October 21, 2007

Sellers Are Holding Onto A False Sense Of Appreciation

The Columbian reports from Washington. “If you think you’re seeing more ‘For Sale’ signs around Clark County, you’re right. The inventory of homes for sale here is the highest in at least five years, according to new figures. A year of sluggish sales contributed to a 12-month inventory of new and pre-owned homes on the market in September, the biggest backlog since records started being kept in 2002, according to RMLS.”

“‘Buyers are in no hurry,’ said Mike Lamb, an associate broker with ‘in Vancouver. ‘Their expectation is that prices will go down.’”

“Sellers are waiting it out as well, and some are ‘holding onto a false sense of appreciation that may not be justified in this market,’ said Kathy Rylander, also an associate broker.”

“New homes account for much of the excess inventory, a situation that has caused a dramatic slowdown in new home building. ‘Builders are having a rational reaction to the marketplace,’ Lamb said. ‘As things slow down, they’re building fewer homes. We’re going to have to work the inventory down.’”

“Home construction represents a $350 million piece of the local economy and supports several thousand jobs in construction and related services.”

“The sector barely kept up with demand two years ago. ‘Now, we’re fighting for every sale out there,’ said Matt Lewis, acquisition and planning manager for Vancouver-based Pacific Lifestyle Homes.”

The News Tribune from Washington. “If there is any doubt that today’s Pierce County housing market is one fit for buyers, check out these offers: A $5,000 furniture gift card on North Tacoma condominiums selling for $249,900 to $342,900. A $15,000 bonus in a gated community of houses in Parkland. A 2005 Honda Civic with a three-bedroom West Tacoma house priced at $549,500. A $15,000 shopping spree at Posh Home with a two-bedroom downtown Tacoma condo.”

“Such an atmosphere differs considerably from just two or three years ago, when buyers competed with multiple offers, were outbid, and sellers declined to make concessions they now readily make.”

“In September, 2,107 new Pierce County homes were for sale, a 26 percent increase over the same month a year ago, according to Northwest MLS.”

“New-home builders are pushing buyer incentives to stand out from the subdivision crowd, said Tom McCollum, a real estate agent selling homes at Stoney Ridge, a 39-house development in Frederickson. Buyers there are eligible for a $20,000 incentive.”

“‘The market has obviously changed, and there’s a lot of standing inventory,’ McCollum said.”

“Parkland subdivision AutumnWood opened for sale last year and added a $15,000 buyer bonus in August. ‘As the market has turned we have to come up with new and better ideas to motivate the buyer,’ said agent John L. Scott.”

“Builders and developers typically are reluctant to lower prices in favor of incentives. A reduction in price comes directly off the bottom line, whereas an upgrade, such as crown molding or an entertainment system, could cost the builder less, said Glenn Crellin, at Washington State University.”

“‘It makes it look like they’re contributing more than might really be the case,’ he said. ‘It’s a marketing ploy.’”

“Plus, lowering the price on one new house in a subdivision could impact the prices on subsequent sales and the value of nearby homes. ‘If they’re offering homes for sale for less than previous purchasers paid, they get a lot of negative reaction from folks who recently moved into their neighborhood,’ Crellin said.”

“David Groff listed his West Tacoma house more than a month ago and added a 2005 Honda Accord as a bonus a few weeks later. His 3,000-square-foot home, with a view, is priced at $549,500.”

“‘The house has a lot to offer, but there are obviously a lot of houses for sale,’ he said. ‘The car idea was just some kind of tangible thing you can see and feel more than a cash bonus.’”

“Bob Mortimer added a 1954 Cadillac to the sale of his Gig Harbor home after several months of no buyers. His four-bedroom house – now at $849,000, down from $895,000 – has been for sale for nearly a year.”

“‘I thought it might be a fun thing to do to offer it with the house instead of lowering the price again,’ Mortimer said.”

“Bill Riley, an owner of Gateway Real Estate, said he raised the price of a house in Puyallup by $15,000 recently and added a Harley-Davidson motorcycle to the listing. ‘Sometimes things like that capture a person’s attention. It didn’t work. We did it for three weeks. We dropped the price back down,’ he said.”

“Other real estate agents tell their clients to avoid incentives in favor of discounting the price on a listing. Buyers, said Windermere agent Mike Tinder, want a good price. Plus, today’s home shoppers respond to price reductions, because they can use money saved from lower house payments to pay off credit card debt, he said.”

“‘I think giving away a car is a bit silly. I think cash is king,’ he said.”

The Bellingham Herald from Washington. “Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said much of Western Washington has returned to a situation where neither buyer nor seller has the upper hand, which may feel strange to some after five years of a hot real estate market.”

“‘The level of activity is down a bit across the state and supply is up, but prices are still holding up reasonably well,’ Crellin said. ‘It’s really turned into a balanced market, or slightly into a buyers’ market.’”

