New Home Starts Increase In May
The new home starts numbers are out for May. “Construction of new homes and apartments, after posting three straight months of declines, increased in May, helped by dry weather. The Commerce Department reported that builders started construction at a seasonally adjusted annual rate of 1.957 million units last month, an increase of 5 percent from the April construction pace.”
“The better-than-expected increase came after declines of 5.5 percent in April, 7.5 percent in March and 5.9 percent in February.”
“Analysts cautioned that construction activity is likely to slide further in coming months as the housing industry slows under the impact of rising mortgage rates. In a sign of that expected slowdown, permits for new construction dropped by 2.1 percent in May to an annual rate of 1.932 million units.”
“For May, construction of new single-family homes was up 2.1 percent to an annual rate of 1.586 million units while construction of multifamily units was up an even stronger 19.7 percent to an annual rate of 371,000 units.”
“The strength in May was led by a 15.8 percent jump in construction activity in the West. Construction rose by 8.5 percent in the South and was up by 1.7 percent in the Northeast. However, construction fell by 15.8 percent in the Midwest.”
“The National Association of Home Builders reported Monday that its builder confidence index fell in June to a reading of 42, the lowest point in 11 years. David Seiders, chief economist for the home builders, said that sales could fall by 13 percent from last year’s record and that construction of single-family homes is likely to drop by about 9 percent from last year’s record level.”
To be updated.
I wish there was a breakdown of what the cost of construction for these permits was expected to be - market price if often wildly different, I know, but could give a sense of what kind of housing was being built.
In my area, it seems like everything is higher end housing and NO “starter homes”, etc. to speak of.
It would be interesting to know what the “seasonal adjustment” did to the raw data. Wonder what the raw YOY numbers are…
The whole report is here:
http://www.census.gov/indicator/www/newresconst.pdf
The actual number of starts appears to be up quite a bit from April, in fact the highest number in a year. Admittedly there is always a strong seasonal element in construction, but it does seem to contradict everything we’ve been hearing about sales declines, canceled contracts, etc.
Thanks. Note that the YOY May numbers are down not up!
Could it be that the train has simply slowed down to pick up passengers and now it’s beginning to move again? And if so, will housing head out of the woods as the brokers suggest or is a real drop simply put off for another year? It’s very hard to tell - the economic engine keeps showing surprising resillience.
“Could it be that the train has simply slowed down to pick up passengers and now it’s beginning to move again?”
I think you are right about this. Too bad that as the train accelerated out of the station, the conductor was not informed that the bridge is out around the next bend…
See “Google Trends”. http://www.google.com/trends?q=housing+bubble
Put in Housing Bubble and you get a real glimspe into who is most concerned (California!). Also, it appears that Google searches for Housing Bubble peaked last year. Not sure whether one can read anything from this. I just think that the longer it goes before a real crash, the better the chance that bubble pronouncements are going to be cast as crying wolf. I had thought things would have gotten far worse by now. I just haven’t seen it yet.
“I had thought things would have gotten far worse by now. I just haven’t seen it yet.”
Go visit your eye care specialist today.
Have you seen a price crash? I don’t think so.
I have seen an inventory crash, and if you have not, then you need some glasses. The price crash is hidden in that inventory pile, waiting for the FBs to cry “uncle” and drop their reservation prices to a level where they can compete with new home sellers throwing in brand new automobiles to sweeten the deals…
“Have you seen a price crash? I don’t think so.”
Perhaps you are paying attention to different prices than I am…
http://tinyurl.com/zrnmn
Not sure what that chart is. Doesn’t reference crashing home prices.
It most certainly does. Homes are what the homebuilders sell, and slumping homebuilder stock prices represent an implicit forecast that they will not be able to sell their product over the next few years for anywhere near what they were selling for as of last August. Read the handwriting on the wall…
In the land of Hoz, it would be a fairy tale to believe that a house crash will occur in 6 months/ a year /or even 2 years. It took 12 years to get to these elevated peaks - it will take 10 years to crash. I am not looking for a 10 or 20% price drop. That has already happened. 20/20 hindsight shows that bubbletraders were hoping to buy PETs.com on a 10% drop from $500/share, The stock went out worthless. Looking for a small drop to buy in the greatest asset bubble burst in history is not catching a falling knife - It is Catching a Guillotine. The winds of panic are blowing and it is best to raise the storm sails.
