I won’t have September’s numbers until tomorrow, but the news is not good for bubbleheads — which is to say that the news is not bad for everyone else. Meanwhile, there’s this from The Business Journal of Phoenix:
Some of Arizona’s leading economists believe the housing slowdown is a short-lived bump in the road that too many people spend too much time thinking about.
Instead, Arizonans should be looking at statistics that show the state created 161,000 jobs through August of this year, more than 340,000 jobs since the end of the 2002 recession and had a whopping 8.7 percent gain in gross state product for 2005.
“It’s hard to imagine a state with more economic momentum,” said Kent Ennis, an economist and the director of research at the Arizona Department of Commerce.
I most sincerely do not hate to say I told you so…
Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate, real estate marketing
Gary Anderson says:
Well, Moody’s economy.com ranks Reno as the number 2 city in terms of potential depth of crash. As a percentage, I only see Reno as being higher than Phoenix regarding PERCENTAGE of built up inventory. So for people to say that Phoenix will not tank is wishful thinking. The crash has become, and real estate agents will be the ones looking for jobs. Better that than to continue allowing people into these ponzi exotic loans only to be left holding the bag.
October 5, 2006 — 9:09 am
Gary Anderson says:
Sorry, “the crash has come”.
October 5, 2006 — 9:10 am
Greg Swann says:
> Sorry, “the crash has come”.
Sorry. It hasn’t. Bread-and-butter houses in Phoenix are down about 6% from the peak, with virtually no change up or down in months. This may not be the ultimate trough, but it doesn’t seem reasonable to expect things to get much worse.
October 5, 2006 — 9:37 am
Gary Anderson says:
6 percent. Add on to that 2.5 percent inflation PER YEAR. If prices were to stay steady for two years that is another 5 percent decline in real value, assuming wages stay flat, which they have. It is likely that the fed will not be able to lower interest rates, as we have 2.5 inflation still. So, the fed will not be able to help much when an unprecedented amount of arms will adjust in 2007 and 2008. Basic disconnect between prices and wages remain. Without the incentive of rising prices, the party is over.
October 5, 2006 — 10:55 am
Gary Anderson says:
From bubbletracking.blogspot.com are Phoenix inventory statistics. Sales of houses in 05 and 06 are in parentheses:
1/30: 32,512 (5,260)___1/05: (9,360)
2/28: 36,176 (5,455)___2/05: (7,935)
3/31: 39,852 (7,265)___3/05: (10,035)
4/30: 44,290 (5,980)___4/05: (8,735)
5/31: 47,187 (6,870)___5/05: (10,425)
6/30: 50,974 (5,460)___6/05: (11,545)
7/10: 50,167
7/20: 51,557
7/31: 52,662 (5,545)___7/05: 11,656 (10,200)
8/10: 52,701
8/20: 53,416
8/31: 53,253 (5,685)___8/05: 15,042 (10,700)
9/10: 53,806
9/20: 54,269
9/30: 54,731
October 5, 2006 — 11:00 am
Greg Swann says:
Your “crash” looks like a fender-bender at the worst. A simple “I was wrong” would do the job nicely, but I’m not holding my breath.
October 5, 2006 — 11:02 am
Greg Swann says:
And, of course, your numbers are bogus. I understand that made-up scary numbers are part of bubbleblogging, but even the real numbers don’t mean what you want so desperately for them to mean. I can’t imagine what the thrill is in fantasizing other people’s pain — but it ain’t happening anyway.
October 5, 2006 — 11:06 am
Gary Anderson says:
Well, all I know is that you are selling one house for every two that you sold last year. And I am glad. You know why? These ponzi scheme “exotic” loans are harmful and can destroy families. I don’t like the idea of Re people and others being out of work. But I like less the fraud that has been perpetuated upon families that don’t understand these loans in order to buy houses that are too expensive. Realtors should be the ones apologizing.
October 5, 2006 — 11:52 am
Greg Swann says:
> Well, all I know is that you are selling one house for every two that you sold last year.
