Market by market falling like dominos. Theory becoming hard data. Even the NAR, builders and realtors giving more realistic quotes. The MSM reporting picking up. Inventory exploding. Tales of homeowner panic.
Pop.
Only a fool would buy at this point.
We're at the Fear stage. Heading to Desperation by April, Panic by May and Capitulation this summer and fall. Hold on tight. We've got a long, long, long way to go.
March 06, 2006
HP readers - can you feel it? Things have changed.
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49 comments:
No, we're between the anxiety & denial phases.
Once the spring boom doesn't appear, we'll move between denial & fear.
This will take a while to play out. We might not be in full "fear" phase until the end of the year.
Good post & graphic.
We are barely into "anxiety." You are getting ahead of the curve. "Denial" would be with people not being able to sell this spring at a loss and their not talking about it.
boy, not sure guys. smells like fear to me, with panic cooking in the oven
I would have to agree with the other blogs....denial is a long phase.
I agree that we are in the denial phase as evidenced by sellers not reducing their price. When you see widespread (significant) price reductions that should signal the change into the start of the fear phase. IMHO
In California we are still in anxiety and denail. Fear is coming this fall.
Check this site out in Charlotte, North Carolina News Investigation Series. Here is what Fear and Trapped Panic look like.
http://www.charlotte.com/mld/charlotte/news/special_packages/foreclosure/
I Suspect that this is not an Isolated Incident of area but Merely the Tip of the Hidden Housing ICEBURG Field...FULL SPEED AHEAD !
It won't go that fast, bubble watchers. I would say the Southern California market will be sticky for another year and in decline for five years after that.
I agree with Robert Coté, at least here in the NY metro area, most home owners are at the anxiety stage.
Those who are waiting for capitulation to enter the housing market better re-up that lease when it comes due because its gonna be a while.
Keith said:
"We're at the Fear stage. Heading to Desperation by April, Panic by May and Capitulation this summer and fall."
I hate to disagree with Keith, but I don’t think we’re going to see a trough in the real estate market this year. We’re talking about massive macro cyclical forces here. This coming decline will look more like a slow train wreck than the NASDAQ sell off.
Where I live, in NW Florida, people are still waaaay in denial.
Fear will make a hard landing sometime around June when the super-hot spring market everyone is counting on is a bust. By then, inventory will skyrocket because everyone will have received their new homeowner's insurance premiums and will see that they are 2-4x last year's rate. People who can't afford the obscene insurance on their overpriced McMansions will be flooding the market with listings.
Panic will be in full swing by October when we are nearing the end of what will probably be another vicious hurricane season and houses for sale now are still on the market and the investors are nowhere to be seen.
I use the house across the street from me as a barometer. They paid 168,000 in 2003. They listed it for 310,500 in August 2005. They haven't had a single offer, not even a lowball, and it has had virtually no showings. Their realtor advised them not to lower the price and wait for the spring market to heat up. They got a new realtor 2 months ago and lowered the price to 299,900. They have had 1 showing in 2 months. They still think the showings and offers will pick up in the next 6 weeks so they are actually thinking about raising the price again! See, DENIAL.
From my experience, in SF and Bay Area, the market is still in denial.
For example, I got e-mail from my agent saying something like this:
Intro: the house has list price of 800K (note: comparable house can be rent for 2200 - 3000).
"... [owner] also mentioned that he expects offers over $900,000, a comparable that is on the market is offered at $1,078,000... "
Maybe San Francisco housing market is not in bubble?
I live in Los Angeles. L.A. is still in the euphoria stage. I am waiting patiently. 41cadillac
boy, not sure guys. smells like fear to me, with panic cooking in the oven
I think it depends which market you are referring to as different markets seem to be in different phases and are moving at their own rate. Here in Marin we are in the mild anxiety phase. I expect the denial phase to occur in full in the Spring.
I have a comment that is a bit off topic. I've noticed that almost all posters have an outsiders view of the bubble. I haven't heard comments from the people most directly affected by the bubble: the record number of buyers who bought in 04-05. What are their feelings?
