Three months free rent. iPods. And a market in freefall. Welcome to Phoenix, where they can't give homes away, and they can't rent them out either

So what happens to a town when the industry that makes up 40% of its economy implodes in historic fashion?

What happens when hundreds of thousands of illegals who built the unwanted homes pack up and go home, and tens of thousands of realtors, mortgage brokers, appraisers, builders and other REIC lose their jobs?

What happens when the mortgage fraud is shut down?

What happens when home after home after home after home is empty and unwanted?

What happens when home prices crash yet another 22% in 12 months and rents drop another 9% year over year?

This is what happens. And no, year-round-golf and pro athletes didn't matter.

Apartments offering freebies, other deals

Renters rejoice - Apartment owners are dangling freebies in front of new tenants who sign 12-month leases.

One company, Mark Taylor, is even going so far as to offer a free iPod, a $25 iPod tunes gift card and two months of free rent to new tenants who lease any apartment in its 34 Valley complexes, including eight in Chandler, four in Tempe, four in Ahwatukee and two in Gilbert.

Renters can thank the struggling real-estate market and its deflated housing prices, increased foreclosure rates and depressed rents on single-family homes, condominiums and apartments. Add to that the condominium-conversion flop, which has led to condos reverting to rental apartments.

"This is a great time to be a renter," said Pete TeKampke, a commercial real-estate broker and board member of the Arizona Multihousing Association.

It's all about the rents. How's your town looking?

And then the realtors, after two years of not eating, finally turned on their lying and deceptive National Association of REALTORS masters

The hungry army of 1.2 million ramen eating realtors should march on the NAR offices in Chicago and demand an end to Lawrence Yun's happy talk and spin, the NAR's non-stop "we've hit bottom" and "prices aren't falling" spew of lies and deception.

Why?

Because this line of BS is actually hurting the 6%'ers, a HELL OF A LOT more than helping. Besides destroying their dwindling base of dues-payers' credibility (what very little of that there's left), the monkeys at the NAR are also confusing would-be sellers into not pricing their debt-traps at saleable prices, and transactions (that aren't REO's) dry up.

No transactions = no commissions = no NAR dues = more ramen

As we've said for years, the NAR should be out there saying "prices are plummeting and will fall even more. If you're a seller, lower your price, lower it big-time, and get out. If you're a buyer, get even more aggressive with your low-ball offers"

Instead, the NAR happy-talk is just freezing the market, as sellers point to the NAR spin as a reason to NOT lower prices, and buyers don't buy, because prices are still way to high.

Meanwhile, the realtors don't eat. And they're getting pissed.

Here's the latest, thanks to the NJ Real Estate Report, who's still kicking HP's ass in that REIC contest btw...

Real estate agents debate local statistics

The latest positive numbers for home sales and prices have divided real estate agents, ordinarily a group uniformly upbeat about the housing market.
Some doubt the numbers, even though they're from their own association, and say it's making it tougher to get home sellers to reduce their prices to more realistic levels.

In particular, Dawe said the figures from the National Association of Realtors, and other information gathered from state and local Realtor groups, seemed to disagree with what the Multiple Listing Service showed.

"As we talk to our sellers about the declining market we are actually facing and the fact that they have to be aggressive in pricing their homes if they expect to find a buyer, the statistics in your article are baffling and impact our credibility with customers," Dawe said.

To Eileen Raynes, an agent with Rosenthal Realty in Margate, the higher sales and price figures were a very welcome break from media coverage she described as "standing on a corner screaming 'Get your dead fish.'"

Bruce E. Breunig Jr., broker at Century 21 Alliance in Margate, admitted that "we Realtors remain part of the problem. We blame the media for fueling the downturn and try to counterbalance it with our own positive spin."

HousingPANIC Stupid Question of the Day

What's the best economic decision for a typical upside-down screwed homedebtor?

Door #1: Stay in their depreciating debt-trap, paying their bloated $3000 a month mortgage, their $300 per month homeowners association fee, their $300 a month tax bill, and their $200 upkeep and repair charges

Door #2: Walk away and rent a similar (or exact same) house for $1000 per month. Total.

Door #3: Hope for a Housing Gambler Bailout so that they can keep doing what's behind Door #1

Here's how one screwed Miami condo investor thinks he's gonna break even on his depreciating debt-trap.

