Somewhat Of A Fear Of Buying At A Peak
The Mountain Express reports from Idaho. “You don’t need to be a real estate guru to realize the housing market in the Wood River Valley is in the midst of some kind (of a) predicament. A short walk through Ketchum will include mountain vistas, warm weather and a propagation of ‘For Sale’ signs that can leave a prospective homebuyer feeling like a kid in a candy store—albeit, an expensive candy store.”
“Anyone who’s ever taken Economics 101 can extrapolate the disparity between supply and demand that will result from this trend of price stagnation. However, as prices begin to drop in accordance with surplus inventory, the $64,000 question remains: Will prices continue to dip, or will buyers finally decide that the time is right?”
“‘There are still people thinking their house is worth what it was two years ago and not facing reality,’ said Rick Green, VP of Resort Real Estate at Zions Bank.”
“Statistics provided by Nicole Buckwalter, president of the Sawtooth Board of Realtors, show that while the total number of sales in this ‘resort area’ are down by approximately 30 percent, compared to the same time period last year.”
“Green said he wasn’t sure if this was the bottom or if there could be another slow season next year. ‘This isn’t a doomsday thing,’ Green said. ‘Real estate here was so good for so long that people who got into the market in the last five to 10 years haven’t seen a downturn before.’”
“In the mid-valley, where both sales and price have increased, those in the real estate industry agree that it’s a buyer’s market. ‘This is a mountain town that’s not being overrun with growth,’ said Dan Gorham, a broker based in Ketchum. ‘There are winners and losers in this, and for buyers, there’s a lot of inventory here.’”
“Home sales in Hailey have decreased as well, with volume down 26 percent this year to date. However, free-market forces seem to be working smoothly, with the median price dropping from $519,900 in 2006 to $427,000, according to the Sawtooth Board’s latest statistics.”
“With the median price down just more than $35,000, 19 units have sold in Bellevue, compared to 11 at the same time in 2006. In Bellevue, the City Council has three large development annexations in front of it that would add more than 1,000 units if all were approved.”
“Using year-to-year changes of address on tax returns, the IRS tracked migration data from county to county, estimating an increase of 580 full-time residents in Blaine County between 2000 and 2005.”
“‘Even this doesn’t explain why developers are putting forth projects when there isn’t the demand,’ Gorham said.”
From Local News 8 in Idaho. “Foreclosures are skyrocketing across the country. But, while the rest of the country struggles to pay mortgages, Idahoans are finding it’s still a buyer’s and seller’s market.”
“Here in eastern Idaho, it’s a completely different story. ‘We’ve escaped the market nationwide. We’ve just been on an upward trend since 2000, or even before that,’ said Mike Stumper, First Horizon Loan Branch Manager.”
“Stumper says Idaho is still in a period of growth with people moving in from other states like California, Nevada and Arizona, ‘We’ve been on the Internet as one of the top two places in the country to live, so people are really just selling their homes, taking their equity, moving to a better lifestyle here in Idaho.’”
“Stumper also says eventually, Idaho will face the same reality the rest of the country is dealing with right now. ‘The market goes up and it goes down. There are corrections all the time. Eventually, it’ll probably slow down here,’ he said.”
The News Tribune from Washington. “Building permits for 1,550 new residential units in Ballard have been issued in the past 18 months by Seattle’s Department of Planning and Development, and there’s more to come. Much of that development has been in the form of condominiums and town homes.”
“According to Gunnar Hadley, a realtor with Ballard Windermere, 60 percent of everything sold here for the first five months of the year were condominiums and town homes. Hadley, who specializes in condo sales, called that an ‘impressive’ statistic.”
“‘That’s truly crazy,’ he said. ‘There’s clearly a massive demand here.’”
“Homeowners will continue to flock here, predicted Lauren Martin, a developers’ representative for The Northlake Group, a company that’s converting more than 100 Ballard apartments into condominiums. The units range in price from $249,900 to $899,900.”
“‘Ballard is just hot - it’s one of the hottest,’ Martin said. ‘It has such a unique feel.’”
“According to Dupre and Scott Apartment Advisors, there have been 242 apartment-to-condo conversions in Ballard from January 2005 to May 2007. John Fox of (a) housing advocacy group said the city has lost 4,700 rentals to conversion since 2005.”
“The city’s rental vacancy rate is down to the lowest it’s been in several years, about 2 percent, but Martin said eventually it’s bound to ‘level out.’ She predicts the conversion trend will continue for another 18 to 24 months until the thousands of new condos already under way are built.”
“At that point, the condo supply should start to satisfy demand and developers will start building apartments instead of condos, she said.”
“But Nichole Poletti, property manager for Ballard Realty, said that construction and land costs have escalated to the point that it’s no longer financially feasible to build apartments in Seattle.”
