing owners in a development.
Great idea - I hope they use the smiley face with the cowboy hat like Walmart does, cracking his whip and lassoing the old price to reveal the new one.
No, it’ll be a smiley face with an eyepatch and a cutlass.
Most likely is a smiley face in a lab coat and latex gloves asking previous buyers to “please bend over, I need to look at your ‘equity’”.
Now the builders have to face the consequences of lowering prices and instantly wiping equity for existing owners in a development.
I have never worked for a developer, but somehow I doubt that wiping out prior customer’s equity is NOT something that’s going to keep the board of Directors up at night. They care about profits and share price. And once all the insiders are done bailing out, they won’t even care about propping up share prices (with company buy-backs) anymore. Any developer that bought most of their land inventory cheap (pre-2001 prices) will ba able to slash prices dramatically and still turn a profit. Those that loaded up on land recently will not be so lucky.
Here’s one for you N AZ watchers:
”Private & Secluded - 9.26 Acres
Along the Oak Creek greenbelt of Page Springs Well drilled, Seller is motivated!
Reduced To $595,000′
Too high still, but definite progress. Just 6-8 months ago less desirable lots nearby were $150k per acre.
…just this week have confided in me that they are thinking of selling their homes.”
The smart money got out Aug ‘05-Feb ‘06. Note to historians; this is when Warren Buffet sold his extra houses. The lucky few Mar-Apr. There is no thinking about it anymore. Getting ready for sale, arranging realtors, actors, buying cookie dough… Sorry, too late.
This is all too common. We see it in every faucet of human enterprise.
Don’t forget Robert, Buffet regrets not selling his Coke in 2000. Nobody is perfect.
And he admits to not being too adept at dealing with foreign currencies. Still, Berkshire is a good hedge (hedge being a trashed word recently for obvious reasons).
Honest man. Great company.
Hedge funds have given the term “hedge” a bad name…
Here’s a short video of the most amazing sign-spinner guy I’ve ever seen.
http://www.youtube.com/watch?v=KIQgkc8VFr4&search=sign%20spinner
Damn that is good! I hope he is making more than minimum wage.
Yeah, that guy is awesome!
This is the coolest thing I’ve seen in ages!
Well, at least sign spinners can look forward to the boom times to come. Maybe he can teach classes and cash in on that.
He shouls make SAG or AFTRA scale.
“shouls” = “should”
Looking at the prices of homes in just about any location is depressing. This bubble has destroyed any hope of owning a slice of heaven for millions of people.
I guess home ownership was too much to ask.
There’s always this one. This seller didn’t get the memo. Dallas is supposedly hot hot hot. To be fair though, it’s in Mesquite, which is Redneck Central. Let’s just say in Mesquite, a smokin’ night out is going to Walmart and then pounding down some Jimmy Dean sausages on the backyard grill before finishing off the evening in front of the TV watching the Rangers blow yet another one.
http://dallas.craigslist.org/rfs/172580357.html
That sounds so enticing too!
“any hope of owning a slice of heaven” get over it. I’ve owned three houses previously and now I’m renting. Its nice not to have to deal with the maintenance. I wouldn’t call it heaven, maybe purgatory…. I feel free now.
Home ownership is heaven and hell all rolled into one. You missed the hell part by not buying at ridiculous prices, the heaven part comes from buying right and avoiding the pitfalls. Use this time to save money and learn your market (and construction standards) inside and out. A lot of people who think they are in high up in housing heaven right now will soon see it turn into the little house of horrors
It is actually fun to shop for a home after prices have bottomed out and nobody is buying. Been there — done that. The selection of homes to choose from at reasonable prices is truly astonishing, and well-worth the patience…
“Home ownership is heaven and hell all rolled into one. You missed the hell part by not buying at ridiculous prices”
The hell part is buying at ridiculous prices PLUS the maintenance headaches. Bought in 1990 and sold with a 20% price cut in 1996.
do not make that mistake again be a contrarian.
“Home ownership is heaven and hell all rolled into one.”
If you can buy the home in a down cycle then heaven, but the volatility in the employment can be hell.
A slice of homeownership heaven anyone?:
http://tinyurl.com/qmc8t
“This bubble has destroyed any hope of owning a slice of heaven for millions of people.”