A fellow on CNBC from the NAHB stated that these numbers aren’t anywhere near an accurate representation of the real picture, since they don’t take into account cancellations, which he said accounted for (if I heard this right) about 60% of starts right now. Did anyone else see this, and can they back me up on this?
Cancellations = leading indicator of drop in future starts…
I can tell you that first quarter permits for units in buildings with 5+ units were up 22.7% from 2005 to 2006, although there were declines in certain markets. Here in NYC, some builders are trying to sell sites, but others are trying to build before the lenders and buyers disappear. They’ve got lots of profit margin to play with if they bought sites years ago, but not if they bought sites recently.
$HGX has given us a shortable open within the first half hour eight out of the last ten days. Are the perma-bulls at CNBC spinning this as “the beginning of a turnaround”? That would be too good to be true; I already have a order in to short HOV at 15c above yd’s close.
Stock Prices Rise on Solid Housing Data
“A sharply stronger-than-expected jump in new-home construction raised optimism about the economy’s health and countered downbeat housing news the day before.”
Yeah $HGX was positive for all of fifteen minutes, now it’s down one percent and shows no signs of coming back to life today.
As The Penguin might say if he were short housing stocks, “WAK, WAK, WAK, WAK!”
oops here’s the link http://biz.yahoo.com/ap/060620/wall_street.html?.v=10
Who said builders are good businessmen? Just add more inventory to the existing glut. Real smart!
The builders are collectively shooting themselves in the foot by this “race to build.” While it is individually rational to recognize the bubble is deflating, and to try to quickly turn land into salable “finished product” before the bubble premium is ancient history, the collective effect of many builders playing the same strategy is to rapidly exacerbate the inventory glut, and to set the stage for rapid home price deflation.
Today you don’t have to be good to be in business. You just need a greedy and stupid banker. Find yourself a stupid banker and you are in business.
It’s not that difficult. Banking requires lack of intelligence and stupidity.
Er, what we meant to say was…:
Stocks Drift Despite Solid Housing Data
“Stocks were mixed in aimless trading Tuesday as solid housing data did little to shake Wall Street from its funk over interest rates and the economy’s health.”
CNBC are actually advertising some upcoming housing specials with surprisingly bearish titles this week.
Work that glut, baby!
Nothing squashes prices like OVERBUILDING:
http://photos1.blogger.com/hello/243/2888/640/figure11.jpg
Only problem is I haven’t seen prices squashed yet. Am now not so sure. I’m thinking the more likely scenario is prices stay flat to slightly down and then don’t move for 2-3 years. Inflation will bring them down in real terms though. But the big 30% or so drops that have been predicted are now increasingly not likely to happen.
The answer to lack of demand is to boost supply?
If you’re looking at this blip as a good sign for the economy you are mistaken, unless we build homes forever, regardless if people buy them or not.
Population will hit 300 million. The houses are needed or will be. The question is prices. I say they flatten and stagnate. But the crash I was hoping for doesn’t appear imminent any longer.
You have a particularly short attention span. I wonder if you started asking your dad if the game was over after the bottom of the 1st.
It is surprising that the game has just started, and you’re wondering if it’ll ever end, or if it even really started in the first place.
The drops are not going to happen this year at all. We will be flat. this is prime for a sucker rally. You know what they call people who buy into sucker rallies, don’t you?
If you don’t have patience to wait, I suggest you visit Ben’s site again in 6 months, and then again every 6 months after that and not in-between.
Regards,
John
What area are you in?
Maine.
Sorry, I am not too familiar with your market. What is the median home going for in your area?
Not exactly sure. But although not that high, home prices in Maine are way beyond what people can afford on their small incomes. It’s the constant inmigration (# 4 in the nation) of wealthy out of staters moving here with their riches and portable jobs that’s responsible for keeping proces aloft.
Be patient, and be thankful that you don’t have to stress every month about making a huge mortgage payment every month. Enjoy your weekends not fixing the things that need to be fixed.
I wish I knew more about your area, so I could shed some light and give you some good news.