“Based on a recent seminar she attended, developers would have to charge about $3 a square foot in rent to make a profit on new construction. That means a 650 square foot unit would rent for around $1,950 a month, while an average older unit that size in Ballard now rents for $790.”
The Seattle PI from Washington. “Seattle-area home values are no longer ballooning like they were a year ago, when annual appreciation was hovering above 17 percent. May’s 9 percent year-over-year growth rate is the lowest since April 2004, according to Standard and Poor’s figures.”
“More homes are available for sale than there were a year ago, although much of that bump comes from new condominiums and townhouses, said broker Mike Skahen.”
“Single-family homes are still in shorter supply, he said, particularly those that are priced under $500,000. ‘People are looking for that like crazy,’ he said. ‘Young couples still like to have single-family homes and there’s just nothing out there in the close-in neighborhoods.’”
“At the same time, the greater inventory has allowed buyers to be pickier, he said. And those who are betting that home prices will continue to level off are behaving more cautiously. ‘There’s somewhat of a fear of buying at a peak,’ he said.”
“‘Seattle and Portland for the last several months have been islands of relative calm and success,’ said David Blitzer, chairman of the Index Committee for Standard & Poor’s. ‘But it’s very difficult to say whether Seattle has completely escaped any downturn or whether it’s just been delayed.’”
“Moss blankets the house’s roof. The siding is rotting off. And mold has spread through the interior. But the home’s condition is ‘average,’ according to an appraisal.”
“It’s one clear example of how many appraisers hide problems and affirm inflated prices willingly or under pressure from the mortgage brokers and bankers who give them business, calling into question whether home buyers are getting what they pay for.”
“‘We’re pressured to hit the value every time, every single sale,’ said appraiser Richard Hagar.”
“It’s a problem that is more common as buyers vie to outbid each other in recent go-go markets such as Seattle’s. And increasingly buyers may find in coming months that they paid too much, as slowing appreciation and rising mortgage interest rates force them to sell at a loss.”
“‘I think we’ll see it come to a head here in the next year or so,’ said Ralph Birkedahl, manager of the state’s appraisal program. ‘We may see more foreclosures than we’re seeing now.’”
“When banks used to issue, then hold onto, mortgages, appraisers protected the lenders, while reassuring buyers they weren’t overpaying. But now, buyers often use mortgage brokers, who work with a variety of lenders, and banks often sell off mortgages.”
“That means mortgage originators hiring appraisers have a greater interest in closing a deal than making sure the buyer isn’t overpaying, said Hagar.”
“‘To a degree, you as a consumer are trusting that the appraiser will somewhat confirm your thought process,’ said Hagar, who helped write state mortgage laws.”
“Most appraisal orders came from banks until the mid-1990s, he said. ‘By 1995, it was 95 percent from mortgage brokers, and that’s when this pressure started to come on massively.’”
“Mortgage brokers pulled their business and even refused to pay if they didn’t like appraisals, Hagar said. He said this cost him 80 percent of his business.”
“Complaints from appraisers picked up with the hot home market in recent years, Birkedahl said. ‘We started hearing more and more about lender pressure and how they wanted appraisers to hit the value.’”
“In his class, Hagar hands out examples of improper appraisal solicitations: ‘Most comps have been in the $350K range, but we need the appraised value at $380K’; ‘Please push value to $925,000. Thank you’; ‘Wants value at $310,000 — need aggressive appraiser!’; ‘Other appraisers told me 133-134 (thousand dollars) is safe. … If you can guarantee me 145 I will set up appraisal tomorrow.’”
“Many have preprinted field names like ‘value needed’ or ’suggested value’ and include statements such as: ‘If preliminary research shows that value is not there please DO NOT do appraisal and contact the agent.’”
“It’s all illegal, said Hagar, adding that he’s been asked to change descriptions of houses, and remove or even alter pictures showing unflattering conditions.”
“It isn’t fair to blame bad appraisals solely on loan originators, said Adam Stein, president of American Brokerage in Auburn. ‘If they tell you to rob a bank, are you going to do it?’ he asked. ‘At some point an appraiser has to take responsibility for doing an overvalued appraisal.’”
“‘Appraisers have given up on filing complaints against other appraisers due to the (Washington State Department of Licensing’s) unwillingness or inability to issue sanctions for criminal actions,’ Appraisers’ Coalition of Washington President Jim Irish wrote.”
“Following up on an earlier law requiring mortgage brokers to be licensed, the state started requiring licenses this year for all loan originators, although it is allowing them to continue working while applications are pending.”
“Based on experiences in other states, Hagar expects 10 percent of originators will turn out to be convicted felons and half of those that remain will fail the test. ‘One, it’ll filter out the scum,’ he said. ‘Two, it’ll filter out the stupid.’”
