Catherine Reagor The Arizona Republic Sept. 26, 2006 12:00 AM
A year ago, builders couldn't buy land fast enough, no matter how much it cost.
Now, Valley land has lost some of its luster with home builders in the rapidly slowing housing industry, even when the property is in one of the northeast Valley's most desirable areas.
The Arizona State Land Department is calling off this week's auctions of two prime pieces of residential land, one in northeast Phoenix's Desert Ridge development and the other in Fountain Hills. advertisement
The auctions weren't worth the agency's time because no builders or investors are willing to pay the appraised prices of $150 million for a parcel of more than 325 acres in Desert Ridge and $130 million for 1,276 acres in Fountain Hills.
Potential bidders on the Desert Ridge and Fountain Hills sites made it clear they can't pay what the properties are currently appraised for because they would have to charge more for houses than buyers are willing to pay.
The prices are based on appraisals taken early this year before the Valley's housing market stumbled.
In January, a condominium developer paid a record $1 million an acre for a piece of land in Desert Ridge. But shortly after that, the Valley's housing market started a turn and has been steadily slowing.
When the current Desert Ridge site first went on the auction block in August, it didn't draw a single bid.
The state is in the process of having the sites reappraised. It could be next year before either site goes back on the market. To make it more affordable, the Desert Ridge parcel could be broken into pieces.
So far this year, home building in metro Phoenix is down 24 percent from last year's record pace. Housing analyst RL Brown recently said new home permits could fall as low as 38,000 Valley-wide this year, down 40 percent from last year.
Last year's investor-buying frenzy prompted builders to stockpile huge parcels for future growth. But this year, many of those speculators walked away from deals as the housing market slowed. Valley home builders are now offering tens of thousands of dollars in incentives to try to sell those houses as well as others built for people who can't sell their existing homes.
"There's a correction going on in the Valley's housing market now, and I don't think these parcels or many others should be auctioned this year," said Nate Nathan, a land broker with Scottsdale-based Nathan & Associates.
The one state land piece that Nathan and some other market watchers think should go on the auction block is the first parcel of the 176,000-acres Superstition Vistas site on the fringes of the southeast Valley.
On the day the agency decided to cancel the auctions in Desert Ridge and Fountain Hills, it set a Dec. 7 sale for the first 1,000 acres of Superstition Vistas.
An appraisal, based on current market conditions, was recently completed on the Superstition Vistas land, said new State Land Deputy Commissioner Jamie Hogue. The asking price is $45.25 million, but the winning bidder must also plan the development of another 6,700 acres in Superstition Vistas as part of the sale.
If Proposition 106, a reform package for the Land Department, is passed on Nov. 7, the agency will be able do more land planning like it's trying to do on Superstition Vistas instead of just selling to the highest bidder.
"We've been anticipating a price correction and now it's here," said David Lereah, chief economist for the national Realtors group.
...
Resales of condominiums statewide were off 41 percent in August
...
Double-digit declines in median home prices were recorded in August for Sarasota-Bradenton, Panama City, Melbourne-Titusville-Palm Bay, and Fort Walton Beach.
...
The nationwide inventory of unsold homes rose 1.5 percent to an all-time high of 3.92 million units. At the August sales pace, it would take 7.5 months to sell the backlog, representing the longest period since April 1993.
xpguy
Senior Member - 3K
posted: Sep. 26, 2006 @ 10:29a
BillRHIT said: Shouldn't this new thread be entitled "Thought on the real estate bubble that is leaking, and about to pop"?
About to pop? It's already popped. Maybe it should be called: "Discussion: There is a real estate housing bubble, how's it popping in your neighborhood?"
However, I think that it will take another few weeks/months for the "pop" to really settle into the hearts of sellers and prices to start coming down nationwide, as opposed to just in the greatly over-valued areas like California, D.C., etc.
z0mb13
Member
posted: Sep. 26, 2006 @ 10:38a
Article from WSJ:
Existing Homes' Median Price Falls
Decline Is First Since 1995 As Sales Continue to Slump; Risk to Broader Economy By MICHAEL CORKERY September 26, 2006; Page A2
Home sales continued to decline last month, and the nation's median home price dropped for the first time in more than a decade.
