Would you now agree that there is a Real Estate slump???

[Texas Proud]

The two markets that I know, Lowell, MA and Houston, TX did not behave that way. In Lowell, it was practically a free fall, where price dropped more than 50% in less than 2 years. Houston was almost the same, but not quite dramatic, it took a little longer, around 3 years, I think.

I was dealing with single family housing bonds at the time... there were whole neighborhoods being repossessed back then... NO sales except for the repos.. and from what I was told by a bond rating agent when he was looking at one of my issues, it was the worst housing slump in US history.. there were more repos as a percent than any other city any time...

 

[Sam]

Well, prices would fall quicker with wide job losses or something that suddenly made an area less desirable. But I didn't even see 50% declines in SoCal after the aerospace contraction. I'm sure Houston and Lowell got hit hard with job losses.

True, job losses were the main cause (oil in Houston, and Wang Labs in Lowell). But Lowell was also hit simultaneously with the Boston Real Estate slump.

 

[califdreamer]

San Diego County number of sales down 4.3% Jan 07 vs Jan 06. Median price down 5.6%.

San Diego is leading So Cal on the way down in home prices. LA County is hanging tough with 6.1% appreciation Jan 07 vs Jan 06. Orange County had no change in median price Jan 07 vs Jan 06.

Karevoll of DataQuick: "The market is showing much more resilience than we or anybody thought." I tend to agree with him although -5.6% in SD is nothing to sneeze at.

Here's one I have problems with: "We may have bottomed out and are on the way up. At least for now." This from an economist for a real estate advisory firm in Orange County. He did a little CYA with that "at least for now" part.

I'm continually amazed by all of this stuff in the media about "we've just about hit bottom and things will bounce back in '07." Aren't they looking at the affordability stats? It's going to take some time, some significant time, to get real estate in alignment again IMO.

 

[tryan]

In Lowell, it was practically a free fall, where price dropped more than 50% in less than 2 years.

hah, those were the days ... the Wang Towers sold at auction to a couple MIT grads for $565k. 10 years later they sold for 100m (after dumping 20m into the place).

Same story with the Searles building in Methuen and countless others.

 

[cute fuzzy bunny]

We've dropped 30% and will go another 10% or so before prices get near to reasonable...in one year...no job problems or other stimuli other than the fact that more desirable homes in closer areas to the city became cheaper. Those became cheaper because there was overbuilding. The overbuilding stopped getting snapped up when prices started getting ridiculous and interest rates hit the foreclosure rate.

By the way, the people who bought my wifes old house that we fixed up 2 years ago just went into default on the property. 100% adjustable interest only loan. Apparently a bad idea.

 

[tryan]

... yeah i am still waiting to see the last couple I sold in the foreclosure listings.

The last one closed at the proverbial "top" (May 2005) ... sub-prime lender (who has since been closed by the state) who pushed the ole 80/20 on the buyer.

The second note had an interest rate of 11.75% !!! Some how "Happily ever after" does not sound like a good ending to this story.

 

[cute fuzzy bunny]

The RE agent and the mortgage company/bank did a real disservice to that customer. They paid me over asking price for the place, I paid their closing costs and rebated them the money for the down payment, so they ended up realistically with a 100% financed property. One working at a gravel yard and the other part time doing medical records.

I really wish I had gotten another offer the same weekend, but they'd have screwed up with someone elses property...

 

[wabmester]

The RE agent and the mortgage company/bank did a real disservice to that customer. They paid me over asking price for the place, I paid their closing costs and rebated them the money for the down payment, so they ended up realistically with a 100% financed property. One working at a gravel yard and the other part time doing medical records.

You've captured the root cause of the bubble right there. Home prices went up artificially. Your selling price had little to do with normal supply and demand, and it was inflated by a kick-back to the buyer.

So, you got a killer price (and pushed up the median selling price). The buyers got to live a bigger house than they could really afford (I wonder if they ever made a payment). Agents all got a bunch of commission. The loan broker got a premium for closing a sub-prime loan. The lender sold the loan to some investor to shed the risk. A giant Ponzi scheme.

Now, housing prices are falling as it unwinds, but that may be the least of it. The subprime industry is imploding right now. And they may be dragging down bigger banks and large investors with them. There is a war on to get lenders to buy back these toxic loans. This is the year things could get really exciting.

 

[justin]

FYI, I downloaded the quarterly summary from the NAR site. That really told the story. Looks like Q2 2006 was the "peak" in many places. YOY % change doesn't yet reflect the peak sales prices in Q2 2006. My guess is Q2 2007 results released some time in July 2007 will show a very significant YOY decrease in a lot of the previously hot markets (like SF bay).

IIRC, SF Bay area is now about $30k less than the Q2 2006 peak median sales price.

 

[cube_rat]

...toxic loans. This is the year things could get really exciting.

Toxic loans are an excellent description, Wab

 

[Brat]

FYI, I downloaded the quarterly summary from the NAR site. That really told the story. Looks like Q2 2006 was the "peak" in many places. YOY % change doesn't yet reflect the peak sales prices in Q2 2006. My guess is Q2 2007 results released some time in July 2007 will show a very significant YOY decrease in a lot of the previously hot markets (like SF bay).

IIRC, SF Bay area is now about $30k less than the Q2 2006 peak median sales price.

The problem with data today is slicing and dicing within a market. Price movement of condos is different than single family dwellings. Right now they are lumped together.

 

[justin]

The problem with data today is slicing and dicing within a market. Price movement of condos is different than single family dwellings. Right now they are lumped together.

Brat, just to clarify, I was referring to the NAR's data on Single Family homes and NOT condos. They are reported and aggregated separately by NAR.