“It isn’t fair to blame bad appraisals solely on loan originators, said Adam Stein, president of American Brokerage in Auburn. ‘If they tell you to rob a bank, are you going to do it?’ he asked. ‘At some point an appraiser has to take responsibility for doing an overvalued appraisal.’
HAHAHAHAHA! Two totally different things!
“Many have preprinted field names like ‘value needed’ or ’suggested value’ and include statements such as: ‘If preliminary research shows that value is not there please DO NOT do appraisal and contact the agent.’”
Yeah the average bank robber gets points for being direct, anyway. They don’t have to resort to smarmy pseudo-professional verbiage on the notes they hand the teller.
And the bankrobber almost always avoids handing the teller a note that holds their personal “from the desk of” information. . . almost.
Why even bother with the appraisal? Go straight to the deal and save the appraisal fee since the loan is going to be sold off anyway.
Right. Appraisals aren’t worth the paper they’re printed on. All they reflect is the agreed upon price between the buyer and seller. No sense in paying those hit the number hacks anymore.
I know I’m being simplistic. There are loan covenants that require an appraisal, but it has become a sham.
I just know that when we bought our home, we made an offer, they accepted, we paid cash: deal done. We sleep very well at night.
That’s nice, but not relevant to many.
Please scuuuze me mac ataaaack. I will try and gauge my precise relevancy more carefully in the future and comment accordingly.
there’re a few people on this board who can pay cash and may not be up to speed as far as all the privilages and perks and possibilities that might be available.. No appraisal to gum up the works can be used as leverage during negotiations..
“Will prices continue to dip, or will buyers finally decide that the time is right?”
These people just don’t get it. Even putting aside a credit crunch, prices are way too far above incomes.
“…prices are way too far above incomes.”
Exactly. How is it that this most important FACT is always left out?
“…a propagation of ‘For Sale’ signs that can leave a prospective homebuyer feeling like a kid in a candy store—albeit, an expensive candy store.”
Huh? What a stupid analogy. A kid would be none too pleased to find himself in a candy store full of treats he hadn’t the money to buy.
“…prices are way too far above incomes.”..
…especially without the availability and use of a toxic mortgage product. Heaven forbid we even start to talk about down payments and reserves.
“A kid would be none too pleased to find himself in a candy store full of treats he hadn’t the money to buy.”
Kind of like me at a Maserati dealership…
Yea… no wonder we had so much fraud (shoplifting).
No, like being at a Ford dealership where all the cars are selling for $300,000, but they are down from $350,000 and advertised at 15% off!
Let the bodies hit the floor……. WWWHHHOOOSSSHH
If 10% are already convicted felons, what happens when all the fraud becomes common knowledge?
OT, but I got a solicitation from Countrywide yesterday for a 40-year mortgage. I ran the numbers and the difference in interest paid on a 400K note @6.3% over 30 vs 40 yrs is ~200K. Gee, I want some of *that* action. Lookin’ like CW is trying to keep their Ponzi scheme going a bit longer, hmmm?
Targetted at the “how much a month” crowd. However, monthly payments aren’t much different once you get past a certain point. We already have “infinity year” loans, also called “interest only” loans…and then there’s the negative amoortization loans (a common option to take in an Option-ARM) that take *longer* than infinity to pay off…
Right, you pay a boatload more in interest, but save little on the monthly. For instance, on a $300,000 loan @ 6.5%, the payment is roughly $140 per month cheaper on a 40 year vs. a 30 year. Hence, 40 year loans do little to facilitate affordability.
..and after the tax deduction the $140 is more like $110 - $120, which is like nothing when it comes to home finance. If the $100 bucks or so makes the difference, then the borrower is way over extended. NTN even $300 - $500 per month is pretty thin. If you total your car and need to buy a new one, that alone could eat up a good chunk of $500.
I finally have it figured out. There was a guy on CNBC talking about how this isn’t a credit crunch. Last credit crunches premiums were up 3-4% above gov, and now they’re only 1% up.
This economy is not going to be taken down by the Wall Street banks. It is going to be taken down by Main Street spenders. Without money flowing out of houseing, Joe6Pack can’t continue to spend.
But global…. Europe is as or more toast than us, and China and India are strong only because they are selling to U.S. and Europe.
Don’t talk to me about P/E because Earnings are going to go away!
Oh, got distracted by huge run up at close and forgot where I was going…. I have the Bulls figured out. They are looking at the Wall Street headlines and ignoring the Main Street headlines. I don’t see how anyone could be a bull if they took a good hard look at consumers financial situation.
What is up with a 200 pt climb in the last 20 minutes? Any justification or is it the PPT trying to generate positive headlines for the nightly news?
I saw that late spike and laughed out loud. Yeah, that’s normal…NOT!
“What is up with a 200 pt climb in the last 20 minutes?”