I talk to many people on a daily basis from all over the country that are struggling and face foreclosure. They are desperate and their spirits are down. It is not a position that I would like to be in.
“I talk to many people on a daily basis from all over the country that are struggling and face foreclosure.”
Fascinating comment. Could you share the reason you talk to many people from all over the country who face foreclosure? (If confidentiality prevents you from doing so, then I understand…)
If you are viewing market conditions from way up in Maine, then that explains much. The bubble is much more clearly visible in CA…
San Diego
yes San Diego is getting beat up recently. I heard this housing shill on KOGO 600 this morning, George Chamberlin saying how wrong everyone is about the bubble. He did the same thing when the “Harvard” report came out last week, do these people even see who really put out that report? Go look up the members of that study, its a who’s who list of the Homebuilders!
Wait for banks to tighten lending standards after the coming BKs from ARMs resetting. Then you’ll see stagnation and prices will need to drop in order to come in line with incomes.
Banks have gotten as aggressive as they can be–relying on appreciation to support loans. Once that appreciation is slowed/stopped - things will change.
….I smile every time I pass a construction site, knowing it means one more house being added to the already deluged supply….. Supply and demand in spades anyone?
In fact (puts hypothetical hat on with tongue firmly in cheek :)), if a large enough group of bears were to order and then cancel later …
I think you are misinformed, and trying to diceminate disinformation here. The inventory glut has grown steadily — someone recently noted that the MOM used home inventory growth rate (5/15-6/15) was about 95% annualized ON A NATIONAL BASIS (that someone was moi), and this does not take into consideration the increased pace of new home construction just reported. This inventory elephant in the room cannot be ignored — it is the face of disequilibrium which will drive prices down, and the builders know this. They are trying to get out while the getting is still good, as they know the bubble premium is rapidly disappearing.
All I said is the big 30% drops won’t happen. Maybe you’ll see -15% over time in REAL dollars thanks to inflation. But an actual drop of more than 10%? Uh uh.
“Uh uh.”
Uh huh. A bigger disequilibrium requires a larger correction to restore balance. Check out the Japanese real estate market from 1990-the present for a leading example.
Unfortunately I don’t have a good graph of the Japanese real esate market but I do have one its evil twin the Japanese stock market with brief commentary.
http://www.exile.ru/2002-August-08/nikkei_likes_it.html
Great chart! That seems like a good rough blueprint for the way real estate prices will correct over the next fifteen years in LA…
Those 30% drops WILL happen. Just look at what has happened in the last six months in the main stream media.
6 Months ago: “There is no bubble”
Now: “Soft landing=Hard landing”
Getstucco — “waitingtopounce” looks like a possible troll to me. We haven’t had one in a while. Maybe a cousin of Homeowner_MA.
“But the big 30% or so drops that have been predicted are now increasingly not likely to happen.”
Are you a homebuilder? Because if you are not, maybe you should consider a career change, as you share their resilient optimism…
Mainester (aka waiting2figurethisstuffout),
Please check out this IMF report before you continue to argue that 30% off sales are not in the realm of possibility…
http://www.imf.org/external/pubs/ft/weo/2003/01/pdf/chapter2.pdf
Waiting2pounce-
Not sure where you are in Maine, and that could make a huge difference as to how quick your area unravels.
If you’re down south around Portland, do you really think that when Boston RE tanks, that the out of towners will keep flocking to ME. to buy overpriced RE?
If you’re up near Bangor/Waterville, do you really think that those areas will support high prices long term?
It seems like perhaps you are a youngster who has never witnessed an RE crash. It does not happen overnight like the stock market.
At any rate, waitng2pounce, when prices begin their inevitable downward slide, I would not “pounce” too quickly.
Good luck to you, and remember, no pouncing.
Patience young grasshopper.
I thought that the housing sector had learned the lesson of overbuilding… what a joke.
The problem with American business IMO is that short term profits ALWAYS trump long term financial stability for businesses these days. I’m not sure exactly how this happened, but for the large part I believe that it’s due to the stock market and its incessant need for better quarter over quarter results. Miss a quarter, get punished big time. Combine this with executives whose compensation plans are tied to stock price, and you have a recipe for disaster.
CEO’s and upper management couldn’t care less about a company’s long term prospects… Only the shorter term stock valuation movements.