More likely: “This bubble has temporarily destroyed any hope of owning a slice of heaven for millions of people.”
For each soon-to-be loser there will be a winner. While vulture capitalists will scarf up a lot of properties, there will be plenty left for the rest of us, should we want them.
The “slice of heaven” is real estate propaganda. A house is a house is a house. I think this bubble might be big enough to change cultural attitudes about owning vs. renting, looking at matters in terms of sober investing vs. “the American dream.”
I’m in the same boat. I would like to buy too. Whenever I email an old girlfriend of mine, they always ask if I’ve bought a house yet (at least up to Dec. 2005, not so much now). Seriously– that is the first question they always ask. And I always say “nope, haven’t bought yet, and when I do, I’m going to find some nice 20 year old to marry and live happily ever after!” Heh heh heh. No, I don’t say that last part, but anyway…
No tinfoil hat, but I do see the current trend as further eradication of the middle class. Not politically based, but based on fundamental economics.
A large percentage of flippers will fail, but what percentage of flippers have already locked in their profits, sold at the right time,
and are just waiting for the bottom?
Maybe a good Sunday topic would be how the RE market, like the Tech-Boom market has become more psychological than financial, technical, or analytical. And who is best positioned to benefit most.
Heaven is in the details.
That’s not a “tinfoil” comment, it’s a fact, the middle class are losing ground!
I had neighbors like that. It was literally they first thing they asked in EVERY SINGLE CONVERSATION i had with them: “so, when are you going to buy a house?” “did you renew your lease yet?” they were really getting off on having this little exchange with me — it made them feel sooo smart! of course, that is because i was too polite to tell them i thought housing was going to crash. I did let them know that nothing i owned was financed.
tee hee: they moved across country last summer and bought a house in an expensive part of california. all their equity from the house back east has probably vanished in the depreciation of their CA house by now. i miss them very much not.
This bubble has destroyed any hope of owning a slice of heaven for millions of people.
Heaven?
In America, equity is heaven. Your worth spiritual worth, quality as a human being, and only true joy in life are quantified in dollar denominated increments. It’s our national religion. Poverty is hell, affluence is heaven. Didn’t you get the memo?
In America, debt is the work of the Devil, and his repo men play for keeps…
Still keeping tabs on the Pulte.com local market in Waltham, MA. Wellington Crossing condos used to be “starting at 611K. A couple of weeks ago it was “starting at 319K to 611K. Now it is “starting at 319K to 464K.
I suppose it is possible that fools have bought the higher priced ones already but I doubt it. The condos were supposed to be finished by late Summer 2005 and some of the area hadn’t even broken ground.back then. I’m sure they just want to unload them by now…
Polestar — I find that pretty interesting. Would appreciate updates. Looks like maybe Pulte saw max softness in the higher end and quit at the inventory it had moved, and now is building toward the lowest end/smallest allowed by the deed restrictions/zoning, to keep its folks employed.
I already saw this at one Beazer development near Tampa - Phase one started late last year, just when the chips started to fall - all 2500-3500 sq.foot houses - I know they ran through their whole waiting list because they called me a month after they told me there was a six month waiting list. Phase two started this year - 1800-2400 sq. ft. max in phase two at lower prices (still too high though… 280-320K- I am waiting for Tampa to get back to $100 per sq. ft. before I think of biddiing on something)
Yesterday we went to El Torito in Dana Point, overlooking the water in south OC. They told us there would be a 25-minute wait when we put our name in, but said our table was ready after only 5 minutes.
Parallels?
To get past the complaints about sign twirlers being a visual nuisance, they could wear bikinis (or a little less). Then nobody would be complaining. LOL
http://www.youtube.com/watch?v=KIQgkc8VFr4&search=sign%20spinner
Or you could spin signs like this guy does.
Hey, does each comment get sent to Ben first, then he posts them? I can’t seem to get a comment through at all.
Nothing really new from Shiller, but he gave another speach, and stated this was the largest boom since 1890
http://www.marketwatch.com/News/Story/750RqBsVB9Jjnqplzr1rGp2?siteid=yhoo&dist=TNMostMailed
No poop Sherlock!
Sounds like a Georgia speach.
