There is so much to blog about in the world of real estate, I can hardly keep up. Here are some interesting links to keep you entertained this weekend, with many thanks to everyone who contributed:
Curious about who’s been busy with Alt-A loans? A List
Not sure what to do with all those remotes? Headgear
Ever wonder how to sell a $100 million dollar house? Interview
Want to know what we Realtors really do all day? Real Estate Confidential
Hey, cheer up. At least we don’t live in Vegas. Q4 Sales Activity
Here’s the subprime heat map for visual learners. Wall Street Journal
Yahoo now has a nifty foreclosure finder feature. Yahoo
Well, at least I don’t have to sell homes in Vegas. Exodus
Isn’t the media done with the bubble yet? Guess Not
Okay, NAR admits it. Prices May Fall
Mortgage mess spreads to Alt A. Seriously
Surviving a shaky market. Buyers Remorse
Man-cave dream house for sale in Spanish Springs. Drool Now
Housing prices never fall. Uh-Huh
Minorities suffer in mortgage meltdown. Shame On Us
Former actors and athletes try their hand at real estate. Bought & Sold
Bay Area defaults on the rise. Really
Yes, even in Marin. Read
And, in San Joaquin County. Read
And, in Ventura County. Read
And, in Riverside. Read (Okay, that’s it, RI… I am NOT posting another one of these. My fingers are getting tired! You post them from now on. You have the power.)
US foreclosure filings rise. Bloomberg
Stuff Realtors can get busted for talking about. Touchy Subjects
As residential real estate continues to languish, commercial goes gangbusters. This from Loopnet:
"Construction Activity Increasing in 2007. Commercial real estate construction activity was subdued during Q1 2007,
according to just-released data from Reis Inc., but for the full year, more
projects will be completed than last year. Reis is predicting that more than
97,500 apartment units will be delivered this year, up from 86,000 last year,
while the office sector will see the addition of more than 70 million sf, up
from 44.4 million sf in 2006, The retail sector will see 39 million sf completed,
up from 27.7 million sf last year. Much of the activity is being spurred by
healthy property fundamentals."
And the Westin Verasa Napa sold out yet another phase. Hot Property
Pulte is offering six months of no payments in some communities. Buy Me
For some it makes sense to rent. Do the Math
Yeah, still glad I don’t live in Vegas. Challenges
Washoe foreclosures double national average. RGJ
And from the Northern Nevada Business Weekly: Notice of defaults in Washoe County in January 2007 equaled five and real estate owned by banks equaled three. In February 2007, the notice of defaults were up to 227, and bank owned properties had increased to 48.
Decline takes us back to 1989. Remember?
Countrywide adjusts its forecast again. 2009
California weakens again. Bummer
And my personal favorite, the super hero action figure generator. Kewl
DERRICK
More of the same. I am curious as to what % of loans with defaults on them actually end up being foreclosure? With all the talk about doom and gloom surely 99% of defaults dont go into foreclosure? Anyone have a number they can stick to that? Also Bantering Bear Since you seem to have called this RE dive and are so smart when it comes to investing, as you would like us to believe. why weren’t you smart enough to invest in RE when anyone could have made a killing? While you were living in your apt I was making money hands over fist the previous 5 years in RE, Some numbers for you to think about ..
Santa Rosa Ca. Bought 3bed/2bath condo 1,400 sq.ft west side of town
Paid. 160k (2001)
Sold. 340k (2004)
Profit = 180k before taxes
bought. Santa rosa Ca 5bed/3bath 3,697 sq/ft Near SRJC
Paid. 740k (2001)
Sold. under contract for 1.095mill
Estimated profit 355,000 (no taxes 5 year rule)
Naples Fl. Bought 3bed/3bath 3,400 sq.ft golden gate estates
paid. $570k (2003)
SOLD $740k (2005)
Profit = 170k before taxes
Reno Nevada bought. 3bed/2.5 bath 2,400 sqft. spanish springs off vista
Paid 260k (2002)
Sold. NEVER
Estimated market price. deffinitely over 300k
TOTAL RETURN BEFORE TAXES ON PROPERTY (5years)
$705,000
Not bad if I dont say so myself.
Did living in your apt the last 5 years do that for you?
BanteringBear
It’s now become clear why Derrick is so adamant about prices not dropping. He’s a flipper!!
As for your numbers Derrick, I don’t believe them for a second. Your credibility might be enhanced should you actually take the time to proof read your posts. And, had you been reading (and comprehending) this blog long enough, you would know that I sold my house last year and am RENTING. Never in my life have I lived in an apartment. As I mentioned a few threads ago, I like big dogs, gardening, and barbeques, things not enjoyed in such confined spaces.