“‘My guess is that for the first time in at least five years, home prices will end up about the same as the previous year,’ said said Gragg Miller of Coldwell Banker Miller-Arnason.. ‘It shouldn’t come as a surprise. The market had been appreciating too quickly and a break was needed.’”

“Through three quarters of this year, the number of homes sold for less than $350,000 is down sharply. At the same time, sales of homes more than $500,000 are up sharply, already surpassing 2006 levels.”

“There are several explanations for the drop in sales for first-time homebuyers. ‘I think of it as the great psych-out factor that’s taking place for buyers (in that price range),’ said real estate agent Ken Gustafson. ‘There is a wait-and-see attitude, where some people are holding back, waiting to see what happens next. It’s interesting because there are many more choices and good loan products out there.’”

“‘Right now some are convinced that what’s happening nationally is happening here, but we don’t see those signs. Once they realize that, demand will increase,’ Crellin said.”

“‘The increased interest from Canadians has really taken place in the last few weeks when their dollar reached parity,’ agent Mike Kent said. ‘Vancouver (B.C.) area home prices are so high right now that Whatcom County looks like a bargain in comparison.’”

“Earlier this month Janna Denney closed on a two-bedroom condominium on Northwest Drive. It was her first real estate purchase. Even though Denney is 22, she was confident about being able to qualify for a loan because she has been working for five years. She was able to get prequalified last spring.”

“‘I felt pretty lucky, because I was qualified before all the news about tightening credit happened,’ Denney said. When she found the unit she wanted, Denney made an offer that was immediately accepted. She’s moved in now and happy with her unit, which was converted from an apartment.”

“‘This place has all-new appliances and they did a great job renovating it,’ said Denney, who paid less than $200,000. ‘On the inside it feels like a brand new condo unit, but with a usedunit price.’”

The Oregonian. “Clark County’s housing market showed signs in September of slowing more than the rest of the Portland area, according to data released Wednesday.”

“The county had a greater inventory, needed more days to sell and had a steeper drop in closed sales compared with the area that includes Clackamas, Columbia, Multnomah, Washington and Yamhill counties.”

“At the rate homes were selling in September, it would take about 12 months to sell all of them. A year earlier, inventory was at 6.4 months. In September 2005, it was 2.6 months.”

“Closed sales dropped nearly 42 percent and pending sales fell about 30 percent.”

The Bend Bulletin from Oregon. “Mortgage defaults have continued to rise through the third quarter in Deschutes County as an increasing number of homeowners struggle to make their payments, county records indicate.”

“‘There is turmoil, some turmoil,’ as Ball Janik LLP bankruptcy and foreclosure attorney Jeff Gardner put it for a crowd of 45 local bankers at a seminar in Bend on Thursday.”

“Ball Janick’s attorneys are representing banking clients in foreclosure cases simultaneously in Washington state, Idaho and Oregon this summer, Gardner said, the first time he’s seen that in 10 years of practice. The cases have all involved residential builders working throughout the full range of the housing market — condominiums, subdivisions and high-end homes.”

“Gardner said he smells nothing in the air to indicate that the banking climate is about to melt down to anything like the high-interest crisis of the early 1980s, the agricultural collapse of the mid-1980s, or the real estate slowdown of the late 1980s and early 1990s.”

“The sky is not falling,’ Gardner said. ‘Banks are not necessarily going out of business.’”

“Despite the housing downturn, said Tom Bourdage, West Coast Bank’s VP for commercial loans said the potential effect of loan failures of all types on the local banking industry won’t be as dire as some think.”

“‘A lot of it is perception,’ Bourdage said. ‘It’s not as bad as it seems.’”

“Bend-based Bank of the Cascades reported that its nonperforming loans rose to around $21 million in the quarter, or about 0.89 percent of total assets, largely due to trouble among some Boise, Idaho, housing projects.”

“The Central Oregon MLS listed about 35 homes this week as ‘distressed,’ said broker Ruben Garmyn. The bulk of them are banks trying for a ’short sale.’”

“Most of the homes were owned by investors who bought too high and have walked away, Garmyn said. He expects it to rise higher through the winter as failed investors and contractors give up.”

“‘There’s going to be so many good deals on the market, it’s just incredible,’ Garmyn said. ‘You need to buy them now when everybody is sitting on the fence and doesn’t want to buy ’em.’”

Business Week reports on Oregon. “In the late 1990s, Bend became one of those sleepy mountain towns, like Bozeman, Mont., and Coeur d’Alene, Idaho, that started popping up on ‘Best Places to Retire’ lists. Construction boomed, the population doubled (to 75,000)—and so did housing prices.”

“But the influx of Californians, which contributed to the real estate boom, has slowed to a trickle. Just 106 single-family homes were sold in September—two-thirds fewer than in the same month in 2005. The town now has a 15-month inventory of homes for sale. ‘There’s a slump in the market, no question,’ says appraiser Michael Caba.”

“The best deals are in high-end homes that developers built on speculation. Bill Berger, who runs the local office of Hasson Company Realtors, has watched the asking price of one new 2,700-square-foot house sink from $579,000 in February to $439,000 now.”