Homebuilders must build to keep their stock price (and hence CEO’s salaries) up. Regardless of what that will do to their long term viability.
This is the only explanation that I can see for the combo of:
1) why the builders are building like there’s no tomorrow despite mounting unsold spec inventory
AND
2) they are using their cash for stock buyback, which should be saved to get them through the coming tough months/years…
(there are multiple reasons for #1, but no other reason why we’re seeing #1 and #2 together IMO)
That said, build away. We might as well make affordable housing for everone (”homes for everyone”) and I guess a good a way as any is to bankrupt all the big builders, then sell the homes that were built for pennies on the dollar. It’s a reversal of the transfer of wealth we’ve seen the last 5 years. (where the builders and current homeowners took in quite the flow from prospective home”buyers”)
clouseau
Unfortunately, if that happens it won’t be a transfer of wealth from the Bob Tolls and Bruce Karatzes of the world—they’re already cashing out. Their employees and stockholders will be ones left with the tab.
they have to make those quarterly numbers for the stockholders. that’s really the driving force behind most public companies these days.
there’s still a huge amount of profit to be capitalized right now in the housing sector simply because prices are so high.
it’s ironic, but speculators have created their own worst enemy by creating a temporary specious supply crunch in past years and overstimulating the builders
“speculators have created their own worst enemy by creating a temporary specious supply crunch in past years and overstimulating the builders”
Didn’t Krafft-Ebbing have something to say about that?
CEOs and board members are rewarded by wild fluctuations in price, as their option price is usually pegged at the lowest stock price for some date range, but then the CEO can sell her stocks when the price is significantly higher. Have a lot of mini-boom/busts for a corp (which might include many layoffs followed by hirings) is good news for the upper crust at the company whose salary is mostly paid through stock, but bad news for those people getting laid off.
If the higher ups in a company were somehow required to be paid a flat salary plus some bonus based on the long term growth, we’d see more economically and socially responsible businesses.
“as their option price is usually pegged at the lowest stock price for some date range”
I’m pretty sure this isn’t true. That is why there has been such a furor over back-dating options. In order for options to be granted without tax consequence to the optionee, they need to be granted at the market price at the time of the grant.
Perhaps there are bonus structures based on something else, but I would be surprised if there was an option strike that could move up and down based on fluctuations.
Anyone care to opine?
“as their option price is usually pegged at the lowest stock price for some date range,”
Apparently the pegging to the lowest stock price often occurs retrospectively…
I would say that homebuilders and developers are a special breed when it comes to living on the financial edge. Remember Trump went bankrupt. My wife has a distant cousin who is a successful developer/builder. He lives a very ostentatious lifestyle even though he went bankrupt about 15 years ago.
My sister had a home custom built by a small builder 4 years ago. His company did such an impressive job that I asked him why he didn’t build more homes. He basically told me that the only way to become a big builder is to be willing to go bankrupt.
On the other hand, one of the wealthiest families I know (but they’re wealthy rather than rich) is a mum-n-dad small builder.
Basic business model: buy a lot or 2, build on it, mortgage the resulting houses to about 50% LTV, and let. They now sell as much as they build because they have as many properties as they can comfortably manage, but will usually sell houses they built 20 years ago (and they renovate before sale).
Because they are building to let themselves, they don’t cut any corners on materials or workmanship, so even their 20 year old houses are worth buying because they are structurally sound, and usually in pretty good areas.
Oh, and we are a government town so there is always a supply of good tenants. That helps this business model immensely, I admit.
My estimation is that the home builders are completing projects they have already started in hopes of profitting from the investment they have already made in getting the property to the point where they can build the houses.
In California, it can take years to properly entitle a development before a grading permit can even be pulled. This process includes environmental studies, traffic studies, archeological studies, hydrological studies, etc. If the project is determined to have an impact on existing environmental conditions, traffic conditions, natural drainage courses, then the developer must come up with ways to mitigate the impact of the development.
These studies and the requisite mitigation engineering cost tens of thousands of dollars for each permit. The mitigiation measures are then subject to review by city and/or county planners and engineers, as well as public comment. If the measures are deemed insufficient, then another mitigation design is undergone and the new measures are scrutinized again.