And to clear something up for you: investing and speculating are two very different things, and you are a speculator. Shrewd real estate investors only buy properties which cash flow. Speculators like you, who relied entirely upon market timing and rapid price appreciation are nothing more than unwitting gamblers, were a dime a dozen as it didn’t take any brains, ingenuity, or financial acumen to follow the herd. Whatever you are doing, I’ll be doing the opposite.
Lindie
Derrick:
So what is the point of this comment? So that we can all marvel at how smart you are? Your over involvement with BanteringBear is getting tiresome. His over involvement with you is getting tiresome.I think everybody’s opinions are welcome, but the personal attacks add nothing to a blog. It is interesting that you accuse BanteringBear of the very thing you do here…..tell us all how damn smart you are and how much money you have made.I do not recall one other person who has ever posted here who felt the need to tell us all how much money he has made. Derrick, we all don’t care.
Please stop with all the self-acclaim.
MikeZ
Diane, another Las Vegas link:
Foreclosures could lead to opportunities
About-face: In his latest take on the Las Vegas housing market in light of new home sales remaining weak, new home prices dropping and inventory of existing homes increasing, Smith said he appears to have underestimated what was happening when he predicted at the end of 2006 that the market was bottoming out.
Smith said any suggestions that the market was going to improve by the end of 2007 appears to have been just wishful thinking. He said a recovery may not happen until 2008 or even 2009 based on the current trends.
Smith said he wouldn’t be surprised if some neighborhoods saw home prices drop as much as 20 to 30 percent because of a glut in those areas. Other neighborhoods where fewer homes are on the market would remain the same, he said.
…
The 2007 sales figures will be down from the sales of 2003 to 2006 and the same will probably occur in 2008, Smith said.
…
MikeZ
Derrick, you’re a flipper! That explains quite a bit.
Judging from your past RE transactions, you’ve typically owned 3 or 4 houses at the same time… which makes me wonder: Why do you only own one house right now?
Diane Cohn
Everyone, even if you can’t stand each other, can you please stay away from the personal attacks? I’m on the verge of killing this thread.
But before I do, why do long term cash flow realty investors often look down their noses at speculators? Why all the hostility? What’s wrong with timing the market? It’s just another way to make the most of your real estate investment.
Reno Ignoramus
Diane:
First, thanks for the comment on the personal attacks. They just take this blog backwards.
Let me suggest one reason why the speculation that occured in our market between 2000-2005 truly did our community little good. It drove prices out of the affordable range for a substantial segment of our community. Yes, for the flippers who timed it right and got in and out before the party ended, it was an opportunity to make money. Sometimes a lot of money. But in the process, prices were driven to unsustainable levels.
Did it benefit our community to have speculators with Voodoo loans buying houses they never intended to occupy? When all that resulted was that prices were driven to levels totally out of whack to the ability of the people who live here to afford? Did it benefit our community to see prices escalate to the point where the only way people can afford to enter the market is with suicide loans? Does it benefit our community to now witness hundreds ( and mounting) of families losing their homes to foreclosure?
The number one issue that confronts our community today, with respect to housing, is affordability. Even after declines of 15%-17% in the median price, it is still the case that the median priced house in Reno is about 6-7 times the median household income. Is this good?
If one engages in speculative activity in the stock market, and times it right, good for him. If in the process the price of a share is driven to unsustainable levels, so what? So some folks get “priced out” of the ability to buy that stock. So what?
Do you not see any difference when the housing market becomes subject to similar speculation?
Move to Reno?
I bought my first house in Odenton MD in 1980 for $79k at 14% 30 yr mortgage. In 1989 I moved to Oklahoma, and rented the house out at $750 a month. In 1991, I paid off of the mortgage from profits from the stock market. Every 2 or 3 years I travel out to the house for repairs and re-modelling. I rent to active duty military at below market levels. The current rent is $1700. In the next 5 years 9,000 military and 12,000 highly paid civilians are expected to move to the area. Two professional 18 hole golf courses are to be constructed within 1 mile of the property.
BanteringBear
“…why do long term cash flow realty investors often look down their noses at speculators? Why all the hostility? What’s wrong with timing the market? It’s just another way to make the most of your real estate investment.”
To answer your question Diane, speculators gamed the system with virtually none of their own skin, driving up prices on not only SFR’s, but multi families too, paying no attention to cap rates. This, in essence, priced out the true investors (temporarily) as well. Purchasing a property and renting it at a loss in hopes of realizing rapid appreciation is foolish to say the least. Why do you think all of these people are upside down in Somersett and elsewhere? The answer: stupid speculators.