Wrong. And I’m about to quintuple my production.
> Realtors should be the ones apologizing.
There are a bunch of people who are on the path to becoming millionaires because of the work we did together.
You don’t know what you’re talking about.
October 5, 2006 — 11:59 am
Todd Tarson says:
>Realtors should be the ones apologizing.
Why?? We didn’t make the loans available.
look I won’t deny that there are folks out there that made poor decisions. I’ve been fortunate enough to be a Realtor in a market where many sales were made on a cash basis. As for my other buying clients I’ve had over the years, I’ve never been involved with a negative amortization loan, and the only IO loan I’ve ever been a part of was the one I used to buy the home I’m living in now.
Folks are spending more of a percentage of income on their homes. Prices did go up and up. I’m sure exotic loans had something to do with it.
What I’m hearing from economists though (not REIC economists either) is that the law of supply and demand led us into the boom and will lead us to a more normal market. The key is absorbtion.
Phoenix it seems will do alright. 1 in 19 jobs created in this country are created in Phoenix. Builders are likely to slow down over the next few years, but 45,000 new homes still need to be built for all the growth.
I’m noticing a susbstancial drop in the amount of new listings, yes sales are still slower than they were the last two years, but many agree that this will be the third most busy year on record for sales of homes.
If this is a bubble bursting… then sign me up.
Gary, I think the bubble folks have some points but are way overstating things and losing site of the facts. Everyone is getting off on the drop of 3.whatever percent forecasted nationally on the price of homes. Gee… after multiple years of double digit increases??
The popping sound I was supposed to hear?? When will I hear it??
October 5, 2006 — 12:08 pm
Todd Tarson says:
>There are a bunch of people who are on the path to becoming millionaires because of the work we did together.
I can’t think of an investor client I have worked with over the years that would be crying the blues today. They’ve taught me plenty during that time, which is why I’m feeling pretty good about the investments I’ve made.
It sure is possible that the articles we see about someone who borrowed multi millions in loans could be in some sort of trouble. That one article probably does not represent even 1% of the real players that were in the market over the last many good years.
October 5, 2006 — 12:13 pm
Gary Anderson says:
Save your money. You will need it.
October 5, 2006 — 12:34 pm
Greg Swann says:
> Save your money. You will need it.
Oh, good grief! Is that really all you’ve got?
October 5, 2006 — 12:50 pm
Gary Anderson says:
From Realty Times, one of the most bullish of all realty websites comes this from economy.com : The greatest annual decline will visit sunny Cape Coral, FL, where home prices are forecast to decline 18.6 percent from the peak price. Other large home price declines will come from Reno, NV (17.2 percent); Merced, CA (16.1 percent); Stockton, CA (15.7 percent); Sarasota, FL (14 percent); Naples, FL (13.8 percent); Tucson, AZ (13.4 percent); Las Vegas, NV (12.9 percent); Chico, CA (12.6 percent) and Fresno, CA (12.5 percent), with another 11 metros suffering double-digit, home price declines.
Remember, if prices stay flat after these drops (which I doubt) housing will not contribute to the economy and that could cause sever financial trouble. If they continue to go down, then the trouble will multiply.
October 5, 2006 — 12:50 pm
Todd Tarson says:
I wonder what the year over year rise in prices was during the run up to the peak?? I’ll bet you it was much higher than the projected losses.
October 5, 2006 — 2:37 pm
Greg Swann says:
> I wonder what the year over year rise in prices was during the run up to the peak??
For the houses I track, it was 45.68%, 12/04 to 12/05. From 12/03 to 12/05 the gain was 84.39%. There are subdivisions I watch where values doubled in two years…
October 5, 2006 — 2:56 pm
Gary Anderson says:
In Japan, the gains have been erased. Better fear.
October 5, 2006 — 5:26 pm
Gary Anderson says:
Here is something from the NAR official site, realtor.org: ”
The ever-increasing complexities of real estate transactions and the rising use of litigation have prompted a need for errors and omissions (E&O) insurance programs to reduce the risk to sales associates and the real estate firms they represent against potential lawsuits. The following items address E&O and professional liability insurance, answering many of the questions REALTORS? may have about how E&O insurance works and how to choose a provider.”
Now Realtors who pushed people into “exotic” loans are fearful of lawsuits. Even though David Lereah stated that the boom would continue through the end of the decade NAR is offering this insurance. He probably was the first to sign up.
October 5, 2006 — 6:25 pm
Todd Tarson says:
>In Japan, the gains have been erased. Better fear.
I don’t live in Japan.
>Now Realtors who pushed people into “exotic” loans are fearful of lawsuits.
Realtors don’t sell loans (the vast majority of them don’t). Realtors are not financial advisors. I’ve yet held a gun to a clients head and demanded they authorize an agreement.
Buyers were begging to purchase homes not all that far back in time. Many of them were investors. Home prices and interest rates were at record low’s. Again, in all the transactions I’ve been in the only ‘exotic’ loan I was a part was my own personal loan for the home I live in now. I knew what I was doing then and when the term expires I simply go get another loan. Meanwhile my home is still, if I sold it today at your doom and gloom numbers, worth more money than it was when I finished construction.
And lastly, let’s say I don’t like the terms of interest when the time comes to make a decision. I’ll simply pay off the balance.
Look Gary, you and the other bubble boys have been telling people to rent for some time now. Well guess who is paying for MY mortgage on MY home right now?? Those renters. And whoops, rents are starting to climb even in my tiny little town. So keep telling folks to rent, no make that keep scaring people into renting.
Many buyers are priced out of the market right now. That happens from time to time. It’s completely normal. Sellers need to meet the market where sales happen. Not long ago buyers had to meet what the market would bear.
October 6, 2006 — 10:06 am
helldigger says:
The “I got my real estate license last year” agents are dropping like flies as the inventory stays high and buyers can’t afford the current prices.
Only seasoned agents who have the background to understand, will survive. The marginal agents have already lost their job and are working at the Burger King already because they would starve otherwise.
October 6, 2006 — 2:43 pm
Todd Tarson says:
There were agents coming into the biz over the last two years that continued to hold whatever current job they had. Simply put there were many ‘part-timers’ that came into the market.
I host part of the orientation of new Members into our local Association. My Association has just over 500 members. The last year more than 150 people sat in on my part of the presentation. There’s probably only 30 or 40 that I would recognize today with a listing or other forms of business. Many brokers were telling me that their new agents continued to work a full time job and the brokers also told me they didn’t think those agents would make it in the biz for very long.
I was almost a victim of the thinning of the herd. I was offered a couple of very good job opportunities where I probably would have made more money this calendar year, but I turned them down. I love this profession and think I can help improve it.. on behalf of the client.
Agents come and go… the story remains the same… the same as it ever was… same as it ever was.
October 7, 2006 — 8:38 am
Gary Anderson says:
We may not live in Japan, but we could be embarking on our own “lost decade”. No investor who bought only for appreciation can make any money renting because mortgages far exceed rent. Maybe you guys will keep raising the rent, which will increase inflation, which will guarantee future fed increases, which will assure bubble bursting.
Interesting that Kara homes may go bankrupt in New Jersey, and other home builders are saying that sales are down more than they can ever remember being down. Wait till investors realize that all those mortgage companies that were counting full payments to their bottom line are not and never will be made. Then the bubble will meet Wall Street head on.
October 9, 2006 — 2:20 pm
Gary Anderson says:
Here is an interesting article from Ben Jones at http://thehousingbubbleblog.com :
The Review Journal reports from Las Vegas. “Loan officer Bob Charles has worked eight months trying to find construction financing for a luxury condo project in Las Vegas that may be ‘caught in the same mud’ as Club Renaissance, a 60-story downtown tower that was announced in January 2005 but has yet to break ground.”
“‘Of the 80-plus lenders that would have thrown their money at this project last year with the frivolousness that Paris Hilton shows when she throws money at her next party, only two lenders are left that will even take a call on a condo project in Vegas,’ Charles said. ‘Well, Paris Hilton came out last month to say that she’s not partying anymore and lenders have mostly done the same.'”
“Banks have tightened their purse strings on construction financing for high-rise condo projects in Las Vegas, especially after projects such as Krystal Sands, Aqua Blue and Icon were canceled, leaving buyers high and dry and Las Vegas with a black eye on Wall Street.”
“Demand for housing has cooled, so builders are looking to unload their inventory and are not as aggressive as they had been in building new units, said Paul Engler, for Chase commercial real estate banking in Phoenix. ‘It’s been interesting times all over the country,’ he said. ‘We’ve been picky about condo projects we’ve invested with. What we’re all watching is affordability of housing, which bleeds all the way down to land prices.'”
“‘What is somewhat unique to Vegas is the number of deals brought forward by completely inexperienced developers and often on unremarkable sites, and we’re talking about $100 million-plus proposed developments,’ said Jeff Teetsel (with) Fremont Investment and Loan.”
“Las Vegas has next to no primary occupant demand to supplement the demand from second-, third- or fourth-home buyers for the very high-end units,’ Teetsel said. ‘In a market with not much more than 1,000 high-rise units ever completed before the last couple years, it was absurd to see 40,000 to 50,000 proposed units announced in the space of two to three years. It’s not surprising to see a number never get out of the ground.'”
“Until recently, all a developer needed to obtain high-rise entitlements in Las Vegas was a mock-up of a possible project, so hundreds of ‘wannabe developers jumped into the pool,’ Charles said. Developers who failed to lock in their construction costs are just buying time now and it doesn’t look as if they’re going to make it, Charles said.”
“‘So, are things bad? Well, I just saw an ad to try to entice people to buy from a certain Vegas condo under construction that said, ‘Free one-year mortgage, free one-year HOAs, no down payments,’ so I’d say it looks bad,’ he said.”
The Nevada Appeal. “Nothing can illustrate the area housing market better than the tale of a newlywed couple with dreams of equity. About a year before Sara and Cory married, they had a dream of the perfect career in house flipping.”
“After a five-year national housing boom the market had started to slow over the year into a hot pool of uncertainty, she’s cautious about house flipping here. ‘The market here, it is too late. It’s too expensive,’ she says.”
“Boom areas of Nevada could have the most dismal price slump in the nation. Carson City is on the list of metropolitan areas projected to have the largest decline in median housing prices. One sign of a scare: seller incentives. Local real estate agent Bob Fredlund said sellers are getting competitive to sweeten the deal. They are giving higher commissions to the buyer’s agent, cash awards of $10,000, trips to Hawaii.”
“‘The people really in trouble are the speculators,’ says Gil Yanuck, assistant state director for the AARP’s Tax-Aide program. ‘They went and refinanced their house to speculate and buy another piece of property that they thought they were going to hold on for two to three months and flip it. Now they have two mortgage payments to make.'”
October 9, 2006 — 2:41 pm
Gary Anderson says:
From Ben Jones at thehouseingbubbleblog.com :
The Review Journal reports from Las Vegas. “Loan officer Bob Charles has worked eight months trying to find construction financing for a luxury condo project in Las Vegas that may be ‘caught in the same mud’ as Club Renaissance, a 60-story downtown tower that was announced in January 2005 but has yet to break ground.”
“‘Of the 80-plus lenders that would have thrown their money at this project last year with the frivolousness that Paris Hilton shows when she throws money at her next party, only two lenders are left that will even take a call on a condo project in Vegas,’ Charles said. ‘Well, Paris Hilton came out last month to say that she’s not partying anymore and lenders have mostly done the same.'”
“Banks have tightened their purse strings on construction financing for high-rise condo projects in Las Vegas, especially after projects such as Krystal Sands, Aqua Blue and Icon were canceled, leaving buyers high and dry and Las Vegas with a black eye on Wall Street.”
“Demand for housing has cooled, so builders are looking to unload their inventory and are not as aggressive as they had been in building new units, said Paul Engler, for Chase commercial real estate banking in Phoenix. ‘It’s been interesting times all over the country,’ he said. ‘We’ve been picky about condo projects we’ve invested with. What we’re all watching is affordability of housing, which bleeds all the way down to land prices.'”
“‘What is somewhat unique to Vegas is the number of deals brought forward by completely inexperienced developers and often on unremarkable sites, and we’re talking about $100 million-plus proposed developments,’ said Jeff Teetsel (with) Fremont Investment and Loan.”
“Las Vegas has next to no primary occupant demand to supplement the demand from second-, third- or fourth-home buyers for the very high-end units,’ Teetsel said. ‘In a market with not much more than 1,000 high-rise units ever completed before the last couple years, it was absurd to see 40,000 to 50,000 proposed units announced in the space of two to three years. It’s not surprising to see a number never get out of the ground.'”
“Until recently, all a developer needed to obtain high-rise entitlements in Las Vegas was a mock-up of a possible project, so hundreds of ‘wannabe developers jumped into the pool,’ Charles said. Developers who failed to lock in their construction costs are just buying time now and it doesn’t look as if they’re going to make it, Charles said.”
“‘So, are things bad? Well, I just saw an ad to try to entice people to buy from a certain Vegas condo under construction that said, ‘Free one-year mortgage, free one-year HOAs, no down payments,’ so I’d say it looks bad,’ he said.”
The Nevada Appeal. “Nothing can illustrate the area housing market better than the tale of a newlywed couple with dreams of equity. About a year before Sara and Cory married, they had a dream of the perfect career in house flipping.”
“After a five-year national housing boom the market had started to slow over the year into a hot pool of uncertainty, she’s cautious about house flipping here. ‘The market here, it is too late. It’s too expensive,’ she says.”
“Boom areas of Nevada could have the most dismal price slump in the nation. Carson City is on the list of metropolitan areas projected to have the largest decline in median housing prices. One sign of a scare: seller incentives. Local real estate agent Bob Fredlund said sellers are getting competitive to sweeten the deal. They are giving higher commissions to the buyer’s agent, cash awards of $10,000, trips to Hawaii.”
“‘The people really in trouble are the speculators,’ says Gil Yanuck, assistant state director for the AARP’s Tax-Aide program. ‘They went and refinanced their house to speculate and buy another piece of property that they thought they were going to hold on for two to three months and flip it. Now they have two mortgage payments to make.'”
October 9, 2006 — 2:43 pm
Gary Anderson says:
Hey guys, here is something from Lew Rockwell. His contention is that easy credit has made the housing bubble national. He is saying that arms have made even places of low appreciation places where many can become upside down in their homes. This may explain why there are huge foreclosures in places like Denver, Michigan, Dallas, etc:
“Using these two points, I disagree with the assertion that all housing bubbles are strictly local. Most assuredly, there are cities in Florida and California where house-price appreciation was surreal. Where this assertion falls apart is that the housing boom was driven by easy credit and not accumulated savings – and easy credit has been available in all 50 states. Even if real estate speculators weren’t heading to Butte, MT or Detroit, MI looking to flip houses and condos, mortgage loans were still incredibly easy to come by for even the most unqualified of borrowers. Therefore, a low-wage first-time homeowner in Detroit (with a 0%-down adjustable rate mortgage) can incur a financially ruinous level of mortgage debt just as easily as a high-wage professional in Tampa can do so by going overboard when extravagantly remodeling a home – 100% funded by an adjustable rate home equity line of credit (HELOC).
Both Michigan and Florida, as a matter of fact, are in the top-ten list of states with the highest foreclosure rates in the United States. Interestingly enough, Florida ranked 2nd in the U.S. for house-price appreciation while Michigan ranked 51st – this information was compiled, for the one-year period ending June 30, 2006, by the Office of Federal Housing Enterprise Oversight and includes the District of Columbia.”
October 10, 2006 — 8:50 am