House Prices

GaudiaRay · May 5, 2006

Welcome to the dead zone

Welcome to the dead zone

Welcome to the dead zone
Real estate survival guide: The great housing bubble has finally started to deflate, and the fall will be harder in some markets than others.

By Shawn Tully, FORTUNE senior writer
May 4, 2006: 2:15 PM EDT

  NEW YORK (FORTUNE) - The stories keep piling up. In many once-sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials.
 <script language="JavaScript">  </script> The message is clear. Five years of superheated price gains rescued America from stock market collapse, put billions in consumers' pockets, and ignited a building boom that bolstered the nation's economy. (To relive the frenzy, see "Riding the Boom.") But it's over. The great housing bubble has finally started to deflate.

You won't find that news in broad national statistics or the upbeat comments from the real estate industry. Thelatest official figures, for example, show both new and existing home sales rising in March, a mixed bag on prices - and a record number of new homes on the market.
  But FORTUNE's on-the-ground reporting - in what up to now have been some of the nation's hottest areas - paints a very different picture: Contracts are being canceled, deals are drying up, prices are starting to drop. The psychology is shifting even as thousands of new homes and condos join the for-sale listings each day - so the downward pressure will only get worse.
 "The buyers' sense of urgency is gone," says Bob Toll, CEO of luxury builder Toll Brothers (Research), who has long been a housing bull. "They see the market going soft, so they stall."
 Take a deep breath. We're not forecasting a nationwide housing collapse. For one thing, the vast expanse of America between the coasts was never touched by real estate mania and is in no danger of a meltdown. And even some overheated markets - including Manhattan, Los Angeles and California's Orange County - are still simmering.
 But things are suddenly looking very chilly indeed in four coastal cities - Boston, Washington, Miami and San Diego - as well as three Western boomtowns: Phoenix, Las Vegas and Sacramento. So far this year, monthly sales have fallen 11 percent to 25 percent in Miami, Boston, northern Virginia and San Diego, according to local housing experts.
 The prognosis is even worse in Phoenix, where only 4,500 homes sold in the first three months of 2006, vs. 6,100 for the same period last year, and in Sacramento, where new-home sales plunged 57 percent in the first quarter (compared with the first quarter of 2005). In California it now takes six months to sell a house, twice as long as a year ago. (See a slideshow of home prices in all the troubled areas.)
 And what's happening in these areas is a sign of what may be coming in the rest of the bubble zone -- the two dozen or so mainly coastal cities and their suburbs that have seen prices soar in recent years and account for 60 percent of the nation's residential real estate value.
 The problem is as basic as beams and trusses: The triple threat of soaring prices, higher mortgage rates and relentlessly rising property taxes has drastically increased the cost of ownership and put many homes out of reach for a huge number of potential buyers.
 In California, for example, only one household in seven can manage the payments on the median-priced house, now selling for $561,000. It takes an income of $134,000 to afford that home, which might be a modest three-bedroom ranch in a bland subdivision. The affordability gap is driving buyers to the sidelines, replacing the frenzy with a growing void as buyers wait for prices to drop.
Welcome to the dead zone
 With houses hovering beyond the reach of most potential purchasers, formerly frantic markets grow eerily calm. People who rush to list their homes, hoping to grab a fat gain just before prices break, take them off the market.
  Sales shrink as buyers float low-ball offers, and sellers refuse them. Realtors and mortgage brokers find other jobs. The bubble areas turn into Dead Zones.
 There's no mystery about what it will take to close the affordability gap and bring the markets back to life: Prices will have to come down, and incomes will have to move up. Right now the ratio of home values to incomes in the bubble zones is about 40 percent above its historical average. So the only question is how much of the adjustment will come from rising incomes and how much from falling prices.
 On that point there's reason to be hopeful. In the past, housing declines almost invariably occurred while the economy was suffering through a recession. This time the housing downturn is coming during a period of strength, with GDP surging nearly 5 percent in the first quarter. If the economy keeps chugging along, household incomes should grow at around 4 percent a year.
 Under those conditions one likely scenario is that housing prices would drop 10 percent to 15 percent in the bubble zone over the next 12 months, then remain flat for maybe four more years while incomes catch up.
 But there's another possibility. For the past few years the housing boom has driven the economy, adding jobs in construction, remodeling, and real estate services. And consumers gorged on the equity in their homes, taking out a total of $2 trillion via loans, refinancings, and sales over the past five years.
 Those powerful stimulants, which added a full point to annual GDP growth, will soon vanish. If corporate spending or some other force doesn't come along to pick up the slack, we could go into a recession that would cut income growth to zero. Then inflated housing prices would have to shoulder the entire, wrenching adjustment, falling 30 percent or more over several years.
 In either case, many individual homeowners have nothing to worry about: They can simply stay put and ride out the cycle. The only thing they'll lose is the opportunity to brag about their paper profits. And in some places, appreciation has been so sharp that a seller could see prices plunge 30 percent and still make a hefty gain.
 The real losers will be those who bought recently at inflated prices and are forced to sell, usually because they're taking a job in another city or can't make the payments when their adjustable mortgage rate jumps. And speculators who bought overpriced condos in hope of a quick killing are going to get hosed.
 Next: Unmaking the myths of the housing boom.
 Additional reporting by Matthew Boyle, Nadira A. Hira, Julie Schlosser, Christopher Tkaczyk and Jia Lynn Yang.

http://money.cnn.com/2006/05/03/news/economy/realestateguide_fortune/index.htm?cnn=yes

Binkerbear · May 5, 2006

Re: House Prices

GR asked me to post this chart here:
View attachment cw060502_housing.bmp
If we expect this to play out like the NasDaq in 2000, then there's a long, long way left to go on the downside.
For the technicians, this looks like a perfect head-and-shoulders pattern indicating the RE market won't be going back up for quite awhile. This is also (I believe) a perfect entry for "shorts", when the level drops thru the base support on that right shoulder (indicated by the dashed-line).