Why the hostility? I think people are tired of the fact that wages won’t even afford a decent home where they can raise their family. This is entirely due to the speculators. Without them, prices would have stayed somewhat in balance with wages. And it’s not only the folks who were “priced out”, but those families who unwittingly overpaid thinking it was a safe “investment”. Now they find that they’ve grossly overpaid and are upside down. This bubble doesn’t sit well with a lot of people, and that number is growing daily.
MikeZ
RE: “why do long term cash flow realty investors often look down their noses at speculators? Why all the hostility?”
(Speaking only for myself) The hostility is probably rooted in the reality that speculators of recent years have hurt many families, especially those who had to buy when prices were inflated because of flippers.
A lot of those unfortunate families are in default, foreclosure or upside down with time-bomb suicide loans because that was the only way they could afford a house after flippers drove prices up.
Shame on the flippers.
(I don’t intend this to be a personal attack on anyone in particular).
DERRICK
Again does anyone know what % of defaults typically go into foreclosure? Bantering B Believe what you may Im not worried the least. Here is a link to some information I thought was pretty interesting. Case studies of just a few of the good paying tech jobs that have already moved from california to reno’s very friendly business climate as we all know. This is only a tidbit but it shows what most of us have already known.
http://www.edawn.org/doingbusiness/case_studies.cfm
DERRICK
Forgot to add 1 more link. Also about california jobs consistently moving to Reno and northern nevada.
http://rgj.p2ionline.com/ShoppingChannelNoPopUp/ss/index.aspx?webstoryid=11251917&area=SS&type=page&AdgroupID=72710
Lindie
Diane, I would be interested in your response to the comments in response to your question about what’s wrong with being a flipper?
Thanks.
2sleepy
Another link for you: click on the video ‘past due and pay day’ http://www.pbs.org/now/shows/317/index.html
MikeZ
This just in: David Lereah has been relieved of his duties as the Chief Economist of the NAR.
Cheer up David, you’ve hit bottom! The worst is behind you!
One of my favorite Photoshopped Lereahs is here: http://tinyurl.com/yq5b3u 🙂
Diane Cohn
Lindie, I guess I just have a dispassionate view of the marketplace. Everywhere I’ve lived, the same thing seems to happen: A place becomes better and more attractive over time for various reasons, home prices rise as a result, some are priced out the market, and people complain about affordability. It happened in the Bay Area, it happened in Truckee, it’s happening here.
When a place becomes attractive, people invest. You can count on it. Though this is the first place I’ve lived where builder oversupply has played a serious role, this too shall correct.
I see the market as waves on the ocean… Cycles that come and go that can’t be stopped. Some people watch them and never participate, some people catch them, ride them out and jump off toward the end in triumph, while others ride them all the way and get slammed against the shore. Others fight them and drown beneath the turmoil before even reaching the beach. The outcomes are endless.
You can be a speculator and profit, or you can be a long term investor and retire in comfort, or you can be just a regular homeowner with a nice place to live, or you can go bankrupt trying to game the system. All are possible. None are evil. They are just the dynamics of any marketplace.
What is the truth of this marketplace? I am, via this blog, always trying to figure it out. Buy now? Wait? Hold? Sell? The answers are different for everyone given their unique needs and circumstances.
And for many, real estate isn’t just an investment, it’s home. There are many sources of information regarding the market… this blog is just an on-the-street data point to add to your collection.
Is Derrick evil for making money on his investments in the Bay Area? I think not. He is just one force in the marketplace. As is Bantering Bear and others like him who take a more long term approach. All have their place, and we can learn from each of them.
Name calling, finger pointing and whining about affordability are a waste of time. The market is what it is. The point here is to decode what we see, share experiences and hopefully help others make the right choices that will benefit everyone in the long run.
I think the best solution is to catch the wave and have a good time. I’m sure we can all help each other in that respect.
2sleepy
Well said Diane. About 20 years ago, as a single parent, I sunk everything I had into a 1300 sq ft tract home in Northern California, I paid $105,000. About 18 months later I had realtor’s knocking on my door trying to get me to list it for $165,000. I didn’t, mainly because the thought of moving with two young sons was just not appealing, and I figured anything else I would buy would have gone up a commensurate amount resulting in no real gain. Two years after that, I would have been lucky to sell the house for $115,000. I stuck it out finally selling it several years later for $155,000. Six months later the same house sold again for almost $200,000. I saw this same thing happening in Reno and in 2005 I told my husband that we should sell our house and rent for two years, then buy a house when the bottom falls out of the market, he just didn’t quite understand my reasoning, or I didn’t explain it well enough so we probably lost a nice profit of $150,000 or so, but hey, we still have a house and eventually house prices will stabilize and start to climb again, as they always have in the past….
MikeZ
Did anyone else get a flyer advertising a “Home To Be Sold To Highest And Best Bidder” auction this Sunday in southwest Reno?
If so, are you going?
MikeZ
Over the last few years, a few people (ok, let’s be honest, MANY people) in my old home state of Rhode Island have said to me:
“Mike! You must be *C*R*A*Z*Y* to think that prices will *ever* fall 30 to 40%! That’s unpossible!”
Well, with the last two median price reports from the state, they’ve suddenly turned into believers.
Bristol County median price down 31%
Providence, East Side down 26.5%
North Kingstown down 30%
These are all YOY declines.
(URLs: http://tinyurl.com/yp6qbf and http://tinyurl.com/2mxq7j – require free registration)
Anyone who thinks the same magnitude YOY median price drops couldn’t happen right here in Reno is dangerously naive.
Grand Wazoo
From today’s WSJ – this is amazing.
As Market Cools, Home Buyers Seek a Way Out
Builders Face Lawsuits,
A Rash of Complaints;
The $266,000 Refund
By MICHAEL CORKERY and RUTH SIMON
May 4, 2007; Page A1
In the latest fallout from the housing market’s decline, disputes are breaking out between builders and buyers who signed contracts for new homes and condos when the market was hot — and now want to get out of them.
Even as many of the new buildings are completed, buyers are filing lawsuits claiming they were duped into purchases they couldn’t afford, or victimized through fraudulent investment schemes. Some are scrutinizing their contracts looking for loopholes, or searching out tiny flaws in finished homes that might allow them to back out without losing their deposits.
For some builders, the disputes are contributing to cancellation rates as high as 30% and writedowns in some markets. “People will go to great lengths to get out of a legally binding transaction,” said Larry Sorsby, chief financial officer of Hovnanian Enterprises Inc. “They were willing to ride the real-estate boom on the way up, but some are not willing to ride it on the way down.”
Newly constructed homes make up only about 15% of total home sales. But a wave of building helped fuel the run-up in housing prices during the real-estate boom, especially in Florida and California. As the market started turning last year, prices on new homes and condos quickly stalled, then began dropping. That gave skittish buyers time to get cold feet.
Florida, a magnet for housing speculators in the boom, is ground zero for such disputes. The state long has been a boon to housing attorneys, some of whom are now filing lawsuits against developers.
One lawyer recently took out an ad in a Palm Beach newspaper reading: “Do you want your money back? Your contract for purchase of a new house or condominium may be illegal…To see if you are entitled to a refund, call us for a free consultation.”
Typically, buyers of new homes and condos put down a cash deposit when they decide to buy, then pay the balance when the home closes and is ready to occupy. But condo buyers, in particular, have a lot to lose by walking away from their contracts because their deposits can total as high as 20% — and some buy multiple units.
Consequently, some condo buyers are aggressively seeking ways to back out, said Brad Hunter, director of the South Florida region for Metrostudy, a residential real-estate market research firm. He expects more to do so in the next year as projects sold during the boom become ready for occupancy.
“If they can find some way in which the developer has not delivered according to the contract, they’re using that as a way to get out,” he said.
Dennis Freeman, an attorney in Aventura, Fla., said he is representing a family who bought a roughly $1.6 million condo in a waterfront high rise, expecting a private entrance. But, he said, the family has now learned that the door to the garbage chute, which is shared with neighbors, cannot be locked. “The privacy of my client’s apartment has been lost,” said Mr. Freeman. He is suing to rescind the contract.
Mr. Freeman recently settled another case in which the developer agreed to return a $266,000 deposit to a condo buyer who claimed that the size of the pool deck and gym were smaller than the developer promised. Mr. Freeman said he was surprised by the settlement. “To me, it’s a reach,” he said.
Other disputes are more heated. Red Bank, N.J.-based Hovnanian, one of the largest builders in the U.S., currently is embroiled in one such dispute with buyers in Florida.
One of those buyers, Daphne Sewell, received three construction loans, totaling about $750,000, to buy three houses in Cape Coral and Lehigh Acres, Fla., in May 2005.
An administrative assistant in Broward County government, Ms. Sewell said she and her husband, a carpenter, earned $90,000 a year at the time of the deal and never should have qualified for their mortgages. She also claims a real-estate firm involved in the deal promised that it would find them tenants to rent out the houses. But the renters never materialized, her houses are vacant, and two of her loans are in foreclosure.
“If I close on them I deplete my savings in two or three months,” said Ms. Sewell. “It’s worth the fight.”
After she was served with foreclosure lawsuits by the lender, she filed a countersuit, which names the builder, First Home Builders of Florida, the lender and a real-estate firm that she alleges promoted the deal, claiming she was defrauded by an investment scheme that promised minimal risk. A lawyer for First Home Builders said his client denies any wrongdoing.
Hovnanian, which bought the assets and contracts to build homes from First Home Builders in August 2005, said it has not been served by Ms. Sewell’s lawsuit and that she took out her construction loans before Hovnanian bought out the assets of First Home Builders.
Still, complaints like Ms. Sewell’s are causing a major headache for the company, which says it is trying to help buyers close on the homes by lowering prices by as much as $100,000 while fending off allegations of fraud. Hovnanian took a charge of $175 million in over the fourth and first quarters related to the Fort Myers market, partly because it had to lower prices on the First Home Builders homes.
Mr. Sorsby, the chief financial officer, said many of these complaints are from regretful buyers trying to take advantage of a public backlash against the housing industry amid the subprime mortgage meltdown. “They are going to great lengths to paint somebody other than themselves the bad guy,” Mr. Sorsby said.
In Alexandria, Va., real-estate attorney Beau Brincefield said he has settled roughly 50 contract disputes and has another “50 or more” in the pipeline. They include a case brought last year by more than a dozen buyers who had contracts to purchase homes from NVR Inc., a Reston, Va., builder that sells homes in 13 states.
Mr. Brincefield said the terms of that settlement are confidential. In general, he said, builders have agreed to lower purchase prices by as much as 35% or refund 25% to 100% of a would-be buyer’s deposit. NVR declined to comment.
Mr. Brincefield said that in many of the contracts he’s seen, “the remedies are very one-sided.” These contracts allow the builder to retain the borrower’s deposit or sue for damages if the buyer cancels, he said, but only allow buyers to get their deposits back if the builder doesn’t meet its obligations. In some cases, he said, builders may have violated the Interstate Land Sales Full Disclosure Act, which requires them to make certain disclosures and meet other requirements.
Some developers are not backing down. Ceebraid-Signal, a West Palm Beach developer of condominiums and condo-hotels across Florida, and its affiliated development entities are suing about 30 buyers who are trying to cancel their contracts. Ceebraid-Signal said it is citing a “specific performance” provision in its contracts requiring buyers to hold up their end of the deal and close.
“That’s called chutzpah,” said Marvin Moss, a lawyer in Aventura, Fla. He represents a client who did not want to close on a $375,000 condo because real-estate values had fallen dramatically since she put down her 10% deposit, from which she was willing to walk away, he said.
“This is to frighten people and force them to close,” said Mr. Moss. “It costs a lot of money in legal fees to defend these actions.” A couple of buyers hit with such lawsuits have backed down and gone through with the sale.
Said Richard Schlesinger, managing director of Ceebraid-Signal: “I don’t think there is anything that we are doing that is inappropriate.”
“These are not situations where a woman bought a unit and she’s now a widow and can’t pay,” he said. “These are people who don’t want to close because they can’t flip and make $100,000.”
Write to Michael Corkery at michael.corkery@wsj.com and Ruth Simon at ruth.simon@wsj.com
Reno Ignoramus
Very interesting article Grand Wazoo.
However, it has no relevance to Reno. You see, here in Reno, where our market is special, things like this just can’t happen. Here in Reno, where well-off Bay Area refugees will support our market for decades to come, nobody cancels their contracts. Here in Reno, where everybody wants to live because of our favorable tax climate, you can absolutely trust the new home builders when they tell you they “sold” almost 900 houses in the first quarter of the year. Here in Reno, where high tech employers are migrating by the hundreds, every year, there soon will be a shortage of houses, and prices are soon to start rising.
So you see, Grand Wazoo, it’s different here. One trillion dollars in ARMs will reset upward nationally over the next 18 months, but that is irrelevant here. More than 2,000,000 houses will be foreclosed upon, by that is irrelevant here. You see, Grand Wazoo, Reno is special.
The economic forces at work all over the rest of the United states don’t apply here. We are immune. And so all these doomsday articles flooding every news outlet in America now mean nothing to us here in Reno.
Did you notice that about 200 new listings appeared on the MLS today?
Winrar Download
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I like what I see so now i am following you.
Look forward to looking over your web page for a second time.
buy coffee
I never, ever would have thought I would be required to understand this thank goodness for the internet, right?