I do not have a digital camera. And, I damn sure would not know how to send pictures to Ben’s site. However, I really appreciate all of those that send pictures to Ben. Thank you for making the effort!
You are old school.
I have got 4.
2 crappy cell phone cameras and 2 decent digital cameras, plus all the old film cameras.
Some of those should go to Ebay.
Sunset — you didn’t have to insult the guy — he was just trying to thank those who can and do submit photos; he wasn’t looking to get shot at.
No insult intended.
I don’t think of old school as an insult.
My apologies.
No, “old school” isn’t that much of an insult, but Peter… drop $400 or so in a good digital camera. It’s money well spent, and they are easier than you think, and if you can figure out how to post on a blog, posting a picture probably isn’t much harder.
Better yet, bid a camera up to like $600, and then try to “flip” it for $800. This purchase should be made on a credit card of course.
Sacramento is seeing increasing inventory and stagnant pricing. It’s interesting to watch the Realtorspeak™ go against the sellers; the agents must be having a hard time getting the prices down.
Personal Anecdote: Half a duplex near me listed at $729,000 in April. It had sold originally for $380,000 in 2004, and had had extensive renovation (but not $300K worth). The guy showing it was a pompous a$$, bragging to a young Asian couple about how he’d been in the business for 20 years and this was the best deal in the neighborhood. I brought him down a notch when I interrupted and asked him if the listing included *both* sides of the duplex. The couple suddenly became a lot less interested as he said no, but assured them that they’re very good neighbors.
Anyway, he dropped the place to $699k, then $693k, and then took it off the market with a “For Rent” sign in front.
Max — nice play.
This reminds me of an experience I had last year. I became interested in a duplex that seemed reasonably priced. Conservatively I figured that I could rent out the other half and break even on P&I. After talking to the agent I realized that only 1/2 of the duplex was for sale. What a rip-off!!! I would’ve gotten all of the hassles of duplex living with none of the benefits.
LOL. I can imagine doing that too. I never even knew a duplex could be sold separately. What a joke is right! Glad you walked.
What the hell is one half of a duplex? A one-plex? A plex? What the hell is a plex?? I guess I’ll have to search Google or Wikipedia.
what’s half a pair of pants?
(ask allen sherman…)
No capitulation yet. But definitely in distress. An example of a seller trying to get out in Irvine.
from ziprealty:
Price Reduced: 05/05/06 — $979,900 to $959,900
Price Reduced: 05/14/06 — $959,900 to $941,000
Price Reduced: 06/01/06 — $941,000 to $930,000
Price Reduced: 06/10/06 — $930,000 to $917,000
Price Reduced: 06/11/06 — $917,000 to $909,900
Price Reduced: 06/16/06 — $909,900 to $855,000
Sellers are reminded that RE is an illiquid market. Prices collapse in gaps. Someone just saved 120K on this property in the span of five weeks just by being prudent and sit on their hands. Sellers begin to agree that RE can go down, but the majority of them still believe that a 40% drop is unthinkable. Well, the market will prove that a 40% is not only unthinkable but very likely, especially along the coasts. Unlike Japan, our country will get to the bottom of this implosion expeditiously. There are many reasons why our scenario is different from that of Japan, but it would be to lengthy to discuss here.
I am personally hoping this is the end of “range pricing.” I know of no one who isn’t turned off by the practice.
This guy at least is legitimatly reducing price to keep the listing fresh. 10% per month is a real reduction. Still, this is very early. We have yet to excise even profits. The speed will be healthy. No more denial, a slap in the face for a hysterical market. Japan was unraveled because of savingsrates and trade balances. Low interest rates kept their financial markets from disaster. Hmm, what’s different here? Negative savings rates. Trade balance. Interest rates. Oh, and mortgages; think Japan 1990 was flush with NegAm, ARM, Zero Down financing? Nope, they went with 90 year loans instead. Different yes, long story oh yes.
“I am personally hoping this is the end of “range pricing.” I know of no one who isn’t turned off by the practice.”
Apparently many Realtors (TM) were not turned off; otherwise, how can you explain its prevalence (until it was just recently crowded out by “Price Reduced” announcements) in SoCal?