GaudiaRay · May 27, 2006

ARM Meltdown? We're Probably Already There

ARM Meltdown? We're Probably Already There

ARM Meltdown? We're Probably Already There

Friday, May 26, 2006

Foreclosures are picking up in so many markets, these posts will have to be condensed. "Nationwide, 87,582 residential properties were listed for sale as foreclosures in April, up 14% in a year. More than double that number, 218,935, were headed toward foreclosure, and an additional 326,889 homeowners were in bankruptcy court."

"Wisconsin echoed the upward trend, with 1,024 homes for sale as foreclosures last month, 6% more than a year earlier. But nearly three times that number, 2,898, were headed toward foreclosure and 3,600 homeowners were in bankruptcy court."

"'I'm certainly aware of the spike,' said attorney Peter J. Zwiefelhofer, who runs Milwaukee Bankruptcy Center. 'A lot of people overpaid for their house in this boom and a lot of properties were appraised at unrealistically high prices, mostly by subprime lenders looking to close a deal. Plus, there's a lot of unsophisticated people out there who look at a mortgage as just a payment and say, 'Oh, I can swing that.' But they can't.'"

"Until this year, most financially strapped homeowners could count on a booming housing market to provide them a quick sale at a nice price. But that's over."

"'What's startling isn't just the higher numbers, but who they represent, the affluent, not just the down and out. 'These are the ones with a bigger ability to get money, the executives, businessmen and professionals, buying more than they can possibly afford,' said Brad Geisen. 'They were banking on price appreciation continuing to go up fast, and pulling their money out in time.'"

"'One thing I've learned: The more expensive the house, the more difficult it is to unload,' said Milwaukee bankruptcy attorney Bruce A. Lanser. 'In a case where the house is upwards of $400,000 to $600,000, I used to think, 'Oh, great house.' But those houses are not selling that well anymore.'"

"In the suburbs of Dallas, Bridget Edwards comes home to uncertainty every day. She and her husband, James, are four months behind on their mortgage. The reason? 'We have an adjustable-rate mortgage,' she explains. 'I really didn't know it would change like this.'"

"'The reason homeowners have been buying properties that are probably beyond their means, is that they haven't been looking at what the house costs,' says Rick Sharga, who maintains a database of foreclosed properties. 'They've been looking at what the monthly payment was.'"

"That?s something the Edwardses admit, and now regret. 'I am sad. I'm angry. I'm confused,' says Bridget Edwards. 'I love this house,' James Edwards says."

"Last year, Jolene Garcia was one of the 9.1 percent of San Antonio homebuyers, about 3,500 people, who chose an adjustable-rate mortgage. Garcia's biggest problem, the one keeping her up at night, is a $3,000 property tax bill due in December. Her loan did not include escrow, the estimated property taxes paid monthly in most mortgages, and she didn't realize it."

"'There was some fairly aggressive lending going on. Young people and immigrants who have no background for buying a home can get led down the merry path,' said Jim Gaines, research economist at Texas A&M University. Today's lending landscape reminds Federal Housing Administration commissioner Brian Montgomery of the 1930s, when high-risk and high-interest-rate lending was common."

"'The economy is better today,' he said. 'But now you are seeing these really exotic loans done on a wide scale. Some families were steered towards loans they shouldn't have been.'"

The Memphis Daily News. "A total of 4,616 foreclosure sales occurred between May 2005 and April 2006, according to The Daily News. The number of properties foreclosed totaled 4,665 because, in some cases, multiple properties owned by one person were sold at the same time. Steve Lockwood, who is executive director of the Frayser Community Development Corp., has been keeping track of foreclosures in Frayser since he accepted the post three years ago."

"'It's an epidemic,' Lockwood said. 'Shelby County has the highest HUD foreclosure rate in the country and Frayser has the highest foreclosure rate in Shelby County."

"Valerie Smothers recently lost her Cordova home in foreclosure because she fell behind on her mortgage payments after her boss was late with her paycheck, she claims. In the beginning, her lender understood, but as a couple of weeks stretched into a couple of months, the mortgage company's patience stretched thin. When she finally had things settled at work and went to the mortgage company, officials refused to accept the $1,900 she had. It wasn't enough for her back payment."

"'They told me the adjustable rate had gone up,' she said, meaning she would need more cash."

"April 2006 foreclosures in Massachusetts were 44.35 percent higher than April 2005 and nearly 90 percent higher than April 2004 levels. April 2006 had 1,227 foreclosures started. That translates to more than 60 filings every business day in April."

"Driven by rising interest rates and high levels of debt, foreclosures on homes in the eight-county Chicago metropolitan area are sky-rocketing, particularly in the region's fastest-growing counties. The soaring rate of foreclosures is quickly transforming what has long been a seller's market into a buyer's market."

"'You have a situation now where you have these potential increases in foreclosures, and interest rates are going up, which will populate the market with more properties,' Jeff Metcalf says. 'The real estate market will be slowing the appreciation in prices. We're moving toward a buyer's market. In fact, we're probably already there.'" posted by Ben Jones @ 12:53 PM
http://getforeclosures.blogspot.com/

GaudiaRay · Jul 29, 2006

Gee, Gosh, like things have gotten worse?! Duh.

Gee, Gosh, like things have gotten worse?! Duh.

