Thursday, May 19, 2005

"Don't Screw Up The Comps"

This Money mag story about San Diego showed up on CNNMoney. "It's clear that something big and basic in the way Americans think about housing has changed. For many of us a house has become a way to pay for retirement or the kids' education, or simply a way to get rich."

"With no savings, and a college loan to repay, Kelly Pearson took out a mortgage for 100 percent of the price of the house. Closing costs were paid for by a $10,000 gift from her parents. Her plan: to borrow more soon and invest in a condo."

After several personal accounts of just how unrealistic people are, the writer turns the focus on the coming storm. "It took 60 days for the average detached home to sell during February, up from 39 days in February 2004. The number of homes sold in San Diego in March fell compared with the number sold in March 2004, the eighth monthly year-over-year decline in nine months. The number of San Diego listings swelled 27 percent in March, to 7,062 houses for sale, up from 5,555 for sale in March 2004."

"Jerry and Laura Satran's Sunday open house is empty. (They) are asking $1.3 million. But here they are, the second week the house has been on the market, drumming their fingers. The previous Sunday, Jerry says, 40 visitors stopped by. No offers."

"Two weeks later the Satrans receive an offer: $1.2 million. Not the full asking price. No one seems more disappointed than the neighbors. One woman suggests the Satrans would be hurting the entire block if they settled for less than $1.25 million. 'She says she was only going to be here for two years, so don't screw up the comps,' says Laura. 'She's not being cruel, everybody who lives here is in it for the investment.'"

22 Comments:

At 1:24 PM, Blogger DrBubb said...

haha

Reminds me of those outrageous days in the Tech boom, when people would be in a brokers office, all cheering as a stock ran up in a series of positive ticks.

That was often a good sell indicator

 
At 1:25 PM, Blogger John Law said...

("With no savings, and a college loan to repay, Kelly Pearson took out a mortgage for 100 percent of the price of the house. Closing costs were paid for by a $10,000 gift from her parents. Her plan: to borrow more soon and invest in a condo.")

that's ridiculous. I bet san diego will slowdown because people will be priced out of the market and speculate elsewhere- like they're already doing in Arizona.

 
At 1:30 PM, Anonymous sharksinthewater said...

(She says she was only going to be here for two years, so don't screw up the comps)

A lot of areas are being overrun with speculators---SoCal, Vegas, AZ, Florida, even Idaho for crap's sake. When (not if) the market turns, these are the first folks to run. Do you think they will care how "the comps" will affect their neighbors? What neighbors? They don't live in these houses.

If I owned a home in a speculator-infested area, I think I would sell ASAP. These are the best prices you are going to see for a long time. Sell while there are still speculators afoot. And if you plan to stay, don't under any circumstances borrow against your equity. It's not real. It's been inflated by speculative activity.

 
At 1:32 PM, Blogger Travis said...

http://www.brokeruniverse.com/grapevine/

Does this seem insane to anyone else?

 
At 1:40 PM, Blogger deb said...

Cavuto on Fox doing a segment on flipping (mostly Miami) right now.

They call the market "hyper-contract flipperism" with 60-80% of buyers being investors. They say lenders and builders are starting to worry.

Oh, Barbara Corcoran is one of their experts, great. She says she is concerned that speculators could get burned if there is a little bubble in the market, not a bursting (whatever that means). But she sees no national bubble at all.

Seth Weinstein is the other expert. He sees real danger with the speculators.

Now, on comes the mayor of Buffalo. He says people are taken advantage of by online advertising and preditory lending, causing problems for his neighborhoods.

Not a great segment. Not much thoughtful analysis. Most of the issues we discuss here were not even raised. Overall, it did have a bit of a negative tone.

 
At 1:42 PM, Anonymous hellboy said...

"No one seems more disappointed than the neighbors. One woman suggests the Satrans would be hurting the entire block if they settled for less than $1.25 million. 'She says she was only going to be here for two years, so don't screw up the comps"

For some reason this reminds me of rats in a sinking ship.

 
At 1:42 PM, Anonymous LV_realprop said...

To anyone out there who has an opinion . If there is a collapse in RE values would it begin in a particular area and spread from there or would it be a general nationwide slowdown. I'm assuming that it would begin in particular markets(parts of Cal?) and spread from there. San Diego seems like it might be the barometer for all this. I'm assuming it wouldn't be long after for LV to be dragged down after Cal started to implode. Most the high rise condos here are dark edifices at night primarily owned by californicans.

 
At 1:46 PM, Blogger Susan Lindsey said...

The following graph illustrates the condo supply in downtown San Diego, a
single zip code area. Inventory is skyrocketing with about 1400 more condos scheduled to be released this year and the next and the next.

http://sdcondo.com/graph.html

 
At 2:34 PM, Anonymous Anonymous said...

Travis, great link from Broker Universe! What a riot!

Low FICO scores, stated income, 100% LTV--no problem! It's amazing to think that these are getting money. It's probably getting wrapped up in a mortgage-backed security somewhere, but I wish I knew how--sounds like a great short sale!

 
At 4:23 PM, Anonymous Anonymous said...

Yes I believe it will start reginal. Up in the Bay Area (No. Cal.), those home sellers go all over the north state and other states driving up the cost of housing. One year ago a bay area couple brought my house in the Sac. area. There are already signs of the housing market cracking in the Bay Area. State wide 49%, but in the Bay Area is more like 80% of all home purchaes are ARM's, interest only, and neg.-amor. type loans. That surly is an indication that people are having to strecth to but houses, and therefore, the top!

 
At 4:29 PM, Anonymous Anonymous said...