I missed the “range pricing” part. I thought Tommy was just showing that the “single” price dropped, on 5/5, from $979,900 to $959,900, then on 5/14, from $959,000 to $941,000 and so on. Personally, I would see that as a decent Dutch auction move. The seller will move the property if he keeps it up. We have no clue from the data given as to whether the initial price was anywhere near reality.
Ya’ll remember this one from back in December? The Sacramento idiots who bought this place and then decided they didn’t want to live in it?
Still for sale.
http://tinyurl.com/qh3zy
and here’s the loss analysis from early this year (see post dated Feb. 8). These people have to be puking blood at this point.
http://flip-this.blogspot.com/2006_02_01_flip-this_archive.html
This is, admittedly, picky and quirky, but if I were selling a brand-new home, I wouldn’t want to list with a firm called “Vintage” Realty.
Wow, vinyl and tile floors, plus carpet, for only $900K. It’s a steal!
Last weekend in Panama City Beach, a new subdivision had a radio remote show and offered free lunch for everyone that attended. I don’t remember any radio remotes during the old days of our beach housing bubble. I wanted to go scarf some free food and laugh at the prices, but I had to go out of town that day.
Hello, and thank you for your continued interest in our White’s Mill Community.
We are pleased to announce that we have reduced the prices for our spec homes that are scheduled to deliver in August
Home site #43 is our Emory Model, full price $ 591,275 reduced price $519,900
Home site #44 is our Remington Model, full price $656,875 reduced price $585,000
Home site #45 is our Hanover Model, full price $637,675 reduced price $540,000
These homes feature many upgrades, including Finished Basements, brick fronts, ceramic tile in the kitchen and all bathrooms, upgraded kitchen cabinets, granite countertops, and much more. For a full listing of options, or to walk the homes, please call me at 540-428-1019, or e-mail me at dawn.yates@pulte.com. Don’t delay, as these homes are sure to sell quickly!!
*In addition to the reduced price, you will also receive $7,500 towards closing costs plus 1% loan origination fee; offer is an incentive for using Pulte Mortgage and PHM Title!
Email from Pulte: Nova- Warren
Homesite #43 I’ve seen. They wanted to sell it to me by March 31 (to meet their first quarter sales goals) for the then-reduced price of $535K. It was too much for a smallish (but very nice) house with no backyard. There are bigger (NV) Mansions with huge yards languishing in the next development over for $585K. And Toll Brothers is building there (when ??? They’ve put it off for a year, now).
Here’s a nearby listing in Warrenton, VA
Price Reduced: 11/14/05 — $630,000 to $610,000
Price Reduced: 12/10/05 — $610,000 to $599,000
Price Reduced: 01/10/06 — $599,000 to $589,900
Price Reduced: 02/06/06 — $589,900 to $579,000
Price Reduced: 03/07/06 — $579,000 to $565,000
Price Increased: 05/03/06 — $565,000 to $570,000
Price Reduced: 06/06/06 — $570,000 to $555,000
On Market: 313 days
Type: SFR
Status: ACTIVE
MLS #: FQ5344238
Also, if you’re interested in Fauquier, it has a “fair market value” database - stuff really sells if it’s priced under their new assessment. http://www.fauquiercounty.gov/government/departments/reassessment/reval/index.cfm
I work in Fairfax, VA but can have a schedule that permits telecommuting (maybe one or two days a week of actual presence - that too maybe once in a month). So I am flexible in terms of distance from work. I am looking at Warrenton, Culpepper, South Prince William County but just looking for now.
That’s 13-14% off. A decent start.
The angst is definitely accumulating in the OC. I have not looked at the listings on ziprealty for a while until today. Serial price reduction attempts are common, yet still not sold.
My zip in north OC was 80 to 90 consistently throughout 2005. In early 2006, it jumped to 130 and held steady for 3 months. In the last two weeks, it has jumped to over 150.
In April and May lots came on but lots sold. Now, almost nothing is moving. In case anyone cares.
At this point, the first wave of carnage seems to be infliction the contingent sellers who already bought the new homes, but are finding it unexpectedly difficult to sell the old ones.
The real reason prices must come down a lot more is that people were paying a stiff premium for the expected future appreciation they wewre expecting. That has now been replaced with expected future depreciation.
If you could invest $1 with an expectation to get $2 in a year, you might pay $1.25, or $1.50 for that above average return, especially considering leverage.