I went all in. Will sell off first thing in the AM.
so, you buy low and will sell high.. buy low.. and sell high..
Eureka!
You’re all-in you say?
I call!
All three major gauges were mired in the red for most of the trading day until blue chips led the broader market higher with less than 20 minutes left in the session.
“Selling pressure abated late in the day,” explained Art Hogan, chief market strategist at Jefferies & Co., largely based on “fear of missing the bottom in an oversold market.”
VT Dan, you are exactly right. Maybe not the PPT, per se, but a mass run up before a huge, maybe really HUGE selloff first thing in the morning. I’m predicting Kramer and Baritomo on the morning news talking about a continued climb.
Cramer was in Mon and Tue becasue the old guy.. what’s his name? Anyway, he was on pre-arranged vacation. Back on Thur, before the big sell off on Friday, he mentioned he was going on vacation.
Positive news story on the today show tomorrow, and a low opening.
(sigh) Why do people always have to raise the PPT boogeyman? Why can’t it simply have been shorts locking in some killer profit near the close?
There was an explanation on some other blog. Something about fund orders that can be entered at the beginning, or end of day, on light days they do it at the beginning, on volatile days, they do it at the end. Something like that. I didnt really understand it, but it seemed to make sense.
It’s fun to believe that there’s some nebulous organization out there that explains why life is so hard instead of coming up with a more mundane but plausible explanation. Oddly, there’s never an equivalent organization that explains why things are going the way we expected because when things go our way, that has to be real of course.
I’m sure the government has some interest in financial market stability, but the supreme powers and exquisite, secret coordination bestowed upon it by many people here doesn’t resemble the government that I’m familiar with.
Subprime and Alt-A have been contained.
All the bad news is already priced in, or course.
That should read “of course.”
Most of what you saw going into the close was mutual fund purchasing as a consequence of first-of-month 401k contributions.
http://market-ticker.denninger.net/
I’m bullish because huge numbers of people are bearish. How’s that?
Huge numbers have been bearish on stocks since millions lost trillions because they were stock market geniuses in 1999. The number of bears versus bulls has been extremely high from 2001 to present. And those smart enough to spot the extreme and unreasoned negativity toward stocks these past five years have made a killing.
In 2-3 years when housing has hit rock bottom and the world’s lemmings are bearish about THAT, it will be time to buy real estate. With considerable judiciousness, of course.
Once wonders how lemmings have any hair left. They’ve spent the past seven years tearing it all out.
This economy is not going to be taken down by the Wall Street banks. It is going to be taken down by Main Street spenders. Without money flowing out of houseing, Joe6Pack can’t continue to spend.
- Totally agree. Consumer spending went crazy as it was fueled by the housing boom. When drywallers in So Cal were knocking out 80k as laborers the temporary income spike led to misplaced trust in their job income. Next, Juan Sixpack buys pickup truck, House, travel trailer for trip to Mexico etc.
that was ken fisher.
““Green said he wasn’t sure if this was the bottom or if there could be another slow season next year”
It must be the bottom. Just wait until next year’s Spring Selling Season ™! Oh Great Spring Selling Season, where are youuuuuuuuu?!!!
Oh my!
Spring Selling season 08 is here…. by now or forever get priced out.
This theme will go on for another 4 or 5 years. When will they ever give up?
Foreclosures are now more than tripple prior historic levels…. No one can get a loan… House prices are off 10% in the last year, but still 30+% over cost of rent… Builders continue to slash prices and will be doing so until they are bankrupt…
There has never been a better time to buy than spring 08!
I got a rock.
I’m in 2010.
OT, but this is interesting:
AIG Subprime Debt May Cost $2.3 Billion, Analysts Say
What’s funny is that they go on and on about the percentage of holdings that are “in subprime-mortgage bonds” or “securities linked to subprime mortgages,” without mentioning the holdings of securitized Alt-A mortgages and prime mortgages that have been issued since 2004 and are already upside-down vis-a-vis the collateral.
by my calculations a loss of $2.3B is only 7% of $33B. I haven’t checked markit today, but last I saw even AAA was down at least 5% lately.
someone does a calcuation and comes up with $8B.
he insurer’s subprime holdings are “one of the essential concerns overhanging the stock,” Joshua Shanker, an analyst at Citigroup in New York said in his report. AIG shares will probably “continue to feel investor pressure as long as many questions on subprime go unanswered.” AIG may lose 82 cents a share for each $10 billion invested, based on a decline in the value of the securities of 25 percent, said Shanker, who has a “hold” rating on AIG. That would be as much as $8.5 billion.
2%? those must be some magic bonds. Magic Backed Securities.