It's gotta suck for millions of investors around the country (and around the world) who bought debt-traps that only rent out for a fraction of what it costs to "own".

Negative cash flow on a depreciating condo or house is the worst of both worlds.

I liked this spreadsheet though. Oh, the optimism. Yup, the price is gonna go up, not down. Yup, rental income is going to ABSOLUTELY SOAR. And no, expenses won't increase - not at all!

Amazing. And sad.

Too bad this poor sap didn't do a spreadsheet BEFORE he bought his debt-trap. Too bad millions didn't bother doing a spreadsheet before they took out toxic loans or listened to realtors on commission.

And too bad that just because you put numbers on a spreadsheet doesn't make them true.

And then the housing gambler Brits tried to get out of their Bulgarian investment properties as fast as they got in

RUSH FOR THE EXITS!!!

I hope to get to Bulgaria this summer to see the madness up close, and rent one of these "investment properties".

It was a Ponzi Scheme folks, pure and simple. The Brits drove the whole thing, it went worldwide, and now it's all falling apart.

Prices skyrocket when everyone wants in (sight unseen) at the same time. Well, what happens when everyone wants out? Should be fun!

The Financial Times ran a good piece on the Brits getting out of Dodge, here's all you need to know:

Bulgaria loses its allure for UK buyers

British home buyers have disappeared from Bansko, a leading Bulgarian ski resort and until recently a “hot-spot” for people seeking moderately priced holiday properties.

Mihail Chobanov, chief executive of Bulgarian Properties, one of the country’s biggest estate agencies, believes that about 50 per cent of UK investors who took a punt on the Bulgarian market four years ago are now trying to sell their properties. “Speculative buyers want to cash out and move on,” he said.

Rapid development at Bansko and Sunny Beach resulted in an over-supply of lower-priced apartments, putting a severe strain on local infrastructure. An estimated 85 per cent of UK investors bought properties off-plan without having visited Bulgaria.

HousingPANIC Quote of the Day

"Prices would have to come down from peak to trough about 40 percent to be back in line with income the way they were in the late '90s"

- Christopher Thornberg, February 2008

Let's do the math for homedebtors and would-be buyers. How much cheaper is it to rent than own in your town

Take a typical home or condo and do the math. Rent is pretty simple - what's the payment. "Ownership" though don't forget to add in insurance, taxes, association fees, upkeep and a 15% vacancy buffer.

Folks, we won't see an end to this housing crash until it's cheaper to "buy" than rent. Let's see just how far off we are today

Going right back to where we started - BusinessWeek / Yahoo cover story on expected 25% fall in home prices (hello 2002)

How could people read things like this on mainstream sites like BusinessWeek and Yahoo and then go out looking to buy a home, unless they're doing serious 2000-price-level low-ball offers? Actually, it'd be a good thing to copy this article and submit it with every bid.

Along with the math of course. Something about price to rent or price to income perhaps?

It's the P/E stupid. It'll always be about the P/E.

Brace yourself: Home prices could sink an additional 25% over the next two or three years, returning values to their 2000 levels in inflation-adjusted terms. That's even with the Federal Reserve's half-percentage-point rate cut on Jan. 30.

While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch (MER), who until recently had expected a much smaller slide.

Shocking though it might seem, a decline of 25% from here would merely reverse the market's spectacular appreciation during the boom. It would put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation. There's a recent model for this kind of return to normalcy after the bursting of a financial bubble. The stock market decline that began in 2000 erased most of the gains of the boom of the second half of the 1990s, leaving investors with ordinary-sized returns.

Why might housing prices plunge violently from here? Remember the two powerful forces that pushed them up: lax lending standards and the conviction that housing is a fail-safe investment. Now both are working in reverse, depressing demand for housing faster than homebuilders can rein in supply.

It's on sale, so it MUST be a good deal. Right? Right?

Let's say you have an investment, and the price is $1000. Then, two years later, the very same investment is at $2000. So you say to yourself - hey, it was $1000 just a bit ago - I'm not gonna pay $2000 today!

And then the investment falls in price to $1800, still 80% more than it did just 100 weeks ago.

So, is it a good deal? Should you run out and buy it, right?

?
?
?

Note, this is a trick question. You don't have enough information to make an informed answer. But if you're the "we don't get paid unless you buy" NAR or NAHB, your answer is YES! YES! YES! A price drop means it's a great time to buy, regardless of the fundamentals.