Below is a transaction listing of sales of TOWNHOUSES, albeit nice ones, in my hometown which is not exactly the hot spot of the real estate world. 10 sales in previous 5 years before things got really nuts last spring. Currently 3 listed for sale, the cheapest at 850k, and that one needs major renovations. All have been sitting for about 2 months.
6/22/2005 1250000
1/14/2005 674900
6/30/2003 474789
11/11/2002 415000
10/31/2002 530000
9/30/2002 505000
6/15/2001 557000
1/8/2001 585000
2/24/2000 545000
3/26/1999 542500
Another home, right on major 4 lane road I decided against buying at 585 in early 2004. Someone bought for 550. Just hit the market again at 800.
Factors like this make me think we're about 4 years from the bottom.
Definetely still denial. Most homeowners and even investors I talk to are oblivious to the kind of talk ciculating on blogs like these.
Exmaple: Have a friend who bought a condo in DC at end of last year. As of last week, he is still counting on making $100K+ within a year or two. I argued the bubble with him a year ago (to no avail) so I just kept my mouth shut.
My sense is also that those who are starting to sense the truth (i.e.,had a harder time selling than they anticipated) aren't talking. They were quick to talk up how real estate "never goes down in this area" or mention "we've made $200K," but aren't saying much now that it has turned.
Also in NW Florida, and I agree that people are seriously in denial here. Seems like half the houses around here are for sale but nothing is moving, though most places sold within days only a few months ago. Prices are still ridiculous, but that's because everyone is convinced things will pick up later in the spring.
If April passes and sales are still slow, then I think we will see panic. And then, as excessively diverted points out, there's the matter of hurricane season and insurers fleeing the state in droves.
I have a feeling things are going to get very ugly here in a few months.
I haven't seen many recent purchasers (04-05)post to this blog site. I think you can go over to "I'mafuckingmoron.com" or "howdoIgetthiscorncoboutofmyass.com" blog to read about their insights to this market. Hope this helps
Salt Lake City, Utah EUPHORIA.
All percentages are up.
84102 Salt Lake City 160 $185,000.00 19.4%
84103 Salt Lake City 311 $328,000.00 13.5%
84104 Salt Lake City 324 $99,650.00 8.6%
84105 Salt Lake City 462 $224,450.00 15.1%
84106 Salt Lake City 562 $198,950.00 13.8%
84107 Murray 262 $184,450.00 16.7%
84108 Salt Lake City 308 $296,000.00 5.7%
84109 Salt Lake City 337 $243,000.00 12.4%
84115 South Salt Lake 364 $134,000.00 8.3%
84116 Salt Lake City 447 $125,000.00 9.4%
84117 Holladay 244 $276,750.00 16.8%
84118 Taylorsville/Kearns 1383 $137,000.00 7.7%
84119 West Valley City 538 $131,450.00 5.1%
84120 West Valley City 709 $141,000.00 8.5%
84121 Cottonwood 577 $264,500.00 15.1%
84123 Taylorsville/Murray 278 $180,500.00 10.3%
84124 Holladay 260 $271,500.00 13.9%
84128 West Valley 512 $151,000.00 11.0%
Salt Lake City: Prices, 2005 annual median home prices for Salt Lake County, compared to 2004.
41cadillac
I bought two years ago in a very desirable town, 2 blocks from beach, 1 block from river. Family circumstances led me to have to sell. The house was on the market for over a year (reduced 4 times) and had one offer that was for $125 thousand less that I paid. I cut my losses and am thankful for what I got. There absolutely is a bubble and we are falling fast - no sellers, realtors, media or banks are acknowledging to it yet. I am not the only one to feel it - but am one of the few to admit it.
I'm seeing the same as 41cadillac in LA sadly. no real anxiety here yet. Hope the spring doesn't bounce...
I'm praying for rain...like everyone else here who has been waiting for this insanity to end.
But the newly debted will be in denial for several more months. Wait until the holidays (Thanksgiving, Christmas 06) for the true desperation selling kicks in.
The good news is prices are falling and they will continue. Hell even RENTS are coming down. This is a no brainer...wait until prices come back to 1:3 or 1:4 median income then its time to buy again.