A.G. Edwards analyst Paul Newsome figures AIG has $35.7 billion in subprime exposure through its mortgage lending company, American General Finance, and its bond investment holdings. He assumes 10 percent of that exposure will sour, resulting in pretax losses of $3.6 billion and after tax losses of $2.3 billion. The 10 percent assumption compared with AIG’s mortgage lending default rate of 2 percent, he said, an increase that is “rather unlikely.” He rates the shares “buy.”
Hmmm. The question that I was getting at above is, they describe their exposure to subprime based MBS, but what about recent prime and Alt-A lending, which we’re already seeing default at rates much higher than historical norms?
Another item of note is that I was recently reading that insurance rates are actually driven as much by the performance of insurer investments as they are by claims payouts (or some argue, much more), which only makes sense if you think about it for a second, but consider it for a moment - if insurers take huge losses in mortgage-backed investments, then we can all expect our insurance rates to be climbing soon, and thus, the risk premium for all of this nonsense comes right back to you and I.
The money that is lost when some specuvestor fails to pay the mortgage has to come from somewhere, whether in higher interest rates charged by banks, higher premiums by insurers, or higher prices by other people that get burned somewhere else down the consumption chain. So, even if there’s no government bailout of lenders, we may still end up paying for it all anyway. And that, my friends, is the evil of the bubble. We all pay in the end. {Sigh}
“Another item of note is that I was recently reading that insurance rates are actually driven as much by the performance of insurer investments as they are by claims payouts”
Do an article search through your local library’s magazine database for the time period 2001-2004 and you’ll find articles detailing the financial pinch insurers got into after the dot.com bust and stockmarket pullback. They’d got very reliant on the investment earnings for their profits.
PPT to the rescue!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
LOL, did you see the market action in the last 5 minutes? Dow shoots up 120 points on a day full of bad news.
Riiiiiiiiiiiiiiggghhhht… No market manipulation, no siree.
How is this related to housing? Simple, really. Both the stock market and the housing market are owned, manipulated and shilled by the same elite group of corporations (aka The Government). Pigs get slaughtered in both markets…
Pass the popcorn, this is more fun than Six Flags!
No market imbalance at 20 min to close. When the traders saw that there was not a glob of sell imbalance orders like there has been the last few days, they issued buy orders.
And a billion sell orders are already lined up for the opening bell.
‘LOL, did you see the market action in the last 5 minutes? Dow shoots up 120 points on a day full of bad news.’
- That was obviously short covering.
“PPT to the rescue!!!!!!!!!!!!!!!!!!!!!!!!!!!!!”
Not quite close enough for my old brain to come up with a parody, to the tune of “Jim Dandy to the Rescue” from the ’50s. Maybe Aladinsane can…
“Based on experiences in other states, Hagar expects 10 percent of originators will turn out to be convicted felons and half of those that remain will fail the test. ‘One, it’ll filter out the scum,’ he said. ‘Two, it’ll filter out the stupid.’”
Wow ! A straight shooter w/the comments.
I like this guy - if I was in his area he would get my business.
Of course, what’s the old saying about ‘it takes one to know one’? The numbers , and the odds, are that he’s either a felon, scum or stupid. Maybe more hitman than straight shooter.
“‘We’re pressured to hit the value every time, every single sale,’ said appraiser Richard Hagar.”
“It’s a problem that is more common as buyers vie to outbid each other in recent go-go markets such as Seattle’s”
The REAL problem are the fake bids that are created by realtors that makes people overbid in the first place.
How ofter did you hear people were told, “there is another biddor can you go higher?”
— If this was true wouldnt the seller simple accept the other bid and that would be it. Why call the lower bidder at all?
— even so none of these so called multiple bids can be confirmed by buyers because the realtors dont allow it. Oh yea I trust realtors.
—- If realtors can create fraud at the back end with appraisals, we are pretty sure they front end loaded the inflated to begin with.
Destroy the commission system and you destroy all this fraud in RE.
“How ofter did you hear people were told, ‘there is another biddor can you go higher?’”
This happened to me, three times, in late 2004 and the beginning of 2005, just before I found housing “salvation” in Ben’s blog. It turned out that in each of those cases, it was true. By the third one, I figured that something is very wrong and searched for answers, leading me here.
I bring that up because now it would be very difficult for an agent to pull this off with anyone but an absolute rube — if the buyer-being-conned refused to up the offer, and the agent said, “Wow, you’re lucky, the other buyer went away!”, I think that there are far, far fewer buyers in the market who would believe that and it would jeopardize the buyer-agent relationship. At any rate, that tactic has to be far less effective in a declining market no matter how one reaches the conclusion.
I’m one of the minority here who doesn’t mind paying a commission (negotiated down one way or the other), because I look in areas unfamiliar to me and count on a good agent to tip me off to the things I wouldn’t otherwise know. A prime example was eif stucco, not common here in Florida to my knowledge, also known as “dryvit.” Looked at a very decent lakefront house, but the agent recognized the dryvit and that was the end of our interest in the property. In another case, the agent mentioned that there were railroad tracks 1/4 mile away and that it gets pretty noisy at night. That, primarily, is what I pay the commission to learn. If you know wee the neighborhood you are looking in, it likely is another story altogether.
