Tuesday, June 27, 2006

Stagnating Real Estate Market

From CNN/Money:

Stuck! Homes sit longer on the market

The tell-tale sign of a stagnating real estate market? When homes for sale start lingering - and that's exactly what real estate brokers and other industry watchers say they're seeing now.

The National Association of Realtors does not maintain national time-on-market figures. But inventory - the number of homes for sale - spiked 37 percent for the 12 months through April 30, the most recent data available.

All that supply means homes are sitting around longer and that sellers are asking more than buyers are willing to pay -- an indication that prices may have to come down.

"Sellers are in denial, and there is a rising disconnect with the buyers," said Jonathan Miller, a real estate appraiser in New York. "Until sellers get the message, you'll see a drop in the number of transactions."
...
All this is evidence that the real estate boom may have run its course in many hot markets. At the very least, sellers will have to set their prices very carefully if they want to move their properties quickly and avoid long months of having their houses spending time-on-market.

If any of you would like to read more from Jonathan Miller, you can visit his site here: Matrix

Caveat Emptor!
Grim

29 Comments:

Blogger grim said...

Thanks Pat!

6/27/2006 06:53:00 PM  
Anonymous UnRealtor said...

Today's USA Today, Page 1:


Buyers in more markets find housing out of reach

By Noelle Knox, USA TODAY

SAN DIEGO — Cortney Henderson is one of the faces of America's housing affordability crisis. She never could have qualified for a mortgage here — where the median home price is $607,000 — had she not had the $27,000 she made as an egg donor to use as "reserves" in her bank account.

Henderson, 31, who graduated last year with a Ph.D. in biomedical engineering and is now a researcher at the University of California, San Diego, still had to get a loan for the entire price of her $540,000 home. Without the $700 her boyfriend chips in each month, she could never cover the mortgage, insurance and property taxes, which still eat up almost 70% of her gross pay.


http://tinyurl.com/ohe2o


But they choke a few paragraphs later with this whopper:

"Even though the real estate boom peaked last year, there's no end in sight."

6/27/2006 07:09:00 PM  
Blogger grim said...

Here is a great piece from Liz Ann Sonders, Chief Investment Strategist at Charles Schwab:

Shelter From the Storm: The Housing Market's Getting Ugly

The party's over. I've penned a series of commentaries on the housing market, and since my last one in February 2006, conditions have deteriorated even further. The consumer, who rode the now-subsiding swell of easy money, could face shoals ahead.

Statistics of every variety tell the same story. One of the more popular affordability indexes, the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index, has just experienced its largest eight-month drop in history. The index measures the percentage of homes sold that are affordable to families earning the median income during a specific quarter. Given the previous parabolic increases in home prices, the big jump in mortgage rates—and income growth that's paled in comparison—this plunge is not unexpected.
...
So, what happens when affordability bites the dust? Inventories of unsold homes begin to creep up. OK, creep is a big understatement. Take a look at the chart, below, showing the sizeable 30% swell in inventories of both existing and new homes. In fact, the past year's increase is the largest since the National Association of Realtors began tracking the data in 1983!
...
My commentary in February honed in on the sub-prime borrower group of mortgage holders—those with checkered or no credit histories. Over the next two years, monthly payments on over $600 billion of sub-prime mortgages may rise by as much as 50% as two-year teaser rates on hybrid adjustable rate mortgages (ARMs) expire and interest payments hit their fully indexed levels. The size of these loans is unprecedented: currently, sub-prime loans outstanding account for more than 10% of the total U.S. mortgage debt of $8.5 trillion. "Affordability" products, including hybrid ARMs, interest only mortgages, "no doc" loans, option ARMs, negative-amortization loans, and piggyback mortgages, have been all the rage. Given the meaningful jump in short-term interest rates (with the discount rate now at 6%) and the decline in home equity, we have a real problem brewing.

But it's not just the sub-prime market that's set to feel the pinch—it's the ARM market in general. According to MacroMavens and Fannie Mae, there's estimated to be $1 trillion in ARM resetting this year and another $1.7 trillion in 2007. The typical ARM holder will see a monthly payment increase of about 25%, while for those in option ARMs, interest only, and negative-amortization loans, the resets could approach 60%!

6/27/2006 07:14:00 PM  
Anonymous Anonymous said...

