Real Estate Bubble news
 

My comment: It may be a cyclical hiccup or it may be another evidence of an upcoming bust in the RE market. Prior evidence is the current slow down in formerly hot markets like San Diego

Source: http://www.latimes.com/business/la-f...temailedli nk


More Sellers of High-End Homes Find They Must Cut Asking Prices
The Southland trend is typical of an overall market starting to lose steam, experts say.
By Annette Haddad
Times Staff Writer

October 20, 2005

Frisca Hong put her Yorba Linda home on the market in August, certain it was worth every penny of her $797,000 asking price.

But after almost two months and no nibbles, Hong reluctantly dropped the price nearly $30,000. Still, her house remains unsold.

"I just listed at what I thought was the right price," Hong said.

The frustration experienced by sellers like Hong reflects a cooling in the market for higher-priced homes in Los Angeles and Orange counties, according to recent price and sales data. Faced with reduced buyer demand and rising inventories of unsold properties, many sellers of homes worth more than $750,000 are dropping asking prices.

Many also are taking weeks before landing buyers.

The slowdown in pricier homes is typical of the latter stages of a housing boom, analysts say, as expensive properties were the first to rise sharply at the beginning of the current cycle.

It's also a leading indicator that the overall housing market is beginning to lose steam, as double-digit price increases become harder to sustain and mortgage rates rise.

Data from a cross-section of more-affordable neighborhoods within Los Angeles and Orange counties ? from Aliso Viejo to Valencia to Compton to Santa Ana ? show that homes priced $500,000 and below were usually snapped up at full list price or more in the second quarter, according to a review of property listing data compiled for The Times by Brea-based research firm Real Data Strategies.

On the other hand, sellers in many pricier neighborhoods in the two counties have dropped original list prices by an average of about 5% since the spring, the data showed.

Of the 165 houses currently on the market in Yorba Linda, for example, nearly 40% have had their prices reduced since hitting the listing service.

In some of the ritziest areas, such as the 90210 ZIP Code of Beverly Hills where the average home price is $3 million, sellers have cut asking prices by an average of at least 10%.

In the first half of 2004, by contrast, sellers of pricier homes typically got 5% to 10% above their asking prices.

Median prices in more expensive areas are generally still higher than a year ago, but they are rising at a slower rate than in more affordable areas, according to data released Monday by DataQuick Information Services, a La Jolla-based real estate research firm.

In more affordable San Bernardino County, the median home price of $352,000 in September was 33% higher than the year-ago month, according to DataQuick.

In pricier Orange County, the median of $610,000 was 14% higher, while Los Angeles County's median of $494,000 was up 21%.

"This is a natural part of the normal real estate cycle because trends in lower-cost markets tend to lag trends in more expensive markets," DataQuick President Marshall Prentice said.

"We're moving into a different market," said Orange County-based real estate agent Steve Ambuehl.

"Homes aren't selling within a week or even a month," which was the norm when the market was sizzling in the first half of 2004, he said. Now, it's routine for pricier homes to sit on the market 60 days to 90 days.

For all types of homes, there are about 40% more listings in Los Angeles and Orange counties than a year ago, said Patrick Veling, president of Real Data Strategies. The increase in supply, he said, is prompting price cuts.

In higher-end areas, he said, "sellers are somewhat delusional at first, then reduce to the point where their house will sell."

The question is whether these price reductions are merely seasonal as the market enters its slowest time of the year. A similar trend emerged last fall, but because many sellers simply refused to sell at a lower price and took their homes off the market, inventories tightened and housing activity resurged by the spring.

But if the region's supply of unsold homes continues to grow and outpace demand, it could widen the gap between asking and selling prices, portending a more serious downturn.

"Incrementally we could get more listings and that would put more downward pressure" on home prices, said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University in Orange.

Concerned that prices in his Yorba Linda neighborhood in northern Orange County might be headed down soon, Lee Cox decided this month to list his 3,300-square-foot house for $1.4 million, about $550,000 more than he paid two years ago.

Cox, who works for a mutual fund company, reviewed data about recently sold homes, visited open houses and studied how much sellers had to lower their original list prices. "We found that people were getting about 96% of their asking price, and a few got 100%," he said. "It all depends on the house and the condition it's in."

Cox used his research to help negotiate the purchase of another house, one that he plans to live in once his sells.

He found a house one mile away that had been on the market more than 100 days.

"The seller had it on the market for a ridiculous price," said Tom Pelton, Cox's real estate agent. The owner eventually agreed to sell to Cox for $1.2 million, or about 9% below the asking price. The house is in escrow.

"Sellers are still overconfident," Pelton said. "They want to know what they can get and will test the market."

Boston is now the most expensive place to live.

Rent is at an all time high, the average house is 350k (ranch) in the burbs and 700k in and around the city. No signs here yet.

Here's an interesting question to ask one's self.... are real incomes increasing fast enough to keep pace with housing price rises? :helpme

That is part of it, also the housing market always slows down from October through March.

