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Real Estate Bust hitting hard!
Old 06-24-2007, 06:29 PM   #1
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Real Estate Bust hitting hard!

The real estate bust has hit New Orleans hard. Is it affecting your area pretty seriously as well? How many years do you expect it will last in your area, until prices return to their 2005 level?

The article below is pretty unnerving. I can verify that there is a huge housing glut here, though comparing median sales prices is pretty tricky since (with so many hurricane damaged homes) without a lot of details one may accidently be comparind apples to oranges. I do think sales prices of undamaged homes in my neighborhood have dropped considerably, but even more alarming is the huge glut of unsold homes. The real estate bust won't delay my ER, but I might stay have to stay here until things get better.

The URL of the article that I copied/pasted below, is Glut of houses sends prices plummeting - Updates - NOLA.com I cut it short because it was too long and the message board didn't allow posting the whole thing. The part I cut was good too.

Glut of houses sends prices plummeting

Posted by NOLA.com June 23, 2007 10:47PM

By Greg Thomas
Real Estate Writer

After years of skyrocketing home prices, an oversupply of homes for sale in the New Orleans area -- nearing levels not seen since the oil bust -- is pushing overall prices down by thousands of dollars and all but erasing the giant gains in appreciation homeowners have seen during the past seven years.
But local sellers have been reluctant to accept that the area's long-running sellers' market is now a buyer's bonanza. And they've been even more hesitant to lower the prices on their homes.
Some are slowly realizing that they must make concessions to sell their homes, with some offering to pay a buyers homeowner's insurance, closing costs or points on a loan.
But many are still unwilling to lower their sales price or make such concessions. Some real estate agents are refusing listings in which sellers have unrealistic expectations, while other agents are demanding bonuses of as much as $10,000 to take on an overpriced home.
Nearly every major real estate firm contacted said it's a challenge convincing sellers that the heavy inventory -- nearly double what it was before Hurricane Katrina -- is depressing prices. Brokers said homeowners are mystified by the new dynamics after seeing the values fetched in 2006 and after several years of appreciation.
While sellers sit and wait for their home to sell, some buyers are waiting for prices to drop even more.
Crystal Bolner, a graduate student at Loyola, recently offered $145,000 for a vacant two-bedroom, 1-1/2 bath on Carnation Street in Metairie that had been on the market for several months and was listed for $195,000.
Bolner, who was aided by her mother, a real estate broker, thought she made a fair offer.
The seller apparently thought differently.
The home is still on the market. Bolner doesn't expect it will sell anytime soon and might try again. After all, with the huge inventory of homes on the market, she has the luxury of taking her time, something impossible just three years ago when multiple bidders often chased a single property.
She said she's been looking for a home for six months and has seen the same thing over and over again.
"Homeowners have an inflated view of what their houses are worth," Bolner said.
Her mother agreed.
"It seems they're all asking $30,000 to $50,000 over the price the house is appraising for," said Mary Bolner of LaGoDa Realty.
And it's unlikely to get any better for sellers, at least until hurricane season ends.
The threshold from a depressed market to a free fall is just one evacuation order away, whether the storm hits the city or not, said Cynthia Sciortino of Prudential Gardner Realtors Inc.
"A mandatory evacuation would be the big nail in the coffin," said Sciortino of Prudential Gardner Realtors Inc. "My sellers all want things sold before (the height of) hurricane season."
After more than seven years of sometimes double-digit appreciation, sellers, especially in Orleans, St. Tammany and Jefferson parishes, have become accustomed to getting premiums on their homes.
As late as January, the National Association of Realtors said the New Orleans area was one of the hottest markets in the United States based on 2006's market performance.
But to get a real picture of the market, local brokers, agents and consultants say, you can't look to sales activity in 2006, where premiums of 20 percent to 30 percent were being paid for undamaged single-family homes compared with 2005's pre-Katrina prices.
"Unfortunately, 2006 is just a stupid benchmark to compare" market performance, said Arthur Sterbcow, president of Latter & Blum Inc. Realtors.
To get a better picture of the market, the New Orleans Metropolitan Association of Realtors has compiled data from Jan. 1 to May 18 going back to 2004. Real estate specialists say that the months before Katrina in 2005 are the best with which to compare the current market.
What the numbers show is that the area is now transitioning to a market that more closely mirrors the slow housing market nationwide that began about the time that the New Orleans metropolitan boom was occurring.
Lawrence Yun, the National Association of Realtors' chief economist, reported in May that 2007 first-quarter existing home sales were down 7 percent over the same period in 2006. Rising interest rates have hurt many with adjustable mortgages, and foreclosures are on the rise.