During 2007 I made offers on 3 houses in Silicon Valley. All 3 offers were over asking price. In all 3 cases I was told that I was outbid. So either:
1. There were not multiple offers, and the seller was lying. And the seller was so intent on the lie that they would not accept a valid offer. And in fact someone (seller, realtor, or proxy) actually recorded a purchase with the county that was above my offer, simply to perpetrate the idea that there’s multiple bid situations.
Or
2. there were multiple bids and I was outbid.
I think it’s the latter. From what the realtor said, there were several bids tightly clustered, but one guy who really wanted the place and was $100k over everyone else. That guy was not me as I’m not desperate. I live in a fine place, just want to live in a better place.
It does seem to be cooling a bit, only 15 people at the last open house I went to. I don’t like this mania, I want to live in a nicer house, better neighborhood, etc without playing the multi bid game. When I bought a house in 1999 it was “normal,” offer, counter offer, seller fixes some problems, etc. Now it’s “guess what the overbid should be”, and as-is.
But I don’t foresee 50% drops in house prices, blood in the streets, etc, either. The unemployment rate for engineers in Silicon Valley is around 2%, it’s hard to hire. There is offshoring going on of course, but there’s startups here and some are having success. And there is some backlash to the offshoring as the wage inflation rates in Asia are 10-20% per year. Still less than here but the advantage is diminishing.
I’ll see if this comment gets through. I’m not quite as bearish as most people here and most of my comments do not make the blog.
the $64,000 question remains: Will prices continue to dip, or will buyers finally decide that the time is right?”
I am not sure it is up to buyers, since most can no longer qualify for enough money to buy much of anything on the market. I believe it is sellers who will need to decide the time is right to lower their prices and bring them inline with incomes.
And the backlog of inventory will prevent a quick recovery even if sellers decide to get real.
Flippers - gone
Entry level buyers - can’t get loans
Move up buyers - need to sell first to an entry level buyer, who can’t get a loan. Stuck.
ThomasPS posted about realtors’ fake bidding tactics, and the way appraisers get strongarmed is highlighted in Ben’s post.
I am so glad the frauds in the real estate biz are going to be eating ramen noodles for the next ten years.
Also, legitimate and able buyers may get impacted by collapsing lenders. If you get all the way to closing, and you loan did not get funded because yet another lender collapsed, would that make you think twice about buying?
Hey, that’s the perfect segue into a business idea I want to run past the gang!
I figure with all the inventory building up and “price reduced” signage all around, there will be demand building for a way to quickly identify motivated sellers amongst the wishers (since everyone has a “price reduced” sign which is becoming increasingly irrelevant).
Introducing the …..”PLEASE STICK EM” sticker! A 6″ high unisex caricature from a side view, bent over, pants down and spreading cheeks. Perhaps with a “seller” t-shirt on and a sad face announcing “I’ll submit to any offer!” in the caption.
I figure the realtors can buy them in rolls of 100 to be applied in the upper left corner of the property’s front yard “for sale” sign. Or, alternatively, they could use the symbol in print ads. That way only a drive-by or a glance at the ad is required in order to ascertain whether the seller is realistically setting the price or not. Perhaps the neighbors can have some fun with it as well by occasionally yelling out an absurdly lowball price and quickly bending over mimicking the sticker when they see the sellers out and about?
What do you think, does the idea fly? Any other marketing ideas?
holymoly.. that is SICK!
but i like it..
GH — well put.
Olympia Gal, I read your post over in the bubble reports thread and you cracked me up praying to Baby Jebus.
I just want to say, I sooooo share your sentiments regarding the builders and developers. How goes it jousting against these tards in your neck of the woods? Any new tales to tell?
I don’t know if you ever saw my post a couple of months or so ago, about how a local town government in Connecticut held a major home builder at bay, with requests (all legal) for this and that, until the market turned down and the builder decided not to build. It was a wonderful example of how a caring, concerned local government can actually work for the people, instead of for the business interests. Wish we had something like that here in Florida. Maybe we do, somewhere I don’t know about, but not in Hillsborough County.
Hey Sammy Schadenfreude, where did you go? Omaha moving along?
“But Nichole Poletti, property manager for Ballard Realty, said that construction and land costs have escalated to the point that it’s no longer financially feasible to build apartments in Seattle. Based on a recent seminar she attended, . . .”
Wow, Nichole attended an entire seminar. Look out, she’s now an official MSM-quotable housing market guru.