But we know how that can turn out.

Here's some hilariously BAD advice from the homebuilders from October 2006. I feel sorry for anyone who tried to catch the falling knife back then. Or tries to today. We've got a long way to go.

As a first-time buyer, should I wait until prices go lower to buy a home?

If you continue to wait, you may never be able to afford to get into the housing market. Even as home prices are currently moderating or in some areas falling, rents continue to climb.

Remember, the sooner you make the jump from renter to home owner, the quicker you begin to create and build up wealth for your family.

HousingPANIC Stupid Question of the Day

Anyone getting the itch to play LOWBALL!?

(is there a cream or ointment to apply to make that feeling go away?)

Rents crashing along with the US housing market

Here's the view from California. If you read anything from any idiot who says that rents will go up as the housing market crashes, just laugh.

Rents are going to tank over the next few years. Way too many houses. Desperate homedebtors who can't sell. A US recession. The illegals go home. Millions of job losses. And bubble sitters and bitter renters rejoice.

Unable or unwilling to sell their homes at declining prices, homeowners in Riverside and San Bernardino counties are converting them to rentals, glutting the market and causing rents to fall for the first time in years, according to Inland property managers.

Among the new landlords are investors who bought houses at peak prices and have watched their equity evaporate or homeowners who have relocated, leaving behind a house they can't sell.

There are so many Inland homes for sale, that even if no more come on the market, it will take more than two years to sell the houses available, according to the California Association of Realtors

"People who can't sell their homes have two choices," said John Denver, owner of Perris-based John Denver Realty. "They can stop payments and let them go back to the bank or rent them out."

"It is a good time to be a renter and a lousy time to become a landlord," said Denver. He said in the past six months, the average time it takes to rent out a house in Perris has lengthened from two or three weeks to two months. Rents have fallen about 5 percent. He said the average monthly rent has slipped to $1,100 in Perris.

Denver said today a $300,000 house purchased with a 7 percent down payment would likely require a monthly mortgage payment of $2,500. The same house, he said, can be rented for $1,300 a month, "and the owner has to do the repairs."

Here's the United States Housing Crash in all its ugliness - Fortune magazine does the P/E on the housing bubble

Nice to see the MSM reporting on the price to rent ratio for housing - just a few years too late to save people from the worst financial mistake of their lives, and just a few years later than the bubble blogs, but at least the truth is now finding a way out.

Here's how bad home prices will crash city by city, based on historic rent yields.

What a shocker - Florida, California, Arizona, Balt/DC - all the usual suspects, all the cities that got infested by REIC, fraudsters, flippers and greed.

Look out below. And rent.

Column headers are city, current price to rent ratio, 15 year average, and expected 5-year price decline (in today's dollars not the devalued ones coming up)

Miami 27.2 16.0 -41.1
Los Angeles 26.7 16.0 -40.3
Baltimore 20.7 12.6 -39.1
Washington DC 26.0 15.9 -38.9
Seattle 38.0 23.3 -38.7
East Bay CA 50.9 31.6 -38.1
Orlando 23.8 14.9 -37.2
Long Island 24.5 15.7 -36.1
Ft Lauderdale 24.5 15.7 -35.9
San Jose 42.5 27.2 -35.9
Palm Beach Fla 27.1 17.6 -35.1
Phoenix 21.5 14.0 -34.6
New York 17.8 11.7 -34.6
Portland, Ore. 31.7 20.8 -34.3
San Diego 34.0 22.4 -34.2
Norfolk 26.8 17.9 -33.3
Philadelphia 18.6 12.5 -33.2
Orange County 36.2 24.3 -33.1
Salt Lake City 24.1 16.3 -32.7
Las Vegas 27.9 18.9 -32.3
Richmond 24.9 16.8 -32.3
Sacramento 28.7 19.4 -32.2
Tampa 21.4 14.5 -32.2
InlandEmpire CA 27.5 18.8 -31.6
Charlotte 26.2 18.2 -30.5
North/Cen NJ 20.6 14.4 -30.2
Jacksonville 20.1 14.3 -28.8
San Francisco 38.2 27.4 -28.3
Raleigh 26.8 19.4 -27.7
Honolulu 35.2 25.5 -27.4
NATIONAL AVG 22.8 16.9 -25.9
Milwaukee 24.2 18.1 -25.0
Atlanta 19.5 14.8 -24.0
Nashville 26.8 20.5 -23.8
San Antonio 17.7 13.5 -23.6
Boston 23.2 18.0 -22.4
Denver 24.4 19.1 -21.7
Hartford 18.7 14.9 -20.0
Minneapolis 19.3 15.5 -19.8
Chicago 22.7 18.3 -19.7
Oklahoma City 15.5 12.7 -17.9
Stamford, CT 26.4 22.0 -16.6
Memphis 21.5 18.1 -15.9
St. Louis 16.6 14.0 -15.7
Austin 19.1 16.3 -14.5
Houston 16.5 14.3 -13.4
Kansas City 16.8 14.8 -11.5
Pittsburgh 11.9 10.6 -10.9
Columbus 18.9 16.9 -10.4
Dallas/FortW 17.8 16.1 -9.4
New Orleans 16.1 14.8 -8.1
Cincinnati 16.3 15.1 -6.9
Indianapolis 15.6 14.9 -5.0
Detroit 10.3 10.9 5.8
Cleveland 13.2 14.3 8.5