Yun, though, said in most metropolitan markets, inventories and prices are stabilizing.
According to one local expert, some areas of the New Orleans market will head farther south before stabilizing.
There were 13,660 single-family detached homes on the market through May 18 of this year, compared with 12,692 for the same time period in 2006 and 9,628 for the same period in 2005, real estate brokers said. With that many homes on the market, Realtors and consultants say, something's got to give.
"People got greedy, but now we're seeing loads of reductions," said Joan Winchell, Garden District office manager and associate broker at Latter & Blum Inc. Realtors.
On the east bank of New Orleans, there were 3,134 homes on the market through June 18, compared with 2,893 during the same time in 2006 and 2,073 in 2005.
Average values in Orleans are difficult to determine because sale price data include the sale of flooded or wind-damaged homes and repaired or undamaged homes.
"The prices are simply not interpretable at this time. We just can't make a market statement" on true values, said Wade Ragas, president of the consultant group Real Property Associates.
A detailed study this year by the local Realtors association and Real Property Associates estimated that undamaged homes were fetching an average increase of 25 percent for about a year after the storm, while damaged homes declined in value, on average, by 42 percent.
So far this year, the average price of homes -- damaged and undamaged -- on the east bank of Orleans Parish has dropped about 30 percent, from $269,410 last year to $188,044 this year.
While the oversupply has pushed prices down in New Orleans, the laws of supply and demand have yet to fully come to bear in the markets that rebounded more quickly after the storm, Ragas said. In western St. Tammany, for instance, sale prices this year have averaged $311,542 compared with last year's $287,549.
But this year, there have been almost 400 more listings and more than 300 fewer sales.
"I think the Western St. Tammany numbers will drop, about 10, maybe 15 percent off," Ragas said.
In East Jefferson, the price increases have been slight. In 2006, the average sales value hit $248,459. Through May 18, average sales were $254,759.
But the caveat is the same: In 2005 there were 1,375 listings, while as of May 18 this year there were 2,320, an increase of 69 percent.
It's the pricier homes that are having the hardest and longest time selling.
Sterbcow said there is a 14-month supply of homes priced between $350,000 to $400,000, meaning that the number of homes in that price range would take 14 months to sell out at the current pace. In a market where supply and demand are fairly balanced, there should be only a five-month inventory of homes for sale, he said.
For homes priced between $500,000 and $750,000, Sterbcow said there is a 19.2-month supply.
And there is a nearly three-year supply of homes valued between $750,000 and $1 million that is affecting Uptown New Orleans, East Jefferson and North Shore areas the most.
Sciortino says there is at least a two-year supply of homes for sale Uptown in all price ranges.
Brokers and agents are having to educate sellers who have an inflated idea of the value of their homes.
The reality is that the halcyon days of the area's housing booms are over, Sterbcow said.
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Old 06-24-2007, 06:49 PM   #2
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Wow, a buddy of mine lives in New Orleans and his house was spared any damage from the hurricane. Right after the hurricane, he said someone knocked on his door and the guy told him he was willing to pay $325k for his house. I don't know the true market value of the house pre-Katrina but I bet it was in the $150-$180K range.

I told him he should have sold it and got the heck out of there but he didn't. I bet he regrets it now.
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Old 06-24-2007, 07:13 PM   #3
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If you believe in global warming; why would you buy in New Orleans?
Also, what business have or will move in to N.O. to support the market?
I think there will be a lot of vacant land behind the new and improved levies they build.
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Old 06-24-2007, 09:40 PM   #4
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How many years do you expect it will last in your area, until prices return to their 2005 level?
In Phoenix it will be a year before inventory drops and prices climb. 2005 was an aberration, and it may be years and years before prices return to that inflated level.
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Old 06-24-2007, 09:53 PM   #5
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Seems funny. US housing has been in a slump for a while. Here in western Canada, a boom started about Feb. Somehow, I think we are a year or so behind the US but obviously I'm contrarian. I wish I could sell my neighbours house short.
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Old 06-24-2007, 10:52 PM   #6
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south florida very hard for me to judge now. looks like prices have dropped 20 to 30% depending on area. my immediate area still has very few houses for sale. realtor dot com shows 7 sold between march 8 & april 30 2007 priced between $285k & $929k. i'd be lucky to get $350k at the point.

