Tuesday, March 14, 2006

Home Auctions Hit The Northeast Again

It's nothing short of amazing that the real estate decline in the Northeast is playing out almost identically to the late 80's boom and early 90's crash.

To draw a parallel with the last crash, we seem to be around 1989-1990 at this point. We're hitting a period of uncertainty shortly after the top of the market. Sales are slowing, prices are falling (albeit slowly), and no one has a clear picture of the direction of the market.

Rewind to late 1989...

In a Cooling Housing Market, Real Estate Auctions Are Hot
December 3, 1989, Sunday
By CHARLOTTE LIBOV (NYT); Connecticut Weekly Desk

AUCTIONING off property, a sales method common in foreclosures, is being used more and more to market houses and condominiums in Connecticut as the demand for real estate continues to slacken.

And to 1990...

Residential Auctions More Popular
By JAY ROMANO
Published: October 7, 1990

RESIDENTIAL real-estate auctions, traditionally perceived as the last resort of desperate developers, are fast becoming an acceptable, sometimes preferable sales strategy, real-estate experts say.

In the midst of a real-estate slump that has left the state blanketed with for-sale signs, anxious sellers are more quickly turning to the auction block to lure cautious buyers to their properties. And according to auctioneers, real-estate agents, developers and the buyers themselves, the strategy is working better than anyone expected.


Now fast forward to today, March 14th, 2006...

Sellers literally put homes on the block
By Kimberly Blanton, Globe Staff
Published: March 14, 2006

Amid softening market, auctions growing more popular, despite risks

A growing number of homeowners and builders, unable to sell homes or condominiums the traditional way, through an agent, are turning to Sotheby's-style auctions like this 26-property sale last month in Newton. With the housing market softening in US cities from Boston to Naples, Fla., to Utah ski towns, the National Auctioneers Association reported that residential properties valued at $14.2 billion sold in 2005 in live auctions, a 24 percent increase over 2003 sales.

Auction houses said a growing surplus of homes on the market nationwide is expected to drive more owners to auctions in the future. Maine-based J.J. Manning, which typically holds one-house auctions, said this was its first auction of properties owned by multiple owners since the early 1990s downturn. The firm plans more this year.

Caveat Emptor,
Grim

22 Comments:

Anonymous Rich In NorthNJ said...

I've posted this at the HousingBubble2 also...

It's too funny…

3/12 in the Union Leader:
Experts in NH say there was no real estate bubble
“Delay said another indicator — foreclosure rates — also shows a vibrant market in New Hampshire.
New Hampshire has the third-lowest rate of foreclosures per household, just behind Rhode Island and Massachusetts.
In Georgia, there was one foreclosure for every 422 households in January.
During that month, there was one foreclosure for every 42,000 households in New Hampshire, he said. ”

3/13 in the Portsmouth Herald:
Officials: Home loan foreclosures on rise
“A growing number of homeowners in New Hampshire are being forced out of their homes by foreclosure.
Foreclosure filings in the state jumped from 188 in February to 263 in March.
In Strafford County, there were 19 foreclosures in January and February, compared to 40 during all of 2005.”

3/14/2006 09:58:00 AM  
Blogger pesche22 said...

its called denial

3/14/2006 10:15:00 AM  
Blogger Richard said...

the problem i'm seeing right now is the inventory available and asking prices are actually laughable. buyers are laughing at these POS as well they should. the better put together houses are still selling at high prices and i would expect that segment of the business to continue to do ok since there's so little quality on the market right now.

sellers of these 1950's s*itboxes will have to adjust their prices to better reflect today's climate.

3/14/2006 10:36:00 AM  
Blogger chicagofinance said...

Grim:

You have the right idea. You put in the effort with the NY Times search you compiled. Now you have a blueprint as to how this will unfold. Use your historical account to predict what this year will look like.

Every correct call builds you street cred....

3/14/2006 10:39:00 AM  
Anonymous Anonymous said...

This juxtaposition is great:

"Sheldon Good & Co., a national auctioneer in Chicago, also reports doing more auctions, including more on behalf of developers selling the unsold units in large hotel-condo projects, particularly in resort areas.