Frequently, before the actual construction of a single house can begin, the mitigation measures must be implemeted first. For large developments, this will likely include restructuring of drainage areas, building replacement wetlands, large-scale improvements to the roadways in the area, and installation of utilites on the site, (sewer, gas, water, electricity, storm drains). A large portion of these improvements must be in place before a single pad can be graded, and then it can take years complete construction of all of the homes in the development. As you can see, for many developments, there is a significant capital investment in the land before the builder sells the first home.
In light of these facts, I would not expect to see a significant fall-off in the number of housing starts until the builders complete the developments they began before the market turned.
A statistic that would better illustrate the health of the home builder market would be the number of new projects being submitted for to government agencies for review and approval.
Here a recent article from Northwest Florida about an upcoming land sale for a parcel that was originally purchased in 2001 for $2 million that is expected to go for $15 million . It falls in with your comment.
“The three parcels were last sold in 2001 to Alabama-based Perdido Village LLC, which paid about $2 million, according to Escambia County Property Appraiser online records.”
Among the reasons the Perdido Key land made it to the auction list was the lengthy process to obtain a building permit, Bone said.
“http://www.pensacolanewsjournal.com/apps/pbcs.dll/article?AID=/20060620/BUSINESS/606200304/1003
http://www.pensacolanewsjournal.com/apps/pbcs.dll/article?AID=/20060620/BUSINESS/606200304/1003
I also saw an article this morning saying that, suddently, defaults and foreclosures are down sharply. Could that be right?
Only if it was written by David Lereah? Yd’s headline in Yahoo was about how they were rising, and there was another story posted here last night that said that even the foreclosure vultures are having a hard time because so many homes in foreclosure have no equity.
I saw that article and what it said was foreclosures of “prime” loans were down. That is foreclosures of qualified borrowers with good credit. The article conspicuously avoided mentioning foreclosures of “subprime” loans, which are skyrocketing as people who should never have qualified for the “no money down, no interest” (neg-am) and ARM loans have started adjusting. Some $300 billion ARMs will adjust this year and another $1 trillion next year. This is causing major pain already. Here’s a link from a local radio station: http://www.wtop.com/?nid=111&sid=825406
My comments….
The Builders know that demand is falling of a cliff and are scrambling to build and finish the developments that they are already working on. Therefore they will build spec houses on the last 15 lots which they later will subsidize heavily to get sold. We can prove this fact by looking at Mortgage applications…. down 35% YOY in May and here we are talking about applications for houses not applications for refinancing, those are down 50% YOY. We find further proof by looking at the supply of unsold new homes…. i.e. Spec houses, which reached an all time high of 565,000 Units in May.
but they always have the option of “stealing” business from the existing home market by slashing prices. they can still make a profit due to excessive prices, whereas individual homeowners and investors will have a much more difficult keeping up with price cuts since their costs are so much higher (unless they bought years ago)
Whew, I’m glad that they are making more land [into housing]. I was worried that I would be priced out forever as we worked off areas with as little as 11 months of inventory. Happily, builders have stepped up to the plate!
LowTenant - such an article was most likely the result of Suzanne’s research, and then published by David Liarah and “In the Bag” Watts.
multifamily units going up like crazy. you can take a drive along the beach and see that. just adds to the glut. short with impunity.
CEO from Debeers Diamonds needs to give advise to home builders. Lesson being you only build just enough homes to keep prices up. If there were 50 diamond suppliers price of a 1 carat emerald cut stone would be about two bucks.
DeBeers execs couldn’t travel in the US for a number of years until they settle anti-trust charges (with fines/bribe) in the late 1990’s.
It is a masterful stroke of Machiavellian business that DeBeers has done with the diamond market.
The collusion in the diamond market is greater than in any other market on earth, IMO. There is a written international agreement called the Kimberly Protocol, that fixes diamond prices and trading world wide (gee, in how many industries is that allowed?). Try to find detailed information on it in search engines.
Manmade diamonds will slaughter DeBeers within a few years. There are plants in Boston and Georgia (I think) which are already building perfect diamonds.
And DeBeers is lobbying heavily to have manufactured diamonds be labeled.
I say they should be labeled: “SUCKER”
Yes, the diamond market is not free, but who NEEDS diamonds? All of us need a place to live though.
