The existing home sales are out. Inventories are up to 9.6 months! Prices are down .6%. We’ve got a L O N G way to go. This is an unprecedented opportunity to make a LOT of money!
Mike
Unfortunitely for those sellers the lending industry is tighting up. This means less and less buyers are able to actually buy. Fewer buyers means more sellers and lower prices. As long as the lending industry keeps tighting their requirements we will see more and more properties remain on the market. Which will definitely mean lower prices will follow.
This is good for those of us that are established and can easily qualify. But for those just starting out, it is not good. The rich (me) get richer and the poor stay poor.
Not only that but as long as prices are dropping people can’t sell their homes as the price they will get will not allow them to pay off their current debts so that’s definitely fouling things up too. When you cut out a large chunk of the market with tighter lending and make the people that can get qualified unable to sell their homes for more than their mortgage balance it’s a bad story.
in the investment arena, there still seem to be a lot of “investors” putting property on the market at absolutely ridiculous prices. Some people have not clued into the fact that the market has taken a dramatic turn for even 12 months ago.
Here’s an example:
I saw one this morning a 4 unit for $470k that gross $1800/mn. This is in an area that normal commands a GRM of 90-150 depending age, condition and exactly location. I have not been inside, but based on location its probably worth low $200s (on a good day).
Of course, this is why I have seen some property that effectively been on the market for 1+yr (usually re-listed multiple times).
When I see these , I hope somebody does NOT buy it as they would in deep yogurt so fast financially.
I’ve seen a ton of those. One was sent to me the other day that was $430k with gross rents of $4650. Supposedly only needs a new driveway, quoted at $3k. Barely over 1% in gross rents per month, not even worth my time to persue.
Still plenty of idiots here in Raleigh ruining the market for the real guys…you know this is a “Hot Rental” market according to Cramer on one of his recent interviews, I guess that means you should accept negative cash flow. Check out Deaton.com They cater to these out of town investors that will pay double what the property is actually worth. Sorry if I sound so negative, it is just ruining it for a buyer like me.
jb,
You may just be a little behind the rest of us. We had the same thing happen in Ohio about 2 years ago. A bunch of California investors were paying retail for properties. At this point, they’ve mostly been washed out of the market, and I guess they moved on to Raleigh. After they lose their butt, they’ll leave Raleigh too.
A little more patience is all that’s required.
Good Luck,
Mike
I’m assuming you meant 6% and not 60%??
Where are you located?
I live in Northern NJ… I’m still seeing houses sell for ridiculous prices in my area and there’s no inventory overload. It’s like everything I hear all across the country doesn’t apply to what’s going in my local market. What’s a man to dooo
I'm assuming you meant 6% and not 60%??
NJ Birdog,
Housing prices were down .6% (six-tenths of one percent).
In any housing bust, inventories rise first, then prices drop. We’re just getting into the price drop portion. Just hang in there, prices should start dropping in your area in the next year. We’re also headed into a recession and that will help with housing prices also.
Mike
NJbird_dog, where in NJ are you? I live in Cedar Knolls and i’ve been seeing alot more fore sale signs recently. Maybe that’s just because I am just starting starting out. I have noticed a handful with “Reduced” signs as well as some that have been on the market for a long time. These homes seem to be Ugly, older homes. All the new construction SFH, or ones built in the last couple years are selling quickly.
Just my observations. It looks like we are behind the curve a bit, but are definitely headed in the same direction as Ohio.
I’m also up north in North Bergen. I’m seeing more for sale signs as well, and even a few with ‘reduced’ signs on them. But these reduced signs don’t mean anything. The houses were over-priced to begin with so a 20-40k reduction still makes them over-priced.
But…just recently a 2BD/2BA house, which I admit is on a very good area of North Bergen, sold for $650k. Other recent sales are still selling for their list price or very close to it. I haven’t seen a significant price reduction in any recent sales in North Bergen. I question whether or not we’ll even see one, because NB is a prime location for people commuting to New York and there’s always demand here for good housing. Only time will tell…
(Btw, thanks propertymanager for clearing that up)
I know the area you are talking about fairly well, my wife grew up in Secaucus and the housing prices there are ridiculous for what you get. I would agree with you that that area is a little bullet proof because of it’s proximity to NYC. What sort of investments do you look to do in that area? Rentals, wholesaling?
I agree. In Houston I project that houses will be about 50 cents on the dollar by Christmas. Now they are around 70 cents. They have been around 80 cents for the last 2 years or so.
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I live in Northern NJ… I’m still seeing houses sell for ridiculous prices in my area and there’s no inventory overload. It’s like everything I hear all across the country doesn’t apply to what’s going in my local market. What’s a man to dooo
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intersting. northern nj here (morris county) and i’ve not heard/seen of this. speaking with various realtors and reading local news shows that homes are selling but that the market has been affected and is a buyers market.
This housing doom and gloom stuff has really, REALLY, gotten out of hand. The media is taking the worst of it and calling it an epidemic that is spanning the USA. Simply untrue. Well, to a point. The media is largely creating the ‘epidemic’ that they are reporting. Seeing some of the posts on this website over the last month or so is proof.
In what frame is there a ‘national’ RE market? Real estate is intensely local in nature. Yes, there are problems nationally that will affect your market. This is a fact. However, markets will generally rise and fall based on LOCAL conditions, not national problems. If you’re market is slowing, soft, or plain out in the mud, then you need to consider what is causing it. Chances are that it is NOT because of the subprime issue.