Grim,

Great article; she lines up all the data and lets us draw our conclusions. This is a slow- motion, chain-reaction that comfortable boomers may not feel too much but cannot stop from happening. I gotta say, we're in a generational stand-off as much as anything else. Our generation (Xers), or those among us not already leveraged out of our minds, has a fairly easy role to play now: wait and watch, rent and save, and strike wisely when the time comes. Much else before us remains so much more intangible, so much more likely to challenge us in ways that send us into the hinterlands without anything but our own will to survive, grasshoppers! This bubble, however, is no longer much of a mystery. Have patience.

WM

6/27/2006 08:09:00 PM  
Blogger Richard said...

it amazes me the industry shills can say we're moving to a more 'normal' market. hello, but last i checked the market hasn't stablized yet. inventory is growing not stablizing. until supply and demand equalize we can't say we've got a balanced market. no one, and i mean no one knows right now where that equalization is. this is probably why even qualified buyers are sitting on the sidelines waiting for some stability. no one wants to catch a falling knife, particularly on the largest purchase most people would ever make.

6/27/2006 08:14:00 PM  
Anonymous MaryanneNJ said...

Henderson, 31, who graduated last year with a Ph.D. in biomedical engineering and is now a researcher at the University of California, San Diego, still had to get a loan for the entire price of her $540,000 home.


So for sake of arguement let's say the she has a mortgage at 6%. That means her monthly payment is a little over $3200.00 a month (not including taxes). Minus her boyfriend's $700, she's still shelling out 70% of her GROSS pay. How did she even get a mortgage? Why are people even stupid enough to put themselves in that position? What happens when the value of her house falls below what she owes the bank? Stupid people.

6/27/2006 08:17:00 PM  
Anonymous Anonymous said...

To maryannenj, in Cortney's defense (and using the info gleaned from the story), she's a postdoc fresh off her PhD. She's used to scraping along off of stipend money to survive. It's like the Far Side comic about New Yorkers in hell...they think they're in heaven. By the time she figures out how screwed she is (i.e. after churning out the papers necessary for a "real" job), it'll be too late anyway.

6/27/2006 08:43:00 PM  
Anonymous Anonymous said...

If you is a fresh post doc. She cannot be making more than 45,000. Do the math. How can you even live? Her boyfriend has to pay for the food , entertainment etc. Her parents must be helping.

6/27/2006 09:16:00 PM  
Anonymous m said...

Anon said: She's used to scraping along off of stipend money to survive.

Scraping along means mac and cheese 4 nights a week...this is way beyond that. I can't believe she was able to get a mortgage.

6/27/2006 09:23:00 PM  
Blogger Grim Ghost said...

Not all fresh Phds are post docs. Some are actually full time employees and in a field that its in demand, can make more than 45K. I would guess more like 55-60K. Still not enough to support a 540K house (which in San Diego gets you a pretty crummy house)

6/27/2006 09:36:00 PM  
Blogger chicagofinance said...

the real issue is why did she buy a place? perfect candidate for renting

6/27/2006 09:38:00 PM  
Anonymous Anonymous said...

Maybe the couple she donated to co-signed with guarantee of sibling contract.

6/27/2006 09:46:00 PM  
Anonymous Anonymous said...

iT`S not homebuyers` market until we saw 20-30% drop in home sale price !!!

Don`t believe in the hype !!!

6/27/2006 11:25:00 PM  
Anonymous Anonymous said...

Many of these recent 20 something transplants around Manhattan & the NYC metro area resemble Ms. Cortney Henderson. On paper, they are probably financial disasters -- making a salary of between $50,000 - $100,000 at the entry or junior level, pay between $2,000 - $5,000 a month in housing costs (either rent or mortgage), and spend another few thousand (conservative guess) on clothes, clubs, drinks, & car payments..

The 'gotta have it now' at any cost generation of self entitled, materialistic sheep.

Real Take home DOESN'T matter when you have either a wealthy family back in the midwest or new england where you grew up, or more likely than not have a huge trust fund.

I always wondered how people who look like they are barely out of college are buying up all these new condos going up in Manhattan downtown, and in Jersey City & Hoboken. You cannot tell me that ALL of them are working on Wall Street and clearing $500,000 a year.

Even a salary of $80,000 a year isn't enough to pay rent on a studio outside of Manhattan or Jersey City.

6/27/2006 11:46:00 PM  
Anonymous Anonymous said...

A $60,000 a year salary is not much these days. Especially in the NYC area where everyone looks like they are making $250,000 a year or more.