Or San Diego....I would watch it very carefully.

I am in Los Angeles. Things definately seem slower.

Most people at work (I am at a very large corporation) do not even talk about real estate anymore, except to talk about WHEN the bubble will pop. (not too long ago they would talk about how the prices were going up and how great it was to buy).

 
At 4:42 PM, Anonymous Anonymous said...

In Craigslist (SF Bay Area), I started seeing more and more "seller very motivated" and "reduced".

Looks like South Bay is the first to crack.

 
At 5:30 PM, Anonymous Don said...

I live in San Diego and I had a realtor come to my door last night looking for people who want to buy. First time that has ever happened. I smell desperation.

 
At 8:47 PM, Blogger Sunny said...

I wonder how long sellers are going to hang on when it starts to stall and slide. RE has really sunk deep into our consciousness when neighbors start saying "Don't screw up the comps. I am starting to think RE has yet to runup.

 
At 8:52 PM, Anonymous Anonymous said...

1:42 LV Prop:

I think the media will start it and, in a sense, define its beginning. The national media are always, as is their charter, looking for the next big story. Who in the media world would not want to be the one to break the story that the Housing Crash of 2005 (or '06) has started? This is bigger than Lewinsky and bigger than Bo versus Carrie.

So it matters not where the crash appears to begin. The media will take care of that. San Diego is a logical, but not exclusive, place to start simply because it is "cool."

Like the old gamma globulin shots I used to have to take -- where and how are not as important as knowing that it is soon and inevitable.

Chip

 
At 11:11 PM, Anonymous Anonymous said...

First thing that will get hit on a speculative bubble will be suburban condos, because in suburban areas where single family houses pre-dominate - such condos make the least sense as a long term investment.

In cities, where few single family houses exist, condos have more intrinstic value longer term. In some cities of course, one generally can only buy a condo or co-op, duplex or multi-family, so they are arguably in some ways comparable to single family houses

In Houston in the mid-80's the hit that condos took (most all in effect "surburban" due to the way Houston is arranged) was nothing short of spectacular. Some dropped 60% to 80% plus in value and higher. The condo resale market all but collapsed.

In the Boston region in 1991 the suburban condo market took hits from 10 to 40% - with most non saleable, a near shutdown of the market

My guess is that vultures will not be anxious to jump into any sectors anytime soon -should a downturn occur. However to predict any crash an index tracking (used) suburban condos price data and sales would be very useful

 
At 12:28 AM, Anonymous Anonymous said...

"First thing that will get hit on a speculative bubble will be suburban condos"

I have to agree. In the Bay Area, we saw severe price compression over the course of the bubble boom. When the bubble bursts, price decompression will occur and these condos will take a very big hit.

 
At 6:41 AM, Anonymous Anonymous said...

relating to another story from this magazine... i'd like to say that only this mag would ask the largest landlord and converter of apartments to condos in america, if he sees a housing bubble... and what do you think he said?... just amazing...

 
At 8:38 AM, Anonymous Anonymous said...

I emailed two people who were renting houses on craigslist for $3500. I asked them if they were willing to take $3000. They both responded very quickly and said they could work something out. One of them actually said that he knows there are 150 houses on the market near his, but his offers unique characteristics! I got the definite sense of desperation.

 
At 9:24 AM, Anonymous BoyInTheBubble said...

Regarding the neighbors' concern about "screwing up the comps": you'd think if these neighbors were so sure prices were going up, they'd look forward to getting lowball bids accepted. After all, if the ask is $1.3 mil and someone bids $1.2, the neighbor could just bid $1.25 or whatever and get the house himself and sell for $1.5 in another three months. He could get the down payment from the equity he's built up in his own house, right? Oh wait, he's tapped all his phantom equity and bought an Escalade with it already, never mind...

 
At 3:46 PM, Anonymous Anonymous said...

harryschwartz0
yup, i live in san diego and it's just fricken' ridiculous, folks making 60k or so and buying 1m dollar homes, just doesn't add up, my mate thinks i'm crazy, 'cause i won't do the i/o or arm thang, just too risky i say, i will wait until the bubble bursts. i am seeing some price reductions in la jolla and some of the other high end stuff, but they're still selling, it's sic

 
At 9:27 AM, Anonymous Anonymous said...

Its June 21st 2005 in Orlando Florida. Seems there are entire developements that are ghost towns. Maybe half the homes there are people living in them, some of them even have tape on the windows from the hurricanes last year. 30% of buyers are using interest only loans and 35% of the homes bought are for investment or "2nd homes". Every new developement has multiple "for sale" signs and the main roads are littered with "for rent" signs. Everyone still says prices are going up up up... but over the past month I have seen more for sale signs on the streets than i have in years. The worst part is all the homes built in the past 10 years are the same 4 or 5 designs. They are so generic, you get the big box, the smaller box, the weird half two story-half one story triangle or the small triangle they are generic to the point where they need to stop giving new developements fancy names like "stoney brook" or "hunt cliff" and just start giving them numbers like "centex homes developement # 254". When they all start hitting the market it will definately turn into a buyers paradise because you will be able to find the same home for less across the street or in another neighborhood. People who are flipping homes expect $280K-300K for a home you could still build for less and the worst part is these flippers are just selling to other speculators who sell to other speculators because the average family in Orlando can't afford the average home in Orlando. Homes in Downtown Orlando that speculators are trying to get 275-400K for are sitting on the market 6-8 months then they play games by taking the home off the market for a week or two and relisting it so it looks like the house just listed. No one is buying these houses except other investors hoping someone is dumb enough to pay the rent and live next to government housing and live in F rated school districts.

 

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