“‘Prices got too high,’ he says. ‘Now they are coming back to reality.’”




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76 Comments »

Comment by Ben Jones
2007-10-21 08:59:12

I wonder about the reasoning of some of these folks:

‘The slowdown in the Seattle housing market is beginning to impact apartment, condo and home renters, too. For sale signs are becoming permanent fixtures in our neighborhoods. Buyers are scared. Many are now opting to rent, which means, more competition — and higher prices for rental units.’

‘Sellers are scared. Sellers are feeling the effect of the downturn in the market — of what everyone thought would be a continuing rise in the market,” Goldberg said. Figures we obtained Friday show in the past three months, new renters have gobbled up 360,000 rental units nationwide, including several thousand in our region. Landlords can now afford to charge more.’

‘We are going to start seeing in the next six to twelve months. Prices will increase the demands for rentals will be greater than sales,’ he said.’

Comment by Neil
2007-10-21 09:13:56

Many are now opting to rent, which means, more competition — and higher prices for rental units.

Standard REIC FUD. I’ve heard this quite a few times for LA. But rents cannot be financed, so they are tied to incomes far more than selling prices have been.

‘We are going to start seeing in the next six to twelve months. Prices will increase the demands for rentals will be greater than sales,’ he said.’

For a little bit rents might actually go up in Seatle. Then the unsold inventory available will drop rents.

Got popcorn?
Neil

Comment by joeyinCalif
2007-10-21 09:38:18

Buyers are scared. Many are now opting to rent

Yup.. these “buyers” are currently homeless… gotta find a place to rent..

Comment by joeyinCalif
2007-10-21 10:21:34

“Look Mabel.. what a beautiful a McCracker box.. if prices weren’t falling like a rock, I’d make an nice offer… hmm.. maybe i can swing it”
“Wilbur, I’ve already told you. I’m scared.. I think we should rent for a while.”

“What luck! There’s a For Rent sign next to the For Sale sign!”

“Look at that line of people waiting to apply to rent the place, even though the owner is desperate to sell, is probably upside down and likely to lose the house, steal rental deposits as the bank kicks the tenants out on the street.”

“Who cares? I’m tired of living under the freeway overpass. Get in line while I park the car.”

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Comment by Ben Jones
2007-10-21 09:03:52

Here is a Register Guard article from Oregon I was going to use above, but the whole site is down:

‘Lori Daleesa Weary and her husband, Cedric, have reduced the price on their Ferry Street Bridge home twice, after relocating to New Jersey in July.’

‘We did about $25,000 in remodeling — new carpeting, tiled counters, wood laminate flooring, new shower, paint inside and out, a new patio cover — and the house is just sitting there,’ she said. ‘The market analysis said it was worth $365,000. We’ve lowered the price twice, and now it’s down to $299,900.’

‘At that price, they won’t make any money from the sale, so they won’t be able to purchase a condominium in New Jersey, where they pay $3,000 per month in rent, she said. ‘And we’re still stuck with our mortgage, keeping up the yard and paying the electric bill to keep the lights and furnace going to show the house,’ Weary said. ‘The house is in a great location, with great neighbors and a park across the street, but the market is just so slow — this has been very stressful.’

Comment by edgewaterjohn
2007-10-21 09:25:40

‘We did about $X in remodeling…’ Who cares? Remodel for use not resale - its a hopeless venture otherwise. Personally when shopping in the past it was most annoying when an owner pointed out any upgrade aside from the functional/structural. I can buy a freakin’ paint brush for pete’s sake.

Comment by joeyinCalif
2007-10-21 09:44:36

Would you deprive a RE agent of the higher commission earned by including the seller’s “improvements” in the sales price? .. some people got no compassion..

 
Comment by diogenes (Tampa,Fl)
2007-10-21 10:11:24

You haven’t been watching the house-flipping shows, now have you?

Comment by Chelle B.
2007-10-21 12:05:30

Speaking of those shows, more than one of the “pros” on A&E’s Flip This House is being sued (or is suing A&E).

The Montelongo’s have multiple foreclosures on homes supposedly sold for ‘major profits’ on the shows. I hope they all get what’s coming to them.

http://www.flipthislawsuit.com/

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Comment by travanx
2007-10-21 14:20:26

I was watching one of the flip this house shows and some say they sold the house, others just end. None of the people walking through the houses looked like they could afford these $900k places. I know looks arent everything, but making that kind of money most people have a certain look to them.

Also these guys working on the houses getting paid $100/hr to pull apart walls and gut things. There is almost no skill involved to do that, yet these people are getting to pocket at least half of that. I really dont get it. Maybe thats why I never could understand those shows.

 
 
 
Comment by felix
2007-10-21 10:31:03

I am in a 40 yr old house in a nice neighborhood. It had original baths and very little updating throughout. I remodeled the baths with quality neutral bath, tile etc. I don’t see why someone wouldn’t pay more for a house with quality neutral updated baths over ugly never can get clean 60s baths.