But now you have to factor the same leverage into the equation as prices drop. Do you really want to have your entire equity position wiped out in 6 to 12 months?
Even if prices were simply not going to go any higher, meaning we didn’t have a bubble, prices would still have to fall because the expectation of future appreciation has vanished.
JMHO
“The real reason prices must come down a lot more is that people were paying a stiff premium for the expected future appreciation they wewre expecting. That has now been replaced with expected future depreciation.”
Amen, Momma — this is one of many reasons for the vast gap between the prices where sellers are currently listing and what buyers are willing and able to pay. Even buyers who are not versed in finance will at some level factor in the risk of falling prices to their purchase decisions. Deflationary psychology goes a long way towards answering the age-old question asked every time at this point in the real estate business cycle, “Where did all the buyers go?”
Well put, and a good example.
Silver Crest at 4S Ranch (Rancho Bernardo, San Diego, CA)
Plan 1 2901 sqft—> $870,890 (3/06)—> $838,000 (6/06)
Plan 2 3212 sqft—> $918,000 (3/06)—> $859,690 (6/06)
Plan 3 3365 sqft—> $952,000 (3/06)—> $879,800 (6/06)
still priced way too high, but at least going in the right direction.
To the group:
Some time back, I would say about 6 months or so, one of the bloggers did an informal “survey” of the anticipated fall-off of house values in 2005, 2006, 2007. I don’t recall who posted this survey.
I was thinking is was Robert Cote. But perhaps not.
I am curious if someone could “re -post” the survey, now the we are half-way through 2006 to see how our predictions are holding to the crash-curve.
Thank-you for you help, and enjoy the price collapse.
Odds are, it will be a curve. I know many people on the blog are hoping for a NASDAQ style peak, that will rapidly resolve to the downside.
But this “summer standoff” implies to me that this overpriced market is like a huge cannonball fired at an angle. It has a lot of momentum, when it begins falling, the fall is gradual at first. But nevertheless, it is unstoppable.
My sense is that so many people bought into it - true first timers, equity locusts, illegals stacking in SFH’s, realtors, flippers, investors, joe six-pack, etc. - and the media has so soft-pedaled it because of the vested interest of their advertisers and owners - that there will be supports at many levels on the way down, as the masses of these groups, in their ignorance of the weight of the hammer, buy in at various levels, thinking they are getting a bargain.
As has been written here numerous times before, I agree that, if there is not a total crash, it will be the realtors who will try to guide the pices down because they need churn, not prices, to make a living.
One thing for certain is that the standoff will not end with a victory for the sellers!
Re: Capitulation, this is s story of “lack of”:
Someone mentioned Santa Ana, CA, a while back. Well, there is 2 or three year old loft complex in the “artists’ village”, where I know somebody who bought when it was a project and moved in as soon as it was done. It was very hyped because “it’s only for artists”. I think the price range back then was 250 to 300.They gave you some good deal if you could prove you were actually some kind of artist. Today, there are 4 properties for sale (I guess they never checked the “artistic” references of the initial buyers). I saw the flyer in one of them; 650.000. I wonder what kind of an artist makes that kind of money! In any case, it’s an insane price for a loft in SANTA ANA, where every night you can hear the cholos playing their music….
I won’t reveal my sources, but many of those are for sale by real artists are because they all bought two or three in the pre-construction of the Lennar development by the train tracks. They all thought they were geniuses in real estate. Now they can’t flip the train track condos and are moving into the higher mortgaged places, selling their “artist” lofts for a profit. I know of at least three there that have or are trying to do this. That had wanted to flip the train track condos, but are underwater and the development isn’t sold out (or wasn’t sold out, could be now).
Of course, some were just getting out while the getting is good (eg. the designer Howe).
Fullerton, in North OC, is offering lofts/working spaces in SOHO for $500k plus.
We live 3 blocks from the tracks, and the trains still wake us. These new condos are right next to the tracks. Great only for the deaf!! Still, I predict that there will be greater fools. Some of them will even get their own elevator.