''We think there's a very high likelihood that trend is going to rise based on overbuilding in Boston, New York, Chicago, Houston, Orlando, and Jacksonville," said Steve Good, chief executive. ''The slowdown is just beginning."

David Wluka, president of the Massachusetts Association of Realtors, said he doesn't see the auction trend taking off, however, in the Boston area."

3/14/2006 11:17:00 AM  
Blogger Richie said...

Soft landing!! Wooo!!

Sorry, I would completely disagree with the "soft landing" theory. If the inventory stayed consistent, and the buyer pool got small, THEN you can say it's a soft landing. But we have the exact opposite. Actually, we have a lot of things going on here:

1. Inventory rising.
2. Buyer pool shrinking.
3. Interest rates rising.
4. Home prices slowly falling.

There's so many things I'm missing, but just looking at that list of 4 shows a lot.

-Richie

3/14/2006 12:08:00 PM  
Blogger lindsey said...

The NAR is out with its 3rd prediction for 06, and it ain't pretty.

Once is an accident, twice is a coincidence, three times is a trend.
David Lereah's numbers are beginning to crunch back. The National Association of Realtors® chief economist predicted a slow down in the market in January. He saw further declines in February. March is more of the same.
NAR Existing home sales decline prediction:

January -- 4.4 percent
February -- 4.7 percent
March -- 5.7 percent

NAR new home sales decline prediction

January --6 percent
Feburary -- 8.5 percent
March -- 7.7 percent (10,000 sales more than last month)

Existing home sales outpace new home sales by a factor of roughly 6-1.

On the plus side, Lereah sees more housing starts then previously expected.

Housing starts decline predictions:
January -- 6.3 percent
February -- 9.4 percent
March --4.3 percent

Lereah stayed with his mortgage interest rate prediction of 6.9 percent by year end.

Despite the declines in sales activity, median home prices are still predicted to rise. Apparently, the laws of supply and demand don't apply to housing.

3/14/2006 12:14:00 PM  
Anonymous Anonymous said...

We tried to sell our house at auction last month. 15 people showed at the open house, 2 registered to bid, only one bid at 50% below the house appraised value. Even giving the house away, people aren't buying!

3/14/2006 12:35:00 PM  
Blogger Richie said...

Despite the declines in sales activity, median home prices are still predicted to rise. Apparently, the laws of supply and demand don't apply to housing.

Reminds me of Joe Pesci in "My Cousin Vinnie" when he says "Do the laws of physics cease to exist on your stove?!"

The funny thing about this whole thing is that the realtors say home price appreciated rapidly BECAUSE of falling rates. So what happens when rates rise? Well, naturally they should fall, but there are no negatives in real estate, so they can only go up.

They can no longer blame it on supply and demand anymore. There's plenty of supply all over.

Right now, they blame the high prices on "unrealistic sellers". Who was responsible for making these sellers unrealistic to begin with?

-Richie

3/14/2006 12:41:00 PM  
Blogger Richie said...

Despite the declines in sales activity, median home prices are still predicted to rise. Apparently, the laws of supply and demand don't apply to housing.

Reminds me of Joe Pesci in "My Cousin Vinnie" when he says "Do the laws of physics cease to exist on your stove?!"

The funny thing about this whole thing is that the realtors say home price appreciated rapidly BECAUSE of falling rates. So what happens when rates rise? Well, naturally they should fall, but there are no negatives in real estate, so they can only go up.

They can no longer blame it on supply and demand anymore. There's plenty of supply all over.

Right now, they blame the high prices on "unrealistic sellers". Who was responsible for making these sellers unrealistic to begin with?

-Richie

3/14/2006 12:42:00 PM  
Anonymous Anonymous said...

[URL=http://realty-reality.blogspot.com/]Realty-Reality[/URL]

Try to be kind...

3/14/2006 01:24:00 PM  
Blogger Richie said...

Looks like NJ legislators don't like anonymous posters.

From NJ.com "The Biondi Bill"


Groups blast legislation to curb free speech on Web
That chill in the air is not the last gasp of winter. It’s New Jersey legislators trying to ice free speech on the Internet, according to advocacy groups who took aim at a pair of bills meant to curb anonymous postings.