Hey, talk to most women and they’ll tell you that they NEED a diamond!
This news is GREAT because it will kill housing prices. Only when there is a true shortage of houses should housing skyrocket, well we all know inventory is through the roof and now it will be through the stratosphere. The folks that will suffer most are the resellers because the homebuilders will undercut them in more ways than one. Don’t worry, the uptick in housing starts will kill housing prices overall.
the irony is as boom peters out, more supply will come into the market. Some developments take 1-2 yrs for completion. Besides, once permit/loan is obtained, building goes on. ^HGX didnot like it.
Well, the over building/excess inventory will be good for buyers eventually when builders have to sell at a major discount .
I think the market turndown hit the industry by surprise . With the NAR/DL/Realtors projecting another 5 years of this mania ,(until recently ),everybody thinks it’s just a little sitback ,but the “big bounce “is coming next year .I think the realtors are pitching a spin that the Feds will lower the rates next year and business will be back to normal .To blame the market crash on interest rates rather than lack of qualified buyers ,excess inventory, and inflated prices ,is wrong .
The real estate industry loves to spin the little story of the speculator weed out ,than everything back to normal . No , the market was never normal in the last 5 years so it has to crash .
I have a friend who is upset with builders. He istrying to sell his house with a 220K markup from when he bought it 3 years ago. Problem is with two open houses and absolutely no shows, he is now in a bind. I was talking to him and he was upset that the builders were building so much.
The irony of the situation is that his house that he bought in ‘03 was brand new and the house he is buying ( I think he made a deal were he rents the new house until his old house sells) is also new.
I love how people see a small prism of reality, as it benefits them, and fail to see the big picture.
>>He is trying to sell his house with a 220K
I meant 320k markup…but with so much easy cash sloshing around, what’s the difference?
Yeah, what’s $100K amongst friends (in this market).
A friend of mine transferred his family to EU about 5 years ago. He mentioned how his housing costs would be nil (company payed) and minimal taxes. He figured he’d return with a few hundred K in the bank, despite having a 5-kid family. Well, soon he has to return stateside, and re-enter the current market.
Poor guy…his hard earned $200K is essentially worthless now. All I could suggest is that he rent for a good while until his housing dollar increases in value. His next locale is SoCal of all places.
“Yeah, what’s $100K amongst friends (in this market)”
—————————————————————-
borrowed with a 30 year loan? $100K is about $200K.
Seems to me that this fellow will be in excellent shape, with $200K in the bank. All he has to do is rent for a while, be patient, learn his target market and wait for a great deal. $100K discounts today are small relative to the % haircuts that are yet to come, particularly in used housing. It will take a while to sort out, though — for one thing, lenders will have to have enough repos (pan) on their books to begin selling them for what they can get. We are way too early in the crash for that right now, IMO.
(Long time Lurker)
OT: I have a story I have to share..
Last Friday my wife went to a garage sale of a friend of a friend…let us call her FB.
FB and her husband live 30 minutes south of Chicago in Mcmansionville, Il.
Husband installs garage doors for a living. She does not work. Three kids under 10.
Purpose of garage sale…no money in bank for the $1700 mortgage.
Other tidbits SUV in driveway…said nothing in the house to eat….and “I don’t know what were going to do there is nothing left to sell”
PS. Earlier this year the $13,000 tax refund went for a boob job and tummy tuck.
Next time get a picture. Of the boob job! LOL.
Misery Index …….These people have three kids and they are spending money like that to the point of being out of food ,( as if a boob job is more important than feeding your kids ).
I say the wife needs to get her ass out of the house ,(that they might lose ), and go to work .If I was the husband I would get rid of this bitch . Sorry , I hate to see kids suffer when they have parents that starve their kids because of their need for adult toys and tummy tucks .
Oh, don’t get me started. This is a hot-button topic for me. I’ve got too many neighbors (and a couple of relatives) who’ve decided mom should stay home, and both mom and dad should buy all their toys first, then toys for the kids, then pay the bills out of what’s left. When the money runs short, re-fi and repeat. They have no financial cushion at all, yet they won’t cut back because it’s all ‘for the kids’. Even the adult toys are ‘for the kids’. And every time their only vehicle breaks down it’s a crisis because they have no spare cash.