Those still holding r/e are in for the ride of their lives. 2 +2 = 4. "But I can't get out; I'm sure it can't be as bad as all that!" Phew. FL1 said, "I'm out", months ago. I just passed on a fab piece of land as this is not the time. My appraiser buddy, who is the bleeding edge, is bleeding as it's much worse than what's reported here. Biz has stopped nearly dead in its tracks. Harken this message. When pandemic flu comes knockin', it will sink debt holders faster than an Israeli bomb can flatten a building, or maybe just as fast. For those who are "in", God Bless. For those who are out, drop on by the "Gold" thread and protect your ass ets.

(Or, is asset switching considered profiteering? Hmm)

As an aside, don'tcha just love it when the MSM reports this stuff as if it's current and "news"? It's old news; it ain't current; and not one whit of forethought from the present forward is offered in this article below from the brainy powerhouse, the NY Times. Maybe the authors could send this over as a writing sample to the WHO?
Regards,
Your friendly profiteer, GR

Housing Slows, Taking Big Toll on the Economy

By VIKAS BAJAJ and DAVID LEONHARDT
Published: July 29, 2006
http://www.nytimes.com/2006/07/29/business/29housing.html?_r=1&ei=5094&en=a2b5074984edd9c0&hp=&ex=1154145600&adxnnl=1&oref=slogin&partner=homepage&adxnnlx=1154145770-+0Ndsylbvct5BrETILh8Ig

The housing industry — which largely carried the American economy through the tribulations of the 2000 stock-market crash, a recession and climbing oil prices — has lost its vigor in recent months and now has begun to bog down the broader economy, which slowed to a modest 2.5 percent growth rate this spring.

That was a sharp comedown from the 5.6 percent growth rate of the first quarter, the Commerce Department reported yesterday, caused in part by the third consecutive quarterly decline in spending on houses and apartment buildings, after several years of rapid growth. [Page C1.]
“It hasn’t slowed down a little bit — it has slowed down a lot,” said Doug McCraw, a developer who has scrapped his plans for a 205-unit condominium tower in a neighborhood just north of downtown Fort Lauderdale, Fla. “Anybody who did not have a shovel in the dirt has chosen to wait till the market settles.”
The housing slowdown is perhaps the clearest effect of the Federal Reserve’s two-year campaign of raising interest rates in a bid to tap the brakes on the economy and reduce inflation. That campaign has been largely successful, with the decline happening gradually while other parts of the economy, mainly the corporate sector, pick up much of the slack.
“Housing is going from being far and away the most important contributor to growth to being a measurable drag, and it’s happening gracefully so far,” said Mark Zandi, chief economist of Moody’s Economy.com, a research company. “But there’s now a growing and measurable risk that things don’t go according to plan.”
The biggest risk, economists say, is that the optimism that fed the real-estate boom will reverse dramatically. The number of homes for sale has surged in recent months, particularly in once-hot markets, like the Northeast, Florida, California and parts of the Southwest. As builders delay land acquisition and construction it could reduce employment and spending in the coming months.
More broadly, just as rising housing prices during the boom added to Americans’ sense of wealth and well-being — encouraging them to spend more on a variety of goods and services — the reverse could dampen sentiment and lead consumers to pull back on their purchases.
While the fate of housing prices has received far more attention recently than real estate’s role as an engine of job growth, the sector has also become one of the country’s most important industries. Residential construction and all the activity that swirls around it — mortgage lending, renovations and the like — account for roughly 16 percent of the economy, making it the largest single sector, slightly bigger than health care.
For much of the last five years, housing — along with health care — was also one of the only reliable generators of jobs. From the start of 2001, when the Fed began cutting its benchmark rate to steady a faltering economy, until early last year, the housing sector added 1.1 million jobs.
The rest of economy lost 1.2 million jobs over the same period, according to an analysis by Moody’s Economy.com.
Housing continued its rapid growth last year, and other industries began hiring in far greater numbers than they had been, creating the healthiest national job market since 2000. In the last few months, though, three pillars of the housing sector — homebuilders, mortgage lenders and real-estate agencies — have stopped adding to their payrolls, and overall job growth in housing has begun to slow.
In South Florida and Las Vegas, where contractors until recently complained that they could not find enough workers to begin work on many projects, developers are scrubbing plans for new condominiums because they cannot sell enough units to get construction financing.
Mr. McCraw, the developer in Fort Lauderdale, said slowing condo sales and a 35 percent jump in the cost of construction materials like steel, copper and concrete convinced him to shelve his project. He is now considering building office space, where demand remains strong, or simply waiting for two years.
In Las Vegas, cranes are still busily at work on new casino projects but dozens of gleaming condominium towers that were slated to sprout up a few miles from the Strip are not likely to be joining the city’s neon-bedecked skyline soon. John Restrepo, a real estate consultant in the city, estimates that only about 7 percent of the 60,000 condominium units that were announced and under construction as of the first quarter of the year are actually being built today.

Among the high-profile projects that were scrapped is Las Ramblas, an 11-building, $3 billion condominium and hotel complex being developed by the Related Companies and Centra Properties and had investors like the actor George Clooney.

“The period of irrational exuberance we saw in ’04 and ’05 and the gold rush fever has gone away,” Mr. Restrepo said.
The Commerce Department said yesterday that housing investment fell at an annual rate of 6.3 percent last quarter, after dropping less than 1 percent in each of the two previous quarters. It grew at roughly 9 percent a year during the previous three years.
Still, building activity for single-family homes, condos, hotels and casinos in Las Vegas is vibrant enough that construction workers are not struggling to find work, said George Vaughn, a business manager for a local of the Laborer’s International Union of North America, which represents almost 5,000 workers in Las Vegas. “The boom is still on,” he said.
The situation is somewhat different elsewhere. An official at the International Union of Bricklayers and Allied Craftworkers said housing work was more difficult to find, but most of its members had been able to find work on commercial building sites.
“If something were to happen with both markets, that would affect us — and everybody for that matter,” said Robert A. Fozio, director of the union’s Northern Ohio district.
On average, real-estate jobs pay somewhat less — about 7 percent less a year on average — than those in other parts of the economy. But real estate has also been one of the only industries creating good jobs for workers without college degrees in recent years, especially in construction and contracting work.
At Hovnanian Enterprises, one of the nation’s largest homebuilders, executives are renegotiating the company’s options to purchase land for future developments, in an effort to delay some transactions and reduce the purchase price on other parcels of land. In April, it forfeited $5.6 million in deposits on property near West Palm Beach, Fla., and Minneapolis, because it was not ready to build in the area.
“It doesn’t make sense to own the land and have it sit there,” said J. Larry Sorsby, the company’s chief financial officer and an executive vice president.
Orders for Hovnanian’s homes fell by 18 percent in the three months ended April 30 and cancellation of existing orders by homebuyers rose to 32 percent from 21 percent a year ago. The company, whose earnings jumped 34 percent to a record last year, is expecting a mere 3.4 percent profit increase this fiscal year.
Mr. Sorsby said the company had not resorted to layoffs, but it had been asking sub-contractors to lower labor costs — with some success.
Going forward, many economists say, the biggest question is whether the orderly real-estate slowdown the Fed has engineered thus far will continue. “Outside the threat of surging energy prices,’’ Mr. Zandi said, “the most significant threat to the expansion is that the housing correction turns into a housing crash.”
The fact that mortgage rates remain low by historical standards offers one reason to doubt that a crash will happen. The average rate on a 30-year conventional mortgage was 6.8 percent last week, up from 5.7 percent a year earlier, according to the Fed.
On the other hand, the boom of recent years has pushed housing prices out of reach for many families along the coasts. Already, some homeowners have resorted to creative loans, like interest-only mortgages, to afford a house, and even modest increases in mortgage rates have the potential to cause a significant drop in demand for new houses.
In either case, housing seems unlikely to continue being the economic powerhouse it was over the last five years.
“Housing is just not going to be what it has been,” said Edward Yardeni, chief investment strategist at Oak Associates, a money management firm. “It could go back to being a significant but relatively small contributor to economic growth.”

GaudiaRay · Jul 30, 2006

Re: House Prices

OK, I just met with the appraiser buddy for a full day of yakkin' about what's happening in the r/e market of so cal.

The upper end in so cal is still active. There are lookie lu's almost lined up. The market at the top is firm. The inventory of houses for sale is now easily triple what it was 6 months ago. That's not saying much, but as an example that was very surprising, in Brentwood, on Saltair Ave (upper end), there were 3 houses open and for sale all within a block of each other. However, the realtor had just sold his house for 3.7 million and the house next to those 3 had also just sold. And there are dumpsters everywhere as people remodel their homes. Rich people in So Cal are not hurting. The house I looked at for 1.6 million? 1960's slab ranch style cheap construction, middle class housing in a rich neighborhood. It's a tear down. So, the house is selling for lot value. My friend says the market has peaked, last December. It has now declined by about 5% in house prices, which to me means it hasn't moved at all.

The market in the outlying counties, Riverside and Orange, and in poorer communities where interest rate adjustments have impact and where so many bought with zero down, is showing weakness. Sales are down. Prices are not rising. Inventories of unsold houses are increasing.

Laidback Al · Jul 30, 2006

Re: House Prices

Thanks GR. Interesting comments about the high end of the market in Southern California. But even the rich people will not be able to prop up the real estate market once the ARMs, zero interest, and interest only loans start coming due.

GaudiaRay · Aug 1, 2006

Re: House Prices

Laidback Al said:
Thanks GR. Interesting comments about the high end of the market in Southern California. But even the rich people will not be able to prop up the real estate market once the ARMs, zero interest, and interest only loans start coming due.

And that's why I wait. I walk by the property I want and linger, ungh.

Do not discount the risk of hyperinflation. 1923 Germany was real. We're not in the US prepping for that. It can't happen here. Right?!

WildernessRetreat · Aug 1, 2006

Re: House Prices

Other factors besides interest rates have created this mania. Anything to keep the economy looking strong has been the order of the day since Bush took office. 10 million extra illegals entering the country has made a huge impact on housing and the economy in general. Jobs created for the war, while not producing wealth or increasing real GDP are creating massive debt and on the surface appear to be fueling an economy that in actuality is going backwards. My bets are on the House of Representatives on the illegals issue. The loss of millions of renters will pour more water on this fantasy of wealth.
Smart investors took positions in real estate when the capital gains law changed. The fools that have come to the party late and haven't taken their profits yet are in for some rude rude results. I've lived in Southern California as well as places like Kodiak, Alaska. I can tell you for certain that the enjoyment of life is higher in Kodiak than Orange county. It's also safer, has lots of water and seafood to feed about a 100 times as many people as now occupy that island. You don't need to be able to farm to survive if you can bait a hook. It also has plenty of wood to keep you warm as opposed to the danger that occurs when you lose your air conditioning. A house in Southern CA cost about 5 to 7 times as much as the same house in Kodiak.
I see the central bank preventing a total collapse in real estate prices. They can't accomodate all the defaults without incurring a total collapse of our system. Printing of money and inflation will rule. Consider the fact that we have 10 times more dollars in circulation now then we did in 1985 and that our situation is way more scary nowadays. The Fed is all of a sudden hiding M3 for a good reason. Look for 10 times more dollars in circulation in 10 years from now. Boomers that can sell will pocket as much as they can and move to low cost areas. Houses will stay at a million or two in Santa Cruz and less popular areas like Kodiak will continue to rise for some time as the stabilation of values returns, interest rates climb but not fast enough to destroy the perception of an economy growing.
Watch silver and gold go through the roof. IMHO

Binkerbear · Aug 1, 2006

Re: House Prices

:iagree:

Laidback Al · Aug 10, 2006

Builder: Oversupply slump worst in 40 years

Builder: Oversupply slump worst in 40 years

Builder: Oversupply slump worst in 40 years
Toll Brothers slashes outlook on new homes as orders plunge and revenue misses forecasts.
August 9 2006: 4:15 PM EDT
NEW YORK (CNNMoney.com) -- Homebuilder Toll Brothers said the current slump in residential construction is unlike any it has seen in 40 years as it became the latest to warn of a glut in new homes for sale and a slowdown in the closely watched real estate market.
The builder of luxury homes also reported weaker than expected preliminary results for the just completed quarter and cut its outlook for the homes it will sell in the current period. Toll Brothers (Charts) shares fell 4 percent in premarket trading.
The housing and homebuilding markets have helped drive the national economy during the past few years. Any downturns in these critical sectors could add to the problems of an already unsteady situation.
In a statement, company chairman Robert Toll warned there is a glut of supply of homes for sale in the market, as the building boom of recent years seems to be turning into a bust.
The slowdown "is the first downturn in the forty years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors," Toll said in his statement.
"Instead, it seems to be the result of an oversupply of inventory and a decline in confidence," he added. "Speculative buyers who spurred demand in 2004 and 2005 are now sellers; builders that built speculative homes must now move their specs; and nervous buyers are canceling contracts for homes already under construction."
Markets where the company recorded big increases in cancellation rates included Orlando, Northern California, Palm Springs, Las Vegas and Phoenix.
The company's reported homebuilding revenues were approximately $1.53 billion in the quarter ending July 31, compared to the record of $1.54 billion a year earlier. Analysts surveyed by earnings tracker First Call had been forecasting a 7 percent increase in overall revenue at the company.
The Pennsylvania-based builder said it expects to deliver 2,500 to 2,800 homes in the current quarter, a cut of at least 14 percent from its previous guidance of 2,900 to 3,300. And the company announced signed contracts in the just completed quarter plunged 45 percent to $1.05 billion from a record of $1.92 billion a year earlier.
The company said it is not under as much pressure as many builders to cut prices because it builds relatively few homes on spec. But Toll said that much of the supply of finished and near-finished product is being marketed using advertised price reductions and increased sales incentives, which in turn is leading many potential buyers to delay their purchase decisions as they wonder about the direction of home prices.
But Toll said the company believes that, as there is a cutback in supply by builders, the housing market should be able get back on the growth track of recent years.
"With many potential buyers on the sidelines right now, we believe there is growing pent-up demand that will come into the market once buyer sentiment improves."
Toll said on a conference call Wednesday afternoon that he expects the slump to last at least through the end of the year, however, adding it could drag on for another two.
"But the market isn't dead," Toll said. "It's concerned with the direction of home prices and if it has reached the bottom. You might argue that this is the best time to buy a home, with comparatively low mortgage rates and incentives. It's very hard to pick a bottom and anyone who tries will probably have a problem."
Toll named some once previously hot markets as underperformers lately.
Florida has been fair or poor, for the most part, not an unexpected assessment during the summertime. Other down markets were Las Vegas and Reno, Chicago, Minnesota and the Maryland shore.
Stronger markets he named were Hoboken, Delaware, Colorado and Phoenix.

Source: http://money.cnn.com/2006/08/09/news/companies/toll_brothers/index.htm

Laidback Al · Aug 10, 2006

Second Home Prices

Second Home Prices

and from the NY Times ---

August 10, 2006

<NYT_HEADLINE type=" " version="1.0">Hot Market for Second Homes Hits Slump </NYT_HEADLINE>

<NYT_BYLINE type=" " version="1.0">By VIKAS BAJAJ
</NYT_BYLINE><NYT_TEXT>WESTHAMPTON, N.Y. ? The brand new 6,000-square-foot vacation home, backing on a boat dock on Moriches Bay, has been on the market for more than a year. After plenty of showings, but no offers, the investor who built the house recently cut the price twice, by a total of $600,000, to $4 million.
It has still not been sold. To be sure, the price reductions have created more interest, according to the agent representing the owner, and he now hopes that it will be sold right after Labor Day, a prime season for home transactions in the Hamptons.
?My feeling is that everybody is waiting for the dust to settle before they make their big decision,?? said the agent, Ira Birns of Prudential Douglas Elliman. But, he acknowledged ruefully, ?there is a lot to choose from.??
It is not just the most expensive vacation homes that are going begging. The once-bustling deal making in a wide variety of popular locations for second homes ? areas like Florida, the Jersey Shore and Lake Tahoe, as well as the high-price playground on the East End of Long Island ? has slowed markedly in recent months.
As the overall housing market weakens, the interest in buying vacation homes, from the most modest condominiums on up, appears to be falling faster. Unlike most metropolitan areas ? where underlying demand and the normal turnover in primary homes as a result of job moves, new households and family changes provide a more solid floor under prices ? the second-home market relies on a different set of motivations that tends to exaggerate booms and busts.
?Second-home buying is very discretionary,? said Edward Leamer, an economist at the University of California, Los Angeles. ?There is no force of demographics that is pushing people into buying homes as there is in primary home markets.?
In second-home markets around the country, the number of sales is shrinking even as the properties on the market increase. Prices at all levels are softening, and in a few places recently have begun dropping.
In Florida, price declines have been most pronounced in areas dominated by second-home sales. In June, median prices ? half the homes sold for more and half for less ? fell 8 percent from a year earlier in Naples and nearby Marco Island on the west coast and 10 percent in Panama City in the Panhandle, according to the Florida Association of Realtors.
By comparison, prices rose 3 percent statewide, 4 percent in Miami and 10 percent in Orlando. (In addition to the overbuilding factor, rapidly rising insurance premiums tied to the greater risk of hurricane damage have hurt home sales in many coastal areas of Florida.)
Paul J. Ciotti, 60, a retired New York teacher, has had his two-bedroom beachfront condominium in Naples on the market since late last year. He first asked $999,000, when ?everybody was going for pie in the sky.?
[He has since cut the price to $799,000, which he says is a bargain because there is little undeveloped beachfront property left in Naples. ?The beachfront is still much stronger,? he said. ?It always will be.?]
While the market?s strength will be tested this fall, there is little doubt that waterfront property has had a nice run in Naples and elsewhere. Mr. Ciotti?s apartment sold for $153,000 in 1987 when the building opened; he bought it for $515,000 in 2004, according to county property records.
During the boom, prices in regions with a heavy concentration of second-home sales rose higher and faster than elsewhere, an analysis by Moody?s Economy.com of national mortgage and housing data showed.
In 2004, the latest year for which data is available, Ocean City, N.J., at 73 percent, headed the list of metropolitan areas with high shares of second homes. From 2002 to 2005, home prices in the area, which includes Cape May, rose at an average annual rate of 17 percent, compared with 10 percent for the nation as a whole and 14 percent for New Jersey.
?These have been the most juiced-up markets,? said Mark Zandi, chief economist at Economy.com.
But this spring and summer, median home prices in the Ocean City area have fallen by 10 to 15 percent from a year earlier. Sales have slowed and more houses are sitting on the market, according to Nicholas J. Marotta, president of the Ocean City Board of Realtors.
He blames speculators for rapidly inflating and then depressing the market by trading in condominiums and oceanfront homes that they bought with low-interest loans requiring only small down payments.
A local developer added that new construction had flooded the market, with more than 100 homes priced at $2 million or more. ?We believed in our own confidence,?? said the developer, Raffaele Pansini, who has been building homes for nine years. ?And in a way, we proved ourselves wrong because we don?t have 100 buyers coming in.?
Like others in the area, he predicted that demand would eventually catch up but that this could take some time.
Elsewhere, increased worries about rising interest rates, higher energy costs and a slowing economy have left some prospective buyers queasy about investing in a second or third property.
That is the experience of Shari Chase, whose real estate firm, Chase International, specializes in the Lake Tahoe winter ski and summer recreation area that straddles the California-Nevada border. Sales fell 35 percent in the first six months of 2006 from the period a year earlier. Prices eked out a 2 percent increase, according to DataQuick Information Systems, a research firm.
Vacation homes, like other luxury items, are frequently caught up in booms that appear to defy gravity. But they depend on a relatively narrow slice of the population, mostly affluent baby boomers, leaving them vulnerable to sudden downturns.
While a number of vacation homes are bought with cash, mortgage data suggests that second homes made up about 14 percent of all home sales in 2004, up from 8.4 percent in 2001.
A survey of consumer finances conducted every three years by the Federal Reserve found that the overall interest in second homes tends to closely follow the ups and downs of the economic cycle. In 1989, some 13.4 percent of those responding said they owned a second home, but that figure fell during the recession in the early 1990?s and reached a low point of 11.9 percent in 1995. Such ownership rose to 13 percent in 1998 but fell back to 11.4 percent in 2001 before rising again to 12.6 percent in 2004.
Anecdotal evidence suggests that vacation homes might have reached a new high-water mark in 2005.
?I saw a lot of clients buy first, and ask questions later, on second and third properties,? said Leo P. Grohowski, chief investment officer at U.S. Trust, which caters to affluent families.
Much of Florida and the Jersey Shore, areas considerably more affordable than the Hamptons, have been favored destinations lately for his well-to-do clients and friends, many of whom encouraged Mr. Grohowski to buy with them. He is happy that he resisted, he said, though ?for a while, I was looking like a dummy.?
Real estate experts note that second-home markets have a natural self-correcting mechanism. However much local people may believe in their particular slice of paradise, destinations can price themselves out of the market. Plenty of people are willing to pay more for waterfront property, privacy and pristine vistas, but no region has a monopoly on those features.
?This is a very efficient market,? said Richard A. Smith, vice chairman and president of Realogy, the former real estate arm of Cendant that owns Coldwell Banker and Sotheby?s International Realty. ?When you don?t like the pricing someplace, you can go someplace else.?
Still, the market for high luxury, homes costing more than $5 million, tends to be more resilient, said George R. Simpson, president of the Suffolk Research Service, a firm that monitors the real estate market in the East End of Long Island.
?This is a market that is driven by ego and wannabes,? he said. ?People come here because it?s the thing to do. Every time P. Diddy has a cocktail party, the prices go up a little.?
But data collected by Mr. Simpson?s firm shows that even the Hamptons are not impervious to weakness. Median home prices in East Hampton and Southampton, including the surrounding villages and hamlets, languished in the low $200,000?s for most of the 1990?s. Adjusted for inflation, prices did not climb past their 1990 levels until the end of the decade.
But for the first six months of 2006, median prices are up 4 percent in Southampton, to $766,000, and 13 percent in East Hampton, to $900,000, according to Suffolk Research, though some of that could reflect a shift in sales toward the top of the market. The number of sales, however, is down 14 percent in Southampton and 19 percent in East Hampton.
Although agents insist that nothing akin to the 1990?s slump is setting in, they are spending more time promoting properties and hand-holding sellers ? exercises considered unnecessary when homes were moving in a week or so and bidding wars were common.
Earlier this month, Elisabeth Mills, an East Hampton agent who works at the Corcoran Group, started showing a commercial on cable television for a $2.3 million modern home, down from $2.5 million, and another home, built on speculation and offered at $1.99 million. The second property is in a neighborhood where the fashion designer Donna Karan and the rap star and entrepreneur P. Diddy live.
Ms. Mills is paying for the 30-second spot, which pans through the interiors and exteriors of the homes and is being shown on CNBC, HGTV and a local cable news channel in Suffolk County, in hopes that it will create extra buzz among agents and potential buyers.
Response to the ad has been ?pretty amazing,? she said, particularly from other builders looking for ways to market their own homes. ?We seem to have increased activity from brokers,? she said.
Walter Priestley, who built the larger house in the ad, said the marketing campaign for the property also includes direct mail and open houses (wine and cheese on Saturdays; bagels and coffee on Sundays) ? all in an effort to set his home apart from others. He says he is confident it will be sold by Labor Day.
?There are still plenty of buyers,? Mr. Priestly said. ?We have 20 to 30 people showing up every time we have an open house.?