The National Association of Realtors said existing, or previously owned, homes changed hands at a seasonally adjusted annual rate of 6.3 million units in August. That was down 0.5% from July and 12.6% from a year earlier.
Last month's sales decline was steepest for condominiums and cooperatives, with sales down 3.5% from July and 14.5% from August 2005. Sales of single-family homes were unchanged from July but were down 12.3% from a year ago.
HOUSING TALK
1 Discuss:2 Fiscally Fit columnist Terri Cullen hosts a continuing discussion, "How Low Will Home Prices Go?" in a new discussion forum3.Yesterday's report also confirmed home prices are coming under pressure. The median sales price of an existing home was $225,000 in August, down 1.7% from a year earlier. That was the first year-to-year price decline since 1995 and the second sharpest in the nearly 40 years the data have been collected.
Prices fell faster for condominiums than for single-family homes. In August, the national median price of a single-family home fell 1.7% from a year ago to $225,700. The median price of an existing condominium fell 2.4% from a year earlier to $223,200.
Economists had been expecting a price correction for some time, after months of slowing sales and an erosion of confidence among home buyers. David Lereah, the National Association of Realtors' chief economist, said the price decline will help the housing market by making homes more affordable and by helping to reduce rising inventories of unsold homes.
"This is a sellers' market turning into a buyers' market," Mr. Lereah said in an interview. "We needed a price correction. Prices had gotten too high, too quickly."
Falling prices have a flip side. If their homes are worth less, consumers may feel less wealthy and therefore spend less on goods and services, a worrisome trend for the broader economy. "We have to acknowledge that this is a clear risk to the consumer," said Haseeb Ahmed, U.S. economist at J.P. Morgan Chase & Co. In the short term, he said the recent drop in gasoline prices should offset the effect of declining home values.
The inventory of unsold homes rose 1.5% last month to 3.9 million housing units, a 7.5-month supply at the current sales pace, and the biggest supply since April 1993. The increase was smaller than in July, when inventories rose 3.2%.
Some economists say prices will have to continue to fall before a sizable number of buyers jump back into the market. "You've got a ways to go," said Thomas Lawler, a former economist at Fannie Mae. "You still have affordability issues in a lot of markets."
Separately, the Federal Reserve reported that banks and hedge funds boosted their lending to larger borrowers this year, while the percentage of problem loans remained relatively low.
In a trend the Fed said reflects increased merger-and-acquisition activity, the volume of syndicated credits -- in which three or more lenders team up to make a large loan -- reached $1.9 trillion in the second quarter, up nearly $250 billion, or 15.2%, from a year earlier. The share of problem credits rose to 5.1% from 4.8%. The report covers loans of more than $20 million.
The lending role of nonbank institutions, such as hedge funds, brokerages and insurance companies, has increased in recent years. According to the report, such institutions accounted for 14% of all loan commitments in the second quarter, up from 2% 10 years ago. The share of problem credits among nonbank institutions stood at 11.8% as of the second quarter.
IMO the buble just started deflating.. we still have a long ways to go!
codename47
Senior Member - 3K
posted: Sep. 26, 2006 @ 10:42a
In August, the national median price of a single-family home fell 1.7% from a year ago to $225,700.
Clearly signs of a sharp correction, that hefty 1.7% decline... Yup, the end is coming!
IMO the buble just started deflating.. we still have a long ways to go!
To where exactly? What is fair value? If you can't say what fair value is, then how do you know homes are overpriced, other than "a talking head told me"
nickmckinney
Ancient Member
posted: Sep. 26, 2006 @ 10:46a
codename47 said: To where exactly? What is fair value? If you can't say what fair value is, then how do you know homes are overpriced, other than "a talking head told me"
The last few decades the median home value was 3X the median family yearly income. Even with that we still had a healthy foreclosure market. I would say 3X~3.5X would about right myself.
Edit - currently south Florida is about 7X median income
z0mb13
Member
posted: Sep. 26, 2006 @ 10:47a
codename47 said: In August, the national median price of a single-family home fell 1.7% from a year ago to $225,700.
Clearly signs of a sharp correction, that hefty 1.7% decline... Yup, the end is coming!
IMO the buble just started deflating.. we still have a long ways to go!
To where exactly? What is fair value? If you can't say what fair value is, then how do you know homes are overpriced, other than "a talking head told me"
fair value is house prices appreciating 5% every year. Not the > 20% we see in some areas of the country IMO it will revert back to a normal 5% appreciation rate since the start of the boom.
z0mb13 said: fair value is house prices appreciating 5% every year. Not the > 20% we see in some areas of the country IMO it will revert back to a normal 5% appreciation rate since the start of the boom.That's what I figure will happen too, things will just go back to the way they are supposed to be appreciation.
codename47 said: In August, the national median price of a single-family home fell 1.7% from a year ago to $225,700.
Clearly signs of a sharp correction, that hefty 1.7% decline... Yup, the end is coming!While 1.7% doesn't seem like a big decline, the real problem is the rate of change. A year ago it was an increase, say 4%, so in one year we've gone from a 4% increase to 1.7% decrease, that's a 5.7% change in one year. How many more years can that rate of change keep up? Inventories are still going up, so I wouldn't necessarilly expect the rate of change will slow down yet.
Kashmoney
Member
posted: Sep. 26, 2006 @ 11:24a
>>>>To where exactly? What is fair value? If you can't say what fair value is, then how do you know homes are overpriced, other than "a talking head told me" <<<<
Fair Value - New home cost(better location) built 2006 - price per sq foot $212 add land improvements (no pool) - $223 sq ft. Old home cost 2 miles down the road built 1998 - price per sq foot $302 (no pool and requires A LOT of touch up work). Old home has been on the market for 150 days plus and was relisted in July...
I hope you're not one of those sellers that are left at the alter....I've been through a price "correction" before and its more of a blood bath than it is a "correction".
What makes me think we are headed towards a blood bath....hmmmm...look at all the defaults that will occur when home prices begin to decline and people with exotic mortgage agreements have to refi...
richard612
Senior Member
posted: Sep. 26, 2006 @ 11:40a
Kashmoney said: I've been through a price "correction" before and its more of a blood bath than it is a "correction".I just realized that I've never seen a single person post to any blog stating that the last downturn wasn't brutal. Medians didn't fall that far, but each person either sold a home or knew of other homes which were changing hands in 1995 at 40% off their 1989 price. Even in Orange County, where Everyone Wants To Live (tm).
"A housing bubble is characterized by rapid increases in the valuations of real property such as housing until unsustainable levels are reached relative to incomes, price-to-rent ratios, and other economic indicators of affordability. This in turn is followed by decreases in home prices that can result in many owners holding negative equity, a mortgage debt higher than the value of the property. Bubbles may only be definitively identified in hindsight, after a market correction .[2] The impact of booming home valuations on the U.S. economy since the 2001–2002 recession is an important factor in the recovery because a large component of consumer spending came from the related refinancing boom, which simultaneously allowed people to reduce their monthly mortgage payments with lower interest rates and withdraw equity from their homes as values increased.[3] As the once-booming U.S. housing market softened in 2005–2006, economists debated whether this is a "soft" or "hard" landing and the impact this slowing will have on consumer confidence and on the overall economy. http://en.wikipedia.org/wiki/US_property_bubble
richard612
Senior Member
posted: Sep. 26, 2006 @ 12:18p
handyguy said: Bubbles may only be definitively identified in hindsight, after a market correction What I want to know is what new market fundamental will pop-up out of nowhere to justify and provide support for 400% appreciation in eight years.
richard612 said: Kashmoney said: I've been through a price "correction" before and its more of a blood bath than it is a "correction".I just realized that I've never seen a single person post to any blog stating that the last downturn wasn't brutal. Medians didn't fall that far, but each person either sold a home or knew of other homes which were changing hands in 1995 at 40% off their 1989 price. Even in Orange County, where Everyone Wants To Live (tm).
national median never drops too much since there is always one or two areas to help out with the numbers. it's the local markets you have to worry about.
I'm buying a home now in Phx, AZ and am being offered 100K off a list price of a new 400K home by builders in great areas. Question is will the market go lower??
housing bubble is still inflating in the northwest, many areas of washington, oregon, idaho are laughable.
DealSpice
Member
posted: Sep. 26, 2006 @ 1:57p
Molecule, Any source for your info. I live in Boise and do see price reductions but not by much. As I see it, houses here are overpriced by more than 100K. And don't tell me there isn't land in ID I wouldn't pay more than $60 per sqft for Boise suburbs.
vickh said: I'm buying a home now in Phx, AZ and am being offered 100K off a list price of a new 400K home by builders in great areas. Question is will the market go lower??
I'd ask for their special BOGO offer - you know, buy one get one free.
caonima
Senior Member
posted: Sep. 26, 2006 @ 2:03p
richard612 said: handyguy said: Bubbles may only be definitively identified in hindsight, after a market correction What I want to know is what new market fundamental will pop-up out of nowhere to justify and provide support for 400% appreciation in eight years.
there's a trend that some countries become not afraid of us (such as the 2 people visited UN last week), and they start to use other currencies in oil transactions. that's the most recent fundamental change
WorkingTree
Member
posted: Sep. 26, 2006 @ 2:03p
same old same old.
anyone who is remotely near the reality of the situation is immediately negged down by the lemmings.
QueenieB said: vickh said: I'm buying a home now in Phx, AZ and am being offered 100K off a list price of a new 400K home by builders in great areas. Question is will the market go lower??
I'd ask for their special BOGO offer - you know, buy one get one free.
that's what i was thinking. realistically though I'm offering them 125K off their asking price. Let's see what happens? I figure at that offer I won't hurt as much if there's a "small" correction
richard612
Senior Member
posted: Sep. 26, 2006 @ 2:59p
I'm afraid to make any lowballs for fear that some stuck seller might actually accept one.
hope69
Senior Member - 2K
posted: Sep. 26, 2006 @ 3:05p
richard612 said: I'm afraid to make any lowballs for fear that some stuck seller might actually accept one. hehe I think that depends on how "low" your lowballing 50% off the asking price and I am sure the seller wouldn't even look at it
rinconshop
Senior Member
posted: Sep. 26, 2006 @ 4:29p
richard612 said: Kashmoney said: I've been through a price "correction" before and its more of a blood bath than it is a "correction".I just realized that I've never seen a single person post to any blog stating that the last downturn wasn't brutal. Medians didn't fall that far, but each person either sold a home or knew of other homes which were changing hands in 1995 at 40% off their 1989 price. Even in Orange County, where Everyone Wants To Live (tm).
That's exactly what I witnessed in some of the richest suburbs around NYC during the last bust. I bought a home in Somerset, NJ in 1993 at 40% off the price original owner paid in 1988. That 40% off doesn't even count inflation that if the 5 year inflation is factored in, the original owner would have lost over 60% of the money he put into the house.
Somerset county's median income is always among the top 10 in the US and was number one in 2003 or 2004, yet the "correction" there can be so brutal. So-Cal's median incomes are mostly around $65K compared to around $90K in Somerset. So I just can't understand why people there are so willing to overpay for the homes. I lived in Santa Barbara for 9 years after I moved out of NJ and couldn't make myself to buy a home there.
OldnTired
Member
posted: Sep. 26, 2006 @ 5:03p
hope69 said: richard612 said: I'm afraid to make any lowballs for fear that some stuck seller might actually accept one. hehe I think that depends on how "low" your lowballing 50% off the asking price and I am sure the seller wouldn't even look at it
Houses are still way over priced even at 50% off. In bubble areas, 80% hair cut will bring things back to normal.
WorkingTree
Member
posted: Sep. 26, 2006 @ 5:20p
Also, I heard the insurgency is in it's last throes as well.
SirPablo1
Ancient Member
posted: Sep. 26, 2006 @ 8:27p
vickh said: I'm buying a home now in Phx, AZ and am being offered 100K off a list price of a new 400K home by builders in great areas. Question is will the market go lower??
If I were you'd hold off on buying a house here in Phoenix. Definetly a renters market.
myf16
Senior Member - 1K
posted: Sep. 26, 2006 @ 8:47p
OldnTired said: Houses are still way over priced even at 50% off. In bubble areas, 80% hair cut will bring things back to normal.
I disagree. 50% would be just about right in bubble areas of California.
BOSTON AND NEW YORK - First came a slowdown in the volume of home sales. Now prices are falling, and the question for anyone selling, buying, or even just hanging onto a home is: How far and how fast?
ADVERTISEMENT
The expert consensus: The slump could last into the summer of 2007. And the speed could depend on how many people hit the panic button or take their homes off the market.
Last month, the median price of a single-family home was down from a year ago - the first significant national decline in 13 years, according to tracking of previously owned homes by the National Association of Realtors. This August, the median price for all housing types was $225,000, down 1.7 percent from August 2005, when the median was $229,000, the realtors' group reported Monday.
cameron2003
Senior Member - 2K
posted: Sep. 27, 2006 @ 12:14a
myf16 said: OldnTired said: Houses are still way over priced even at 50% off. In bubble areas, 80% hair cut will bring things back to normal.
I disagree. 50% would be just about right in bubble areas of California.
Actually west coast is holding price value better than rest of country. It the only region still up from last year. http://www.mercurynews.com/mld/mercurynews/15605557.htm
codename47
Senior Member - 3K
posted: Sep. 27, 2006 @ 12:15a
Low rates spurred and sustained the higher than normal price-income thing, over 3-3.5x income.
Believe it or not, there are more cities in the US than Boston, NY, LA, Phoenix, and Miami. There are more states than California and Florida.
On average, prices are still very reasonable.
As far as the 5% increase vs the very recent 20% increases, what will most likely happen as has been stated is just a flat maybe 1-2% increase per year going forward. Some areas might go negative. Some might go VERY negative (miami, Vegas, LA), but all in all I think a soft landing will happen. Stagnation would be great, especially in Dallas, where home prices are stupid cheap.
No, I won't be a seller left at the alter. I didn't go hog wild and buy 10 condos with the hopes of selling them to greater fools in LA or Miami. I have 1 rental and 1 other home I'll hold on to. Nothing to far over the top.
As far as the local market, I really think Tx property taxes are helping to moderate price increases.
rinconshop
Senior Member
posted: Sep. 27, 2006 @ 12:33a
The last slump started around 1989 and most of the fall happened by the end of 1993, but it continued to decline till the end of 1996:
The last two booms and busts are also very much symmetric that both the upturns and downturns lasted around 5 years.
So if this slump is like the last two, it won't reach the bottom till 4 years later. But if it's also symmetric like the past booms, the downturn can last 10 years, as the upturn this time took 10 years.
True bargain hunters should wait at least 5 years.
BOSTON AND NEW YORK - First came a slowdown in the volume of home sales. Now prices are falling, and the question for anyone selling, buying, or even just hanging onto a home is: How far and how fast?
ADVERTISEMENT
The expert consensus: The slump could last into the summer of 2007. And the speed could depend on how many people hit the panic button or take their homes off the market.
Last month, the median price of a single-family home was down from a year ago - the first significant national decline in 13 years, according to tracking of previously owned homes by the National Association of Realtors. This August, the median price for all housing types was $225,000, down 1.7 percent from August 2005, when the median was $229,000, the realtors' group reported Monday. Last time, it lasts about 7 years (1990-1997). Why should it last only one year this time? The bubble this time even has a lot more air to pop...
By the way, both my wife and I are professionals with steady jobs and we now cannot even afford to buy our own home, which in 1997 (lucky us!) cost us less than 1/4 of the current worth (based on zillow.com estimate).
Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.
Members of our community may attach files to a post in accordance with the User Agreement. FatWallet is not responsible for the content, accuracy, completeness or validity of any information contained in any attached file. Files have *not* been scanned for viruses. Be especially wary of Excel files which may contain malicious content.