The general media wants you to believe that markets are failing everyone, yet the worst (or best depending on POV) they could come up with was a headline “43 major markets in decline.” However, they didn’t list most of these markets, they didn’t clarify exactly what is meant by “decline” (heck a .0001% reduction COULD be classified as a decline), and they didn’t acknowledge the fact that there are 1000s of local markets.
Now, foreclosures are the hot topic. Foreclosure numbers are UP. Well, so is homeownership. The past 5-7 years of easy financing have given us a mind boggling number of owners. Foreclosure numbers SHOULD be up! Of course, this number too, has to be imbelished by the media. Someone recently posted a ‘top 500 foreclosure by zipcode.’ Look closely. It doesn’t report actual foreclosures. It also adds in auction notices and default notices (that’s the first letter that you get) to come up with it’s totals. Hardly REO owned yet!
So, if your zip is in that list, then your market should be in a slump, right? Then what is wrong with Charlotte, NC? I mean, it had 3 or 4 of it’s zips in that list, yet the market there increased by 6% (that’s SIX percent). Just one example, folks. Compare your own markets.
Sure, CA and Las Vegas and FL are all the news. MARKETS ARE PLUMMETING!! according to the media. If you research those areas though, it’s hardly the case, in most instances. Sure markets are down from their highs, but when a market can drop 30% in value and STILL owners can profit $100-200K on their equity (the smart ones!), that ain’t that bad.
Even the idea of supply and demand and what determines a 'buyer’s market are local. Here, a stable market is 6-9 months sell time. Spoke with an agent in WA talking about how slow it was there. It was taking a whole 30-45 days to sell a property!!!
Raj
Interesting…
Raj,
I agree with you that the world is not coming to an end. In fact, in reality, nothing is happening now that hasn’t happened many times before. To a large extent, what is happening is nothing more than the normal business cycle. Contrary to talk of doom and gloom, I believe that what is happening could be an unprecedented opportunity to make a LOT of money.
I am not a believer in the old saying that “all real estate is local”. Of course, what happens in your town is unique to your town, but it is also heavily affected by national factors. Yes, the media is currently concentrating on the downturn in the former bubble areas and that is not representative of the much of the country. However, during the recent “boom”, the media also concentrated on these same areas. Look at all the "flipping " shows and real estate news stories on TV. During the boom, I don’t remember seeing a single episode of “Flip that House in Hillbillytown Ohio” or a single national news story about our boring market here in Ohio. They concentrated on the excitement of Las Vegas, California, and Florida where appreciation was going crazy. Even though Ohio wasn’t in a bubble area, our house prices increased at an abnormally high rate during the “boom” because we were being inflluenced by the national trend. Likewise, now that the boom areas have gone bust, our home sales are WAY down and prices have dropped, again because we are being influenced by the national trend.
Is all real estate local? Yes. Is all real estate affected by the national trend? Yes. Is the nation in a cyclical downtrend and headed toward a recession? Yes.
Mike
It’s both good and bad. It’s harder for new investors to get established (financing, etc.) with the credit crunch and all, but the well-established investors will be able to get a lot of properties at good deals.
Mike, I couldn’t agree more. Maybe I should have better clarified that RE markets are locally driven because I still believe that local events matter more than national, though national events play a part. For example, where are all these former boom area people moving? Find that out and you’ve got an appreciating market.
And sorry for the rant. After reading on this for months, it just seems like most people aren’t able to think for themselves anymore. All it takes is some basic research to understand that the RE market (whatever you view that as), the economy, or whatever else the media currently wants to promote, isn’t as bad as being reported. Could it be? Yeah, and probably will be worse than it should be because the reports are fueling the fear that causes the problem.
Just read that the Fed is probably going to work the strings some more to avert a full blown recession. Don’t know if that’s going to be good or bad, but I can’t wait for the outcome. The last time this area was hit with a strong price downtown, over 90% of what was on the market sold that year! In a nutshell, if you wanted to sell, you sold. Yet, that was called a buyer’s market. Go figure.
Raj
In June, new home sales dropped 4%. Then in July, new home sales rose 2.8%. The national median new home price actually rose 0.6% from July 2006 to $239,500. July existing home sales fell 0.2% (the lowest rate in 5 years). The national median existing home price fell to $228,900. The July supply of existing home inventory was the highest on record at 9.6 months supply.
Durable goods orders rose 5.9% in July. Also in July, capital goods orders rose 2.2%, excluding defense and aircraft. Analysts are lowering their retail sales growth forecasts.
The numbers really were mixed, but existing home sales were definitely taking a beating in July, and that was before the August credit market freeze.
The long term economic outlook is pretty unclear. Even though banks all over the world were exposed to US subprime mortgages, these collateralized debt obligations are still backed by homes in the United States. Are we all going to move outdoors? Would you not pay a premium to get a nice house? So far, unemployment has not been affected. Do you know anyone who plans to curtail their spending? Credit card balances are now starting to rise, accroding to a source at Merrill Lynch.
I think that there will definitely be some "investors" who get washed out or default on their mortgages, but families often times have an attachment to their homes that they will not give up just because they are a little upside down. Everyone that I talk to says the same thing: that prices are falling now, but they will just go back up again in a few years.
Barring major incompetence, ineptitude or stupidity exhibited by the Fed or by our holy old government, the attention span of the media and the American public will not allow this panic to continue.