When the family ends up homeless with mom and dad screaming nonstop, blaming each other for their bankruptcy, the kids will sure thank their parents, won’t they?
Another Newsflash:
I live here in Winter Haven right between Tampa and Orlando.
Over the last two months I have noticed a HUGE increase of boats, jetskis and motorcycles for sale. Most are late model ( 2000-2006 ) and some of the For Sale signs reek of desperation. People are dragging this stuff out of the garage and putting it in the front yards everywhere.
Looked at a nice 1998 18′ Wellcraft CC fisherman last night. NADA value was $14,000 ( boat in excellent condition )…..seller wants $9,500 cash. He told me his ARM is gonna reset in July on his ~ $ 300,000 home and his payments are gonna go up ~$ 400/month. Also had two brand new Acura SUVs in the drive way and a trophy wife with a big shiny rock on her finger.
They are a stressed looking late-twenty something couple who has accumulated more debt in five years than I have in the last twenty ( I’m 45 ). They have no children and now I seriously doubt that they could afford to start their family.
Got to work this AM and as soon as my cell phone was in range I had a voicemail from the kid with the boat tellin’ me that he would consider taking five hundred off the price if we could exchange his title for my cash TODAY.
I am gonna go ahead and wait this out a little longer and keep my powder dry. I am willin’ to bet that my $ 9,000 will get me a HELLUVA deal come Christmas 2006.
“Over the last two months I have noticed a HUGE increase of boats, jetskis and motorcycles for sale. Most are late model ( 2000-2006 ) and some of the For Sale signs reek of desperation. People are dragging this stuff out of the garage and putting it in the front yards everywhere.”
Sounds familiar…
http://www.mylocalnews.com/nws/index.php?/main/content/city_street_or_used_car_lot_maienschein_working_to_eliminate_problem/
After hearing that story from the garage sale hosts, would it be morally repugnant to low-ball them on their wares for sales, knowing that they’re forced to accept? Or would it just be serving them their just desserts/smart business?
Personally, I think if I saw an item for sale I wanted, I’d only buy it on condition that they’d accept food as payment. These people obviously can’t be trusted to intelligently spend whatever few bucks they make from the sale, and there are innocent kids to think of, too.
keep an eye out on how the homebuilder stocks are reacting today>:
http://finance.yahoo.com/q/bc?s=TOL&t=1d&l=off&z=m&q=l&c=HOV,PHM,LEN,KBH,CTX
DJIA up, builders down. It doesn’t look as though Wall Street is too excited about the prospect of the builders throwing more gasoline onto the inventory pyre…
http://finance.yahoo.com/q/bc?t=1d&s=TOL&l=off&z=m&q=l&c=HOV%2CPHM%2CLEN%2CKBH%2CCTX&c=%5EDJI
posted today at sdcia……
“Loan Balance: $255,000
First: $204,000 2yr interest only
Second: $ 51,000 HELOC variable interest only.
Loan change date is 7-1-06.
Subject Property:
1b/1b condo, 686 sq ft, zip code 92120 on Mission Gorge Rd.
Last comparable unit listed on the market few weeks ago with a range $199k - $219k.
Any suggestions on how to refi this? “
Your joking . Impossible situation . Ask the lender for a short sale ,( which isn’t going to happen because it looks like a hard money lender on the first ). Could bring money to the table to refi into one loan . Final analysis ………F–ked homeowner .
yeah, get a second job an just keep paying, paying, paying…….
Youse goes down to Central and 8th. Ask around for Jimmy Three Fingers. Youse talk to him real polite, unnerstand? Now Jimmy, he might come up wit some ideas youse could be a bit sqeuamish about, ya know? He might need ya to do tings for him that ya aint done before, ya hear what I’m sayin’ to you? But you go see Jimmy — he’s your only chance, old buddy.
Just do the right thing…leave the keys on kitchen counter. Pull the band aid off in one quick rip…painful but effective.
My wife’s friend is dating a guy that bought a condo there, they have been trying to sell for numerous months. I am afraid that their only option is to keep it and rent it out for a loss, or to hand the keys back and take a foreclosure.
I just heard good ‘ole George Chamberlin (San Diego) on the radio saying how really great today’s housing start news is. As in, how great it is for the housing industry.
‘Ole George is smart enough to know this is actually really bad for builders, but (for whatever agenda he’s promoting) uses such news for daily public brainwashing. Noticeably, he omits any clearly bad news. He obviously wants the party to continue, but his credibility will suffer as the whole thing comes crashing down.
tsk, tsk
that guy was doing mortgage radio ads like crazy last year. We know who pays his bills. He will be remembered as the guy on the Titanic that told the band to keep playing…
That SD condo owner is FFFFUUUUCCCCKKKKKEEEDDDDDD!!!!!
Our Phoenix area lease runs out in March 07 and we have been touring both new home communities and resale open houses . We are being told by all the realtors and HB representatives that at the current pace of sales they expect the oversupply of inventory to be depleted by early next year which will bring on the next jump in housing prices. Meanwhile, the Zip Realty Phoenix listing total will probably break 50,000 this week. We will see.
We are being told by all the realtors and HB representatives that at the current pace of sales they expect the oversupply of inventory to be depleted by early next year which will bring on the next jump in housing prices.
—————————————————————–
This kind of lying, unsubstantiated bullshit is what caused this Housing Bubble to begin in the first place; and as we start the quick crash back to reality, it will prove to be part of the undoing.
The days of fudging facts, “wink wink” complicity between appraisers/ RE agents/ brokers, $Easy Money$, and GlamorShots are nearing an end.
Those pitiful Realtor(tm) shill idiots you talked to won’t even be around next year.
Les Pendens ..Your post on the realtor spin is exactly what I figured the realtors would be telling people . The “big bounce theory ” for 2007 ,started by chief economist of the NAR.
Another prediction that I’m seeing is economists trying to call a minor 10% correction and the market will be back to normal . Lies , all lies ……..as you said .
“We are being told by all the realtors and HB representatives that at the current pace of sales they expect the oversupply of inventory to be depleted by early next year which will bring on the next jump in housing prices.”
1) Phoenix inventory is approaching a permanently high plateau.
2) Once the plateau level is reached, it will be maintained by falling, not rising prices, as those who are sunk by unsustainable cash burn rates on their money-losing “investments” or whose reseting ARMs break them will be forced to drop their list prices in order to sell.
3) The huge inventory pile confers market power to buyers, not sellers, and consequently, only homes priced relatively low relative to close comps will sell.
4) How do last year’s prices, which only made sense on the assumption that high rates of price inflation would continue, make any sense whatsoever in the brave new world of the Bernanke Fed, where Fed governors make near-daily announcements that they intend to maintain price stability?
I’m curious as to how Phoenix could even absorb that many new residents to fill all these places to live. Unless the builders just figured that all the renters become owners, which would drive down rents and make hown ownership less beneficial.
I just don’t know where Arizona will get the water to support all this growth in the long term. They get last dibbs on the Colorado, which is in a permanent state of drought due to erroneous 1930s estimates on average flow. Is living on blacktop in the middle of the desert with a rock garden that much of a draw?
Have to add my two cents worth on Arizona’s water supply. Phoenix Metro area has enough water rights for a build-out population of about 7 million. The state has some junior but also a lot of senior Colorado River water rights - and if they all went to residential use they alone could support about 11,000,000 people. But after that, no more unless you start hauling in icebergs.
If there is not enough water to draw, what good is water right?
Other states have water rights too ? California, Nevada,
New Mexico? Whose right is better? The drought cycle will return.
Renew the lease.
What a con job, working off the inventory by next year…hahahhahaaa
I love it! Keep building boys. Let’s put inventory through the roof!
This increase in building increases the liklihood that the Fed will keep raising rates, so I see this as fully self-correcting (with a little help from the Fed).
Meanwhile, I hope they keep building nice houses, so that I have a good selection when it comes time to purchase my retirement pad in a few years. Go boys go!
These builders are building on land they bought at cheap prices years ago. Their profit margin allows them to sell below current inventory prices. I theorize as long as mortgage rates remain below 7 or 8%, they view the market as still viable, in spite of slow sales and huge inventories.
Furthermore, every house they build helps the bubble pop quicker. Bring it on. gordo