Until then, my landlord can come fix my leaky toilet, or I'll fix it myself and withhold $65 rent. He doesn't like it? Fuck him, I can get a better place for less money in 90 days when my lease comes up for renewal.
Denial in San Diego.
Market times are still at 4-6 months, no price reductions, median price still climbing, sales plummeting. All I hear is, "things will pick up in the Spring. We're in a buyer's market now."
"wait until prices come back to 1:3 or 1:4 median income then its time to buy again.
NFW the nature and content of the housing supply says no. $200/250k median priced homes in Los Angeles?
My brother who purchased a brand new house 1 month ago in Phoenix, called me yesterday. He says inventory is high and I saw a big change in his talk. A month ago, when I tried to convince him to walk away from a 7K downpayment on the house, he thought I am crazy. He told me that house prices are down 5%. His losses since purchase are 18K since houses dropped 5%. I didn't want to let him suffer, but he lost 11K more than the 7K he didn't want to let go just a month ago. I told him, but he wouldn't listen.
Kara Homes IN nEW jERSEY
now extending their up to $246,000 discount on their QUICK DELIVERY HOMES inventory... seen a whole page ads in nEW jERSEY NEWSPAPER LAST sUNDAY 3/5/2006 !!!
http://www.karahomes.com/community/quick_delivery_spectacular.html
IMHO, I think we're in anxiety phase because the spring season is not in full swing yet. When the sales and the offer doesn't come in as strongly as expected this spring, there will be some fear but mostly denial.
The pundits will come out and say that RE is flatting out and will maintain this "high plateau". Prices will be compared to 2005 to say that YOY prices are still up. This is denial, which will be a long phase and may last until the spring of 2007. Then true fear will set in by summer of 2007 when stats come out that home sales for spring of 2007 is not as strong and YOY prices decreased from 2006 and sales volume still isn't strong.
From this point, I don't know and the scenario is much muddier to predict. We may have increase defaults and foreclosures. Increased panic selling for those who have ARMs that are about to reset.
Reckoning day may finally arrive and the repercussion of this bubble will be felt far and wide -- maybe even to China, Japan and whoever is exporting to the U.S.
I live in New Hope, PA. Bought house in 95 for 270, they now sell for 600+. But interest rates were 7.75 in 1995, since then, 40 year low interest rates have doubled housing cost. I have never seen so many houses for sale starting in January. Houses would sell in 1,2,3 days and there was a waiting list. No more. I saw a house in my section actually not sell last August (the cheapest one in fact, the first never to sell). Clear sign there is a problem. I wonder if Bernake will lower interest rates (like Japan did to 0) to keep housing ATM alive.
I visited a buddy yesterday that I've been lecturing on the housing bubble for two years. He's a homeowner but only a FB if prices seriously decline (possible because he's not in a very desirable area.)
He's a nice guy but one of the dolts who listens to whatever he hears at the water cooler and on the Today show. Finally he admitted that what I have been talking about is happening, he heard housing was down, but didn't say where he heard it. Said he's glad he didn't buy rental properties like he considered.
He still doesn't understand the perilous state of the local market. Oh well, he spends his weekend driving his Ford Explorer to Home Depot and buying sod and other housing trinkets, convinced that housing is the best investment around.
I wonder if Bernake will lower interest rates (like Japan did to 0) to keep housing ATM alive.
That's not possible. Housing prices were completely out of whack with fundamentals and history regardless of cheap credit.
The interest rate could go back to 1% and the only things that would happen is 1)cars would have 0% loans for 84 months to get you to buy that new Tahoe, 2)credit card usage would rise as payments are reduced since doubling the past year, and 3)housing would still be dead.
great posts. I'm biased - having lived in Phoenix, which truly is in meltdown mode, and writer of a bubble blog
I'll have to agree with the HP readers - we're still in the river in egypt
Amazing, considering all the news and the five straight months of declining sales
But, that's good news for ANYONE reading this who still owns a home. You may still have time (hours, days) to get your home listed and still find a sucker (I mean buyer)
SF is still largely in denial, though I think we're heading toward negotiating (not on your chart, but still probably a phase many sellers will go through).
