Judy Weil - Housing Bubble and Real Estate Market Tracker (intermittent posting of nice set of quality links to RE trend resources, like this one a lot - MarkM) http://seekingalpha.com/by/author/judy-weil
Message edited by: MarkM on 2006-11-19 07:29:30 CST
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.
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Resales of condominiums statewide were off 41 percent in August
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Double-digit declines in median home prices were recorded in August for Sarasota-Bradenton, Panama City, Melbourne-Titusville-Palm Bay, and Fort Walton Beach.
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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.
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.
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!
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"
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
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.
>>>>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...
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
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.
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