http://www.nytimes.com/2006/08/10/business/10homes.html?ex=1312862400&en=ae623018683420b0&ei=5089&partner=rssyahoo&emc=rss

</NYT_TEXT>

GaudiaRay · Aug 23, 2006

Re: House Prices

GR: this is old news, as this is last month's news. this month, august, is the 2nd to last before the market stands poised to collapse. I sense a crowding in. Here the article references a 7.3 month inventory; the 242 houses here in Ojai represent how many months of sales based on sales over the past 4 weeks? wanna guess? I'll guess 30 houses sold in a month, max, last month. That's 8 months min. I'm guessing by the time this month ends, it will be 9 months and growing. and in 2 months, it'll be at 15, yes, 15, months and growing. Panic, as you'll witness, spreads fast and gets going faster. I've no reason to know why this will happen. it just happens. bird flu happens.

signed,

your friend (who holds no invesment RE and no hard money loans on RE).. aka "sink the boat and whoever's on board". imagine a rat trap that's slammed on the rat's leg; it can knaw it off or it can die. the choice is the rat's. further musing...how are all those happy balanced portfolioists now? know any? who's managing estate money saying to themselves, hey, i gotta own this shopping center or those second homes or those apartment house units? as i've said ad nauseum, first loss is least loss. time to get out the shovels folks; we're gonna be diggin' a lotta graves, for these folks now and when bird flu says hi to them too. maybe now's the time to be selling grease? the skids are gonna be coated and it might as well be you who sell it to those who are gonna experience backend fun and games for the first time in their lives. ah, it pays to be older and wiser, doesn't it!

Home Sales Fall to Unexpectedly Low Rate

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[*] <form id="emailThis" name="emailThis" action="http://www.nytimes.com/mem/emailthis.html" method="post">By JEREMY W. PETERS</form>

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Published: August 23, 2006
<nyt_text></nyt_text> Sales of existing homes fell in July to an unexpectedly low rate, a sign that a widespread softening of the housing market is taking hold.
Existing Home Sales Data (Excel)

The National Association of Realtors reported today that purchases fell 4.1 percent last month to an annual rate of 6.3 million homes, the slowest since late 2003. The rate was 11.2 percent higher a year earlier.
At the same time, the inventory of unsold homes on the market swelled to a 7.3-month supply, the most in more than a decade.
The national median price of a sold home held steady in July at $230,000. But the association said that prices fell in most areas of the country, and in many places are now lower than a year earlier. Only in the South are prices still rising: the median home there sold for 3.2 percent more last month than a year earlier. Had it not been for that gain, the national median home price would have declined on a year-over-year basis for the first time since April 1995.
?This surge in excess supply is having a major effect on house prices,? Capital Economics wrote in a research report today.
The number of homes changing hands fell in every region, with the West experiencing the sharpest decline, of 6.4 percent. Sales volume was off by 5.9 percent in the Midwest, 5.4 percent in the Northeast and 1.2 percent in the South.
When combined with other recent statistics showing falling real estate investment and fewer application for building permits, the sales figures today make clear that a housing slowdown is now under way. Most economists, including Federal Reserve chairman Ben S. Bernanke, still expect the slowdown to be orderly. But it remains to be seen just how far home sales will slide in the coming months and what the impact on the economy will be.
Economic expansion in the second quarter slowed to a 2.5 percent annual rate, down from 5.6 percent in the first quarter. Because housing has been so central to the overall health of the nation?s economy in recent years, forecasters are concerned that a steep decline in home sales may help push the economy into a recession.
But so far, many economists are predicting a slowdown, not a collapse. ?The trend here is one of stabilizing prices after the sharp gains seen for many years,? said Joshua Shapiro, chief United States economist with MFR. ?While certainly a change in trend, so far the official data are not corroborating some of the more alarmist stories being bandied about recently.?
http://www.nytimes.com/2006/08/23/business/23cnd-econ.html?hp&ex=1156392000&en=2e6aba13e683c830&ei=5094&partner=homepage

Binkerbear · Aug 30, 2006

Re: House Prices

How about this chart ?

GaudiaRay · Aug 31, 2006

Re: House Prices

Bink, The chart you post is a typical crashing market chart. As the R/E market is so big, its crash will normalize and will appear very similar to this chart.

Sinclair says the Feds are dumping in liquidity yet again in an attempt to avoid a rate hike.