SD bubble update:
Current ziprealty inventory: 22,034 (and growing steadily)
Number of used homes marked “price reduced”: 7,925 = 36% (steadily growing IN PERCENTAGE TERMS)
My hunches:
- Inventory will keep growing until it tops out around 35K
- ziprealty percentage marked “Price Reduced” will keep growing until it tops out around 50%
- Inventory will hit a permanently high plateau (in terms of average time on the market of 14-20 months) for a while, as downward adjustment to the realized sales prices becomes the new equilibrating mechanism until prices have fallen off 40% from peak (August 2005) levels.
These are, admittedly, wild guesses made under the influence of affordable cabernet sauvignon. Does anyone have more refined estimates?
Saw a picture a very foxy lady real estate agent on sign driving in from Las Vegas Airport with quote “I’ll do anything to sell you this house” Sure got my attention, and my mind wondering what she anytyhing meant. Now if that was a promise for a year, we might have a deal.
No, that is a promise for one shot.
1) Since we topped out last time at 19K and we have about twice as many people I would guess the max inventory will be closer to 40K. Since this bubble is worse, it may be higher. I would personally guess 45K.
2) I believe numbers of reduced listings will also go higher than 50%. Properties which remain on the MLS face a bias towards having been overpriced to begin with. Those that are priced “right”, sell quickly leaving those require reduction on the record. This was not an issue in a hot market.
3) We’ve discussed the inaccuracy of the median price many times. The median may not show a 40% drop in price, even when you are getting 40% “more” for your money.
4) I prefer affordable Mexican beer for fueling my financial prognostication. It’s the cheapest of all beers.
Assuming you haven’t bought a house in the last three years, you should at least be able to afford a microbrew.
After sleeping on it, I woke up thinking my guesstimate for the quasi-permanently high plateau SD inventory level (35K) was low…
What’s more, if we get out to your 45K listings, then unless this time is “different”, we would expect to see 3200 or so homes a month selling if we topped out at 14 months of inventory (the national average at the record level in the mid-1970s). But I would guess we would only see a trickle of sales at the point when the quasi-permanent-high plateau is reached, suggesting that this time we will ultimately get out past 14 months worth of inventory before sellers collectively capitulate.
You should try the unaffordable cabs - some of them can really take you to interesting places
I don’t have any estimates that I would claim to be better refined, because it’s all naval-gazing unless you have at least a Dickian time scoop. But I expect an overshoot on the low side after the enormous overshoot on the up side that we have seen. In real terms, we could easily see the lows of the last cycle IMHO. So if you were to take 1995 prices and adjust for inflation, that would be the bottom of the channel, and you could expect to fall below that point in an overshoot.
Because the two are oft compared, SD seems wimpy in the # of listings. I challenge SD sellers to step up to the plate to get to 50K before Phoenix does!
I think SD has about a week!
It’s very frustrating; we have loved Merced, it has been good to us, but we just want to go to the coast and retire,’ she said.”
Too bad that these guys wagered their financial lives on a dump in Merced. They’ll be like everyone else in the Valley…trying to escape that overpriced $hithole to move to the ocean.
Hopefully they won’t end up in Eureka. Too many of these old bastards show up here, cash overflowing from their pockets, all too eager to buy the next “investment.”
I now get to judge the Bozeman, MT real estate situation by tracking a house I know fairly well. A colleague of mine bought his 1930’s house in a fairly nice part of town in 2002 for ~$270k (inflated even then). Made a lot of cosmetic improvements, installed hardwood floors throughout, new appliances, remodeled two bedrooms, etc… but no major changes (came with very nice custom kitchen and master bath from previous owner).
Bottom line: a VERY small 4 bed 3 bath house (listed at 2000 sq ft but I’ve been inside and that must include semi finished basement, odd corners on the second floor etc…). Master bedroom is decent size, the other three are tiny. No garage. Small yard. Completely remodeled with all the trimings and nice custom kitchen.
They are asking $570k (assuming $80k in improvements that is a $200k/80% profit in just 4 years of ownership). Owners already closed on their new home assuming this would sell easily and moved in March so this house has been sitting vacant for 3+ months. Spent one month as a FSBO with no action, and now listed on the MLS for two weeks… still no action. There are at least 10 completely remodeled “historic” homes in this neighborhood on the market, all listed as “active” in the MLS (and a few FSBO’s as well). This is the most expensive home listed within this genre and not the biggest or best by any means.