I agree that changing things that aren’t horribly ugly, outdated and dirty looking for trendy high end remodels and not doing any work yourself is risky and annoying to some buyers. But I would rather buy a house where that baths didn’t need tearing out as long as they have been updated without using non neutral colors.

You can’t just add remodeling cost to the price you paid for the house, but condition effects price relative to other homes to a point, although all the prices may have dropped a certain percent.

Comment by joeyinCalif
2007-10-21 10:50:01

imo, it’s a personal decision. Either get a discount on a home that needs work and upgrade it or have the seller do the work.
But, the seller doing the work has several drawbacks.. a buyer has no control over costs or design and there’s that 6% commission on whatever the improvements cost.. also the price of the home is higher so assessed value is higher, which means a larger loan (figure eventually paying 2X the cost of improvements here) as well as higher property taxes, etc..

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Comment by Giacomo
2007-10-21 10:44:39

It drives me nuts to see home appreciation attributed to “upgrades.” Speculation on cheap loans drove up prices, not granite counters and whirlpool tubs.

The cheap money is gone, and the bubble isn’t going to be re-inflated by house staging, new carpets, or blind optimism.

Comment by reuven
2007-10-21 11:05:04

What about Balloons? They’re starting to tie them to the sidewalk signs here in California! Maybe those will re-inflate the price.

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Comment by BanteringBear
2007-10-21 11:57:51

“‘We did about $X in remodeling…’ Who cares? Remodel for use not resale - its a hopeless venture otherwise. Personally when shopping in the past it was most annoying when an owner pointed out any upgrade aside from the functional/structural. I can buy a freakin’ paint brush for pete’s sake.”

Not necessarily true. Upgrades DO increase the value of a home. 3/4″ solid wood flooring is more valuable than vinyl, and on and on and on. Now, if someone is paying a contractor to do the work, then they should expect to LOSE some of that remodel money when they sell. Do it yourself, and you stand to gain a little, but you’re spending your own time, which is money.

But, as I have always believed, you make money when you BUY real estate, not when you sell it. When it comes time to sell, it is about having the best product at the best price, period. If you can remodel a place, and get a higher quality product on the market for less than all the competition, and still make money, you bought it at a good price. Too many fools watched Flip This/That House never realizing that you make money when you buy, not when you sell.

 
Comment by OK_Land_lord
2007-10-21 19:45:10

I think some of the people who watch the stupid shows on TV and some moron comes in and tells them that the remodel they did to the bathroom and kitchen will bring $40k an $60k respectively. Did these morons ever relize that poeple can do the math and determine that they could have the same work profesionally done for 1/3 the price if not less.

I you put $1M worth of stuff into a $hit box, it is still is $h%t box will only bring what the typical value of homes in the area is worth.

 
 
Comment by Tom
2007-10-21 09:47:29

I see a lot of people learning a very valuable lesson. Hopefully, when this all subsides, many years from now, these people don’t rush back in when the Gov’t says, it’s a great time to buy, and the NAR says, “PRICES NEVER GO DOWN, EVER!”

 
Comment by Steve W
2007-10-21 11:11:51

Real good market analysis, huh?

 
Comment by WAman
2007-10-21 15:23:54

They wanted 365k for a place with laminated wood floors? For that price in the Portland area you should get real hardwood floors. I know I sold property there in 2000-2002 and many homes in the 200k and up had real wood floors. I had it in my house in the Jackson School neighborhood.

 
 
Comment by SKB WPB
2007-10-21 09:10:36

‘At that price, they won’t make any money from the sale, so they won’t be able to purchase a condominium in New Jersey, where they pay $3,000 per month in rent, she said. ‘And we’re still stuck with our mortgage, keeping up the yard and paying the electric bill to keep the lights and furnace going to show the house,’ Weary said. ‘The house is in a great location, with great neighbors and a park across the street, but the market is just so slow — this has been very stressful.’

Boohoo, you are not going to make any money off of the sale.
Here is a novel idea, try saving money for five years from the money you earn with your job. Then you will have enough for a huge down payment or even a cash sale.
Why does everyone always expect to make money on the sale of a house?

Comment by Ben Jones
2007-10-21 09:15:11

‘Why does everyone always expect to make money on the sale of a house?’

Financial manias have a way of doing that. So they’ll sit there and take an enourmous monthly loss comforted by the belief that someone will make it all better. Unbelievable.

 
Comment by AndrewHac
2007-10-23 13:14:52

“Why does everyone always expect to make money on the sale of a house?”…
Because they are greedy, lazy, and want to earn free money from some one else pocket. And thus most of the time they fail in doing so and the flash-back will haunt them the rest of their parasitic lives.

 
 
Comment by Olympiagal
2007-10-21 09:15:29

Yee HAW! This is what I like to read on a beautiful misty morning here in Olympia! I believe I’ll put another chunk of fir on the fire, go find my favorite moo-cow slippers–I don’t even care if they clash zoologically with the monkey jammie bottoms–make another cup of coffee with extra extra whipped cream since this is such a celebration, and then read it alllll agaaaaaain.