Isn’t this essentially just another side effect of the buy vs. rent disparity? If it doesn’t make sense for an individual to buy vs. rent, then it isn’t goint to make sense for a builder to buy, build, and rent.
Yep, basically it is saying that condo buyers are paying three times what renters are paying for similar space. That certainly justifies all the condo conversions… as long as the supply of fools willing to overpay for condos doesn’t run out!
And another great RE agent name “Gunnar Hadley” classic!
I suspect Gunnar is just killing it right now…yup and there is an RE boom on also. Gunnar get ready to get your dancing shoes on and hit the corner with your giant arrow soon, and then not so much dancing when he holds the need food sign next to the offramp.
“‘Seattle and Portland for the last several months have been islands of relative calm and success,’ said David Blitzer, chairman of the Index Committee for Standard & Poor’s. ‘But it’s very difficult to say whether Seattle has completely escaped any downturn or whether it’s just been delayed.’”
Actually, Dave ol’ boy, it’s not that difficult of an outcome to figure out. Hint: The answer doesn’t start with “escaped.”
Hint: compare cost of purchase to cost of rent. Compare cost of purchase to cost of construction. Compare cost of purchase to historic normal affordability levels. Compare cost of purchase to peoples’ incomes against tighter lending standards. That will tell you if the cost of purchase is too high. If it is to high, then it will fall.
Darrell — I try to imagine what prices would be like if virtually all buyers had to bring 20% real cash to the closing table — in a non-lienable situation, assuming quiet help from Mom & Dad , but no recordable seconds/piggybacks. That would be my buying market, for sure.
I as a renter don’t want them to start comparing cost of purchase to cost of rent at this stage of the game. Let’s keep the rents low and the pain to buyers high. A large dose of pain will be the only thing to keep these people from reentry into the market when interest rates change. I can’t count on the mortgage industry holding them to a reentry with a 20% down payment.
When OH WHEN will we ever see a main stream story comparing historic norm affordability to current affordability? Or an MSM article about how much cheaper it is to rent than buy. Or an MSM article on what HUGE markup the builders are still making when you ignore how much they overpaid for the land? Or an MSM article comparing John Q Public’s median financial situation to the minimums that will be needed to qualify for loans going forward?
WHEN oh WHEN will the press do its job of gathering and sharing real, and unbiased information????
When there’s no risk in losing advertisers by doing so.
According to a radio story I heard earlier this week, a lot of that RE ad money has left the newspapers. And it’s not coming back.
Last week’s New Times had an article about reporters and other staff bailing the East Valley Tribue and AZ Republic, and that they won’t be filling those openings. This is going to get worse before it gets better.
Wonder what % of Goog’s advertising income is from the RE industry. Seems every page I hit has an ad from a mortgage company or home builder.
Ding!
Amen!
Today, I witnessed a new type of panic. A contactor sitting on a spec home for nine months, with out even a bite.
‘We’ve been on the Internet as one of the top two places in the country to live, so people are really just selling their homes, taking their equity, moving to a better lifestyle here in Idaho.’”
I just shake my head when I read this pap. Am I really to believe that people just uproot and move to areas of the country because someone says ‘it’s a great area’? What about, you need a job to survive? How many people can move to these remote areas without concern for schools, jobs, hospitals, etc? Then again when I see the news of all those people signing to buy houses that they couldn’t afford, maybe I need to rethink my thinking.
I’ve been thinking about this myself (as in, “How do I do this?”).
These people must either (a) have no debt whatsoever and enough cash that they don’t need to work anymore, which doesn’t seem like it can be that big a number, (b) have a government pension that more than covers all of their expenses, allowing them to move at will, or (c) harbor delusions of grandeur.
Its a joke. Fort Collins has been a perennial Money mag “Top 10″ place to live, yet its made no difference in the local market.
Was on a Carnival cruise 2 weeks ago and ate dinner with a couple that moved from SoCal to Utah. They were about 30. 2-3 years ago sold his SoCal house for half a million more than it was bought for, bought a house in Utah with about 1/5th the gain, and does a part-time job from home and is living by investing the other $400K.
You’ve got to be kidding. You met them on a cruise, right. He does odd jobs (maybe drug smuggling?), bought a house for $100K and has $400K left to invest. A safe investment now brings in 5% so that would be $20K a year. That means now hospitalization, no savings, no new cars, etc. Yet, they took a cruise!! This sheep will be fleeced by the end of the year.
Still $400K of real money is a lot of cash. If they are not full of it what is $4-8K for two on a good cruise is not bad. The problem will be if they are hit by the wealth effect. Stop working all together and travel. The average million dollar inheritance for an 18-24 year old only lasts like 12-36 months before the well runs dry. Check back in on them in 3 years.
I believe Darrell.
Where could i go to see a average/wild guess about how much construction cost is on the average house? Or condo, or whatever?