Here's the SF Bay data for the last 5 quarters (in $000's):

2005Q4: $718.7
2006Q1: $720.4
2006Q2: $751.9
2006Q3: $738.3
2006Q4: $733.4

Guess I was wrong earler. Only a $18k drop btw Q2 and Q4 2006. Definitely a downward trend over the last 3 quarters of 2006, even though NAR's YOY results indicate a slight increase. That's why I think the downturn will really start to be noticeable in another couple quarters - once the YOY numbers turn negative in a lot more places.

I wonder if seasonality affects this data? Is Q4 generally lower in price than Q2 due to weather?

 

[wabmester]

The problem with data today is slicing and dicing within a market. Price movement of condos is different than single family dwellings. Right now they are lumped together.

You can find a breakdown by type of house and zip code from dataquick:

link

 

[Nords]

By the way, the people who bought my wifes old house that we fixed up 2 years ago just went into default on the property. 100% adjustable interest only loan. Apparently a bad idea.

Haven't you been looking for a real estate bargain? I realize that prices are still dropping but you know all the players in this tragedy and might be able to infuse a big shot of liquidity in exchange for taking back the title... and dumping it onto the next flipper!

But then I remember that PenFed is just about to start paying you over 6% for doing nothing. Never mind.

 

[lazygood4nothinbum]

just checked out wab's dqnews link for south florida. reflects what seems to be the case here. my area has gone up about 5% yoy. nice to see, especially since during the bubble this little x-crack town soared so high it made the front page of the new york times. but the inherited house area has gone down about 20%, perfectly reflected in our asking and hoped-for prices, which is coincidentally about 20% off what we probably would have gotten last year.

 

[tryan]

But then I remember that PenFed is just about to start paying you over 6% for doing nothing. Never mind.

Man ... this is exactly my dilema. Manage tenants and deal with late payments for 4.5-5 % return OR just BAIL and park the wad at 6%.

 

[retire@40]

Man ... this is exactly my dilema. Manage tenants and deal with late payments for 4.5-5 % return OR just BAIL and park the wad at 6%.

If you put it that way, it's like asking "Would you rather have a guaranteed no-hassle $100, or do you want to make an effort and take a chance to make $75?"

 

[tryan]

Exactly, expect by the time Uncle and the state gets thier cut ... it's probably $75 either way with NO potential for growth from PENFED.

Now if rates jump another percent or 2 ....

 

[cute fuzzy bunny]

Yeah, I think i'll pass on taking back her old house. Crappy neighborhood and the fixer two doors down just went up for sale for $100k less than we sold our place for...thats a 38% drop...granted it doesnt have the 50k+sweat we put into her place, but still...

I'll wait for things to hit rock bottom, then maybe i'll take a bite or two somewhere.

Some REAL bargains in a town about 30 miles from here that just had their waste treatment plant kick the bucket...nobody can shower or wash clothes and they're limited to one toilet flush per day...pending perhaps forcing them to rent portapotties sometime soon if they dont get a grant from the state for $1M to rebuild the plant.

Bet some of the properties in that area will get even cheaper if the grant gets turned down or delayed.

 

[Brat]

Some REAL bargains in a town about 30 miles from here that just had their waste treatment plant kick the bucket...nobody can shower or wash clothes and they're limited to one toilet flush per day...pending perhaps forcing them to rent portapotties sometime soon if they dont get a grant from the state for $1M to rebuild the plant.

Bet some of the properties in that area will get even cheaper if the grant gets turned down or delayed.

Eh? Waste water treatment plants aren't rebuilt in a month. Doesn't the district have bonding authority?? That is NUTS!!!

 

[cute fuzzy bunny]

No kidding. Granted I can buy and hold a property for a while until they sort it out.

http://www.appeal-democrat.com/articles/2007/02/16/news/local_news/news2.txt

Smartville aint so smart, it seems.

My favorites are the two guys who are quoted in dispute of the facts, while then immediately acknowledging that they really dont have any actual information. But they KNOW that stuff that was said is wrong. :


"County officials estimated the discharge from 20,000 to 50,000 gallons. River Highlands General Manager Marc Zamora said the estimates are overstated, although he is not sure how much leaked."

"“It's really not possible to do cleanups,” he said. “There aren't any easy solutions.”

The cleanup would be difficult, and nature will quickly break down the contaminants naturally anyway, he said. Maan didn't know how long it would take for the trace compounds to break down"

The latter guy was just voted in to the city council. He's a banker. Obviously a real expert in the matter of human waste contamination.

 

[Brat]

Jeesh...

I am a Commissioner for my local Sewer District. My address and phone number is in the book, the Counsel meetings are at my house. My life would be at risk if we saw this coming and didn't address it. As I recall there were floods in that area a few months ago. Did that wipe out the plant? If so didn't they have insurance, why didn't they act quicker?

 

[cute fuzzy bunny]

Nope, no flooding. In fact we had the driest january in recorded history after fairly light rains through the end of last year.

Just a bunch of buttheads that werent paying attention until 50,000 gallons of sewage started running down the hill.

Just waiting to see what the effect is on real estate in the area

 

[ScooterGuy]

I remain concerned because--IMHO--we have two bubbles out there. Housing/sub-prime mortages is one, but the other is unsecured debt. I'm specifically thinking about credit card debt. I keep thinking about that TV commercial, where a middle-aged man, after describing his mounting debt to maintain his 'lifestyle,' plaintively cries, "somebody help me." I see this as a classic case in Chaos Theory, where an unsustainable situation abruptly undergoes a binary step-change, to a lower energy state ... without a pause in the middle.

I wish I was wrong.

 

[Brat]

Ah, did you see the program on Link TV today about consumer debt? I caught just enough of it to understand that there are a whole lot of folks who don't know how much financial trouble they have.