At the same time there are dozens of brand new luxury downtown condo/townhomes on the market in the same general neighborhood at lower prices with more sq ft, amenities, etc…
I’m assuming that they have to sell, so it will be very interesting to see what happens to the asking price. (Actual selling price will unfortunately not be known as that is not publicly available in MT.) In the past, folks could overshoot the market and wait for it to catch up. If we’ve passed the peak, then they might very well end up chasing the market down.
“Griffin reduced the price of her home $85,000 over the last year and it still hasn’t sold. ‘It’s very frustrating; we have loved Merced, it has been good to us, but we just want to go to the coast and retire,’ she said.”
——————————————————
Tough shit lady. Stuff doesn’t always go according to plan.
Just because you think your house is worth a fortune doesn’t translate into your ability to retire on the ocean.
You aren’t entitled to squat; and your house is only worth what other people are gonna pay for it.
I love when these wack-jobs feel they are entitled to retire off of some other stranger’s dime. I’ve told my wife a dozen or so times over the last couple of years that I’m not going to give a total stranger $100,000+ towards the purchase of their new McMansion. If I have to rent, so be it. At some point this ridiculous culture of entitlement is going to come crashing down. If I want to go to the coast and retire, I’m going to do it the old fashioned way by working and saving. I hope Griffin rots in Merced until her kids finally have to put her in a home.
I see capitulation in the markets from time to time and have seen quite a few cases in the last week. But we’re typically talking about 30% or greater losses before the emotional outbursts associated with capitulation kick in. I don’t think that we’re seeing those kinds of losses in real estate in a general way yet.
What’s needed in capitulation is a continued slide that totally kills all hope of any kind of recovery in your position. Where every bounce up gets subsequently sold. And where there is some grave personal economic consequence. Like blowing your kids’ college fund.
Posted in another thread, seems most appropriate here:
320 Lupine Way
Short Hills, NJ 07078
1) Jun 2005 - Bought for $1,300,000
2) Oct 2005 - Put on market @ $1,295,000 (MLS 2204767)
3) Dec 2005 - Listing withdrawn
4) Mar 2006 - Put on market @ $1,198,500 (MLS 2261656)
5) May 2006 - Price dropped to $999,850
6) Jun 2006 - Under Contract (June 12)
7) Jun 2006 - Closed $999,999 (June 15)
This is a “top town” with top schools, a train that runs right into New York City in 30 minutes, and multi-million dollar homes all over the place.
That is a 23% drop YOY. One data point does not a statistically significant sample make, but the few-and-far-between anecdotes are all we have to go on at this stage. It is a nice time in real estate market history to have Bayesian proclivities…
I think what makes this a particularly good example, is that it’s not a comp selling for lower, it’s the same house selling for lower.
Speaks to the what the market is thinking, and what sellers are forced to think about: losing big money.
Also, this house has the “Location, Location, Location” factor, illustrating that no town is immune from declining values.
I bought the Sunday Phoenix paper today; first time in a while. The ‘How Low Will It Go’ article that was my first post today (sunday) is at the top of the front page. I pulled out the RE classifieds section. I don’t know how anyone could even begin looking at homes because there are so many! It had this little bit of info:
Valley Median prices
2002 $175,000
2003 $174,800
2004 $244,900
2005 $329,900
2006 $329,900 (april)
I also got the Flagstaff paper. I watch this one closely, and the amount of new homes for sale is astounding. The asking prices are so out of whack with Flag incomes, I don’t know how they will sell 10%. And developers are building hundreds, maybe thousands more.
Ben wrote
“I also got the Flagstaff paper. I watch this one closely, and the amount of new homes for sale is astounding. The asking prices are so out of whack with Flag incomes, I don’t know how they will sell 10%. And developers are building hundreds, maybe thousands more.”
Cool! I have Flagstaff as a potential place for my permanent residence in a few years. But somewhere in a big meadow away from tinderbox trees. Will certainly have fire insurance when I do go there, wherever it is!
So do I, Bill. I tried like hell to find something there this spring and couldn’t.
Just be patient. Even though Flag is a bit more insulated from the other markets with limited supply et al, the day of reckoning approaches.
As of 6/16/06, there were 809 total residential listings — 809 for single-family alone. [Flagstaff's population is only around 50-60K] Asking prices for the local McMansions are a joke: small lots, uninspired architecture and –if you’re lucky — a peek of the San Francisco Peaks (woopee!).
No, reality hasn’t set into the “brains” of Flagstaff RE owners/investors/Realtors — yet. This is a college town/tourist stop that has a crappy salary base and an overabundance of second homes. The equity refugees from CA/Phoenix are in for a severe reality check in the near future. There are so many full-of-themselves “paper millionaires” driving around town in their suburban assault vehicles, one can only hope that the crash comes sooner than later. Bring IT ON!!
I wouldn’t call it “capitulation” — yet — but in Colorado Springs reality is starting to impose itself on the sellers. I give you Exhibit A:
http://themartys.springssearch.com/browse/IDX1_ViewRecord.asp
This house, in Colorado Springs’ much sought-after Old North Side, originally was on the market early last year for more than $800K. No takers. Sometime last Fall, they lowered the price to $799K. Still no takers, and it sat for months. Then about six weeks ago, they shaved off a full $50K, to $749K. Lo and behold, I checked a couple days ago and it’s now dropped another $50K, to $699K. Can you say, “Increasingly motivated seller?” I knew you could! Keep those $50K price drops coming every six weeks and you might unload the place by Christmas!
BTW, the realtor has had at least two open houses (probably more), and the one I went to, back in December, was very well attended by looky-loos, but no buyers in the bunch. The place is beautiful inside, but upkeep and heating/cooling look costly.
Oops the link above didn’t work, so do this: Go to Springssearch.com (link below) and select “Central” for housing area and Single Family Home for type. Set the price variable to between $675K and $700K and you should see the house (it’s about 5200 sq feet, asking price is $699K).
http://themartys.springssearch.com/index.asp
Capitulation doesn’t come until the end or bottom of a down cylce. Usually when everyone’s had enough of falling prices, confusion, all hope is lost, etc, the “weak” hands throw in the towel as in to “give up”. As far as prices are concerned, we’re still way at the top, so we’ve got a long way to go before we see capitulation, possibly a couple years worth, IMO.
Yes - we’ve only recently gotten past Unbridled Arrogance, and have just entered Denial and Anger (”stupid” buyers not buying). We will soon be creeping up on Bargaining, but with a few exceptions, we really aren’t there yet. After that, FBs still have to go through Depression and Acceptance before we can declare they are in full “capitulation” mode!
I don’t even think 2 years will be enough time for a majority of FBs to be there. Some have only recently purchased option-ARMs that have 5 to 7-year rate locks (won’t begin to reset until 2011-2013). I wish this mess would just hurry up and get over with quickly, but I’m afraid we may have a loooong slow decline ahead of us.
Good point about the more recent ARMs not resetting for a few years. If prices do start to come down for many of those, do you think many of those buyers will be able to hold out until 2011-13, if they see themselves going deeper in the whole every month? At some point, when they see it as a losing proposition (if they see it that way), they’ll probably try to get out ASAP. Just a thought though.
Good question - I suppose it really all depends on why Mr. FB bought in the first place and exactly how over-leveraged he currently is. If he’s one of the many self-styled “genius” amateur specuvestors who just ran out and bought 13 pre-construction condos (because Gary Watts assured you 15% “in the bag” profits for this year), then it doesn’t really matter when his 107% LTV option-ARMs resets. He’s ALREADY underwater AND burning money at an unsustainable rate, so is likely to want to dump his investment properties/cut his losses before prices drop even further.
OTH, if he’s an option-ARM FTB currently living in his one-and-only house (I think Realt-whores call such people “buyer-users”), then he is not likely to abandon your home just because its market value has fallen. Typically, such buyers will sell at a loss (or turn in keys to the bank) only when they are FORCED to sell. The trigger could be rate/payment-reset shock, job loss/transfer, divorce, uninsured illness, or any of the above.
I know someone who bought a two bedroom apartment on the Upper West Side of Manhattan and has been trying to FISBO his one bedroom on the Upper Eastside. Unfortunately there is a lot of inventory in his building and apartment is on the avenue side of the building on a low floor.
However rents are climbing rapidly in Manhattan because the vacancy rate is about 0.5% in doorman buildings. So he intends to rent out the apartment and expects positive cashflow.