In a joint letter sent yesterday to three assemblymen, the groups said bills A-1327 and A-2326 conflict with state and federal laws.

“... We urge you to withdraw your support for these troubling bills and not waste taxpayer resources defending laws that will inevitably be challenged in court and struck down,” the letter said. It was signed by representatives of the Electronic Frontier Foundation, the Center for Democracy and Technology, Public Citizen and the U.S. Internet Industry Association. Craig Newmark, founder of craigslist, and a pair of law professors also signed.

A-1327 would require operators of interactive Web sites to solicit identities of online participants; operators could be held liable for defamatory statements made on their sites.

Its sponsor, Assemblyman Peter Biondi (R-Somerset), has said his intention was to restore civility to forums at nj.com, a sister organization of The Star-Ledger. The lawmaker awaits a review of his bill from the state Office of Legislative Services, his office said.

3/14/2006 03:32:00 PM  
Blogger RentinginNJ said...

From Bankrate.com

"Going up, down and sideways: Top 30 cities to watch"

Bankrate.com has put together a list of 30 RE markets to watch. They list 10 markets with room still left for appreciation, 10 markets that have peaked and are due for a “soft landing”, and 10 markets where price declines are likely.

It looks like our beloved North Jersey has made the list of “markets likely to decline”. Here is the blurb followed by the link to the full article:

Edison and Newark, N.J. As far as the real estate analysts are concerned, these two cities have pretty big targets on them for a decline in appreciation. John Burns Real Estate Consulting ranks Edison seventh -- ahead of Los Angeles, Miami and Washington, D.C., -- as a market facing a potential housing bubble. It gives Newark an F on its local market grading scale, attributable largely to the loss of several thousand jobs and the highest housing-cost-to-income percentage in the state's metro markets. Fortune predicts a very modest 1.2 percent gain in housing appreciation this year for Edison that would be wiped out in 2007 by a loss of 2.9 percent. The situation is similar in Newark, where Fortune suggests a 1.5 percent increase this year will be canceled out by a 1.8 percent loss the following year.

http://tinyurl.com/l4raq

3/14/2006 04:56:00 PM  
Anonymous Anonymous said...

For what it's worth--and the unprecedented mismatch between median house price and median income aside--anyone who bought a well built, well located property in NNJ in 1989/1990-- especially in places convenient to NYC like Hoboken, or with good schools like Millburn--has seen a remarkable return on their investment. I have no idea what that means for the future. But if you are making a comparison between today and that moment in time, its an important consideration.

3/14/2006 05:11:00 PM  
Blogger grim said...

rentinginnj,

What I'm wondering is what they base their decline estimates on. First they say how grossly overvalued the area is, but then continue with an estimated drop of 1-2%?

grim

3/14/2006 10:34:00 PM  
Blogger RentinginNJ said...

Grim,

I agree. 1.2% growth in 2006 hardly seems like cities with “pretty big targets on them for a decline in appreciation”. Bankrate said they “talked to experts, studied public and private databases, analyzed market trends and examined the analyses of many others -- often contradictory”. They also note that they did not want to publish numeric predictions, but rather identify “markets worth of watching”.

I think they cited various sources, including Fortune, to corroborate their prediction for the general direction of various markets. I don’t think that they are necessarily affirming the Fortune predictions. For example, Fortune predicts Washington DC will drop more than Newark, but Bankrate puts Washington in the “soft landing” category and Newark in the “decline category”.

All things considered, I think its pretty impressive to be in the bottom 10 of 379 RE markets, especially when all we typically hear about is California & Vegas.

3/14/2006 11:16:00 PM  
Blogger skep-tic said...

why would anyone particpate in an auction unless the seller agreed in writing to sell to the highest bidder, no matter what? this is just a scam to try to ignite bidding wars.

3/15/2006 11:37:00 AM  
Anonymous Anonymous said...

Anyone have an opinion about South Jersy real estate values? I assume we are part of the Philadelphia region.

3/18/2006 08:29:00 PM  
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