Bubble Sitters & Bitter Renters - it's time to ask for a discount on your rent

18 million empty homes in America and exploding for-sale inventory

Desperate Homedebtors scrambling to find renters to cover a fraction of their monthly expenses

A wave of foreclosures

Economy rapidly slowing down and millions of REIC jobs lost

Yup, it's time to pick up the phone and ask for a discount on your rent. Start with at least 20% off, in return for signing a new 1-year extension. Call today. You'll be amazed at what you'll get.

And if they don't play ball, move, and negotiate when you do. There's tons of amazing houses out there renting for a fraction of the cost of "owning", in the best neighborhoods, in your favorite towns. Enjoy the good times for renting. You can smell desperation in the air amongst the "owners".

Bubble Sitters - tell your stories here.

It's the P/E stupid. It'll always be the P/E stupid.

Here's a typical real estate investment spreadsheet. Just doing the math. Feel free to play along at home.

Monthly Rental Amount $2,400.00
Percent of Year UnOccupied 5%
Take out for Vacancy for Annual Cash In of $27,360.00

Property Acquisition Cost $300,000.00
Less Down Payment - Cash In $60,000.00
Amount of the loan $240,000.00

Payment Monthly Pricipal/Interest $1,556.64
Annual Insurance Cost $1,200.00
Annual Taxes $1,400.00
Annual Repairs Budget $600.00
Percent of Rent Mgmt Fee of 6%
These expenses total to Annual Cash Out of $23,521.28

Income of $27,360 minus cost of $23,521 = $3839 cash return over cash out

$3839 divided by cash investment of $60,000 = Rental Yield of 6.4%

______________

Now here's the example for a typical overpriced Phoenix condo (real numbers based on personal experience. And I'm actually being kind as rent would have been around $900):

Monthly Rental Amount $1,100.00
Percent of Year UnOccupied 10%
Take out for Vacancy for Annual Cash In of $11,880

Property Acquisition Cost $300,000.00
Less Down Payment - Cash In $60,000.00
Amount of the loan $240,000.00

Payment Monthly Pricipal/Interest $1,556.64
Annual Insurance Cost $1,200.00
Annual Taxes $1,400.00
Annual Repairs Budget $600.00
Percent of Rent Mgmt Fee of 6%
These expenses total to Annual Cash Out of $23,521.28

Income of $11,880 minus cost of $23,521 = NEGATIVE $11,641 cash return over cash out

-$11,641 divided by cash investment of $60,000 = Rental Yield of NEGATIVE 19% PER YEAR

PLUS: Unit is now depreciating at least 20% in 2007, 10% in 2008 and 10% in 2009, total value decline of $105,600 over three years.

Add in the three years of $34,923 in negative income and you've lost $139,923 on your $60,000 investment in 36 months. Add in inflation every year, or what you could have made investing in gold, oil or even CD's and your real loss is even greater.

Bottom line - if you listened (or listen) to a realtor on commission and buy a place with negative cash flow today that is also dropping in price, you're a fool, and you'll likely go bankrupt.

And that's the math. Housing crash style.

Article: "Now That Housing Has Soured, Renters Are Glad They Didn't Buy". Yup. Damn right. It's the P/E stupid. It's always the P/E.

Fact: It's significantly cheaper to rent than "buy" today.

Fact: Renters today don't face the risk of massive asset price depreciation.

Fact: The housing crash won't be over until it's cheaper to "own" than rent again.

With the housing-market slowdown, tightening mortgage-lending standards and rising home foreclosures, renters are more easily answering the question: "Why rent when you can own?" Such a question was common during the housing boom, when homeowners, happy with the gains their homes were making -- at least on paper -- would urge non-property-owner friends to join the party.

..Home buyers who bought at the top of the market can find themselves with high mortgage payments for an asset that has lost much of its value. With the housing market in flux, it makes sense to hold off on buying, renters say. Now, these renters are asking, "Why own when you can rent?"

Housing-bubble blogs like Housing Panic and Housing Doom are full of anti-ownership sentiment from renters. Some renters are resentful they can't afford to own in pricey cities, while others are bitter that speculators drove up housing values in their markets. Some are irked that naïve buyers who bit off too much mortgage are calling on lenders and government for bailouts when, all along, they could have held off on buying a place.

I assume some times that everyone with a pulse must by now understand that the housing bubble was just one big unsustainable Ponzi Scheme....

And then I get a post like this:

It makes me shiver when I imagine any of you bitter renter peons using the word "think". It is almost certain that all of you are lacking 2 fundamental things (not necessarily in that order):

1. A brain to think with
2. Home ownership (requiring a brain)

Renters just don’t get it. Renting a shit-hole 1BR apartment is not an achievement it is a statement of utter incompetency and lack of character.

Since I’m an employer I always look at the employment applications looking for housing status. If you’re over 25 and rent you can forget about getting hired! You sorry ass dip-shit imbeciles. You really don’t get it. I might as well talk to the garbage can. Unf*cking believable!!!

How bad is the housing crash getting in Phoenix? Here's a home $220,000 below appraisal - yours to buy or maybe even commit mortgage fraud!

Hell, you find a home in housing-crash-central-Phoenix listed at $220,000 below appraisal, just go get yourself a loan for the appraised amount with no down and no doc (IndyMac might be able to help you there if you hurry), move in, then do the American thing and NEVER MAKE A PAYMENT.

Meanwhile, take the $220,000 and transfer it to your Swiss bank account, and just walk away.

Sweet!

Or if you really want to "own" it, go ahead and buy. And see how quick you can lose another $220,000. Or try to rent it out, and ask yourself why renters would only pay 30% of what your cost to "own" would be.

Welcome to HousingPANIC.

$900000 $220k below RECENT appraisal, builder desperate

Priced to move, this WEEK! Not in MLS. No agents please. This is a Pre-foreclosure.

This home is really just one of about 11 other high-end foreclosure or pre-foreclosure homes in the Desert Hills, Cave Creek, or Carefree areas. What is it you are exactly looking for? We can send you a detailed list of all “instant equity on the buy - value purchases” in the area.

A Special HousingPANIC Message to the Homedebtors of America

We don't care what you think your home is worth.

We don't care what you owe on your home.

We don't care what homes sold for last year, or the year before, or the year before.

We simply don't care.

All we, and the market, care about is what we think your home is worth today.

Hint: You might want to check what your home would rent out for per month, and multiply that by 120. And if you price it for more than that, you're smoking crack.

Renting is hazardous to your wealth. Oh, really?

Are You Throwing Away Money by Renting? Maybe Not

It’s something we’ve all been told for so long we don’t even question it: if you’re paying a mortgage, you’re making an investment; if you’re paying rent, you’re making a mistake. But is it true? Are you making your landlord rich at the expense of your own wealth? The answer’s not as simple as you might think – for a lot of people, and in a lot of situations, paying rent is the smartest thing you can do.

While housing prices soared, rents merely chugged along. Between 2004 and 2006 home prices nationwide rose 16%, while rents inched up just 1.2%.

If you can satisfy your needs by renting a house at $1000 a month instead of paying a $2500 a month house payment then that’s $1500 a month you can invest in the stock market or elsewhere. Add the $10,000 or $20,000 you would have put up for a down payment and that investment turns into a healthy nest egg. After a few years if you decide it’s time to buy a house then you have enough saved for a healthy down payment.