So to look at the short-term changes in the housing market shows that the reporter hasn't analyzed the entire situation. That's irresponsible journalism.
Sounds like someone with an Agenda, perhahps someone looking to buy property themselves by creating an illusion of a falling market.

I've made 30% on my place already. I expect growth to slow but not to retreat. In many areas real income was way ahead of housing and living costs.

Not a response to your question.
Regardless of what this forcast and stuff shows I am still jumping in, in my area. Got some new inside info overheard during dinner (couple of the city council guys and galls) of an upcoming program.
You bet I will be buying and flipping some houses in my area ASAP.
The info is huge.

What confuses me about the article is this part:

"The slowdown in pricier homes is typical of the latter stages of a housing boom, analysts say, as expensive properties were the first to rise sharply at the beginning of the current cycle."

They've been saying this shit since 2001. A buddy that bought a $249K place in 2001 recently sold it for $450K

So........ unless there's a BIG BIG sign re a slowdown.... keep an open mind re the RE market, it may just be a hiccup.

Real estate prices never drop.. right? Check out this chart of the Japanese real estate market over the last few decades:
http://www.reinet.or.jp/e/jreidata/a_shi/im/0312_1.gif

We obviously have a very economic situation in the US than Japan did during their bubble in the 80s. If the market has peaked, prices definately won't drop like a dot com stock in 2000.

When does REAL fundamental support stop (fundamental support = mortgage rates, rise in income, net worths, etc) and SPECULATION start regarding this current (long long long) boom? Would it be safe to say that the price rises are fueled mostly by speculation?

warlock5 sorry about the email delay, I'll send you an email now.

They do drop. However, it's nearly always the result of industry leaving an area or other catastophic events.

If nuclear waste is dumped in your neighborhood. Good luck selling.

our realtor said they expect about 160,000 condos on the market from Ft Lauderdale to Miami most which are owned by investors. They can't rent them out and some are starting to just ditch them

Then around West Palm the new houses being built can't be sold, my boyfriend's brother said they saw homes that go vor $320,000+ reduced to $275,000

It will crash eventually. I just hope not for at least 3 more years. Please!!!

Usually they would take the property off the market and wait for prices to pop back up.

Actually Manhattan is :)

House prices arent soaring that much, your money just buys less.

the US dollar has taken a giant dump the last two years. To someone with US dollars it feels like prices of everything with real value are soaring. Collector cars, houses, whatever.

To someone buying this stuff with Canadian dollars, its more like normal inflation.

Most expensive place to live. I didn't say most expensive property. You might want to recheck your stats.

I didn't believe it either...when I was first told. But trust me its Boston....saw it last night on CN8. So heres a smiley face back :upsidedow

We have one of the highest minimum wages in the country but its still not enough.

I saw an article the other day on a cost of living study that was done recently which had Manhattan ranked the highest. I can't seem to find it now tho :( Just saw it the other day, thats the only reason I commented :)

http://money.cnn.com/2005/10/18/real...aces/index.htm

So here's another smiley for you :winkwink:

http://www.boston.com/business/artic...xpensive_city/

http://www.laborradio.org/node/1632

http://www.baystatebanner.com/archiv...5/091505-3.htm

3 More for ya

Guess we'll have to agree to disagree :)

Those say "New York City" which takes into account the other four boroughs and of course drastically changes the numbers. I'm referring to Manhattan which IMO can't be lumped in with Staten Island and such.

Well for those that don't know Boston....wouldn't know that though Boston does not technically have borrows...it does have different sections very similar to New York.

Roxbury (poor)
Dorchester (lower middle class/poor)
West Roxbury (affluent)
Mattapan (poor/lower middle class)
Jamaica Plain

Just to name a few.

So If you wanted to take just one part of the city and compare...put Manhattan up against Beacon Hill.....Forbes 17th most expensive Zip Code in the country. No New York zip code makes the top 20.

Of course, any large metropolitan area does :) All studies are skewed one way or another anyway.

And I'm not looking for a fight of who's area is more expensive. I don't even live in the state of NY, I was just mentioning what I came across recently. Though I do have an Uncle who is from the Boston "area" even though he's an hour away and seems to think that somehow becuase Boston is an expensive city that makes him cool or something.

expensive to live or buy a house?

Thats very true. Plus the reports I posted are for family's of four.

I don't know many family's of four that are looking to move into Manhattan :1orglaugh

Agreed. I'd live there, but only as a Bachelor.

living in the LA market and owning a real estate company, i can say that no doubt the # of people looking at homes has declined as well as asking prices begininng to drop. last year homes went for over asking - now they usually go for a small discount to asking. also, the it appears that interest rates have finally upticked and now rates are 10%-15% higher than they were just 3 months ago - this will slow the market as now homes cost more even without raising the prices.

No doubt real estate bublle will burts. My guess is it will happen within 3 years.

oldtimer hit the nail on the head!