Maybe it can meet the most basic living requirements in San Diego, but a single person couldn't live on that salary in this region of the country (NNJ, NYC, LI or Westchester) unless they live at home

I can tell you for a fact, someone making in the five figures cannot qualify to buy anything in todays market in 90% of NJ or anywhere in the five boros.

6/27/2006 11:50:00 PM  
Anonymous Anonymous said...

{{{Scraping along means mac and cheese 4 nights a week...this is way beyond that. I can't believe she was able to get a mortgage.}}


Sure, I have yet to meet someone who actually does this. More likely than not, its the $20 Sushi Lunches & $100 dinners every night...

6/27/2006 11:52:00 PM  
Anonymous Anonymous said...

i had a real estate agent in new jersey tell me last night,

"Oh its not to bad,, a little
slow."

She has not closed on a deal
in 4 months.

Denial.

6/28/2006 06:27:00 AM  
Blogger minutesfromNYC said...

I know a few people under 30 who make under 50k a year, and drive a $45,000 car...and live at home with parents.

Just pull up at the gym I work out at. All I see is the "Jerzy Boy" juice heads with the spiked on the side hair cuts getting out of BMW M3's

It is amazing how much pretend wealth is out there. I take pride in taking my POS car there...they look at me funny like I am poor or something

6/28/2006 06:56:00 AM  
Blogger Richard said...

renting an apartment/house while saving for a downpayment and/or waiting for the prices to come down is one thing. renting a car is another. i just never understood the point of leasing unless you can write it off as a business expense and need it for entertaining clients and such.

6/28/2006 07:26:00 AM  
Blogger grim said...

It's about getting the flashiest car for the lowest monthly payment.

Why finance a Honda Civic when you can lease a Lexus?

"Aren't you worth it? Don't you think you deserve it?"

grim

6/28/2006 07:43:00 AM  
Blogger NJGal said...

It sucks for those people already priced too high and currently sitting. The new sellers can force them to reduce by setting their prices lower. I like how Miller calls it "a rising disconnect" - it's only going to get worse until sellers capitulate, because buyers have already shown that they won't.

6/28/2006 07:48:00 AM  
Blogger patient homebuyer said...

i drive my 02 elantra and i see all these types you speak of at open houses in lic ny, i tell my wife it is all smoke and mirrors
and with the impending glut of overpriced real estate we will be a great position before long with our excellent credit, non-existant income to debt ratio and our large down payment (20% on whatever we buy) is through saving very hard for years. i sleep very well at night and have no fears of opening my mailbox or answering my phone

6/28/2006 07:56:00 AM  
Blogger minutesfromNYC said...

I bought my car on ebay for $1,200.00 - -cash

hahah

6/28/2006 08:41:00 AM  
Anonymous Anonymous said...

minutes - I love hearing that.

I can't wait until the day I hear -I bought this pre-certified house on RExpedia for $150K and am using the difference to fund my child's college !

Pat

6/28/2006 10:09:00 AM  
Anonymous Anonymous said...

"Sure, I have yet to meet someone who actually does this. More likely than not, its the $20 Sushi Lunches & $100 dinners every night... "
I see a lot of comments like this, the $300 jeans, etc. etc. Not to be too judgemental, but if it seems like everyone you hang around with is like that, you need to find some new friends!

6/28/2006 10:21:00 AM  
Anonymous gary said...

Fuck 'em all, the shit will hit the fan eventually. Once again, I am a homeowner and the last of the baby boomers.

6/28/2006 10:50:00 AM  
Anonymous gary said...

and by the way..... boooyaaa.

6/28/2006 10:50:00 AM  
Anonymous Anonymous said...

{{{I see a lot of comments like this, the $300 jeans, etc. etc. Not to be too judgemental, but if it seems like everyone you hang around with is like that, you need to find some new friends! }}}

Show me someone who isn't like this, I have yet to meet someone.

If you need to be on a budget and live on a 5 figure salary as a single person, then you should out of this region of the country.

The NYC metro area along with Southern California is based with conspicuous consumption to the extreme where you are judged by the car you drive & what you wear.

On Long Island & Northern NJ it is more of extreme classism rather than racism & segregation based on ethnicity

6/28/2006 11:20:00 AM  
Anonymous Jonathan Miller said...

Thanks for the mention. Your blog is part of my daily read. Always good stuff.

6/28/2006 03:14:00 PM  

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