I looked at a couple of houses over the last two months. One was listed at 800K. The owner bought it for 650K a year ago and claims she put 100K into it (I doubt it). She's lowered the price twice, and it's down to 750K now. It's been sitting empty for two months. She's asking way too much, but she feels that she can negotiate with fate - ie., "I won't make any profit, but at least I'll break even."
Another was listed at 740K. They made us sign in, irritatingly, and then emailed us a notice that there were "several offers, move fast!" Two weeks later, it's relisted at 700K. There are a lot of rich people in SF, but I don't know who can afford to spend 700K on such a small house.
That said, I have also seen a competitively priced house go for ~50K above asking. So there are still buyers out there willing to make the plunge.
Spring will be a reckoning, no doubt about it. Personally, I'd recommend sellers get really generous right now. If you bought over 3-4 years ago, you can easily sell by knocking off 50-100K, beat the panic phase by several months (at least), and still make a remarkable profit. Of course, if this turns out to be a blip, you'll be kicking yourself. Roll the dice, pay your price.
Most of the sellers will hold out for long term holding . The builders will quit building , demand will build up again . As long as real estate interest are below 8 % it will be a minor correction . It cost alot to build a home these days so that makes for a built in mim. a house can fall . Last year flippers will be the big loosers not long term owner occupied people .
South Florida is deying they are even in denial.
I'm in Calabasas, CA. The market is still at euphoric levels. The word is even if prices decline elsewhere, they won't decline here as it is too desirable. So far they are right. There is a new community, flippers are making 100's of thousand or even millions per house.
I'm waiting for the pullback, but it's not here yet.
What will you say when houses start selling this spring and summer a prices continue upward?
What will you say when houses start selling this spring and summer a prices continue upward?
I'll say that the pain of the coming correction has just doubled.
The correction must and will come. It's just a matter of when.
Area of socal such as malibu,calabasas, etc will not drop. Very limited supply, with lots of rich people. only negative is to many camel jockey and fast talkers.
I'm in Westlake Village, just down the road from Calabasas and over the hill from Malibu. Prices here have not dropped noticably yet but time on the market has risen substantially, inventory has risen slightly since November, and open houses happen 7 days a week now. I've seen a few that have dropped prices and they are still sitting on the market while more stuff comes on at the bubble peak prices.
I was in Calabasas, but recently sold. The market was strong as of 1 1/2 months ago and that was during the Xmas season. Home prices have exploded.
different people are in different stages, it's not really regional thing.
Builders like DHI who are discounting new homes are in fear. (they are probably a little quicker as they've been here before)
Sellers who listed and have not seen any offers are in anxiety mode.
Sellers who listed, have had no offers, and are now re-listing or waiting till spring are in denial.
Those who are still listing above last summer's prices or purchasing more investment properties (yes those suckers are out there) are in euphoria mode.
It's no surprise real estate is cyclical and that we're due for some cooling off. What people don't seem to get is that unlike the financial markets, real estate is composed of hundreds (thousands?) of fractured and local/regional markets. If you're thinking of buying in a market that didn't experience a bubble, there could be some advantage to waiting (hoping?) for some sellers to panic. But then again, you may be waiting indefinitely. Careful analysis can help. Here's my local real estate blog for a market NOT experiencing a bubble.
p.s. I agree with Robert Coté. Most markets, even those with substantial bubbles, are barely into the "anxiety" stage. Denial meanwhile will probably take a long time to sink in before we experience any sort of widespread capitulation.
The housing bust will be regional. In the Dallas area, there never was a boom. My sister bought a 6 yr-old house 3300 sqft with a swimming pool for $217K last summer. Are you telling me that same house will be worth $150K in two years? I don't think so. The bust will be along the east and west coast and LV/PHX. I'm looking at buying a 2300 sqft house listed at $155K about 8 yrs old. I almost bought a 20 yr-old house 1900 sqft listed at $105K last month.
Nice blog. An interesting read. Thanks.
Sincerely,
Charlie Cowan
charles cowan real estate
http://www.etowahrealty.com
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