a friend of mine just 15 minutes up the road says he has a dozen or more houses for sale in his immediate area. realtor dot com shows in his area only 4 houses sold in all of 2007 (through april 30).

we've dropped the price on the inherited house to 1.195 down from 1.250 which was down from 1.299. we probably could have gotten 1.45-1.5 at the peak. we are well-priced in relation to other houses in the area (actually we are undercutting them by a bit) but no one is buying. not even a low-ball offer since we listed late january. the only deepwater home sold in 2007 in that immediate area that i know of was by an 80something year old guy who just found out he has major cancer, has no family and just wanted out so he sold his teardown after being listed for 2 weeks for $950k. according to realtor dot com, the only other house in the immediate area to sell in 2007 was a dry lot for $525k.

our legislators screwed us again on taxes. they will be reduced by only about 7% to start and then maybe up to another 9% depending on how much each municipality raised taxes over last year. then in 2008 we vote on destroying our "save our home" amendment by selecting "super exempted" homesteads instead. it will work out well enough for me because i want to sell within a few years anyway but i think it is a bad move for anyone planning to stick around for 20 years or more.

florida is still a growth state, not as crazy as it was but still growing. south florida is closing in on buildout (my county almost completely built-out). so demand could stay relatively strong. hurricanes are, of course, the wildcard. another bad one and we could be in big trouble. but if we don't get hit for another year or two, the market doesn't seem to have much of a memory.

as to prices going back to 2005? i think you'd have a better chance for the dot com bubble to resurface.
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Old 06-25-2007, 12:35 AM   #7
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Real estate in the SF Bay Area seems to be holding up.

Sales are down but prices are steady or up slightly from a year ago. According to Zillow my house is up about $20k in the last year. Nearby sales support that.

Some houses (maybe 25% or so) are still selling for more than the asking price. As an example according to some marketing info from one of the local agents a 1450 sq ft., 3bd, 2bath house recently listed for $712k and sold for $792k.

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Old 06-25-2007, 08:23 AM   #8
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I'm in southwest Florida and I don't expect the prices to ever return to the wild frenzy they were but I'm hopeing for some pick up in the market soon .I'd like to sell but in this market it would be impossible .
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Old 06-25-2007, 08:32 AM   #9
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I'm in southwest Florida and I don't expect the prices to ever return to the wild frenzy they were but I'm hopeing for some pick up in the market soon .I'd like to sell but in this market it would be impossible .
Estimated "inventory" is about 18-20 months worth here in Tampa Bay. On the other hand, the smaller more expensive neighborhoods have held their prices fairly well.

Overall it's a return to sanity as far as I'm concerned, though I'm glad we're not forced to sell right now.
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Old 06-25-2007, 08:36 AM   #10
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Here in Bethesda, things have only slipped a little since 2005, at least in my nbhd -- which is still busily being converted from 2000 sq ft houses built in the 1960s to 5000+ sq ft megaboxes. Houses on my block (the original ones of which are almost identical) still sell for about 700K, down slightly from 750K 2 years ago. But it takes 3-4 weeks to sell now, up from 3-4 days. The megaboxes sell for about 1500K or more. Shows that there are still enough people with (a) too much money or ability to borrow money, and (b) too little taste. Those things are ugly.
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Old 06-25-2007, 09:11 AM   #11
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We've got a high inventory but its mostly junky houses, bad lots and hideously overpriced homes.

Prices seem to be taking a bit of a bounce. Looking at the comps in both my old and new neighborhoods theres a pretty good downslope the last year, a bottom last month and some upticking this month.
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Old 06-25-2007, 09:35 AM   #12
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Old 06-25-2007, 10:01 AM   #13
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San Francisco sale and resale of condominiums

Purchased Resold

5/05 $820K 9/06 $940K +$120K
3/05 $613.5K 10/06 $750K +$136.5
5/05 $765K 12/06 $870K +105K
5/05 $785K 2/07 $880K +95K

These are the resales that I looked up a couple of months ago. The market here and in Honolulu is still very HOT! Not a bad return for buying in 05 when many here were predicting the end of appreciation in California.