Comment by Ben Jones
2007-10-21 09:18:10

Good for you. I hope that seeing all these lagging markets turn in almost exactly the same fashion will give hope to anyone out there who is frustrated.

Comment by Olympiagal
2007-10-21 09:24:42

Well, the PNW really has held out longer, alas. But just look at these lovely articles. REjoicing! REjoicing!

What a wonderful, wonderful blog. Thank you, Ben.

 
Comment by JOEY IN LA
2007-10-21 10:03:30

The San Gabriel Valley in the Los Angeles area is certainly lagging. The prices seem very sticky in the asian areas. I think the easy money from China and SE Asia is still pouring in. It’s typical for older 2/3 br homes to be lowered and replaced with a 5 or 6 br house with not yard; soon to be followed with an family of three generations or to have the rooms rented out. Very sticky indeed in this area. Anyone see otherwise?

Comment by Pen
2007-10-21 10:30:17

Not really seeing this in the areas where I’d be shopping for a home, but I’have seen similar stuff (without the knock-down and rebuild).

This would be on my list of nightmare neighbor situations, regardless of the nationality of the family. Dealing with just regular neighbors is bad enough sometimes, but when you throw extended families into the mix it can get sort of scary.

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Comment by are they crazy
2007-10-21 12:14:44

I object - I live with daughter, SIL and grandson. Living as extended families used to be the norm with everyone helping each other out. What is scary about extended families?

 
 
Comment by Giacomo
2007-10-21 11:28:07

A SFH can very quickly become the equivalent of a small apartment building, in terms of impact on the neighborhood. More often than not, adults who don’t have a problem sharing a house with their parents, siblings, nephews and neices will still want to have their own car and parking space.

It is, in effect, a practical way around codes meant to control density. City governments have trouble dealing with it because they don’t want to give the impression of cultural bias.

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Comment by not a gator
2007-10-21 19:40:11

In my old neighborhood (post WWII tract housing), there is a space at the end of every block for about 5-6 cars to park.

In the winter this doubles as a place to stack snow.

Many good times there. :-D

 
 
 
Comment by txchick57
2007-10-21 10:27:57

Now find something saying Sedona and Flagstaff are going into the tank, also Santa Fe ;)

Comment by Ben Jones
2007-10-21 10:33:27

Not much on the web about Santa Fe, but the little I have seen looked just like all the rest. The others are in the tank. Sedona has a massive inventory and almost nothing selling. I had a post up here recently that reported 900 condos for sale in Flag and 80 sold year to date. Supply and demand, baby, it works the same in every market!

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Comment by BanteringBear
2007-10-21 12:36:11

“Sedona has a massive inventory and almost nothing selling. I had a post up here recently that reported 900 condos for sale in Flag and 80 sold year to date.”

That is an absolutely staggering report. I can only surmise that many spec builders will soon file Chapter 7, and the banks will eat the loans, and possibly fail themselves.

 
 
 
Comment by mikey
2007-10-21 10:58:08

Milwaukee UNEMPLOYMENT is 2nd highest to DETROIT among 50 largest cities.
http://www.jsonline.com/story/index.aspx?id=675581

So much for ALL IS WELL and “Now is the Time to Buy”

NAR and the US Gov’t are cooking the Books and Fudging the FACTS as fast as they can :)

 
Comment by Kim
2007-10-21 11:03:03

Chicago is lagging too (down only about 5% YOY according to Housingtracker). However the good news is that rents are still at 2001 levels - a HUGE disconnect from purchasing prices. A recent article said they were going up in the city, but I’m actually finding they’re going down in the ‘burbs.

 
 
 
Comment by edgewaterjohn
2007-10-21 09:15:29

“Gardner said he smells nothing in the air to indicate that the banking climate is about to melt down…”

Whew, with such a scientific assurance as this I’ll be sleeping a heckuva lot sounder tonight. Way to go MSM - nothing like reporting the use all one’s senses in your financial reporting.

Comment by scprofessor
2007-10-21 09:22:39

Mr. Garner says, based upon his 10 years of experience that he “smells nothing in the air to indicate that the banking climate is about to melt down to anything like the high-interest crisis of the early 1980s, the agricultural collapse of the mid-1980s, or the real estate slowdown of the late 1980s and early 1990s.”

Something smells like if you only have 10-years in the business, what makes you the expert to say anything. I was there, doing your job in 1979. I was there doing your job in 1990. Let me tell you that my nose has more experience and it tells me that things smell worse today than they did on either of those previous downturns. Why? Because at least then, as compared to today, there was an understanding of prudent lending practices, abandoned a few years ago by people like you with 10 (or less) years of history behind them who failed to understand the dangers associated with making loans to people without understanding words like creditworthiness and downpayment.

Comment by Betamax
2007-10-21 11:58:06

Well said. He hasn’t experienced any of the previous crashes professionally, so he isn’t qualified to ’smell’ jack squat.