With consumer confidence having gone South, it's really just a waiting game.
When any issue causes anxiety, the prices fall. At some pointin the near term, the headlines will read, "Buyers Evaporate. Sellers Taking Big Mark Downs", and "When Will The Decline End?", and "Foreclosures Reach Ten Year High. No Relief in Sight", "NAHB President Meets with Politicians in DC to Discuss What To Do Next".

Meanwhile, Johnny Paycheck and his fellow nail bangers and drywallers are going to be dried up consumers, with their trucks for sale as their ultimate humiliation and tossing in of the towel.

It's obvious. It's just not yet upon us as the society always moves slowly.

GaudiaRay · Aug 31, 2006

Re: House Prices

Posted by Lars at FluClinic

Interesting chart on home prices, adjusted for today's dollar, going back to 1890
<hr style="color: rgb(209, 209, 225);" size="1">   http://graphics8.nytimes.com/images...raph2.large.gif

At least one complication to me is that a home today is not very comparable technically to a home in 1890.
  __________________
"How small, of all that human hearts endure,
That part which laws or kings can cause or cure!"
http://www.curevents.com/vb/showthread.php?t=57294

--Samuel Johnson

GaudiaRay · Aug 31, 2006

Re: House Prices

A drop from 200 to 180 will wipe out the down payment for what I guess to be 60 to 70 % of all R/E buyers in the past 24 months.

They'll be the grease that will skid this baby carriage into the pit.

Binkerbear · Aug 31, 2006

Re: House Prices

... the headlines will read, "Buyers Evaporate. Sellers Taking Big Mark Downs", and "When Will The Decline End?", and "Foreclosures Reach Ten Year High. No Relief in Sight" -GR
Yes, and when those headlines occur, it will be time to get back in, flu or no flu.

I'm leaving today for the Florida Panhandle. I can't imagine all the 'For Sale' signs that I'll be seeing. That area has already gone from wild, frenzied boom to total bust. It will be interesting. I will be asking some realtors if prices have started coming down yet and by how much. And I will be thinking: 'they haven't seen nuthin' yet'.

Laidback Al · Aug 31, 2006

Re: House Prices

Binkerbear said:
... the headlines will read, "Buyers Evaporate. Sellers Taking Big Mark Downs", and "When Will The Decline End?", and "Foreclosures Reach Ten Year High. No Relief in Sight" -GR
Yes, and when those headlines occur, it will be time to get back in, flu or no flu...

The fatality rate of a pandemic and its effect on population demographics will affect the number and kinds of real estate buyers after a pandemic. There may be lots of properties to choose from. I am not so sure that real estate will be the best market sector to be in after a pandemic.

GaudiaRay · Sep 7, 2006

Re: House Prices

GR: No matter what you see, the place to be is not in the US dollar, it's invested to your eyeballs, unleveraged, in gold. Then kick back and watch bird flu turn householders into economic graveyard plot holders and gold holders into top dogs in this oncoming economic rumble.

www.jsmineset.com
Sept 7, 2006
Jim Sinclair’s Commentary The FORMULA (stagflation) is starting to function and Yellen is out of her mind!
U.S. Stocks Fall as Housing Slump Deepens; Countrywide Drops
By Hilary Johnson
Sept. 7 (Bloomberg) -- U.S. stocks dropped for a second day on mounting evidence that a housing slump may cause economic growth to slow.
Share prices sank after two homebuilders, KB Home and Beazer Homes USA Inc., said earnings will be lower than their forecasts and an industry group said home prices may decline for the first time since 1993. Countrywide Financial Corp., the biggest U.S. mortgage lender, led financial shares lower.
``Housing has fallen more dramatically than anyone would have thought,'' said Linda Duessel, an equity strategist who helps manage $218 billion at Federated Investors in Pittsburgh. Investors are ``worried about an economy that is slowing more than expected.''
Federal Reserve Bank of San Francisco President Janet Yellen, who said inflation may decelerate ``faster than many forecasts expect,'' gave the market no support. Yellen also said policy makers ``must have a bias'' toward higher borrowing costs even though the pace of growth is waning.
More…

U.S. Home Prices May Fall for First Time in 13 Years
By Kathleen M. Howley
Sept. 7 (Bloomberg) -- U.S. home prices may fall for the first time since 1993 as a record number of homes for sale gives buyers the upper hand in negotiations, the National Association of Realtors said.
``We'll probably see prices dip temporarily below year-ago levels as the market works through a buildup in housing inventory,'' David Lereah, NAR's chief economist, said in a report released today in Washington by the real estate industry's largest trade group. He didn't provide a monthly median estimate.
The inventory of new and existing homes for sale has swelled to record levels as the five-year U.S. housing boom comes to an end. KB Home, the No. 6 U.S. homebuilder by stock market value, yesterday lowered its 2006 earnings forecast after quarterly orders plunged and Hovnanian Enterprises Inc., the No. 10 builder, reported profit fell 34 percent. Today, Beazer Homes USA Inc., No. 12, lowered its forecast after orders fell by half.
Short-term housing investors, so-called ``flippers,'' are putting their properties up for sale, making for ``an increasingly challenging housing market,'' KB Home Chief Executive Bruce Karatz said in a statement yesterday that detailed the builder's 43 percent drop in new orders.
More…

Binkerbear · Sep 8, 2006

Re: House Prices

GR: No matter what you see, the place to be is not in the US dollar, it's invested to your eyeballs, unleveraged, in gold. Then kick back and watch bird flu turn householders into economic graveyard plot holders and gold holders into top dogs in this oncoming economic rumble.

Translation: Please dear friends, consider at least a 5 % diversification into gold. Even the most mild-mannered, logical financial planner would agree with a mere 5 %. After all, you really don't want to lose everything that you've saved your whole life for.

Moderators: Please don't ban GR again. I am here to translate anytime that it's needed.

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