Marshall Swift Construction Manual, issued on a quarterly basis by location (city, zip, county, whatever) from your local bookstore. Also, other publishers will provide such lists in a breakdown by item. I would check with your local contractor performing repairs, especially ones that work for insurance companies. Good thought, call your homeowners insurance company or agent and get a referral to a local contractor. Final, check your yellow pages for a contractor who does insurance work and ask about the construction rating booklet and how you can get one.
Its been sometime, but there are sources out there.
Lol..this quote states it all whether its better to rent or buy in Seattle at the present time..:)
“Based on a recent seminar she attended, developers would have to charge about $3 a square foot in rent to make a profit on new construction. That means a 650 square foot unit would rent for around $1,950 a month, while an average older unit that size in Ballard now rents for $790.”
Back of an envelope calculation puts the 650 sq. ft. place at $195,000 to buy? About 100 months rent would equal the price from what I have heard. Even if not exact, the order of magnitude still is ponderous,
I need some help. Two days ago I saw a listing on realtor.com for a house at 8207 Obsidian Bay Court in Sacramento, CA 95829 for $251,000 4br/2ba with swimming pool. A friend who lives in the area said it is being foreclosed. I called the listing RE agent and was told it is sale pending. Now it is no longer on realtor.com. Another realtor told my friend the bank is foreclosing it and it would be about 2 to 3 months before the sale take place. Would someone provide some info on this property. Has it sold already?
Thanks.
I have a question that I would like your response to, If you would. Does BB and the USFed raise rates or lower rates in the next year?
I think that if his/their choice is lower rates to save homes for approximately 2.2 million homeowners in over their heads with the corresponding skyrocketing US accounts deficits and oil prices or raise the rates and sacrifice the homeowners and keep the oil prices under control, they will chose to raise rates.
My reason is as follows: If oil prices skyrocket upto $100-150 a barrel, the country will not have to worry about 2.2 million homeless homowners renting. The entire economy will lock up and come to a standstill.
So what do you all think?
I live in Hillsborough, North Carolina, a small Revolutionary-War town 12 miles from Chapel Hill, 12 miles from Durham, 23 miles from Research Triangle Park, and 35 miles from Raleigh. I rent a small (maybe 1,400 sq ft) not-well-maintained 2BR 1.5 BA house on a large lot for the below-market rent of $750. I have chance to buy a very attractive 1,860-sq-ft, 3BR, 2.5BA house on .59 acre lot, FSBO, built 9 years ago just outside town for $250,000. Today it would cost, I think, about $300,000, possibly more, to build the same house. Yet a very similar house built by same builder at same time on the same cul-de-sac just sold after only about 5 weeks on the market for $234,000 (motivated seller) and other comps suggest the fair-market-value for the one I want to buy is probably only in the $235,000 to $245,000. Seller is unwilling to negotiate on even the smallest point. I can put $50,000 down, but then the monthly payment with taxes and insurance on a trad 30-yr fixed mortgage will be about $1,457, nearly twice what I now pay in rent, and close to half my monthly take-home pay. Although I could look for a housemate. Any advice for me, anyone?
“I can put $50,000 down, but then the monthly payment with taxes and insurance on a trad 30-yr fixed mortgage will be about $1,457, nearly twice what I now pay in rent, and close to half my monthly take-home pay.”
********
I read that statement and decided that you don’t need any advice.
It’s all there right in front of you.
firstly property prices are falling.. you wanna see some or all of your precious 50 grand evaporate? Lay it out there in this barren desert of a market under the blazing foreclosure sun and you won’t have to wait long.
secondly, you make like 40K a year and want to buy 5x as much house. This is way beyond what’s considered a safe limit.
“housemate” loses job.. someone gets sick.. employer goes kaput or lays your butt off.. You’re fully “invested” in the house and have no backup? Any little thing could put an end to this dream really soon..
I know it’s bizarre but sh!t happens.
Mr. “Oh” told us so yesterday
Why would you want to pay $250 for a house that has $235 comps. You’d have to make up the difference between price and appraisal.
We rented in the late 70’s early 80’s because our rent was less than the utilities would have been. We paid rent and no utilities. We wanted a house too, but it was stupid to move and pay a mortgage, taxes, insurance & utilities, when we could rent for less than the utilities would have cost somewhere else. We compromised, bought land and held it until prices were reasonable enough to build. We waited 9 years, but it was worth it moneywise. 15 Years after our house was built we had it paid for. No house is worth your financial security.
Why would you want to pay $250 for a house that has $235 comps.
Easy - $100k cash back…
You know that the past 7 years the RE market and the Stock market have gone up up up up up! This younger generation who lives on credit for anything they cannot pay cash for and wants everthing now needs to take a break. A little recession may put some reality in their buts and bring them back to earth. If not now then soon!