 
 
 
Comment by dwkunkel
2007-10-21 09:24:01

Before we bought our first house we were living off of my wife’s income and saving every penny that I made. We borrowed to buy a house in 1978 with 20% down because prices were increasing so rapidly at the time. If prices has been static or declining we would have just kept saving and bought for cash in about 5 years.

 
Comment by Doug in Boone, NC
2007-10-21 09:26:21

“‘A lot of it is perception,’ Bourdage said. ‘It’s not as bad as it seems.’”

Check back this time next year!

Comment by Neil
2007-10-21 09:38:43

It isn’t bad. Homes are becoming affordable!

As I’ve noted before, Fear is denial where they cry themselves to sleep and cut the price a tiny amount. Soon we’ll be into a new stage. But not yet. I need to get on the used car sites to see how the prices are doing. :)

Got popcorn?
Neil

Comment by Ben Jones
2007-10-21 09:55:51

The California post from yesterday shows that it just depends on how you look at it. The media is reporting more and more people saying things like ‘one persons loss is anothers gain.’ I hope we get to a point where they just announce, ‘it’s a blessing in disguise!’

 
 
 
Comment by Tom
2007-10-21 09:44:36

As soon as the Government “waives” the short sell income tax rule on “phantom income” you will see prices accelerate downward. This is why lenders are fighting this Bill they are trying to push through congress. They would much rather prolong the problem and mask it through SIV’s so that they can keep it off the books and get their bonuses and just maybe, maybe, this whole thing will magically disappear.

Also, has anyone notices that since the M3 “vanished” that the money supply has grown at about a 16% annual clip since then?

When the FED was asked why they stopped publushing it, they said, “Because we wanted to save the few million dollars it costs to create it and it was unecessary.”

Because it cost a few million dollars? Why not just print that money? Not like it costs them anything to do it anyways.

Comment by reuven
2007-10-21 12:22:59

I’m really ticked off that they call this very real income “phantom income”.

At least call the tax break “government handout for delinquent borrowers” so people know what they’re getting a good deal, and not something they’re entitled to.

 
 
Comment by SeattleMoose
2007-10-21 10:05:32

People up here in transition from denial to fear…

Yesterday I was a the loser guy who “missed the boat” and today I am the guy whose fear-mongering is ruining the party?

Either way there is no winning with all the FBs.

How do you tell someone they are a stupid lemming….in a nice way?

Comment by Ben Jones
2007-10-21 10:12:23

You have to start by cupping your hands around your mouth and shouting over the edge of the cliff.

Comment by robiscrazy
2007-10-21 13:40:42

LMAO!

 
 
Comment by AndrewHac
2007-10-23 13:22:12

“Either way there is no winning with all the FBs.”
Why would you want to party and mingle in the ground with the FB ? I would think it is boring like hell to hear one FB comforts another FB that “Hang in there, Man Dude. Around this time of next year your house will be sold for the asking amount that you wanted or maybe even more…”. Heck, I would rather go the park and feed the squirrels that having friends, or relatives, or acquaintances in the same party with the FB. FB are borers…

 
 
Comment by diogenes (Tampa,Fl)
2007-10-21 10:14:38

‘As the market has turned we have to come up with new and better ideas to motivate the buyer,’ said agent John L. Scott.”

The usual crap we see from Realtors(tm). We don’t want your crap ass**wipe. I just want an affordable price. It’s really that simple. Keep you “incentives”. My only incentive is the final dollar cost after financing at the end of the term.

 
Comment by SeattleMoose
2007-10-21 10:16:50

You just gotta love the “it is different here in Bellingham” mantra…

Yea, after up to 300% appreciation for some properties over the last 7 years, a year off before the climb resumes (gives wages a chance to catch up you see…) and the party continues.

Eternal optimism, blind faith, clever spin to keep eating, or…stupidity?

 
Comment by Adam
2007-10-21 10:20:37

I’m a bit confused by realtors. Rather than saying, “everything is fine, keep your houses priced high…,” I would think they would be encouraging buyers to lower their prices so they could get their 6%. Maybe they are? I dunno.

Comment by Giacomo
2007-10-21 11:51:30

I’ve tried pitching this concept to a couple of Realtors (online). Generally, they don’t have much stomach for confronting their listings with bad news. They get listings by flattering sellers about the value of their property, and they let “the market” inform them otherwise (when there are no offers over time).

You’re right, it doesn’t seem like this little bit of cowardice is in their own self-interest. But it’s probably a mistake to except them to be more rational than other human beings.

Comment by Giacomo
2007-10-21 11:54:41

Sorry, I meant to say “EXPECT them to be …”

 
 
Comment by combotechie
2007-10-21 12:26:47

If people were pursuaded that they were house rich then whomever tries to chisel them out of this richness is seen as a thief.
The media is seen as part this theivery, as is the FED for raising rates (if the FED would just lower rates down to where they belong then the problem will be solved).

None of this thinking is rational, but very little of what drives human behaviour is rational.

 
 
Comment by MacAttack
2007-10-21 10:21:05

Down here in Portland, the owner of Legend Homes is doing the blame-the-media thing, saying his business is down 2/3 - but not complaining about the boom, except to say it wasn’t sustainable.

 
Comment by Ron
2007-10-21 10:40:14

share this info:
Homes in my development ( Sonoma, Ca) which have been forsale in the low $500K range have not sold except a foreclosure for $397 and a estate sale for$386 a few months back. Suddenly two homes that were located on a CT. backing up to a creek go on sale for $690K and $535 right next to each other and both sell within the first few days. Well the neighbors went crazy with the idea that the bubble had returned and homes were going to sell hard and fast again even though the other 15 homes forsale havn’t moved. These two homes have had extensive remodeling.
So today I notice in the county records that the home forsale @$690K sold for $557K and the other home that was listed for $535 actually sold in June 05 for $630K but it still has not closed so I don’t know the actual sell price. Even the $557K is way overpriced but the current market is funny with certain folks that have dollars buying homes in locations that seem to attract them. The development behind us also has a creek and the only house that has sold recently was on that street, so something about creeks seem to attract certain buyers around here. LOL

Comment by Itsabouttime
2007-10-21 10:51:10

Well, when they go up ****’s creek, at least they won’t have far to go. ;-)

IAT

Comment by OK_Land_lord
2007-10-21 19:57:05

LMAO!!

 
 
 
Comment by Graspier
2007-10-21 10:46:49

“Bill Riley, an owner of Gateway Real Estate, said he raised the price of a house in Puyallup by $15,000 recently and added a Harley-Davidson motorcycle to the listing. ‘Sometimes things like that capture a person’s attention. It didn’t work. We did it for three weeks. We dropped the price back down,’ he said.”

I am betting that I could pick up a lot of cheap new and used motorcycles in the next couple of years, I don’t need to buy an overpriced house to get one.

 
Comment by reuven
2007-10-21 11:01:38

The Tampa Tribune from Florida. “Vacant homes with ‘For Sale’ signs on lawns and ‘For Rent’ signs taped to windows line the block. Neighbors have vanished, some loading moving vans in the middle of the night. New neighborhoods such as Carriage Pointe, where speculators bought homes several at a clip and homeowners stretched their budgets with creative financing, are particularly hard-hit.”

This was SO OBVIOUS in Florida! There are huge developments in Lake County (Central Florida) consisting of rows and rows of single-family detached homes all owned by absentee owners. Some are rented, some are for sale, others are simply empty. ENTIRE NEIGHBORHOODS.

Even before the “crash” it was plain to see that this area would never become a real neighboorhood. But people didn’t actually consider what they were buying; they just kept flipping them back and forth to each other.

It seemed to me that about 1/2 the economy of Florida was based on people buying and selling houses to each other!

People I worked with would cash out their 401Ks to buy “investment property” to put their kids through school. And before they had made a penny, they’d gloat about how much money they “made” after checking sites like Zillow, etc.

 
Comment by Doug in Boone, NC
2007-10-21 11:10:27

“Bob Mortimer added a 1954 Cadillac to the sale of his Gig Harbor home after several months of no buyers.”

Maybe one of the reasons is that what some people see as a 53-year-old classis car, other people see it as just another piece of junk.

Comment by Pen
2007-10-21 11:13:42

yep, nothing like a POJ to go with a POS…

 
Comment by Betamax
2007-10-21 11:56:14

and what’s up with the 2005 Honda Civic & Accord offered in other sales. Are these really considered deal-makers? It is to laugh…

Comment by AndrewHac
2007-10-23 13:26:31

“and what’s up with the 2005 Honda Civic & Accord offered in other sales. Are these really considered deal-makers? It is to laugh…” Hell no. Give me a Corvette 1969’s StingRay edition with immaculate restoration work and perhaps I will think about the offer over a beer tonight. A 2005’s Honda Civic can go to the dumb site for all I care.

 
 
 
Comment by Earl 288
2007-10-21 11:28:12

It should be obvious, that this market can`t possibly make a quick turn around, and that anyone who buys in the next few years will certainly loose money. The`re not catching a falling knife, the`re catching a falling gillotine blade.

 
Comment by Ron
2007-10-21 11:31:32

I was up in Gig Harbor recently for my Uncle’s memorial service. Longbranch is a very pretty area but the number of forsale signs was something to see. All along the road coming in from the bridge folks were trying to sell lots. Their was quite a bit of building activity that had just been completed or various stages of development. With two bridges over the Narrows now,it makes it easier to get in and out but its still a long commute to Tacoma or Seattle. My relatives were telling me that quite a few folks had moved in over the past few years but the commute had got the better of them and they were looking for somebody to buy their property at the 05 price levels. Anyway it looks like the land rush is just about over in Gig Harbor and the only thing left is for the long slide down.

 
Comment by Rational expectations
2007-10-21 11:57:08

There is one group that could really help at this moment (ironically) … realtors.

It is obvious that most “home owners” are ignorant of the evolving, and accelerating, market downturn. Sellers won’t listen to buyers who say that their asking price is unrealistic. They could listen to their realtor, especially if the realtor comes well equipped with the facts and is backed up by other realtors with the same information. NAR and the state affiliates could prepare canned presentations, etc. for their members. They could also make it clear that brutal honesty at this point is in everyone’s interest, and could revive somewhat the professional reputation of realtors, which will be absymal after everyone wakes up (never far above lawyers to begin with).

Why this won’t happen:

1.) Most realtors are amateurs. The ranks of “real estate professionals” swelled in recent years with people who nothing about real estate — or most anything else. They are ill equipped to advise clients on the housing market because they don’t understand it themselves.

2.) NAR is staffed by pathological liars. Sad, but true. What is the credibility of an organization that must adjust its “forecasts” downward monthly _10 times_ so far this year (does anyone really think they got it right in October?). No one who understands the market will believe them.

3.) Stupidity. Yes, this is pretty democratic. Everyone involved has pretty much been driving by looking in the rear view mirror. It takes some re-adjustment of thinking to stop looking at the recent past and attach one’s mind to other history, like for example past housing bubbles … or the depression. Ignorance has a cost for everyone (sellers, buyers, brokers, and realtors). Unfortunately, there are externalities to ignorance, and so those who anticipated the housing crash must still wait while it acts itself out and everyone suffers in slow motion.

Rational expectations

 
Comment by reuven
2007-10-21 12:17:20

The Car giveaways probably worked best when you had people easily able to get “no-money-down” mortgages, with 100% financing, and a teaser rate. These howmuchamonth people didn’t care about the true cost of anything, just the monthly payment.

With these mortgages harder to get, fewer people will fall for the free car tactic. They’ll figure out they’re paying for a car and financing it at less favorable rates that a car dealer would be able to do.

Comment by Mormon_Tea
2007-10-21 14:24:53

The “howmuchamonth” crowd…the “goaheadandgetit” store…”the plastic fantastic generation”…Yes indeed, there is going to be a LOT more wailing and gnashing of teeth in 2008, 2009, 2010…

 
 
Comment by robiscrazy
2007-10-21 14:09:25

Hey, how about we adapt the concept of gap insurance from the auto industry and apply it to home sales.

If sellers have to sell for less than the loan amount then the insurance company picks up the tab for the difference.

What do you guys think?

Comment by not a gator
2007-10-21 19:44:29

Isn’t that what mortgage insurance was about? Required on LTV’s over 80%?

 
Comment by Kent from Waco
2007-10-21 22:11:11

Never happen.

What’s to stop me from knocking $100 grand off the price when selling to a friend then pocketing the difference?

All that would happen is that prices would be driven down even faster as sellers would have an incentive to just grab the first lowball offer that came their way.

Besides, no insurance agency would write such a policy because you can’t rate rate the risk. You can calculate the rate at which people get sick or houses burn. No way to do that for short sales.

 
 
Comment by Groundhogday
2007-10-21 14:14:15

“‘Right now some are convinced that what’s happening nationally is happening here, but we don’t see those signs. Once they realize that, demand will increase,’ Crellin said.”

We don’t see those signs? Overbuilding and rising inventory? Rampant speculation? Median home price vs. median household income? Builder incentives instead of price cuts? Equivalent rent ratio? ARM’s, teaser rates, negative am, interest only, subprime?

The Pacific Northwest is lagging the rest of the country, but it is hard to imagine how anyone could NOT see what we are heading down the same path. Unless, of course, they are paid by the real estate industry to NOT see what is coming.

 
Comment by AUA
2007-10-21 19:12:22

“Plus, today’s home shoppers respond to price reductions, because they can use money saved from lower house payments to pay off credit card debt, he said.”

Really? Really? The fact that this was said with a straight face, and the truth it expresses - - that our entire nation has indentured itself to corporations and foreign countries with debt - - has got to be the most disgusting thing I’ve ever heard.

 
Comment by Seattle_Land
2007-10-22 09:43:01

“‘The increased interest from Canadians has really taken place in the last few weeks when their dollar reached parity,’ agent Mike Kent said. ‘Vancouver (B.C.) area home prices are so high right now that Whatcom County looks like a bargain in comparison.’”

Hurry up Americans before the Canadians get all the bargains in Whatcom County. Hurry up before the world discovers Whatcom County while they vist the Olympic Games in Vancouver, B.C. Yea, right.

 
Comment by Christiane
2007-10-23 08:43:31

I love to read your blog. Things are similar here in the metro Atlanta area. Most of our issues deal with the high amount of mortgage fraud and investor owned properties. The inventory is said to be around 10-12 months in certain markets. As we all know, real estate is very local…so there are many areas that have seen very little price drop in the houses for sale. We do not seem to have many incentives added on to our houses. Maybe its coming soon?

 
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