Doesn't look very good for anyone that sold in 05 and didn't reinvest. Of course, to many this will support bailing now fer sure! I've had 21 years of 11% yearly appreciation on my purchase price in Ca and 9% in Honolulu for 29 years.
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Old 06-25-2007, 10:41 AM   #14
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We've got a high inventory but its mostly junky houses, bad lots and hideously overpriced homes.
Seen the same thing here in suburban Maryland (just outside of DC). Quite a few single family homes for sale at ridiculous prices, but the vast majority are in need of major renovations. I'm sure we could offer $50k-100k less than the asking price, but I doubt the owners would take it. They would rather bet on the housing market in this area stabilizing or reversing course when the new administration hits town.

As a compromise, we're considering a nice townhouse, but even those are going for high prices, since they offer comparable space to single family homes, but at better prices (typically $150k-$250k less).
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Old 06-25-2007, 10:49 AM   #15
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Big problem we have around these parts are people who havent been paying much attention to the actual market prices lately and still think the house is worth 20% more than it is. Then an agent trots out and agrees with them

Couple of people in my old neighborhood are thinking of selling this year and when I asked them how much they thought they'd get the answer was "Oh, 380, maybe 400...we had an agent come out and appraise it and she agreed we should get 380 no problem!".

My house is larger, newer and nicer than theirs and I'm not going to get anywhere NEAR 380.

One guy put his house (similar to mine) up for $450 last year. Bought a bigger, more expensive house. Watched him go down to 399 and then to 350. Still not selling. I saw yesterday it was now at 341 and the listing now noted that "short sale must be approved by the bank, sold as-is".

Whoops.
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Old 06-25-2007, 11:36 AM   #16
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Here in Los Angeles, the prices are higher than one year ago on less volume. Homes are taking a bit longer to sell.
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Old 06-25-2007, 11:47 AM   #17
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Here in Boston, real estate is also out of control. The 2-family homes are being divided as condos, the piggyback and interest-only loans are stretching out payments as much as possible, and some bank are even offering 40-year loans. Not sure how much more creativity can keep all this alive.
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Old 06-25-2007, 11:47 AM   #18
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This is what I watch these days to see where the local market it going: Sheriff's Sale
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Old 06-25-2007, 11:54 AM   #19
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Quote:
Originally Posted by honobob View Post
San Francisco sale and resale of condominiums
Purchased Resold

5/05 $820K 9/06 $940K +$120K
3/05 $613.5K 10/06 $750K +$136.5
5/05 $765K 12/06 $870K +105K
5/05 $785K 2/07 $880K +95K

These are the resales that I looked up a couple of months ago. The market here and in Honolulu is still very HOT! Not a bad return for buying in 05 when many here were predicting the end of appreciation in California.

Doesn't look very good for anyone that sold in 05 and didn't reinvest. Of course, to many this will support bailing now fer sure! I've had 21 years of 11% yearly appreciation on my purchase price in Ca and 9% in Honolulu for 29 years.
By way of comparison and especially for CFB, I took the liberty of deducting 6% for the real estate commissions, and computing an annual % return compared to the DJIA index:

so it seems that it was not such a good investment after all.

Of course, the DJIA might have a small trading fee if you bought the index ETF and a low MER, but then it had no mortgage interest, condo fees, lawyers fee, moving costs or maintenance either. 15% cap gains tax if you sold the index still keeps it above the best example quoted. Lots of money left over to pay the rent.
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Old 06-25-2007, 11:57 AM   #20
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By way of comparison and especially for CFB, I took the liberty of deducting 6% for the real estate commissions, and computing an annual % return compared to the DJIA index:

so it seems that it was not such a good investment after all.

Of course, the DJIA might have a small trading fee if you bought the index ETF and a low MER, but then it had no mortgage interest, condo fees, lawyers fee, moving costs or maintenance either. 15% cap gains tax if you sold the index still keeps it above the best example quoted. Lots of money left over to pay the rent.
But, but, but....

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