Its kind of a double-edged sword. A weak dollar means more foreign buyers for many hot US markets -- which I've heard some investors attribute to the continuing rise in the South Florida real esate market.. not easy for Americans to compete with.

I believe real estate is in a bubble.. but I don't think the bottom is going to fall out.

What events do you think will precipitate it?

I've been hearing that for at least 3 years now ... if its said every year - eventually people will be right! :winkwink:

What's that old saying?

Even a broken clock is right twice each day!

LOL

Another reason why thisis happening is that houses are going to possibly loose the tax breaks they currently hold.

Basically banks are not going to work with middle income peeps and provide mortgages since those families within the middle income range that can buy home through a bank loan will not get the tax benfitis to make the ends meet.

This marks the end of the middle class in the USA.

Middle class people just became high risk in the eyes of banking institutions.

Although it is a nice "Spin" artical by popular media.
I just gave you peeps the explaination why.

Government taxes are possibly changing and homes may become no longer an investment safe haven for many people that use home owners tax breaks.
The bottomline is, the banks/creditors know this and are not putting out home loans as often since the creditors are not willing to take the risk of the fall out of the tax adjustments.

When supply exceeds demand prices fall for the price of anything in business.

When costs to buy exceed the pool of people who can afford to buy the prices fall.

When interest rates rise money shifts back to the security of high yield securities.

Solid as usual, KRL :thumbsup Most recent reminder of the first line of what you posted--the 2000 Net Stock Crash

Is it normal to expect a sale at a good price within a couple of months? I've seen people in my area hold out for years for a good price.

Yep, those tax breaks for mortgage interest is definitely viewed by some economists as having a distortive effect on investment opportunity costs and their relative net social benefits.

Seems like real estate is nuts right now.

You can say that again.

double post

Tom Barrack, bigger real estate tycoon than Trump:
http://money.cnn.com/2005/10/21/news...ex.htm?cnn=yes

Full article: http://www.fortune.com/fortune/inves...7911-1,00.html

All articles aside, there are now 3 bedroom houses listed in Vancouver for under 250k whereas 3 months ago there were only 1 and 2 bedroom houses for that price.

Higher prices just mean more "creative" loans and multiple signers on the mortgages

Look at how many families those mexicans can stuff in a house.. They'll keep buying 400,000 dollar houses cuz they can have 20 people living there

And the yuppies that make 100,000 a year will still buy million dollar homes on interest only... or even those supercool new 1% loans

IF the market slumps the dollar will follow... then foreigner investors will come in and pick up some deals... boosting the housing prices again

There will be some short periods of slow growth, but overall it's going to take social insurrection or government malfeasance (or both) to stop this housing boom

You must understand that this housing boom is unlike any other in history.. It is not comparable to the past because of the globalization of the world economies and massive unrestricted illegal immigration into the US

A PERFECT EXAMPLE IS KATRINA HURRICANE: 50 years ago that would have depressed the entire US economy... but today the US is so connected to the global marketplace that it barely made a "dent." When katrina happened, japan immediately responded by releasing oil reserves to keep the market steady... proving that the world had an interest in Katrina... not just the US

Point is, the US housing market is fueling world growth... It is in the world's interest to keep it going... so it will keep going... until world war 3

just an opinion

What about the proposals re killing part of the mortgage interest deduction?

God I hope that doesn't happen

I think the recommendation was lowering the threshold from one million dollars to 500,000 dollars for interest write-off. Usually, congress compromises so it could be somewhere in between

That's certainly going to have an influence if it passes...

But there are other factors that could continue to increase the value of homes... or at least keep the market stable

For example, if social security privatization (nationalization) passes... which has a good chance of taking place... YOu'll see a rise in the stock market.. Baby boomers will be retiring at the same time and be able to continue to afford new homes.

Another thing to contemplate is buyer psychology. As long as they "feel good" they're going to spend. STock market goes up, consumers "feel good" they spend

A lot of "If this then that" crap

But the point is... don't believe everything you read in the papers. These writers have their own motives and often don't understand how geopolitics, buyer psychology, and the market intertwine. High level investors often have a way of "talking down" the market so that they scare away the competition.

I am not a psychic and can't predict everything... just saying there is more to this "housing bubble" hype than meets the eye.. I happen to live in a neighborhood with some Pulte home executives and they feed me different information from what is seen on TV or is read in the newspapers

House prices will eventually drop. There's too many wana-be investors.
They even have fucking TV shows surrounding, buying and flipping houses. We can allways count on the media to kill a good thing. I hate when shit like this happens.

I dont think it will fall in the next 5 months.

There is a bubble type feeling in the air........ then again, figuring out when things will pop is the key. Im sure people felt back in 2001 that it was the year the market popped....they were wrong. Maybe if we have 3 years of back to back declines, it would solidify the observation that the bubble is over. Right now, its just too early to tell.

Unlike stocks... real estate doesn't come crashing with a huge THUD... it takes a while to let the air out of the balloon. :2 cents: